<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1998
REGISTRATION NO. 333-41647
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2 TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
STEELCASE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 2522 38-0819050
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR CLASSIFICATION NUMBER) NUMBER)
ORGANIZATION)
901 44TH STREET
GRAND RAPIDS, MICHIGAN 49508
(616) 247-2710
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JON D. BOTSFORD, ESQ.
GENERAL COUNSEL AND SECRETARY
STEELCASE INC.
901 44TH STREET
GRAND RAPIDS, MICHIGAN 49508
(616) 246-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
KRIS F. HEINZELMAN, ESQ. ROBERT M. THOMAS, JR., ESQ.
CRAVATH, SWAINE & MOORE SULLIVAN & CROMWELL
825 EIGHTH AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10004
(212) 474-1000 (212) 558-4000
JEREMIAH T. MULLIGAN, KEVIN SHERIDAN, ESQ. HUGH H. MAKENS, ESQ.
ESQ. ROBERTS, SHERIDAN & WARNER NORCROSS & JUDD
CURTIS, MALLET- KOTEL LLP
PREVOST, COLT & MOSLE 12 EAST 49TH STREET 900 OLD KENT BUILDING
101 PARK AVENUE, 36TH NEW YORK, NEW YORK 111 LYON STREET, N.W.
FLOOR 10017 GRAND RAPIDS, MICHIGAN
NEW YORK, NEW YORK (212) 299-8600 49503
10178 (616) 752-2000
(212) 696-6000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED(1) PER UNIT OFFERING PRICE(2) FEE(3)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock... 13,972,500 $26.00 $363,285,000 $104,220
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 1,822,500 shares subject to the Underwriters' over-allotment
options. A maximum aggregate offering price of $10,000,000 was previously
registered.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(3) A fee in the amount of $2,950 was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 20, 1998
12,150,000 SHARES
[LOGO OF STEELCASE APPEARS HERE]
CLASS A COMMON STOCK
-----------
Of the 12,150,000 shares of Class A Common Stock offered, 9,720,000 shares
are being offered hereby in the United States and 2,430,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
All of the shares of Class A Common Stock offered hereby are being sold by
the Selling Shareholders. See "Principal and Selling Shareholders". The Company
will not receive any of the proceeds from the sale of the shares.
After giving effect to the Recapitalization, the Company will have two
classes of authorized common stock, Class A Common Stock and Class B Common
Stock. Except with respect to voting and conversion, the rights of the holders
of Class A Common Stock and Class B Common Stock are substantially identical.
Each share of Class B Common Stock is entitled to 10 votes and each share of
Class A Common Stock is entitled to one vote. Upon completion of the Offerings,
the holders of Class B Common Stock will retain approximately 99.2% of the
combined voting power of both classes of Common Stock (assuming no exercise of
the Underwriters' over-allotment options). See "Description of Capital Stock".
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
per share will be between $23.00 and $26.00. For factors to be considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
The Class A Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "SCS", subject to notice of official issuance.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) SHAREHOLDERS(2)
-------------- ------------ -------------------
<S> <C> <C> <C>
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $360,000 payable by certain Selling
Shareholders.
(3) The Selling Shareholders have granted the U.S. Underwriters an option for
30 days to purchase up to an additional 1,458,000 shares of Class A Common
Stock at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, the Selling
Shareholders have granted the International Underwriters a similar option
with respect to an additional 364,500 shares as part of the concurrent
international offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to
Selling Shareholders will be $ , $ and $ , respectively. See
"Underwriting".
-----------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates of the shares will be ready for delivery in New York, New York on
or about , 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
-----------
The date of this Prospectus is , 1998.
<PAGE>
STEELCASE
[DIAGRAM]
[DEPICTING PATENT DIAGRAM OF METAL WASTE BASKET]
The first first . . .
and there have been many, many more . . .
- -------------------------------------------------------------------------------
Steelcase(R), Activity(TM) Products, Avenir(R), Ballet(R), Brayton
International Collections(R), Broadmoor(R), CaneCreek(R), Context(R),
Criterion(R), DesignTex(R), Details(R), Elective Elements(R), Ellipse(R),
FirstFile(R), Metro(R), Migrations(TM), Montage(TM), Pathways(R), Personal
Harbor(R), Player(R), Protege(R), Rally(R), Rapport(R), Sensor(R), Series
9000(R), Springboard(R), Stow Davis(R), Teamwork(R), Turnstone(R) and Vecta(R)
are trademarks of Steelcase Inc. and its subsidiaries. Strafor(R), Airborne(R)
and Gordon Russell(R) are trademarks of Steelcase Strafor S.A. Softboard(TM)
is a trademark of Microfield Graphics, Inc. and Environmentally
Intelligent(TM) is a trademark of McDonough Braungart Design Chemistry, L.L.C.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH
THE OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
. . . 85 YEARS OF INSPIRATION
[PHOTO OF A VINTAGE DELIVERY
TRUCK]
early delivery system to first
industry dealer network
established in 1922
[PHOTO]
in the mid-1930's manufactured
Frank Lloyd Wright-designed
desk, precursor to systems
furniture, for S.C. Johnson &
Sons
[PHOTO]
first standard sizing of desks
[PHOTO]
Sunshine Styling -- the addition
of color to office furniture in
the early 1950's
[PHOTO]
Series 9000 -- the largest
selling office furniture system
in the industry, continually
enhanced and supported for 25
years
[PHOTO]
established first acoustical
testing laboratory in the
industry in the mid-1970's
[PHOTO OF A TRACTOR-TRAILER IN FRONT OF SEARS TOWER]
Steelcase furnishes 44 floors of
Chicago's Sears Tower in 1973
setting a standard for the
industry in manufacturing and
delivery capabilities
[PHOTO]
Sensor, high performance
ergonomic seating; more than 4
million sold worldwide since
1986
[PHOTO]
Corporate Development Center --
a creative workplace for
Steelcase research, design,
engineering and marketing
personnel
[PHOTO]
Context, an award-winning
furniture system designed to
support teamwork and
collaboration
<PAGE>
[PHOTO]
Criterion, the Company's best-
selling chair today, designed to
meet customer health, safety and
comfort needs
[PHOTO]
Award-winning Personal Harbor
workspace for individual and
team environments
[PHOTO]
Brayton Migrations seating for
lounge and team areas
[PHOTO]
Details computer support
worktools are designed to help
prevent repetitive stress
injuries
[PHOTO]
Metro Teamwork system with
Softboard, an electronic white
board with software that records
and transmits information to
personal computers
[PHOTO]
William McDonough Collection
from DesignTex, the first
Environmentally Intelligent
compostible upholstery fabrics
[PHOTO]
TNT -- the newest furniture
system from Steelcase Strafor,
with elegant styling for the
European market
[PHOTO]
Vecta Ballet table -- an award-
winning folding table for
conference centers and training
rooms
[PHOTO]
the Pathways portfolio uses a
design logic to create total
interior space solutions
[LOGO OF STEELCASE]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
included elsewhere in this Prospectus. Unless otherwise indicated, the
information contained in this Prospectus assumes that the Underwriters' over-
allotment options are not exercised and gives effect to the recapitalization,
including a 700-for-1 stock split of Class B Common Stock (as defined herein)
effected as a stock dividend and the subsequent conversion of the Existing
Preferred Stock (as defined herein) into shares of Class B Common Stock (the
"Recapitalization") described under "Description of Capital Stock--
Recapitalization". The information contained herein assumes the conversion of
the Existing Preferred Stock, and gives pro forma effect to the Repurchase and
the Employee Stock Grant (each as defined herein), at an initial public
offering price of $23.00 per share. As used herein in conjunction with any
given year, the term "Fiscal" refers to the fiscal year of the Company, which
prior to March 1995 ended on February 28 and thereafter ends on the last Friday
in February. For example, Fiscal 1996 ended on February 23, 1996. See Note 1 to
Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
THE COMPANY
Steelcase Inc. ("Steelcase" or the "Company") is the world's largest
manufacturer and provider of office furniture, office furniture systems and
related products and services. The Company has led the U.S. office furniture
industry in sales for 24 consecutive years and believes it has the industry's
largest base of installed products. In Fiscal 1997, the Company's consolidated
net sales were $2.4 billion and in the year ended December 31, 1996,
unconsolidated joint ventures in which the Company generally holds 50%
interests generated approximately $0.5 billion in net sales.
To enhance its industry leadership position, the Company focuses on research,
development and design methods that analyze individual and group work processes
to create work environments that enable workers to perform more effectively.
Since 1994, the Company has won 24 design awards for new products and product
enhancements across its product lines. In calendar 1998, the Company plans to
introduce more than 75 new products and product enhancements, including
Pathways, a unique portfolio of products that, in addition to office furniture
and work tools, will include architectural elements such as interior walls and
floors designed to integrate entire work spaces. Pathways is designed to be
compatible with the Company's current products.
The Company offers its extensive range of products and services to commercial
and non-commercial organizations worldwide through a network of independent
dealers in more than 650 locations. These dealers provide local expertise and
ongoing customer support services and remain in close contact with customers
during and after the completion of a project to help ensure customer
satisfaction and to encourage repeat business. Steelcase has strong brand
recognition and a reputation for quality among architects, contract interior
designers and corporate facility managers who typically influence purchasing
decisions. The Company's dealer network and sales organization utilize
Workplace Performance, a consultative process supported by proprietary
software-based tools, to help demonstrate early in the planning process the
impact of office space and the work environment on productivity and occupancy
costs.
Steelcase's comprehensive portfolio of furniture products and related
products and services, together with its extensive knowledge of work
environments, enables the Company to satisfy virtually all of its customers'
furniture-related needs. These needs include not only furniture and related
products but also initial workspace planning, rapid delivery and installation,
ongoing support services, furniture asset management, leasing and, if desired,
refurbishing or remanufacturing. The Company's primary product categories
include: (i) office furniture systems, including Series 9000, Avenir, Context,
Elective Elements and Montage; (ii) seating products, including Sensor,
Criterion, Rally and Springboard; (iii) group and individual storage products,
including filing units and cabinets; and (iv) desk and casegood products,
3
<PAGE>
such as bookcases and credenzas. The Company sells and markets primarily steel
and wood products under the Steelcase and Turnstone brands as well as various
other brand name products manufactured through joint ventures such as Steelcase
Strafor S.A. ("Steelcase Strafor"), the Company's 50% joint venture with
Strafor Facom S.A., licensing arrangements and the Steelcase Design
Partnership, a group of six Steelcase entities that focuses on specialty
markets (the "Steelcase Design Partnership").
INDUSTRY DYNAMICS
The Business and Institutional Furniture Manufacturer's Association ("BIFMA")
reports that U.S. office furniture industry shipments totaled approximately $10
billion in calendar 1996 and grew at a compound annual growth rate ("CAGR") of
approximately 7.2% over the three-year period ended December 31, 1996. Strong
growth continued in 1997, with BIFMA reporting that U.S. office furniture
industry shipments increased $1.1 billion, or 14.9%, to $8.5 billion for the
nine-month period ended September 30, 1997, from $7.4 billion for the
comparable period in the prior year.
Overall growth in the office furniture industry is primarily a function of
increased white-collar employment, increased commercial construction and
increased capital spending. The Company believes that certain other recent
trends are also affecting, and will continue to affect, the demand for the
Company's products and services. The growing use and integration of technology,
changes in organizational structures and work processes, greater awareness of
health and safety issues and continued focus on cost efficiency are driving
businesses to increasingly pursue more effective ways to support their workers
and utilize their existing work spaces. The Company believes these trends will
increase demand for its existing products and services and will create
opportunities to introduce new products and to develop new markets.
COMPETITIVE STRENGTHS
The Company believes it will continue to be the leader in its industry as a
result of the following competitive strengths:
MARKET LEADERSHIP AND STRONG BRAND FRANCHISE. The Company has maintained the
largest total market share of any manufacturer in the U.S. office furniture
industry since 1973. In calendar 1996, based on BIFMA statistics, the Company
had a market share of approximately 20%, nearly twice that of its nearest
competitor. "Steelcase" is the most widely recognized brand name in the
industry, and the Company believes it has earned a reputation for producing a
broad range of high quality office furniture and related products. The
Company's industry leadership and brand recognition are key marketing tools for
expanding its customer base and entering new markets and market segments.
LONG-TERM CUSTOMER RELATIONSHIPS; LARGE INSTALLED BASE. The Company, together
with its dealer network, has developed strong, long-term relationships with a
large number of commercial and non-commercial organizations. As a result of its
sales leadership and these long-term relationships, the Company believes it has
the largest base of installed products in the U.S. office furniture industry.
Through this installed base, the Company generates significant annual sales
from repeat and expansion orders. By purchasing additional Steelcase products,
these customers ensure compatibility and conformity with existing products and
retain the local Steelcase dealer as a single contact for ongoing services. The
Company believes that as its existing customers expand and reconfigure their
workplaces their need for additional Steelcase products and dealer services
will increase.
GLOBAL DEALER NETWORK. The Company's strong relationships with its worldwide
network of independent dealers in more than 650 locations, built over many
years of consistent partnership,
4
<PAGE>
allow the Company to focus on the core functions of design, manufacturing and
distribution while benefiting from the dealers' local market expertise and
ongoing customer support. This network, which includes dealers in more than 200
locations outside of the United States and Canada, complements the Company's
global distribution capability and enables Steelcase to address the product and
support service needs of its multinational customers in virtually any non-
domestic market. The Company's relationships with its dealers are typically
long-term in nature, providing continuity in customer relationships and a
strong foundation of product knowledge. In addition, the dealers, together with
the Company's sales representatives, maintain close relationships with local
architects, contract interior designers and corporate facility managers who
typically influence purchasing decisions.
LEADERSHIP IN DESIGN, RESEARCH AND INNOVATION. The Company utilizes its
extensive knowledge of work processes, its ongoing research and its user-
centered design methodology to create innovative products and concepts which
address evolving customer needs. The Company's Corporate Development Center
provides a creative environment for 750 of the Company's research, design,
engineering and marketing personnel and houses 10 laboratories for testing
sound, lighting, ergonomics, flammability and product durability. The Company's
personnel use the Corporate Development Center to conduct over 14,000 product
tests annually. Since 1994, the Company has won 24 design awards for new
products and product enhancements across its product lines. The Company,
through its commitment to design, research and innovation, has developed a
strong reputation among, and close ties with, leading independent architectural
and design firms and design schools which play a significant role in the
industry.
KNOWLEDGE OF WORKPLACE NEEDS; CONSULTATIVE MARKETING APPROACH. The Company,
through ongoing research and interaction with its broad customer base, has
gained an extensive knowledge of how people work and how businesses can use
furniture and related products to facilitate more effective work processes. In
1995, the Company introduced Workplace Performance, a consultative process
supported by proprietary software-based tools that incorporates an extensive
database of customer information and industry research and trends. With the aid
of Workplace Performance, the Company's dealers and salesforce work with
customers early in the planning process to illustrate possible work space
configurations and product packages that help the customers improve their
productivity and lower their occupancy costs. The Company believes that its
ability to provide more comprehensive support to customers in the early stages
of the planning process is a significant competitive advantage.
MANUFACTURING AND DISTRIBUTION CAPABILITY. The Company believes it has the
largest office furniture manufacturing capacity in the world with more than 50
manufacturing facilities, including those operated by joint ventures. In
addition, the Company has an extensive distribution system in the United States
and Canada and uses commercial transport and delivery services in both the
United States and abroad. The Company's products, including those offered by
the Company's joint ventures, are generally available throughout the world.
CORPORATE CULTURE. Management believes that the Company's corporate culture
and values strengthen relationships with employees, customers, dealers and the
communities in which it operates. For Steelcase employees, this corporate
culture fosters loyalty and productivity as demonstrated by the fact that the
Company's employees in the United States and Canada have an average tenure of
approximately 12 years. As an example of its commitment to its employees, the
Company will grant at the time of the Offerings (as defined herein) to each of
approximately 15,000 employees 10 shares of Class A Common Stock (as defined
herein) and an immediately exercisable option to purchase a maximum of 100
shares of Class A Common Stock at a purchase price equal to 85% of the initial
public offering price.
5
<PAGE>
GROWTH STRATEGY
Steelcase's objectives are to strengthen its industry leadership position and
increase its revenues and profitability. To achieve these objectives, the
Company will:
FOCUS ON PRODUCT INNOVATION. The Company intends to strengthen its leadership
position in the office furniture industry and increase its revenues through the
development of aesthetically pleasing and technologically-sophisticated new
products and product enhancements. In Fiscal 1995, 1996 and 1997, the Company
spent approximately $40 million, $50 million and $65 million, respectively, on
research and development. In calendar 1998, the Company plans to introduce more
than 75 new products and product enhancements, including Pathways and Answer,
an office furniture systems line under the Turnstone brand which is designed to
work with Pathways. The Company's user-centered design efforts address
significant workplace trends and result in products that support individual
worker needs, including health, safety and comfort. In addition, these products
integrate technology and further support the new work processes being adopted
by organizations. The Company believes its new products and product
enhancements will offer superior flexibility and help its customers improve
organizational performance, better utilize their work space and work more
effectively.
PURSUE NEW MARKET OPPORTUNITY--PATHWAYS. In addition to enhancing its
existing product categories, the Company intends to leverage its extensive
knowledge of work processes to penetrate new markets and develop new market
segments for the work environment. The Company recently developed Pathways, a
unique portfolio of products and architectural elements designed to create
total interior space solutions. Pathways is designed to enable customers to
create, outfit and reconfigure technologically-sophisticated work environments
faster and more economically than they can today. Pathways uses a design logic
that makes its architectural elements and other products compatible with the
Company's current products, as well as competitors' products. The Pathways
portfolio includes removable, reconfigurable architectural elements such as
floor and wall systems, power, lighting and complementary furniture and work
tools. The Company believes Pathways offers a superior means to integrate all
workplace elements, including building operating systems, and accommodate all
technological workplace needs. As a result, the Company believes Pathways
represents a significant opportunity for increased sales from customer projects
which involve new construction or building refurbishment. The Company expects
to begin shipping Pathways products in the first quarter of calendar 1998.
LEVERAGE INSTALLED BASE THROUGH KNOWLEDGE OF WORK. As a result of its sales
leadership and long-term relationships with many of its customers, the Company
believes it has the largest base of installed products in the industry. The
Company believes its knowledge of work has enabled it to develop a strong
reputation for improving workplace effectiveness and performance through the
integration of people, processes, technology and work space. As a result, the
Company's customers increasingly look to the Company and its dealers for advice
and consultation on general workplace issues in addition to furniture. This
offers the Company the opportunity to analyze customers' needs and to offer
solutions that include the application of the Company's products across all of
its product lines. The Company intends to increase sales to its existing
customers by capitalizing on its broad range of product solutions and its
Workplace Performance consultative approach, as well as new product
applications, to drive incremental growth across all product categories.
LEVERAGE DEALER NETWORK AND INCREASE SALES OPPORTUNITIES. To leverage further
its strong dealer network, the Company intends to continue to invest in dealer
programs and training that expand the service and operations capabilities of
its dealers as well as promote Steelcase products. In
6
<PAGE>
addition, the Company intends to increase its percentage of a dealer's sales by
continually enhancing and expanding its portfolio of knowledge, products and
services to ensure that dealers can satisfy virtually all of a customer's
furniture-related needs through sales of Steelcase products. As the Company
broadens its portfolio, it also supports dealers in expanding their customer
base. For example, the Company's Turnstone brand product offering allows
dealers to compete effectively in the value-priced market segment.
PURSUE STRATEGIC ACQUISITIONS, JOINT VENTURES AND ALLIANCES. The Company has
historically acquired companies with complementary or ancillary businesses or
products, entered into joint ventures and established strategic or commercial
alliances with various companies. The Company will continue to evaluate similar
transactions that it believes are consistent with its growth strategy or
otherwise present attractive opportunities for growth, entry into new markets
or introduction of new products.
ENHANCE GLOBAL PRESENCE. The Company intends to support the existing global
operations of its Steelcase International operating unit ("Steelcase
International") and of Steelcase Strafor by investing in product development
for regional market needs, expanding existing dealer operations and services
and developing alliances to penetrate further the markets served by the
Company. In addition, the Company intends to support the worldwide needs of its
multinational customers as they expand their global operations, as well as
service local organizations in regional markets.
7
<PAGE>
THE OFFERINGS(1)
Class A Common Stock offered by the Selling Shareholders:
U.S. Offering.................... 9,720,000 shares
International Offering........... 2,430,000 shares
----------------
Total.......................... 12,150,000 shares
=================
Common Stock to be outstanding after the Offerings:
Class A Common Stock.............. 12,300,000 shares(2)
Class B Common Stock.............. 144,125,400 shares(3)
------------------
Total........................... 156,425,400 shares
==================
Voting Rights......... There will be two classes of common stock outstanding
after the Offerings: class A common stock ("Class A
Common Stock") entitled to one vote per share and
class B common stock ("Class B Common Stock")
entitled to 10 votes per share. Class A Common Stock
and Class B Common Stock generally will vote as a
single class with respect to all matters submitted to
a vote of shareholders. The Class A Common Stock and
the Class B Common Stock are collectively referred to
in this Prospectus as "Common Stock". See
"Description of Capital Stock--Class A Common Stock
and Class B Common Stock".
Conversion............ Class B Common Stock is convertible into Class A
Common Stock on a share-for-share basis (i) at the
option of the holder thereof at any time, (ii) upon
transfer to a person or entity which is not a
Permitted Transferee (as defined in the Second
Restated Articles of Incorporation of the Company),
(iii) with respect to shares of Class B Common Stock
acquired after the Recapitalization, at such time as
a corporation, partnership, limited liability
company, trust or charitable organization ceases to
be 100% controlled by Permitted Transferees and (iv)
on the date on which the number of shares of Class B
Common Stock outstanding is less than 15% of the then
outstanding shares of Common Stock (without regard to
voting rights). See "Description of Capital Stock--
Class A Common Stock and Class B Common Stock".
Use of Proceeds....... All of the proceeds from the sale of the 12,150,000
shares of Class A Common Stock offered hereby will be
received by the Selling Shareholders. See "Use of
Proceeds".
Proposed New York
Stock Exchange
("NYSE") symbol...... SCS
- --------
(1) The offering of 9,720,000 shares of Class A Common Stock initially being
offered in the United States (the "U.S. Offering") and the concurrent
offering of 2,430,000 shares of Class A Common Stock initially being
offered outside the United States (the "International Offering") are
collectively referred to in this Prospectus as the "Offerings". The Selling
Shareholders have granted the Underwriters an option for 30 days to
purchase an aggregate of up to an additional 1,822,500 shares of Class A
Common Stock. See "Underwriting".
(2) Includes 150,000 shares of Class A Common Stock which will be granted to
certain employees of the Company at the time of the Offerings (the
"Employee Stock Grant"). Excludes (i) up to 2,800,000 shares of Class A
Common Stock issuable upon the exercise of incentive options to be granted
to designated employees pursuant to the Incentive Compensation Plan (as
defined herein) at the time of the Offerings at an exercise price equal to
the initial public offering price and (ii) up to 1,500,000 shares of Class
A Common Stock to be sold upon the exercise of options to be granted to
certain employees pursuant to the Purchase Plan (as defined herein) at the
time of the Offerings (the "Employee Discount Option Grant") which will be
immediately exercisable at 85% of the initial public offering price. See
"Management--Stock Incentive Plans". The Company intends to purchase
1,650,000 shares of Class B Common Stock from the Selling Shareholders at
the same price at which the shares of Class A Common Stock are being sold
to the Underwriters in the Offerings (the "Repurchase") to avoid equity
dilution in connection with the Employee Stock Grant and the Employee
Discount Option Grant.
(3) Includes 17,120,400 shares of Class B Common Stock to be issued upon
conversion of the Company's existing class A preferred stock, par value
$100 per share ("Existing Class A Preferred Stock"), and existing class B
preferred stock, par value $50 per share ("Existing Class B Preferred
Stock", and, together with the Existing Class A Preferred Stock, the
"Existing Preferred Stock"), in connection with the Recapitalization (as
adjusted to eliminate fractional shares). See "Description of Capital
Stock--Recapitalization".
8
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth certain summary financial data of the Company.
The summary is qualified in its entirety by, and should be read in conjunction
with, "Selected Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and the Consolidated Financial
Statements of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED(2)
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997(1) 1996 1997
------------ ------------ ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $2,048.7 $2,155.9 $2,408.4 $1,775.1 $2,060.5
Cost of sales.......... 1,451.8 1,468.2 1,551.6 1,150.7 1,316.5
-------- -------- -------- -------- --------
Gross profit........... 596.9 687.7 856.8 624.4 744.0
Selling, general and
administrative ex-
penses................ 518.7 524.1 630.4 464.9 499.1
Patent litigation ex-
pense(3).............. -- -- 84.8 84.8 --
-------- -------- -------- -------- --------
Operating income....... 78.2 163.6 141.6 74.7 244.9
Patent litigation in-
terest expense(3)..... -- -- (111.7) (111.7) --
Other income, net...... 27.1 24.0 21.4 18.4 15.7
-------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes and equity in
net income (loss) of
joint ventures and
dealer transitions.... 105.3 187.6 51.3 (18.6) 260.6
Provision for income
taxes................. 40.9 68.1 23.6 (8.6) 100.3
Equity in net income
(loss) of joint
ventures and dealer
transitions........... (0.2) 4.0 -- 1.2 3.0
-------- -------- -------- -------- --------
Net income (loss)...... $ 64.2 $ 123.5 $ 27.7 $ (8.8) $ 163.3
======== ======== ======== ======== ========
UNAUDITED PRO FORMA PER
SHARE DATA(4):
Net income............. $ 27.7 $ 163.3
Pro forma adjustments:
Retained earnings
reduction for
conversion of
Existing Preferred
Stock................ (383.2) --
Net income reduction
for Employee Stock
Grant................ -- (2.1)
-------- --------
Net income (loss)
attributable to
holders of Common
Stock................. $ (355.5) $ 161.2
======== ========
Net income (loss) per
share of Common
Stock................. $ (2.25) $ 1.02
======== ========
Weighted average shares
of Common Stock
outstanding .......... 158.1 158.3
======== ========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NOVEMBER 28, 1997(2)
---------------------
ACTUAL PRO FORMA(5)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 551.2 $ 365.9
Total assets.............................................. 2,171.4 1,984.7
Total liabilities......................................... 688.4 687.0
Shareholders' equity...................................... 1,483.0 1,297.7
</TABLE>
- --------
(1) Fiscal 1997 included 53 weeks.
(2) Unaudited.
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations" and Note 10 to Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
(4) The unaudited pro forma per share data gives effect to the Recapitalization
and the Employee Stock Grant as if the Recapitalization had occurred on
February 24, 1996 and the Employee Stock Grant had occurred on March 1,
1997. Because of the significant impact of the Recapitalization on net
income (loss) per share of Common Stock, historical amounts have not been
presented. See "Management--Stock Incentive Plans", "Description of Capital
Stock--Recapitalization" and Note 2 to Consolidated Financial Statements of
the Company included elsewhere in this Prospectus.
(5) The unaudited pro forma balance sheet data gives effect to (i) the
declaration and payment of a special dividend in the aggregate amount of
$150.9 million, which was paid on January 9, 1998 to holders of Common
Stock as of December 2, 1997 (the "Special Dividend"), (ii) the Repurchase
and (iii) the Employee Stock Grant as if the Special Dividend, the
Repurchase and the Employee Stock Grant had occurred as of November 28,
1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources", "Management--Stock
Incentive Plans" and Note 2 to Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.
10
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following risk factors
in addition to other information set forth in this Prospectus prior to making
an investment in the Class A Common Stock offered hereby.
STRONG COMPETITION
The office furniture industry is highly competitive, with a number of
competitors offering similar products. The Company's most significant
competitors in its primary markets are Herman Miller, Inc. ("Herman Miller"),
Haworth, Inc. ("Haworth"), Knoll, Inc. ("Knoll"), Kimball International, Inc.
("Kimball") and, in certain segments, Hon Industries Inc. ("Hon"). Each of
these competitors has a substantial installed base of products which can be a
source of significant future sales through repeat and expansion orders. These
competitors' products have strong acceptance in the marketplace, and such
competitors could develop alternative product designs which could give them a
competitive advantage over the Company. The Company also faces significant
price competition from its competitors and may encounter competition from new
market entrants. There can be no assurance that the Company will be able to
compete successfully in its markets in the future. See "Business--
Competition".
RISKS ASSOCIATED WITH ACHIEVING AND MANAGING GROWTH
As part of its growth strategy, the Company seeks to increase its revenues
and profitability through the introduction of innovative new products in both
existing and new markets. In particular, with the introduction of the Pathways
product portfolio scheduled for first shipment in the first quarter of
calendar 1998, the Company intends to enter the market for architectural
elements such as floor, wall and lighting systems and power and communications
infrastructure which is now served primarily by a portion of the construction
industry. There can be no assurance that the Company's new products will
achieve the same degree of success as that achieved by the Company's products
historically or that the Company's success will be replicated in new markets.
The Company also intends to pursue acquisitions, joint ventures and
alliances. The Company has historically acquired companies with complementary
businesses or products and entered into strategic joint ventures and alliances
with various companies. There can be no assurance that the Company will be
able to continue to identify attractive opportunities or enter into any such
transactions in the future. In addition, if an acquisition is completed, there
can be no assurance that the Company will be able to successfully integrate
the acquired entity into the Company's operations.
In addition, factors beyond the Company's control, including general
economic factors and business conditions in the markets or affecting the
customers served by the Company, may affect the Company's ability to achieve
and implement its growth strategy. See "Business--Growth Strategy".
ECONOMIC FACTORS AFFECTING THE OFFICE FURNITURE INDUSTRY
Fluctuations in office furniture industry revenues may be affected by a
variety of macroeconomic factors such as white-collar employment levels,
commercial construction and capital spending, as well as industry factors such
as technology demands, corporate organizational restructuring, health and
safety concerns and a continued focus on cost efficiency. There can be no
assurance that current or future economic or industry trends will not have an
adverse effect on the Company's financial condition or results of operations.
See "Business--Industry Dynamics".
NON-BINDING DEALERSHIP ARRANGEMENTS
The Company relies almost entirely on a network of independent dealers for
the marketing of its products to customers. The Company's domestic dealers and
many of its non-domestic dealers operate without written contracts, but are
subject to a uniform set of guidelines prescribed by the Company. There can be
no assurance that certain dealers will not choose to end their relationships
11
<PAGE>
with the Company or be terminated by the Company or that any replacements in
geographic areas covered by these dealers will be satisfactory. There can also
be no assurance that the loss or termination of dealers will not result in an
adverse effect on the Company's financial condition or results of operations.
See "Business--Sales and Marketing".
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company conducts business in countries outside the United States, which
exposes the Company to fluctuations in foreign currency exchange rates. In
Fiscal 1997, approximately 9.3% of the Company's consolidated revenues
originated outside the United States, the majority of which were denominated
in currencies other than U.S. dollars. The Company's production costs, profit
margins and competitive position in foreign markets are affected by the
strength of the currencies in countries where it manufactures or purchases
goods relative to the strength of the currencies in countries where its
products are sold. The Company from time to time reviews its foreign currency
exposure and evaluates whether it should enter into hedging transactions.
Although the Company hedges the majority of its transactional foreign currency
exposure, fluctuations in foreign currency exchange rates could still have an
adverse effect on the Company's financial condition or results of operations.
The Company's international operations are subject to other risks, such as
the imposition of government controls, export license requirements, inflation,
tariff or taxes and other trade barriers, difficulties in staffing and
managing international operations, price, wage and exchange controls, and
political, social and economic stability. There can be no assurance that these
and other factors will not have an adverse effect on the Company's financial
condition or results of operations.
RISKS ASSOCIATED WITH MANUFACTURING OPERATIONS
Although the Company relies on numerous manufacturing facilities in North
America and throughout the rest of the world, many of these facilities are
dependent upon products or parts supplied from other Company facilities, and
certain products and certain parts necessary for other products are
manufactured by the Company at only one facility. All the Company's facilities
are subject to the ordinary risks associated with manufacturing operations,
including damage or loss and disruption of production from accidents, natural
disasters and other causes. In addition, in the event that operations at
certain of the Company's facilities were interrupted for any reason and the
Company was not able to obtain products or parts from that facility or from
alternative sources, the Company's manufacturing operations at other locations
that depend on those products and parts could also be adversely affected.
Although the Company maintains business interruption insurance, any prolonged
interruption in the Company's ability to manufacture certain products or parts
could have a material adverse effect on the Company's business, including its
reputation, its vendor relations and its dealership network. See "Business--
Manufacturing".
ENVIRONMENTAL MATTERS
The Company is subject to a variety of federal, state, local and foreign
laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal and remediation of,
and exposure to, hazardous and non-hazardous substances, materials and waste.
The nature of the Company's existing and historical operations exposes the
Company to the risk of liabilities, claims and pollution control requirements
for a wide variety of environmental matters, including compliance with future
Clean Air Act requirements which are potentially significant to the Company's
operations and liability for releases and emissions of hazardous substances,
materials and waste. Although liabilities, claims and requirements relating to
environmental matters have not materially affected the Company to date, there
can be no assurance that they will not have a material adverse effect on the
Company's financial condition or results of operations. See "Business--
Environmental Matters".
CONTROL BY EXISTING SHAREHOLDERS
The Company has two classes of voting stock: the Class A Common Stock being
offered hereby, which is entitled to one vote per share, and the Class B
Common Stock, which is entitled to 10 votes
12
<PAGE>
per share. Upon completion of the Offerings, the Repurchase and the Employee
Stock Grant, the holders of Class B Common Stock will have 99.2% of the total
outstanding voting power of the Company. As a result, these shareholders will
have significant influence on the direction and policies of the Company and,
if they choose to act in concert, will be able to elect all the members of the
Company's Board of Directors (the "Board") and to control the approval of
important corporate transactions and other matters requiring shareholder
approval. See "Principal and Selling Shareholders" and "Description of Capital
Stock--Class A Common Stock and Class B Common Stock".
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Repurchase and the Employee Stock
Grant, the Company will have outstanding 156,425,400 shares of Common Stock,
consisting of the 12,150,000 shares of Class A Common Stock offered hereby,
150,000 shares of Class A Common Stock granted pursuant to the Employee Stock
Grant and 144,125,400 shares of Class B Common Stock (including 17,120,400
shares of Class B Common Stock issuable upon conversion of the Existing
Preferred Stock in the Recapitalization, as adjusted to eliminate fractional
shares). In addition, the Company will grant immediately exercisable options
to purchase a maximum of 1,500,000 shares of Class A Common Stock pursuant to
the Employee Discount Option Grant and options to purchase up to 2,800,000
shares of Class A Common Stock pursuant to the Incentive Compensation Plan.
See "Management--Stock Incentive Plans".
Subject to the lock-up provisions described in the paragraph below, all the
shares of Class A Common Stock offered in the Offerings, all the shares of
Class A Common Stock issued pursuant to the Employee Stock Grant and all the
shares of Class A Common Stock issued upon exercise of the options described
above will be freely transferable without restriction or further registration
under the Securities Act of 1933 (the "Securities Act"), except that any
shares purchased by "affiliates" of the Company, as that term is defined in
Rule 144 under the Securities Act ("Rule 144"), generally may only be sold
subject to certain restrictions as to timing, manner and volume. Any share of
Class A Common Stock outstanding as a result of the conversion of shares of
Class B Common Stock subsequent to the Offerings and all the shares of Class B
Common Stock, representing 92.1% of the outstanding Common Stock upon
completion of the Offerings, the Repurchase and the Employee Stock Grant will
be deemed to be "restricted securities" under the Securities Act. However,
beginning approximately 90 days after the consummation of the Offerings, such
shares of Common Stock, other than those held by "affiliates" and 10,500
shares held by a former employee of the Company, will be freely tradeable
pursuant to Rule 144(k) under the Securities Act.
The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the
date of this Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any securities of the Company that are substantially similar to the
Class A Common Stock, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
Class A Common Stock or any such substantially similar securities (other than
pursuant to the Recapitalization or pursuant to the Steelcase Inc. Employee
Stock Purchase Plan (the "Purchase Plan"), the Steelcase Inc. Incentive
Compensation Plan (the "Incentive Compensation Plan") or the Steelcase Inc.
Nonqualified Stock Option Plan (the "Nonqualified Plan"), or upon the
conversion or exchange of convertible or exchangeable securities outstanding
as of the date of the Underwriting Agreement), without the prior written
consent of Goldman, Sachs & Co. In addition, the Company's directors and
executive officers, and certain of its shareholders who represent in the
aggregate 93.3% of the outstanding Class B Common Stock after the Offerings,
have agreed, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of this
Prospectus, not to, directly or indirectly, offer, pledge, sell, contract to
sell or otherwise dispose of any securities of the Company outstanding as of
the date of this Prospectus, including but not limited to any securities that
are convertible into or exchangeable for, or that represent the right to
receive any Common Stock or substantially similar securities, or enter into
13
<PAGE>
any swap or other arrangement that transfers, in whole or in part, the economic
consequences of ownership of any securities of the Company, without the prior
written consent of Goldman, Sachs & Co., other than (i) the conversion or
exchange of convertible or exchangeable securities outstanding as of the date
of this Prospectus to be issued in the Recapitalization, (ii) the shares of
Class A Common Stock offered hereby, (iii) the Repurchase or (iv) the transfer
of securities of the Company by sale or gift, provided the transferee agrees in
writing to the same terms and conditions binding the transferor.
No prediction can be made as to the effect, if any, that subsequent sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of the Class A Common Stock. Nevertheless, sales of significant
numbers of shares of Common Stock in the public market could adversely affect
the market price of the Class A Common Stock and could impair the Company's
ability to raise capital through an offering of its equity securities. See
"Shares Eligible for Future Sale" and "Underwriting".
DIVIDENDS
The Company has paid regular dividends in the past and intends to continue to
pay dividends following the Offerings. However, there can be no assurance as to
the amount and frequency of any such dividend or that a dividend will be paid
at all due to factors relating to the Company or the economy generally. See
"Dividend Policy".
CERTAIN ANTI-TAKEOVER MATTERS
The Company's Second Restated Articles of Incorporation (the "Articles") and
Amended By-laws (the "By-laws") contain certain provisions that may discourage
other persons from attempting to acquire control of the Company. These
provisions include, but are not limited to, a staggered Board, the
authorization of the Board to issue shares of undesignated preferred stock in
one or more series without the specific approval of the holders of Common
Stock, the establishment of advance notice requirements for director
nominations and actions to be taken at annual meetings and the requirement that
two-thirds of the shareholders entitled to vote at a meeting are required to
approve any change to the By-laws and certain provisions of the Articles. In
addition, the Articles and the By-laws permit special meetings of the
shareholders to be called only by the Company's Chief Executive Officer or upon
request by a majority of the Board and deny shareholders the ability to call
such meetings. Such provisions, as well as the provisions of the Michigan
Business Combination Act (the "MBCA") to which the Company is subject, could
impede a merger, takeover or other business combination involving the Company
or discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company. In certain circumstances, such
provisions may inhibit or discourage takeover attempts and could reduce the
market value of the Class A Common Stock. See "Description of Capital Stock--
Certain Anti-Takeover Matters".
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock, and there can be no assurance that an active trading market for
the Class A Common Stock will develop or be sustained. The initial public
offering price of the Class A Common Stock will be determined by negotiations
among the Company, the Selling Shareholders (or their representatives), the
U.S. Underwriters and the International Underwriters based upon several factors
and will not necessarily reflect the market price of the Class A Common Stock
after the Offerings. The price at which the Class A Common Stock will trade in
the marketplace will depend upon a number of factors, including variations in
the Company's financial and operating results, changes in earnings estimates by
industry research analysts, investors' perceptions of the Company and general
economic, industry and market conditions. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations. These
market fluctuations may adversely affect the market price of the Class A Common
Stock. See "Underwriting".
14
<PAGE>
THE COMPANY
The Company was founded in 1912 and initially focused on manufacturing high
quality metal office products. Over time, the Company expanded its product
offerings and built a strong distribution system to support its high quality
manufacturing operations in the United States and Canada. With the growth of
office furniture systems sales in the late 1970's, the U.S. office furniture
industry grew rapidly from $0.8 billion in 1971 to $3.3 billion in 1980,
according to BIFMA statistics. During this time, Steelcase gained market share
by focusing on sales of systems products and investing in additional
manufacturing capacity. During the 1970's and 1980's, the Company expanded
globally, with the establishment of joint ventures in Europe and Japan, while
continuing to invest in additional manufacturing capacity. During the 1980's,
the Company also increased its emphasis on design, with the formation in 1987
of the Steelcase Design Partnership, and on research, with the opening in 1989
of its Corporate Development Center. The Company introduced its award-winning
Sensor seating line in 1986 and Context systems line in 1989. In the 1990's,
the Company has increased its focus on manufacturing quality and efficiency,
has enhanced its product portfolio, has continued its commitment to research
and design and has continued its global expansion.
The Company markets its products and services throughout the world as
follows:
STEELCASE U.S. Steelcase U.S. ("Steelcase U.S.") operations include
approximately 14,100 employees, 34 manufacturing and distribution facilities,
20 regional sales offices and dealers in more than 400 locations. Steelcase
U.S. also includes the Steelcase Design Partnership, a group of six Steelcase
entities that serves specialty markets. These entities operate autonomously
but have access to corporate engineering and research resources, and their
products are offered by the Company's dealer network to complement the
Steelcase brand product base.
STEELCASE CANADA. Steelcase Canada, Ltd., a wholly owned subsidiary
("Steelcase Canada"), primarily operates as an extension of Steelcase U.S. in
the Canadian markets, sourcing its sales both through its manufacturing
facility in Markham, Ontario and through imports from Steelcase U.S. Steelcase
Canada has approximately 580 employees and dealers in more than 40 locations.
STEELCASE INTERNATIONAL. Steelcase International coordinates sales,
manufacturing, distribution and marketing of all Steelcase products throughout
Asia, Latin America, the Middle East and the Far East. Steelcase International
conducts these activities partly through U.S.-based operations and partly
through Steelcase subsidiaries and joint ventures in Australia, Brazil, China,
Japan, Mexico, Saudi Arabia and Thailand. Steelcase International also
manufactures products through licensing arrangements in Colombia, India, Japan
and Thailand. Steelcase International has approximately 430 employees and
dealers in more than 40 locations.
STEELCASE STRAFOR. Steelcase Strafor, a 50% joint venture with Strafor Facom
S.A., is a leading office furniture company in Europe with net sales of
approximately $0.5 billion in the year ended December 31, 1996. Steelcase
Strafor primarily serves the European market with 14 manufacturing facilities,
approximately 3,900 employees and dealers in more than 170 locations.
SERVICES AND OTHER BUSINESSES. Steelcase also has service-oriented divisions
or subsidiaries such as Furniture Management Coalition ("FMC") and Steelcase
Financial Services Inc. ("SFSI"). In addition, IDEO Product Development, Inc.,
a subsidiary of the Company ("IDEO"), provides product design services to the
Company and third parties. Attwood Corporation, a subsidiary of the Company,
provides thermoplastic injection moldings parts to the Company and is a
leading manufacturer of marine hardware and accessories. These divisions and
subsidiaries include approximately 1,200 employees and four manufacturing
facilities.
The Company's headquarters are located at 901 44th Street, Grand Rapids,
Michigan 49508 (telephone number: (616) 247-2710).
15
<PAGE>
USE OF PROCEEDS
All of the shares of Class A Common Stock being offered in the Offerings are
being sold by the Selling Shareholders. The Company will not receive any of
the proceeds from the sale of such shares.
DIVIDEND POLICY
The Company intends to continue to pay regular quarterly dividends. However,
the declaration and payment of dividends by the Company are subject to the
discretion of the Board and to compliance with applicable law. The
determination of the timing and amount of future dividends, if any, will
depend upon, among other things, the Company's results of operations,
financial condition, cash requirements, future business prospects, general
business conditions and other factors that the Board may deem relevant at the
time. The aggregate dividends paid on outstanding common stock in each quarter
in Fiscal 1995, 1996 and 1997 and in the first three quarters of Fiscal 1998
are set forth below. Per share amounts are not presented because the Company
does not believe such amounts will be meaningful following the
Recapitalization. See the Consolidated Statements of Changes in Shareholders'
Equity in the Consolidated Financial Statements of the Company on page F-6
hereof for information on preferred stock dividends paid during the fiscal
periods presented.
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER FISCAL YEAR
------------- -------------- ------------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FISCAL 1995............. $ 2.5 $ 2.5 $ 2.6 $5.0 $12.6
FISCAL 1996............. 5.0 5.0 5.0 5.1 20.1
FISCAL 1997............. 5.0 5.0 5.0 7.1 22.1
FISCAL 1998............. 10.0 10.1 10.1
</TABLE>
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 28, 1997 on an actual basis and on a pro forma basis giving effect to
(i) the Special Dividend, (ii) the Recapitalization, (iii) the Offerings, (iv)
the Repurchase and (v) the Employee Stock Grant as if the Special Dividend,
the Recapitalization, the Offerings, the Repurchase and the Employee Stock
Grant had occurred as of such date. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources", "Management--Stock Incentive Plans", "Description of Capital
Stock--Recapitalization", "Underwriting" and Notes 2 and 9 to Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NOVEMBER 28, 1997
------------------
PRO
ACTUAL FORMA
-------- --------
(IN MILLIONS)
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Preferred Stock--Class A, $100 par value; actual: 20,000
shares authorized, 7,672.5 shares issued and
outstanding.............................................. $ 0.8 $ --
Preferred Stock--Class B, $50 par value; actual: 200,000
shares authorized, 196,490 shares issued and
outstanding.............................................. 9.8 --
Preferred Stock--no par value; pro forma: 50,000,000
shares authorized, none issued and outstanding........... -- --
Common Stock--$50 par value; actual: 220,000 shares
authorized, 201,150 shares issued and outstanding........ 10.0 --
Class A Common Stock--no par value; pro forma: 475,000,000
shares authorized, 12,300,000 shares issued and
outstanding(1)........................................... -- 35.0
Class B Common Stock--no par value; pro forma: 475,000,000
shares authorized, 144,125,400 shares issued and
outstanding(2) .......................................... -- 341.6
Additional paid-in capital................................ 5.1 --
Cumulative translation adjustment......................... (15.5) (15.5)
Retained earnings......................................... 1,472.8 936.6
-------- --------
Total shareholders' equity.............................. $1,483.0 $1,297.7
======== ========
</TABLE>
- --------
(1) Includes 150,000 shares of Class A Common Stock which will be issued
pursuant to the Employee Stock Grant. Excludes (i) up to 2,800,000 shares
of Class A Common Stock issuable upon the exercise of incentive options to
be granted to designated employees pursuant to the Incentive Compensation
Plan at the time of the Offerings at an exercise price equal to the
initial public offering price and (ii) 1,500,000 shares of Class A Common
Stock to be sold upon the exercise of options to be granted pursuant to
the Employee Discount Option Grant. See "Management--Stock Incentive
Plans".
(2) Includes 17,120,400 shares of Class B Common Stock to be issued upon
conversion of the Existing Preferred Stock in connection with the
Recapitalization (as adjusted to eliminate fractional shares). See
"Description of Capital Stock--Recapitalization".
17
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with the Consolidated Financial
Statements of the Company and other financial data included elsewhere in this
Prospectus. The data set forth below (except for the financial data as of
November 28, 1997 and for the nine months ended November 22, 1996 and November
28, 1997) have been derived from financial statements audited by BDO Seidman,
LLP, independent certified public accountants. Consolidated balance sheets as
of February 23, 1996 and February 28, 1997, and the related consolidated
statements of income and of cash flows for each of the three years in the
period ended February 28, 1997 are included elsewhere in this Prospectus. The
financial data as of November 28, 1997 and for the nine months ended
November 22, 1996 and November 28, 1997 has been derived from the Company's
unaudited financial statements which, in the opinion of management, have been
prepared on the same basis as the audited financial statements and include all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the information set forth below. These historical results are not
necessarily indicative of the results to be expected in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED(2)
---------------------------------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1993 1994 1995 1996 1997(1) 1996 1997
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $1,758.6 $1,813.7 $2,048.7 $2,155.9 $2,408.4 $1,775.1 $2,060.5
Cost of sales.......... 1,228.1 1,268.6 1,451.8 1,468.2 1,551.6 1,150.7 1,316.5
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 530.5 545.1 596.9 687.7 856.8 624.4 744.0
Selling, general and
administrative
expenses(3)........... 421.1 500.0 518.7 524.1 630.4 464.9 499.1
Patent litigation ex-
pense(4).............. -- 12.0 -- -- 84.8 84.8 --
-------- -------- -------- -------- -------- -------- --------
Operating income....... 109.4 33.1 78.2 163.6 141.6 74.7 244.9
Patent litigation in-
terest expense(4)..... -- (3.0) -- -- (111.7) (111.7) --
Other income, net...... 10.7 16.3 27.1 24.0 21.4 18.4 15.7
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes, equity in net
income (loss) of joint
ventures and dealer
transitions, and
cumulative effect of
accounting changes.... 120.1 46.4 105.3 187.6 51.3 (18.6) 260.6
Provision for income
taxes................. 41.6 17.8 40.9 68.1 23.6 (8.6) 100.3
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
equity in net income
(loss) of joint
ventures and dealer
transitions, and
cumulative effect of
accounting changes.... 78.5 28.6 64.4 119.5 27.7 (10.0) 160.3
Equity in net income
(loss) of joint
ventures and dealer
transitions(3)........ (0.6) (30.6) (0.2) 4.0 -- 1.2 3.0
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
accounting changes.... 77.9 (2.0) 64.2 123.5 27.7 (8.8) 163.3
Cumulative effect of
accounting
changes(5)............ -- (68.1) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 77.9 $ (70.1) $ 64.2 $ 123.5 $ 27.7 $ (8.8) $ 163.3
======== ======== ======== ======== ======== ======== ========
UNAUDITED PRO FORMA PER
SHARE DATA(6):
Net income............. $ 27.7 $ 163.3
Pro forma adjustments:
Retained earnings
reduction for
conversion of
Existing Preferred
Stock................ (383.2) --
Net income reduction
for Employee Stock
Grant................ -- (2.1)
-------- --------
Net income (loss)
attributable to
holders of Common
Stock................. $ (355.5) $ 161.2
======== ========
Net income (loss) per
share of Common
Stock................. $ (2.25) $ 1.02
======== ========
Weighted average shares
of Common Stock
outstanding........... 158.1 158.3
======== ========
Dividends per share of
Common Stock.......... $ 0.27 $ 0.28
======== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NOVEMBER 28, 1997(2)
----------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, PRO
1993 1994 1995 1996 1997(1) ACTUAL FORMA(7)
------------ ------------ ------------ ------------ ------------ ---------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 484.0 $ 385.7 $ 476.4 $ 475.6 $ 474.6 $ 551.2 $ 365.9
Total assets............ 1,634.5 1,703.8 1,761.8 1,884.5 1,922.1 2,171.4 1,984.7
Total liabilities(5).... 254.1 439.4 459.6 490.9 542.1 688.4 687.0
Shareholders' equity.... 1,380.4 1,264.4 1,302.2 1,393.6 1,380.0 1,483.0 1,297.7
</TABLE>
- --------
(1) Fiscal 1997 included 53 weeks.
(2) Unaudited.
(3) During Fiscal 1994, the Company and Steelcase Strafor recorded
restructuring and unusual charges related to plant closings and
consolidations, severance payments, fixed asset write-downs, intangible
asset write-offs, reorganization related costs and certain environmental
matters. These charges increased selling, general and administrative
expenses and equity in net loss of joint ventures by approximately $56.2
million and $20.0 million, respectively.
(4) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations" and Note 10 to Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
(5) Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, for its domestic unfunded
postretirement health care and life insurance programs, and SFAS No. 109,
Accounting for Income Taxes. The cumulative effects of adopting SFAS No.
106 and SFAS No. 109 were to decrease and increase net income during
Fiscal 1994 by $70.0 million and $1.9 million, respectively.
(6) The unaudited pro forma per share data gives effect to the
Recapitalization and the Employee Stock Grant as if the Recapitalization
had occurred on February 24, 1996 and the Employee Stock Grant had
occurred on March 1, 1997. Because of the significant impact of the
Recapitalization on net income (loss) per share of Common Stock and
dividends per share of Common Stock, historical amounts have not been
presented. See "Management--Stock Incentive Plans", "Description of
Capital Stock--Recapitalization" and Note 2 to Consolidated Financial
Statements of the Company included elsewhere in this Prospectus.
(7) The unaudited pro forma balance sheet data gives effect to (i) the
declaration and payment of the Special Dividend in the aggregate amount of
$150.9 million, (ii) the Repurchase and (iii) the Employee Stock Grant as
if the Special Dividend, the Repurchase and the Employee Stock Grant had
occurred as of November 28, 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources", "Management--Stock Incentive Plans" and Note 2 to
Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with "Selected Financial Data" and
the Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
OVERVIEW
For operating purposes, the Company's business includes four geographic
segments: the U.S. market, the Canadian market, the European market and all
other international markets. U.S. net sales include office furniture sold
within the country through Steelcase U.S., as well as revenues generated from
the Company's service-oriented and non-furniture related businesses. Non-
domestic net sales include office furniture sold through Steelcase Canada and
Steelcase International. The Company reflects Steelcase Strafor in its
consolidated financial statements pursuant to the equity method of accounting
and therefore does not consolidate the joint venture's results of operations
with that of its own. See Note 6 to Consolidated Financial Statements of the
Company included elsewhere in this Prospectus. Steelcase Strafor has not had a
material impact on net income during the periods discussed herein due
primarily to a weak European economy.
According to BIFMA, U.S. office furniture industry shipments totaled
approximately $10 billion in calendar 1996 and grew at a CAGR of approximately
7.2% over the three-year period ended December 31, 1996. Strong growth
continued in 1997, with BIFMA reporting that U.S. office furniture industry
shipments increased $1.1 billion, or 14.9%, to $8.5 billion for the nine-month
period ended September 30, 1997, from $7.4 billion for the comparable period
in the prior year. Management believes this growth has been a function of
increased white-collar employment, increased commercial construction and
increased capital spending and recent changes in the workplace, including the
growing use and integration of technology, changes in organizational
structures and work processes, greater awareness of health and safety issues
and continued focus on cost efficiency.
The Company has outperformed the U.S. industry average with U.S. office
furniture net sales growth of 8.3% in Fiscal 1997 and 16.5% during the nine
months ended November 28, 1997. Over the three-year period ended February 28,
1997, consolidated net sales grew at a CAGR of approximately 9.9%. The growth
occurred both in U.S. office furniture net sales, with a CAGR of 9.1%, and in
non-domestic office furniture net sales, with a CAGR of 19.5%. The Company's
net sales primarily represent sales to its dealers, which it builds to order,
with relatively short lead times. Therefore, net sales in a quarter
predominantly depend on customer orders received by dealers during that
quarter and the Company does not have any significant long-term inventory and
backlog.
Gross margins have improved to 35.6% for Fiscal 1997 from 29.1% for Fiscal
1995 and to 36.1% for the nine months ended November 28, 1997 from 35.2% for
the comparable period in the prior year. This improvement reflects increased
overhead absorption through increased sales and the impact of a cost reduction
program, initiated in Fiscal 1996, designed primarily to improve raw materials
sourcing, contain costs and rationalize facilities. The gross margin
improvement has been slightly offset by selling, general and administrative
expenses which increased to 26.2% of net sales for Fiscal 1997 from 25.3% of
net sales for Fiscal 1995 reflecting strategic investments in new product
developments, such as Pathways, and in information systems, such as SAP, a
comprehensive information management system ("SAP") supplied by SAP AG. As a
result of the improvements in gross margin net of the increases in selling,
general and administrative expenses, operating margins have improved
significantly to 9.4% (excluding patent litigation expense) for Fiscal 1997
from 3.8% for Fiscal 1995 and improved to 11.9% for the nine months ended
November 28, 1997 from 9.0% (excluding patent litigation expense) for the
comparable period in the prior year.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of income data as a
percentage of net sales for Fiscal 1995, 1996 and 1997 and the nine months
ended November 22, 1996 and November 28, 1997.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 70.9 68.1 64.4 64.8 63.9
----- ----- ----- ----- -----
Gross profit............ 29.1 31.9 35.6 35.2 36.1
Selling, general and
administrative
expenses............... 25.3 24.3 26.2 26.2 24.2
Patent litigation ex-
pense.................. -- -- 3.5 4.8 --
----- ----- ----- ----- -----
Operating income........ 3.8 7.6 5.9 4.2 11.9
Patent litigation inter-
est expense............ -- -- (4.6) (6.3) --
Other income, net....... 1.3 1.1 0.9 1.0 0.8
----- ----- ----- ----- -----
Income (loss) before
provision for income
taxes and equity in net
income (loss) of joint
ventures and dealer
transitions............ 5.1 8.7 2.2 (1.1) 12.7
Provision for income
taxes.................. 2.0 3.2 1.0 (0.5) 4.9
----- ----- ----- ----- -----
Income (loss) before
equity in net income
(loss) of joint
ventures and dealer
transitions............ 3.1 5.5 1.2 (0.6) 7.8
Equity in net income
(loss) of joint ven-
tures and dealer tran-
sitions................ -- 0.2 -- 0.1 0.1
----- ----- ----- ----- -----
Net income (loss)....... 3.1% 5.7% 1.2% (0.5)% 7.9%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED NOVEMBER 28, 1997 COMPARED TO NINE MONTHS ENDED NOVEMBER
22, 1996
NET SALES. Net sales increased $285.4 million, or 16.1%, to $2,060.5 million
for the nine months ended November 28, 1997, from $1,775.1 million for the
nine months ended November 22, 1996. The Company's U.S. net sales increased
$260.5 million, or 16.2%, to $1,873.0 million from $1,612.5 million and non-
domestic net sales increased $24.9 million, or 15.3%, to $187.5 million from
$162.6 million, respectively, from the comparable period in the prior year.
The growth in the U.S. business has been driven primarily by increases in unit
sales across most product lines reflecting strong industry fundamentals. The
non-domestic net sales growth resulted from industry growth in Canada and
strong export sales to both Latin America and the Middle East.
GROSS PROFIT. The Company's gross profit increased $119.6 million, or 19.2%,
to $744.0 million for the nine months ended November 28, 1997, from $624.4
million for the nine months ended November 22, 1996. As a percentage of net
sales, gross profit increased to 36.1% for the nine months ended November 28,
1997 from 35.2% for the nine months ended November 22, 1996. The improvement
resulted primarily from the increased unit sales volume in the period without
a comparable increase in overhead, as well as continued success of the Fiscal
1996 cost reduction program. In addition, this improvement in gross profit
absorbed incremental costs related to furniture distribution process changes,
the restructuring and disposition of a non-furniture related manufacturing
facility and certain manufacturing equipment write-offs, which aggregated
$15.0 million and $4.5 million for the nine months ended November 28, 1997 and
November 22, 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $34.2 million, or 7.4%, to $499.1 million
for the nine months ended November 28, 1997, from $464.9 million for the nine
months ended November 22, 1996. As a percentage of net sales, the Company's
selling, general and administrative expenses decreased to 24.2% for the nine
months ended November 28, 1997 from 26.2% for the nine months ended November
22, 1996, reflecting
21
<PAGE>
management's cost containment efforts. The decrease was partially offset by
investments in new product development and information systems. In addition,
selling, general and administrative expenses for the nine months ended
November 28, 1997 include charges relating to the restructuring of a foreign
subsidiary and the relocation of a showroom facility in the amount of $5.0
million and receipt by the Company of a net litigation settlement in the
amount of $9.8 million. Selling, general and administrative expenses for the
nine months ended November 22, 1996 include a subsidiary restructuring charge
and an intangible asset write-off aggregating approximately $8.6 million.
PATENT LITIGATION EXPENSE. In December 1996, the Company concluded a 17-year
patent litigation with Haworth resulting in a lump sum payment by the Company
to Haworth. This payment, net of reserves, reduced net income by $123.5
million for the nine months ended November 22, 1996. See Note 10 to
Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
OTHER INCOME, NET. Other income, net decreased $2.7 million, or 14.7%, to
$15.7 million for the nine months ended November 28, 1997 from $18.4 million
for the nine months ended November 22, 1996 primarily as a result of losses
incurred on dealer transitions, which are dealerships that the Company has
acquired with the intention of reselling as soon as practicable.
PROVISION FOR INCOME TAXES. Income tax expense for the nine months ended
November 28, 1997 was 38.5% of income before taxes as compared to 46.2% for
the nine months ended November 22, 1996. The decrease in the effective tax
rate was primarily attributable to the impact of recurring non-deductible
expenses relative to the level of income for each of the respective periods.
NET INCOME (LOSS). For the reasons set forth above, primarily patent
litigation expenses, net income (loss) increased $172.1 million to $163.3
million for the nine months ended November 28, 1997 from $(8.8) million for
the nine months ended November 22, 1996. Excluding patent litigation expenses,
net income would have increased $48.6 million, or 42.4%, to $163.3 million for
the nine months ended November 28, 1997 from $114.7 million for the nine
months ended November 22, 1996.
YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 23, 1996
Fiscal 1997 included 53 weeks while Fiscal 1996 included 52 weeks. See Note
1 to Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
NET SALES. Net sales increased $252.5 million, or 11.7%, to $2,408.4 million
for Fiscal 1997 from $2,155.9 million for Fiscal 1996. The Company's U.S. net
sales increased $216.7 million, or 11.0%, to $2,183.9 million from $1,967.2
million and non-domestic net sales increased $35.8 million, or 19.0%, to
$224.5 million from $188.7 million, respectively, from Fiscal 1996. The U.S.
net sales growth resulted from increases in unit sales across most product
categories reflecting strong industry fundamentals and, in part, from
acquisitions. The non-domestic net sales growth resulted from acquisitions and
strong export sales to both Latin America and the Middle East.
GROSS PROFIT. The Company's gross profit increased $169.1 million, or 24.6%,
to $856.8 million for Fiscal 1997 from $687.7 million for Fiscal 1996. As a
percentage of net sales, gross profit increased to 35.6% for Fiscal 1997 from
31.9% for Fiscal 1996. The improvement during Fiscal 1997 primarily resulted
from increased unit sales volume growth while overhead costs remained
relatively fixed due to a full year's impact of the Fiscal 1996 cost reduction
program.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $106.3 million, or 20.3%, to $630.4 million
for Fiscal 1997 from $524.1 million for Fiscal 1996. As a percentage of net
sales, selling, general and administrative expenses increased to 26.2%
22
<PAGE>
for Fiscal 1997 from 24.3% for Fiscal 1996. The increase was attributable
primarily to increased investments in new product development and information
systems, as well as acquisitions and international expansion. The Company also
absorbed $8.6 million of charges related to a subsidiary restructuring and an
intangible asset write-off in Fiscal 1997 and $6.6 million of charges relating
to the restructuring of a foreign subsidiary and termination of a management
incentive compensation program in Fiscal 1996.
PATENT LITIGATION EXPENSE. In December 1996, the Company concluded a 17-year
patent litigation with Haworth resulting in a lump sum payment by the Company
to Haworth. This payment, net of reserves, reduced net income by $123.5
million for Fiscal 1997. See Note 10 to Consolidated Financial Statements of
the Company included elsewhere in this Prospectus.
OTHER INCOME, NET. Other income, net decreased $2.6 million, or 10.8%, to
$21.4 million for Fiscal 1997 from $24.0 million for Fiscal 1996 primarily as
a result of losses incurred on dealer transitions and decreased interest
income.
PROVISION FOR INCOME TAXES. Income tax expense for Fiscal 1997 was 46.0% of
income before taxes as compared to 36.3% for Fiscal 1996. The increase in the
effective tax rate was primarily attributable to the impact of recurring non-
deductible expenses relative to the level of income for each of the respective
periods.
NET INCOME. For the reasons set forth above, primarily patent litigation
expenses, net income decreased $95.8 million, or 77.6%, to $27.7 million for
Fiscal 1997 from $123.5 million for Fiscal 1996. Excluding patent litigation
expenses, net income would have increased $27.7 million, or 22.4%, to $151.2
million for Fiscal 1997 from $123.5 million for Fiscal 1996.
YEAR ENDED FEBRUARY 23, 1996 COMPARED TO YEAR ENDED FEBRUARY 28, 1995
NET SALES. Net sales increased $107.2 million, or 5.2%, to $2,155.9 million
for Fiscal 1996 from $2,048.7 million for Fiscal 1995. The Company's U.S. net
sales increased $83.8 million, or 4.4%, to $1,967.2 million from $1,883.4
million and non-domestic net sales increased $23.4 million, or 14.2%, to
$188.7 million from $165.3 million, respectively, from Fiscal 1995. A
significant portion of the growth in the Company's U.S. net sales was due to a
price increase, while non-domestic net sales grew primarily as a result of
industry growth in Canada and the consolidation of operations in Japan due to
an increase in the Company's ownership interest.
GROSS PROFIT. The Company's gross profit increased $90.8 million, or 15.2%,
to $687.7 million for Fiscal 1996 from $596.9 million for Fiscal 1995. As a
percentage of net sales, gross profit increased to 31.9% for Fiscal 1996 from
29.1% for Fiscal 1995. This improvement was driven by a number of factors
including plant rationalization and productivity gains achieved as a result of
the cost reduction program initiated in Fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $5.4 million, or 1.0%, to $524.1 million for
Fiscal 1996 from $518.7 million for Fiscal 1995. As a percentage of net sales,
selling, general and administrative expenses decreased to 24.3% for Fiscal
1996 from 25.3% for Fiscal 1995. Included in selling, general and
administrative expenses are $6.6 million of charges relating to the
restructuring of a foreign subsidiary and termination of a management
incentive compensation program in Fiscal 1996 and $24.5 million of charges
relating to voluntary severance packages and an equipment write-off associated
with the termination of a product development program in Fiscal 1995. The
increase after excluding these charges, primarily resulted from increased
investments in new product development and information systems, and the
consolidation of operations in Japan.
23
<PAGE>
OTHER INCOME, NET. Other income, net decreased $3.1 million, or 11.4%, to
$24.0 million for Fiscal 1996 from $27.1 million for Fiscal 1995. The decrease
is attributable to a gain realized on the sale of stock reduced by losses on
dealer transitions completed during Fiscal 1995, net of increased interest
income earned in Fiscal 1996.
PROVISION FOR INCOME TAXES. Income tax expense for Fiscal 1996 was 36.3% of
income before taxes as compared to 38.8% for Fiscal 1995. The decrease in the
effective tax rate is primarily attributable to the impact of recurring non-
deductible expenses relative to the level of income for each of the respective
periods and an increase in certain tax credits available to the Company in
Fiscal 1996.
NET INCOME. For the reasons set forth above, net income increased $59.3
million, or 92.4%, to $123.5 million for Fiscal 1996 from $64.2 million for
Fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's cash and capital requirements have been
satisfied through cash generated from operating activities. The Company has no
long-term debt. Cash, cash equivalents and short-term investments were $351.8
million at November 28, 1997. After payment of the Special Dividend described
below, these funds, in addition to cash generated from future operations, are
expected to be sufficient to finance the known or foreseeable future liquidity
and capital needs of the Company.
The Company's capital expenditures were $122.0 million in Fiscal 1997
compared to $104.6 million in Fiscal 1996 and $94.8 million in Fiscal 1995.
Capital expenditures for the nine months ended November 28, 1997, were $96.9
million and the Company estimates that capital expenditures for Fiscal 1998
will exceed $125.0 million. These capital expenditures include increased
investments in manufacturing equipment expected to improve productivity and
safety, increase capacity, and facilitate the first shipment of Pathways
products which is scheduled for the first quarter of calendar 1998. In
addition, capital expenditures for Fiscal 1996 and Fiscal 1997 reflect costs
associated with replacing the Company's aircraft and investing in corporate
and showroom facilities. The Company expects capital expenditures to continue
to be significant due to the Company's continued investment in new product
development, SAP implementation and new manufacturing equipment intended to
increase plant capacity. While the costs of purchasing and implementing SAP
will be capitalized and amortized over the software's expected useful life,
certain modifications, year 2000 related matters, data preparation, training
and other costs, will be expensed as incurred.
Since 1995, the Company has been reviewing potential issues associated with
computer applications that could fail or generate erroneous results by or at
the year 2000 ("Year 2000 Issues") and expects to conclude its review of all
these issues during calendar 1998. To date, the cost to the Company of
analyzing these potential problems, identifying actual applications that need
to be addressed and modifying its computer applications has not been material.
Based upon its current estimates, management expects that the additional cost
of concluding its review and addressing any identified problems will not be
material and that any remaining Year 2000 Issues, including those that relate
to interfacing with customers, dealers and suppliers, will be addressed and
rectified in a timely manner and will not have any adverse affect on the
Company's operations or its financial results or conditions.
The Special Dividend in the aggregate amount of $150.9 million was declared
by the Company's Board of Directors on October 27, 1997 and was paid on
January 9, 1998 to Common Stock holders of record as of December 2, 1997.
CASH PROVIDED BY OPERATING ACTIVITIES. Cash provided by operating activities
totaled $306.1 million for the nine months ended November 28, 1997, $80.8
million for Fiscal 1997, $200.7 million for
24
<PAGE>
Fiscal 1996 and $42.2 million for Fiscal 1995. Cash from operating activities
resulted primarily from net income, excluding non-cash items, such as
depreciation and amortization, net of increases in accounts and notes
receivable and leased assets.
CASH USED IN INVESTING ACTIVITIES. Cash used in investing activities totaled
$112.3 million for the nine months ended November 28, 1997 and was comprised
primarily of capital expenditures and net increases in investments. Cash used
in investing activities totaled $75.4 million for Fiscal 1997 and was
comprised primarily of capital expenditures, net of a repayment of a note
receivable from Steelcase Strafor. Cash used in investing activities totaled
$115.9 million for Fiscal 1996 and was comprised primarily of capital
expenditures and acquisitions. Cash used in investing activities totaled $68.7
million for Fiscal 1995 and was comprised primarily of capital expenditures,
net of proceeds from the sale of facilities.
CASH USED IN FINANCING ACTIVITIES. Cash used in financing activities totaled
$44.9 million for the nine months ended November 28, 1997, $40.4 million for
Fiscal 1997, $39.8 million for Fiscal 1996 and $33.0 million for Fiscal 1995.
The cash was used primarily to fund quarterly dividends paid by the Company.
INFLATION
The Company believes that inflation has not had a material effect on its
overall financial condition or results of operations during the nine months
ended November 28, 1997 and Fiscal 1997, 1996 and 1995. While the Company has
experienced inflationary increases in compensation-related and certain raw
material costs, it has also experienced certain decreases in other raw
material costs.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share, establishes standards for computing and presenting earnings per share
and simplifies the standards previously found in APB Opinion No. 15, which has
been superseded. It replaces the presentation of primary earnings per share
with a presentation of basic earnings per share, which excludes dilution and
is computed by dividing net income attributable to holders of common stock by
the weighted-average number of shares of common stock outstanding for the
period. Diluted earnings per share is computed in a similar manner to fully
diluted earnings per share pursuant to APB Opinion No. 15. This Statement is
effective for the Company for Fiscal 1998 and is not expected to have a
material effect on the Company's consolidated financial statements.
SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. This Statement is effective for the Company for
Fiscal 1999 and requires comparative information for earlier years to be
restated.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual and interim
financial statements. It also establishes new standards for disclosures
regarding products and services, geographic areas and major customers. This
statement is effective for the Company for Fiscal 1999.
The Company's consolidated balance sheets and the related consolidated
statements of income, changes in shareholders' equity and cash flows will not
be affected by implementation of SFAS No. 130 and SFAS No. 131.
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BUSINESS
GENERAL
Steelcase is the world's largest manufacturer and provider of office
furniture, office furniture systems and related products and services. The
Company has led the U.S. office furniture industry in sales for 24 consecutive
years and believes it has the industry's largest base of installed products.
In Fiscal 1997, the Company's consolidated net sales were $2.4 billion and in
the year ended December 31, 1996, unconsolidated joint ventures in which the
Company generally holds 50% interests generated approximately $0.5 billion in
net sales.
To enhance its industry leadership position, the Company focuses on
research, development and design methods that analyze individual and group
work processes to create work environments that enable workers to perform more
effectively. Since 1994, the Company has won 24 design awards for new products
and product enhancements across its product lines. In calendar 1998, the
Company plans to introduce more than 75 new products and product enhancements,
including Pathways, a unique portfolio of products that, in addition to office
furniture and work tools, will include architectural elements such as interior
walls and floors designed to integrate entire work spaces. Pathways is
designed to be compatible with the Company's current products.
The Company offers its extensive range of products and services to
commercial and non-commercial organizations worldwide through a network of
independent dealers in more than 650 locations. These dealers provide local
expertise and ongoing customer support services and remain in close contact
with customers during and after the completion of a project to help ensure
customer satisfaction and to encourage repeat business. Steelcase has strong
brand recognition and a reputation for quality among architects, contract
interior designers and corporate facility managers who typically influence
purchasing decisions. The Company's dealer network and sales organization
utilize Workplace Performance, a consultative process supported by proprietary
software-based tools, to help demonstrate early in the planning process the
impact of office space and the work environment on productivity and occupancy
costs.
Steelcase's comprehensive portfolio of furniture products and related
products and services, together with its extensive knowledge of work
environments, enables the Company to satisfy virtually all of its customers'
furniture-related needs. These needs include not only furniture and related
products but also initial workspace planning, rapid delivery and installation,
ongoing support services, furniture asset management, leasing and, if desired,
refurbishing or remanufacturing. The Company's primary product categories
include: (i) office furniture systems, including Series 9000, Avenir, Context,
Elective Elements and Montage; (ii) seating products, including Sensor,
Criterion, Rally and Springboard; (iii) group and individual storage products,
including filing units and cabinets; and (iv) desk and casegood products, such
as bookcases and credenzas. The Company sells and markets primarily steel and
wood products under the Steelcase and Turnstone brands as well as various
other brand name products manufactured through joint ventures such as
Steelcase Strafor, licensing arrangements and the Steelcase Design
Partnership.
The Company also offers complementary product lines through the Steelcase
Design Partnership focusing on specialty markets, including product lines for
lobby and reception areas, cafeteria and informal gathering areas, private
offices, learning environments, executive conference areas, group work
environments, video conferencing facilities and healthcare environments. The
Steelcase Design Partnership also provides surfacing materials for
hospitality, healthcare and contract markets, architectural millwork and
ergonomic tools for the workplace. In addition to its product offerings, the
Company provides services such as (i) furniture asset management through FMC,
(ii) refurbishing and remanufacturing through Revest Inc. ("Revest") and (iii)
lease financing through SFSI.
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INDUSTRY DYNAMICS
BIFMA reports that U.S. office furniture industry shipments totaled
approximately $10 billion in calendar 1996 and grew at a CAGR of approximately
7.2% over the three-year period ended December 31, 1996. Strong growth
continued in 1997, with BIFMA reporting that U.S. office furniture industry
shipments increased $1.1 billion, or 14.9%, to $8.5 billion for the nine-month
period ended September 30, 1997, from $7.4 billion for the comparable period
in the prior year.
Overall growth in the office furniture industry is primarily a function of
increased white-collar employment, increased commercial construction and
increased capital spending. The Company believes that certain other recent
trends are also affecting, and will continue to affect, the demand for the
Company's products and services. The growing use and integration of
technology, changes in organizational structures and work processes, greater
awareness of health and safety issues and continued focus on cost efficiency
are driving businesses to increasingly pursue more effective ways to support
their workers and utilize their existing work spaces. The Company believes
these trends will increase demand for its existing products and services and
will create opportunities to introduce new products and to develop new
markets.
INTEGRATING TECHNOLOGY. The rapidly growing role of technology in the
workplace has placed greater demand on the infrastructure of the office
environment. Organizations must provide workers with ready access to
technology interfaces at their individual workstations as well as in the
increasing number of team workspaces. Many companies have also found that
their existing buildings and space division cannot provide sufficient capacity
and flexibility to support changes in workplace technology. Steelcase
continues to enhance its existing product lines to accommodate technological
changes, and the Company's new product development will focus on work process
improvements linked to technology integration. The Company's Pathways
portfolio is designed to be integrated with building infrastructures for
improved distribution of power and communications cabling.
CHANGES IN WORK PROCESSES. Businesses are increasingly changing their
organizational structures from a hierarchical model to flatter functional
models in order to focus on the work needs of the individual. Additionally,
there is a broader range of work being performed by individuals and teams
across many levels within organizations. Traditional office layouts are being
replaced with product applications that allow space to be easily reconfigured
to the specific needs of groups and individuals. The Company believes that
these trends have significant implications for the physical work environment
and will increase the demand for products such as those offered by the Company
that accommodate these new organizational structures and provide increasingly
flexible support for both individual and group work environments.
INCREASED AWARENESS OF HEALTH AND SAFETY ISSUES. Businesses are increasingly
focused on the health, safety and comfort of office workers and are paying
closer attention to how physical environments affect those issues.
Ergonomically-designed furniture products and work tools can reduce the risk
of injury associated with certain repetitive work processes and the lost time
caused by those injuries. In addition, such products provide for greater
comfort and can create enhanced productivity. Steelcase believes that this
heightened focus will drive demand for its broad range of ergonomically-
designed products.
FOCUS ON COST AND EFFICIENCY. Businesses are increasingly considering
workplace design as a key factor in reducing occupancy costs and achieving
productivity gains. The Company believes that these concerns will continue to
drive the demand for its new products and product applications that integrate
technology, processes, people and space to improve the work environment and
increase worker effectiveness.
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COMPETITIVE STRENGTHS
The Company believes it will continue to be the leader in its industry as a
result of the following competitive strengths:
MARKET LEADERSHIP AND STRONG BRAND FRANCHISE. The Company has maintained the
largest total market share of any manufacturer in the U.S. office furniture
industry since 1973. In calendar 1996, based on BIFMA statistics, the Company
had a market share of approximately 20%, nearly twice that of its nearest
competitor. "Steelcase" is the most widely recognized brand name in the
industry, and the Company believes it has earned a reputation for producing a
broad range of high quality office furniture and related products. The
Company's industry leadership and brand recognition are key marketing tools
for expanding its customer base and entering new markets and market segments.
LONG-TERM CUSTOMER RELATIONSHIPS; LARGE INSTALLED BASE. The Company,
together with its dealer network, has developed strong, long-term
relationships with a large number of commercial and non-commercial
organizations. As a result of its sales leadership and these long-term
relationships, the Company believes it has the largest base of installed
products in the U.S. office furniture industry. Through this installed base,
the Company generates significant annual sales from repeat and expansion
orders. By purchasing additional Steelcase products, these customers ensure
compatibility and conformity with existing products and retain the local
Steelcase dealer as a single contact for ongoing services. The Company
believes that as its existing customers expand and reconfigure their
workplaces their need for additional Steelcase products and dealer services
will increase.
GLOBAL DEALER NETWORK. The Company's strong relationships with its worldwide
network of independent dealers in more than 650 locations, built over many
years of consistent partnership, allow the Company to focus on the core
functions of design, manufacturing and distribution while benefiting from the
dealers' local market expertise and ongoing customer support. This network,
which includes dealers in more than 200 locations outside of the United States
and Canada, complements the Company's global distribution capability and
enables Steelcase to address the product and support service needs of its
multinational customers in virtually all non-domestic markets. The Company's
relationships with its dealers are typically long-term in nature, providing
continuity in customer relationships and a strong foundation of product
knowledge. In addition, the dealers, together with the Company's sales
representatives, maintain close relationships with local architects, contract
interior designers and corporate facility managers who typically influence
purchasing decisions.
LEADERSHIP IN DESIGN, RESEARCH AND INNOVATION. The Company utilizes its
extensive knowledge of work processes, its ongoing research and its user-
centered design methodology to create innovative products and concepts which
address evolving customer needs. The Company's Corporate Development Center
provides a creative environment for 750 of the Company's research, design,
engineering and marketing personnel and houses ten laboratories for testing
sound, lighting, ergonomics, flammability and product durability. The
Company's personnel use the Corporate Development Center to conduct over
14,000 product tests annually. Since 1994, the Company has won 24 design
awards for new products and product enhancements across its product lines. The
Company, through its commitment to design, research and innovation, has
developed a strong reputation among, and close ties with, leading independent
architectural and design firms and design schools which play a significant
role in the industry.
KNOWLEDGE OF WORKPLACE NEEDS; CONSULTATIVE MARKETING APPROACH. The Company,
through ongoing research and interaction with its broad customer base, has
gained an extensive knowledge of how people work and how businesses can use
furniture and related products to facilitate more effective work processes. In
1995, the Company introduced Workplace Performance, a consultative process
supported by proprietary software-based tools that incorporates an extensive
database of customer
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information and industry research and trends. With the aid of Workplace
Performance, the Company's dealers and salesforce work with customers early in
the planning process to illustrate possible work space configurations and
product packages that help the customers improve their productivity and lower
their occupancy costs. The Company believes that its ability to provide more
comprehensive support to customers in the early stages of the planning process
is a significant competitive advantage.
MANUFACTURING AND DISTRIBUTION CAPABILITY. The Company believes it has the
largest office furniture manufacturing capacity in the world with more than 50
manufacturing facilities, including those operated by joint ventures. In
addition, the Company has an extensive distribution system in the United
States and Canada and uses commercial transport and delivery services in both
the United States and abroad. The Company's products, including those offered
by the Company's joint ventures, are generally available throughout the world.
CORPORATE CULTURE. Management believes that the Company's corporate culture
and values strengthen relationships with employees, customers, dealers and the
communities in which it operates. For Steelcase employees, this corporate
culture fosters loyalty and productivity as demonstrated by the fact that the
Company's employees in the United States and Canada have an average tenure of
approximately 12 years. As an example of its commitment to its employees, at
the time of the Offerings the Company will grant to each of approximately
15,000 employees 10 shares of Class A Common Stock pursuant to the Employee
Stock Grant and an immediately exercisable option to purchase a maximum of 100
shares of Class A Common Stock at a purchase price equal to 85% of the initial
public offering price pursuant to the Employee Discount Option Grant.
GROWTH STRATEGY
Steelcase's objectives are to strengthen its industry leadership position
and increase its revenues and profitability. To achieve these objectives, the
Company will:
FOCUS ON PRODUCT INNOVATION. The Company intends to strengthen its
leadership position in the office furniture industry and increase its revenues
through the development of aesthetically pleasing and technologically-
sophisticated new products and product enhancements. In Fiscal 1995, 1996 and
1997, the Company spent approximately $40 million, $50 million and $65
million, respectively, on research and development. In calendar 1998, the
Company plans to introduce more than 75 new products and product enhancements,
including Pathways and Answer, an office furniture systems line under the
Turnstone brand which is designed to work with Pathways. The Company's user-
centered design efforts address significant workplace trends and result in
products that support individual worker needs, including health, safety and
comfort. In addition, these products integrate technology and further support
the new work processes being adopted by organizations. The Company believes
its new products and product enhancements will offer superior flexibility and
help its customers improve organizational performance, better utilize their
work space and work more effectively.
PURSUE NEW MARKET OPPORTUNITY--PATHWAYS. In addition to enhancing its
existing product categories, the Company intends to leverage its extensive
knowledge of work processes to penetrate new markets and develop new market
segments for the work environment. The Company recently developed Pathways, a
unique portfolio of products and architectural elements designed to create
total interior space solutions. Pathways is designed to enable customers to
create, outfit and reconfigure technologically-sophisticated work environments
faster and more economically than they can today. Pathways uses a design logic
that makes its architectural elements and other products compatible with the
Company's current products, as well as competitors' products. The Pathways
portfolio includes removable, reconfigurable architectural elements such as
floor and wall systems, power, lighting and complementary furniture and work
tools. The Company believes Pathways offers a superior means to integrate all
workplace elements, including building operating systems, and accommodate all
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technological workplace needs. As a result, the Company believes Pathways
represents a significant opportunity for increased sales from customer
projects which involve new construction or building refurbishment. The Company
expects to begin shipping Pathways products in the first quarter of calendar
1998.
LEVERAGE INSTALLED BASE THROUGH KNOWLEDGE OF WORK. As a result of its sales
leadership and long-term relationships with many of its customers, the Company
believes it has the largest base of installed products in the industry. The
Company believes its knowledge of work has enabled it to develop a strong
reputation for improving workplace effectiveness and performance through the
integration of people, processes, technology and work space. As a result, the
Company's customers increasingly look to the Company and its dealers for
advice and consultation on general workplace issues in addition to furniture.
This offers the Company the opportunity to analyze customers' needs and to
offer solutions that include the application of the Company's products across
all of its product lines. The Company intends to increase sales to its
existing customers by capitalizing on its broad range of product solutions and
its Workplace Performance consultative approach, as well as new product
applications, to drive incremental growth across all product categories.
LEVERAGE DEALER NETWORK AND INCREASE SALES OPPORTUNITIES. To leverage
further its strong dealer network, the Company intends to continue to invest
in dealer programs and training that expand the service and operations
capabilities of its dealers as well as promote Steelcase products. In
addition, the Company intends to increase its percentage of a dealer's sales
by continually enhancing and expanding its portfolio of knowledge, products
and services to ensure that dealers can satisfy virtually all of a customer's
furniture-related needs through sales of Steelcase products. As the Company
broadens its portfolio, it also supports dealers in expanding their customer
base. For example, the Company's Turnstone brand product offering allows
dealers to compete effectively in the value-priced market segment.
PURSUE STRATEGIC ACQUISITIONS, JOINT VENTURES AND ALLIANCES. The Company has
historically acquired companies with complementary or ancillary businesses or
products, entered into joint ventures and established strategic or commercial
alliances with various companies. The Company will continue to evaluate
similar transactions that it believes are consistent with its growth strategy
or otherwise present attractive opportunities for growth, entry into new
markets or introduction of new products.
ENHANCE GLOBAL PRESENCE. The Company intends to support the existing global
operations of Steelcase International and Steelcase Strafor by investing in
product development for regional market needs, expanding existing dealer
operations and services and developing alliances to penetrate further the
markets served by the Company. In addition, the Company intends to support the
worldwide needs of its multinational customers as they expand their global
operations, as well as service local organizations in regional markets.
PRODUCTS AND SERVICES
Steelcase provides a broad range of office furniture and related products
and comprehensive support services to its customers as part of specific
projects and ongoing contractual relationships.
PRODUCTS
The Company offers an extensive range of office furniture and related
products at a variety of price points, allowing customers to satisfy virtually
all of their office furniture-related work environment needs
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through the Company and its dealers. The Company's primary product lines
include: (i) office furniture systems; (ii) seating; (iii) storage solutions;
and (iv) desks and casegoods.
OFFICE FURNITURE SYSTEMS
Since the mid-1980's, furniture systems have been the largest product
category in the office furniture industry, representing approximately one-
third of all office furniture sold in 1996. Office furniture systems consist
of movable and reconfigurable components which may be used to create work
areas of variable sizes and configurations. Furniture systems generally use
movable panels for space division, for acoustic and visual privacy, for
structural support and as conduits for power, telephone and data cabling.
Furniture systems also include panel-supported and freestanding components
such as work surfaces, desks, returns, pedestals, drawers, binder bins,
filing, lighting fixtures and keyboard support shelves. Furniture systems
offer customers more flexibility and greater space efficiency than traditional
dry-wall-based private offices and undivided desk areas.
Steelcase is the market leader based on sales in this category, offering a
broad range of aesthetic options, performance features, applications and price
points. Each Steelcase system also offers technology management options to
help ensure that phone, power and data lines are effectively managed and
available to the user. The Company's continued enhancement of Series 9000, a
panel-based system, and introduction of new furniture systems lines over the
years has allowed it to present a significantly wider selection of furniture
systems lines and componentry than any one competitor. The Company's furniture
systems product lines include:
SERIES 9000. Series 9000 is the Company's flagship furniture system,
representing the office furniture industry's largest selling product line. The
Company believes Series 9000 is the most comprehensive furniture system
product line in the industry. Series 9000 offers broad flexibility of
application, extensive technological capabilities and the ability to withstand
repeated reconfigurations. Because of its many options, Series 9000 is
installed by many different customers in a broad variety of facilities.
AVENIR. Avenir is a foundation system that offers simplicity, versatility
and value. Avenir provides a broad variety of panel, component and surface
material options. With universal panel connectors and fully assembled storage
options, Avenir is easy to install and reconfigure.
CONTEXT. Context is a unique furniture system which is built around
freestanding core desk units rather than panels or panel-supported components,
and utilizes screens for visual privacy. Context offers enhanced communication
and collaboration capabilities, as well as stackable privacy, high-image
aesthetics and technological support. Context is also suitable for private
offices.
ELECTIVE ELEMENTS. Elective Elements is a wood panel-based furniture system
known for its executive image, design versatility and solid performance.
Elective Elements' solutions can be tailored with an extensive palette of
finishes and an expanded range of components to create high-performance
environments.
MONTAGE. Montage is the Company's furniture system that emphasizes
architectural beauty and appeal, featuring versatility and progressive design
with a distinctive aesthetic style. Montage uses a frame and tile system which
provides stackable space division and flowing work surfaces and allows for
adaptation to changing interaction needs by increasing or reducing frame
heights.
PERSONAL HARBOR. Personal Harbor workspace is designed to support
individuals in highly collaborative team environments with the added benefit
of visual and acoustic privacy. Its compact
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workspace utilizes flexible work surfaces, shelving and storage space to
maximize individual effectiveness.
SEATING
Steelcase believes it is the world's largest office seating manufacturer and
a proven market leader in seating innovation. In 1973, the Company introduced
the first office chair to utilize a double plastic shell, a concept now
utilized in most office chairs. In the 1970's and 1980's, the Company was
among the first to develop ergonomic office chairs utilizing chair shapes,
materials and mechanisms designed to enhance worker productivity. The Company
believes its focus and research on materials, ergonomics, technology and work
processes and its broad platform of product styles and price points will
maintain and enhance the Company's share of the seating market. The Company
also believes that Sensor, which has sold more than 4 million units since its
introduction in 1986, has sold more units than any other office chair in the
history of the office furniture industry, and that Criterion, introduced in
1989, is currently the largest selling office chair in the world on an annual
basis.
The Company believes it offers the widest assortment of chair types and
chairs in the office furniture industry, providing chairs and other types of
seating for virtually every office need. The Company views most office seating
(excluding specialized uses such as stacking chairs or lounge seating) as
either high-performance or general use. The Company's primary seating products
are:
SENSOR. Sensor is marketed as a high-performance chair with several models
to meet the needs of virtually everyone throughout an organization. It has a
patented, flexing inner shell and a sophisticated synchro-tilt mechanism
designed to adjust with each movement of the user.
CRITERION. Criterion is marketed as a high-performance chair with a wide
variety of easy-to-use back, seat and arm adjustments. Criterion is one of the
first chairs on the market to offer an adjustable seat depth and adjustable
arm width to accommodate a wide range of body sizes and shapes.
The Company's other seating lines include: (i) general use chairs such as
Rally and Protege; (ii) Rapport, an office chair with a unique high-tech
aesthetic; (iii) Springboard, a high-performance, value-priced chair; and (iv)
Player, a side chair. In addition to these chairs, the Company offers a number
of other seating products including guest, executive, lounge, stackable and
collaborative or team-based offerings in both wood and non-wood materials.
STORAGE SOLUTIONS
The Company believes that it has been a leader in office storage products
and systems since the 1940's. Current product offerings include a broad
variety of vertical and lateral filing cabinets, bookcases and other types of
storage components. All product offerings are available in a wide range of
color and price options. The most popular lines, Series 800 and Series 900
lateral files, have a very large installed base and are repeatedly cited in
independent surveys as the highest quality storage product among certain
segments.
All the Company's office furniture systems offerings are complemented by a
full range of integrated storage solutions, including binder bins, storage
cabinets, personal storage towers, mobile and fixed pedestals and numerous
choices of lateral and vertical files coordinated in design, as well as
offering the same full range of color options. These products are available
fully assembled or as component parts for maximum customization. Recent
introductions include moderately-priced storage solutions through its
FirstFile series and the Activity Products line, introduced in 1995 to address
the increasing need to transport work items within and between individual and
team settings. Certain new products scheduled for introduction in calendar
1998 are designed to coordinate with Turnstone and Pathways products.
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DESKS AND CASEGOODS
The Company offers a wide variety of traditional, transitional and
contemporary desk and casegood products. These products offer a range of
solutions for private offices, team rooms and open plan environments. Desks
and casegoods are offered across many brands and in a variety of materials.
Steelcase offers these products in its wood collections CaneCreek, Broadmoor
and Stow Davis, providing a broad scope of style and performance options. In
addition, the Turnstone brand casegoods and desks are targeted to more cost-
conscious customers and are offered in laminate, wood, metal and home office
versions.
STEELCASE DESIGN PARTNERSHIP
The Steelcase Design Partnership entities design, manufacture and market a
variety of award-winning office products for specialty markets that complement
other Steelcase products, providing the customer with a more comprehensive
portfolio of product choices. The Steelcase Design Partnership includes:
BRAYTON INTERNATIONAL. Brayton International Inc. offers a broad collection
of lounge, executive, guest and healthcare seating, along with occasional
tables. Brayton products span traditional, transitional and contemporary
styling, featuring a wide range of finish options.
METRO. Metropolitan Furniture Corporation offers a variety of products known
for their contemporary style and designed to support and integrate technology
in groupwork environments, video conferencing facilities and private offices.
VECTA. Vecta, a division of the Company, provides seating and table products
designed for a variety of learning environments and conference, team and
cafeteria areas. It offers a number of folding tables that support the
flexibility requirements of training rooms.
DESIGNTEX. DesignTex Fabrics, Inc. provides and designs textiles for seating
upholstery, wallcovering and office panel systems. It serves contract,
hospitality and healthcare markets.
DETAILS. Office Details Inc. offers innovative work tools, including
keyboard support and desktop or wall-mounted organizational products and
personal lighting designed to help improve the productivity and efficiency of
people in the workplace.
WIGAND. Wigand Corporation engineers and produces architectural woodwork for
corporate headquarters, luxury hotels and professional workspaces.
PATHWAYS
Pathways is a unique portfolio of integrated architectural elements
including wall, floor and lighting systems, furniture, power and
communications elements designed to coordinate with existing Steelcase
products as well as competitors' products. The Company believes that Pathways
will be attractive to its existing customer base as well as to real estate
developers designing or retrofitting buildings. The Company has successfully
tested prototype Pathways in a customer location and expects to begin shipping
Pathways products in the first quarter of calendar 1998.
Pathways is designed to provide total interior space solutions, from wall to
wall and floor to ceiling, particularly in buildings that can no longer
accommodate the wiring and cabling needs of today's technology-driven
workplaces. Pathways architectural elements accept all wiring and cabling
network components and are designed to integrate with building infrastructures
for improved distribution of power and communications cabling.
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SERVICES
The Company utilizes its extensive knowledge of work processes and the local
expertise of its dealers to provide a range of services to customers,
including workplace planning, remanufacturing and refurbishing, furniture
management and lease financing. The Company believes services provided to its
customers during and after the furniture procurement process are becoming
increasingly important to customers and are key points of differentiation in
the marketplace. Many of the Company's dealers offer design and support
services, including project management and ongoing repair and maintenance, to
enhance long-term customer satisfaction and loyalty. The Company also offers
services on a nationwide basis to assist customers in addressing a range of
procurement-related issues. Revest remanufactures and refurbishes high quality
used office furniture, including systems products. The Company estimates that
shipments of remanufactured office furniture would have increased the $10
billion in U.S. office furniture industry shipments in calendar 1996 as
reported by BIFMA by approximately 5-10%. The FMC division provides
coordinated furniture management services, such as warehousing, inventory
control and internal relocations to customers with nationwide facilities. Each
customer is provided with a national representative who coordinates and
directs the various management services that are generally provided on a local
basis by Steelcase dealers. In addition to providing financing to dealerships,
SFSI provides customers with lease financing for products in connection with
the acquisition of office furniture. SFSI's net investment in leased assets
approximated $148.3 million as of November 28, 1997.
PRODUCT DESIGN AND DEVELOPMENT
Steelcase has a long history of award-winning product designs. Since 1994,
the Company has won 24 design awards for new products and enhancements across
its products lines, including the Industrial Designers Society of America
("IDSA") Gold Industrial Design Excellence Award for its Personal Harbor
workspace in 1995, the Facilities Design and Management Magazine Gold Award
for Table Cable wire management systems in 1996, and the IDSA Silver
Industrial Design Excellence Award for its Stella adjustable keyboard shelf in
1997.
In response to rapidly changing work environments, the Company has increased
research and development efforts in recent years and intends to introduce more
than 75 new products and product enhancements in calendar 1998. The Company
leverages the expertise of its research and design staff and its subsidiary,
IDEO, to enhance existing products and design new products to address evolving
customer needs and industry trends. In recent years, the Company's design
efforts have focused on the Pathways architectural elements as well as more
traditional furniture and related products. The Company's research efforts
include on-site user observation, behavioral science studies and anthropologic
research, human factors research and technology trends studies. In addition to
its own research, the Company commissions research by academics and industry
consultants. The Corporate Development Center houses 10 laboratories which the
Company's personnel use to conduct over 14,000 product tests annually in such
areas as sound, lighting, ergonomics, flammability and product durability.
SALES AND MARKETING
The Company distributes its products through a worldwide network of
independent dealers in more than 650 locations including more than 450 in the
United States and Canada and more than 200 throughout the rest of the world.
Each dealership has its own salesforce which is supported by the Company's
sales representatives, who work closely with dealers throughout the sales
process. The dealers, together with the Company's sales representatives,
maintain close relationships with architects, contract interior designers and
corporate facility managers, who typically influence purchasing decisions.
Many customers conduct an extensive evaluation of available product options
prior to making an initial furniture purchase for a facility and the Company's
salesforce and its dealers are increasingly
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becoming involved in the initial stages of the planning process. Workplace
Performance software-based tools are employed to help the customer focus on
specific business goals and to provide possible configurations and product
packages that will help customers achieve those goals. Workplace Performance
tools are also utilized to help the customer and its architects and designers
visualize and map potential work environments. The sales process often
involves a customer visit to the Company's headquarters in Grand Rapids,
Michigan during which the Company's sales staff and executive management,
together with the dealers, demonstrate the Company's latest product offerings
in an active office environment.
The Company's dealer network was started over 75 years ago as a strategic
way of growing the Company's product and service sales throughout the United
States with local, entrepreneurial representation. The Company conducts dealer
programs and training that expand the service and operations capabilities of
the dealers as well as promote Company products. The Company also conducts
specific training seminars for significant product introductions such as
Pathways. SFSI provides lines of credit, term notes and project financing to
the Company's dealers. SFSI's notes receivable from the Company's dealers, the
majority of which are secured, approximated $160.5 million as of November 28,
1997.
The Company has experienced minimal turnover in its dealership network and
is not dependent on any one of its dealers.
MANUFACTURING
The Company manufactures at 31 facilities in the United States, Canada and
Mexico and, through international subsidiaries, joint ventures and licensing
arrangements, at 20 facilities throughout the rest of the world. In 1987, the
Company adopted world class manufacturing principles which utilize a variety
of production techniques, including cell, or team, manufacturing, focused
factories and rapid continuous improvement. In 1994, 14 manufacturing
facilities and seven administrative and shipping facilities in the United
States and Canada were awarded registration to ISO 9001, an internationally
developed set of facility quality criteria. The Company continually examines
new opportunities to consolidate its manufacturing and distribution operations
to improve efficiency. Substantially all plants "build to order" rather than
to "forecast", which directly reduces finished goods inventory levels and
emphasizes continuous improvement in set-up and delivery time to customers. As
a result of these and other order processing and customer service
improvements, the Company's average lead time, i.e. the time from order to
delivery, has been reduced to four to six weeks in the United States and
Canada. The Company has an extensive distribution system in the United States
and Canada and utilizes commercial transport and delivery services in both the
United States and abroad.
INTERNATIONAL OPERATIONS
STEELCASE CANADA
Steelcase Canada operates as an extension of Steelcase U.S. in the Canadian
markets, sourcing its sales through its manufacturing facility in Markham,
Ontario and through imports from Steelcase U.S. Steelcase Canada has
approximately 580 employees and dealers in more than 40 locations. Steelcase
Canada had more than 18.0% market share of the Canadian office furniture
industry in calendar 1996 and generated $97.9 million in net sales for Fiscal
1997.
STEELCASE INTERNATIONAL
The Company conducts its non-European international operations primarily
through its Steelcase International operating group. The Company's products
are generally available throughout the world and are currently sold to
international customers in various countries outside of Europe, including
Australia, Brazil, China, Japan, Mexico, Saudi Arabia and Thailand. In Fiscal
1997, net sales derived from sales to international customers outside of
Europe and Canada were $126.6 million, or 5.3%, of
35
<PAGE>
the Company's consolidated net sales. The Company's share of the office
furniture market in such markets is not material. Steelcase International has
approximately 430 employees.
The Company competes in non-European markets by exporting its products
abroad. The Company supplements this business with two manufacturing ventures
in Brazil and Saudi Arabia and with licensees in Japan, Thailand, India and
Colombia. Sales of the Company's products to non-European international
markets are made almost exclusively through the Company's dealer network. As
of December 31, 1997, the Company's international dealer network outside of
Europe and Canada was comprised of more than 40 locations in the Pacific Rim,
the Middle East, Latin America and Australia.
STEELCASE STRAFOR
The Company's European business is conducted almost entirely through
Steelcase Strafor. Steelcase Strafor is a leading office furniture company in
Europe with net sales of approximately $500 million in the year ended December
31, 1996. Steelcase Strafor has the leading market share in France, with a
16.9% market share in calendar year 1996, but its share is below 10% of the
office furniture market in all other countries in which it operates. In Fiscal
1997, the Company's interest in Steelcase Strafor resulted in $2.0 million of
net income. Steelcase Strafor sells products throughout Europe and North
Africa.
Steelcase Strafor serves the European market with 14 manufacturing
facilities located in six countries, approximately 3,900 employees and a
network of independent dealers in more than 170 locations. Steelcase Strafor
develops and manufactures its own office furniture products under such brand
names as Steelcase Strafor, Strafor, Gordon Russell, Pohlschroder, Waiko, and
Airborne and complements its product offerings with Steelcase brand and
Steelcase Design Partnership products. Steelcase Strafor's products, although
in large part purchased by European customers, are generally available
throughout the world. Steelcase Strafor generally does not enter into formal
agreements with its independent dealers.
PROPERTIES
The Company maintains its corporate headquarters in Grand Rapids, Michigan
and conducts its operations at locations throughout the United States and,
through its wholly owned subsidiaries and joint ventures, has manufacturing
facilities in Canada, Mexico, Saudi Arabia, Brazil, France, Germany, Portugal,
Spain, the United Kingdom and Morocco. These office, manufacturing and
distribution facilities total approximately 23 million square feet, of which
approximately 7 million square feet are leased.
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<PAGE>
The Company's principal office, manufacturing and distribution facilities
(300,000 square feet or larger) as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE OWNED OR
LOCATION FOOTAGE LEASED DESCRIPTION OF USE
-------- ----------- -------- --------------------------------
<S> <C> <C> <C>
Grand Rapids, Michigan.. 383,000 Owned Corporate Headquarters
Grand Rapids, Michigan.. 896,000 Owned Chair Manufacturing
Grand Rapids, Michigan.. 445,000 Owned Chair Manufacturing
Grand Rapids, Michigan.. 824,000 Owned Desk Manufacturing
Grand Rapids, Michigan.. 786,000 Owned Distribution Center
Grand Rapids, Michigan.. 867,000 Owned File Manufacturing
Grand Rapids, Michigan.. 950,000 Owned Systems Manufacturing
Grand Rapids, Michigan.. 748,000(1) Owned Systems Manufacturing
Gaines Township, Michi-
gan.................... 599,000 Owned Corporate Development Center
Kentwood, Michigan...... 666,000 Owned Computer Furniture Manufacturing
Kentwood, Michigan...... 789,000 Owned Context Manufacturing
Kentwood, Michigan...... 886,000 Owned Panel Manufacturing
Kentwood, Michigan...... 1,118,000 Owned Distribution Center
Kentwood, Michigan...... 421,000 Leased Wood Furniture Manufacturing
Lowell, Michigan........ 480,000 Owned Attwood Manufacturing
Athens, Alabama......... 777,000 Owned Manufacturing
Tustin, California...... 1,044,000 Owned Manufacturing
Fletcher, North Caroli-
na..................... 895,000 Owned Wood Furniture Manufacturing
Grand Prairie, Texas.... 320,000 Owned Vecta Manufacturing
Markham, Ontario........ 725,000 Owned Steelcase Canada Manufacturing
Strasbourg, France...... 386,000 Owned(2) Manufacturing
Dortmund, Germany....... 300,000 Owned(2) Manufacturing
Durlangen, Germany...... 415,000 Owned(2) Manufacturing
Madrid, Spain........... 358,000 Owned(2) Manufacturing
</TABLE>
- --------
(1) Approximately 100,000 square feet are currently utilized for
manufacturing. The remainder of the facility is idle or being used for
storage.
(2) Through Steelcase Strafor.
RAW MATERIALS AND SUPPLIERS
The Company has focused on achieving purchasing economies by forming close
relationships with its major suppliers. The Company utilizes steel, lumber,
paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics,
leathers and upholstery filling material. In an effort to promote close
relationships with its supply base, the Company has pursued several
initiatives over the past three years, including (i) supply base integration
through closer collaboration, (ii) supplier certification in accordance with
Company-issued standards and (iii) the maintenance of open lines of
communication with the total supply base. In addition, the Company strives to
include key suppliers in the product development cycle so as to utilize their
expertise and share research and development costs. The Company believes
adequate sources are available for all of its raw materials.
INTELLECTUAL PROPERTY
The Company has approximately 160 active U.S. utility patents and
approximately 80 active U.S. design patents relating to its current and
anticipated products. The Company also owns approximately 220 patents in a
number of foreign countries. The Company has been active in obtaining patents
since its inception, and has filed an increasing number of patent applications
in recent years. The average remaining life for the patents in its U.S.
portfolio is approximately 10 years. Although the Company
37
<PAGE>
considers securing and protecting its intellectual property rights to be
important to its business, the loss of any individual patent, or group of
patents related to a particular product, would not result in a material
adverse effect on the Company's financial condition or results of operations.
The Company and its subsidiaries have registered various trademarks and
service marks in the United States and certain foreign countries. The U.S.
marks include Steelcase, Activity, Avenir, Ballet, Brayton International
Collections, Broadmoor, CaneCreek, Context, Criterion, DesignTex, Details,
Elective Elements, Ellipse, FirstFile, Metro, Migrations, Montage, Pathways,
Personal Harbor, Player, Protege, Rally, Rapport, Sensor, Series 9000,
Springboard, Stow Davis, Teamwork, Turnstone and Vecta. Steelcase Strafor has
various U.S. trademarks, including Strafor, Airborne and Gordon Russell.
The Company has established a global network of intellectual property
licenses with its affiliates. It also occasionally licenses its intellectual
property to selected third parties and occasionally enters into license
agreements under which it pays a royalty to third parties for the use of
patented products or process technology.
COMPETITION
The office furniture market is highly competitive, with a number of
competitors offering similar products. In the contract segment of the market,
companies compete primarily on price, delivery and service, product design and
features, quality and the relationships developed between dealers and
customers. The Company's most significant competitors in its primary markets
are Herman Miller, Haworth, Knoll, Kimball and, in certain market segments,
Hon. Together, these companies represent a substantial portion of the market
share of the overall office furniture market. The Company also competes with
many other companies in specific product categories.
In Europe, which is a highly competitive, fragmented market, Steelcase
Strafor generally competes with other European-based enterprises with a
significant European presence, including the Samas-Groep N.V. The Company also
manufactures and sells office furniture in other parts of the world through
wholly owned operations, joint ventures, licensing arrangements and
independent dealerships. The Company does not have a significant share of the
market in any of the countries in which it offers its products outside the
United States, Canada and Europe. The office furniture market in most of these
countries is highly competitive, price sensitive, fragmented and served
primarily by local companies. The Company's major competitors in the non-
European international markets generally are other North American office
furniture companies such as Herman Miller, Haworth and Teknion Inc., although
the Company does encounter local competition in most markets.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of federal, state, local and foreign
laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal and remediation of,
and exposure to, hazardous and non-hazardous substances, materials and wastes
("Environmental Laws"). The Company believes that its operations are in
substantial compliance with all Environmental Laws. The Company's costs and
expenses relating to Environmental Laws are included in the Company's general
operating budget or in the operating budgets of certain subsidiaries or
divisions and are typically incurred as part of projects that involve adding
production capacity and output or implementing new production processes.
Although liabilities, claims and pollution control requirements relating to
Environmental Laws have not materially affected the Company to date, there can
be no assurance that they will not have a material adverse effect on the
Company's business, financial condition or results of operations in the
future.
Under the Clean Air Act Amendments of 1990, the United States Environmental
Protection Agency ("EPA") is required to promulgate various emission
standards, including the National Emission
38
<PAGE>
Standards for Hazardous Air Pollutants ("NESHAPs"), for certain sources of
hazardous air pollutants, including the wood and metal furniture manufacturing
industries. NESHAPs for the wood furniture manufacturing industry required
reduction by November 1997 of emissions of certain volatile organic compounds
found in the coatings, stains and adhesives used by the Company. Compliance
with the wood furniture NESHAP has not materially affected the Company. The
EPA is expected to promulgate NESHAPs for the metal furniture industry by
November 2000. The Company intends to continue to participate actively in
negotiations relating to these regulations because of their potential
significance to the Company's operations. The Company cannot estimate the
effects of compliance with the metal furniture NESHAPs or other future Clean
Air Act Requirements.
Under certain Environmental Laws, the Company could be held liable, without
regard to fault, for the costs of remediation associated with its existing or
historical operations. The Company could also be held responsible for third-
party property and personal injury claims or for violations of Environmental
Laws relating to such contamination. The Company is a party to, or otherwise
involved in, legal proceedings relating to several contaminated properties
being investigated and remediated under state or Federal law. Based on its
present information regarding the nature and volume of its wastes allegedly
disposed or released at these properties, the number of other financially
viable potentially responsible parties, and the total estimated cleanup costs,
the Company does not believe that the costs associated with these properties
will be material, either individually or in the aggregate.
To resolve allegations made by the Michigan Department of Environmental
Quality ("MDEQ") (formerly known as the Michigan Department of Natural
Resources) concerning the hazardous waste management program at the Company's
Grand Rapids, Michigan facilities, the Company entered into a Consent Order
with the MDEQ in 1995 pursuant to which the Company agreed, among other
things, to pay a $150,000 stipulated penalty. In lieu of this penalty, the
MDEQ approved the Company's proposal to conduct a Supplemental Environmental
Project ("SEP"), which involved implementing an improved cleaning process for
ancillary production equipment. Notwithstanding its significant cost, to date,
this process has not functioned satisfactorily. The Company is evaluating the
SEP, and in the event that it determines that the SEP no longer meets the
Company's objectives, the Company may elect to implement an alternative
process or to negotiate with the MDEQ regarding payment of the stipulated
penalty.
The Company has received a Letter of Violation from the MDEQ regarding
operational, notice and record-keeping requirements for one piece of pollution
control equipment and associated coating lines at the Company's Grand Rapids,
Michigan Systems I plant. Because it is currently in negotiations with the
MDEQ, the Company cannot estimate the costs of resolving this matter, which is
potentially subject to substantial state and federal penalties. The Company
believes, however, based upon the nature of the alleged violations
negotiations to date, its compliance history and its continuing good faith
efforts to comply with all applicable environmental requirements, that it will
be able to resolve this matter without incurring a significant fine or being
required to expend significant amounts on replacing or upgrading equipment.
EMPLOYEES
As of December 31, 1997, the Company had approximately 16,300 employees,
including approximately 11,100 hourly and approximately 5,200 salaried
employees. Employees covered by collective bargaining agreements constitute
less than 10% of the Company's employees. Management believes that the
Company's relations with its employees are good. In addition, the Company's
joint ventures have approximately 4,000 employees.
LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of its business. The Company is not a party to any lawsuit or
proceeding which, in the opinion of management based on known information, is
likely to have a material adverse effect on the Company.
39
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Robert C. Pew II(1)(2).... 74 Chairman of the Board and Director
Peter M. Wege(3).......... 77 Vice Chairman of the Board and Director
James P. Hackett(1)(2).... 42 President, Chief Executive Officer and Director
Robert A. Ballard......... 62 Executive Vice President--Business Operations
Alwyn Rougier-Chapman..... 58 Senior Vice President--Finance, Chief Financial
Officer and Treasurer
James G. Mitchell......... 48 Senior Vice President--Sales, Marketing and
Dealer Alliances
William P. Crawford(2).... 54 President and Chief Executive Officer--
Steelcase Design Partnership and Director
James R. Stelter.......... 42 Senior Vice President--Wood Furniture and
Turnstone
Robert W. Black........... 38 Vice President--Marketing
Ann C. Jarvis............. 51 Vice President--Advanced Concepts and Design
James P. Keane............ 38 Vice President--Corporate Strategy and
Development
Richard B. Yeates......... 37 Vice President and General Sales Manager
John L. Stasiw............ 43 Vice President and General Manager--Steelcase
International
Nancy W. Hickey........... 46 Vice President--Dealer and Customer Alliances
Jon D. Botsford........... 43 General Counsel and Secretary
Robert C. Pew III(1)(2)... 46 Director
Peter M. Wege II(1)(2).... 48 Director
David D. Hunting, Jr.(3).. 71 Director
Frank H. Merlotti(1)(2)... 71 Director
P. Craig Welch, Jr.(3).... 53 Director
</TABLE>
- --------
(1) Member of the Executive Committee (Mr. Merlotti, Chairman).
(2) Member of the Compensation Committee (Mr. Merlotti, Chairman).
(3) Member of the Audit Committee (Mr. Hunting, Chairman).
Robert C. Pew II has been the Chairman of the Board since 1974 and a member
of the Board since 1960. From 1952 to 1989, Mr. Pew held various positions at
the Company, including President from 1966 to 1979 and Chief Executive Officer
from 1966 to 1988.
Peter M. Wege has been Vice Chairman of the Board since 1985 and a member of
the Board since 1948. Since joining the Company in 1947, Mr. Wege has held
various positions, including Secretary from 1961 to 1985.
James P. Hackett has been President and Chief Executive Officer of the
Company since 1994. Mr. Hackett was elected to the Board in 1994. Since
joining the Company in 1981, Mr. Hackett has held various positions, including
Executive Vice President and Chief Operating Officer of Steelcase U.S. and
President of Turnstone Inc. Prior to 1981, he held a variety of sales and
management positions at The Procter & Gamble Company. Since 1995, Mr. Hackett
has been a member of the
40
<PAGE>
Board of Directors of Old Kent Financial Corporation, a banking firm that
serves as trustee for the Company's retirement and 401(k) funds. Mr. Hackett
is also Chair of the Institute of Design Board of Overseers at the Illinois
Institute of Technology, and is a member of the Board of Directors of Spectrum
Health, the largest healthcare system serving western Michigan.
Robert A. Ballard has been Executive Vice President--Business Operations of
the Company since 1996. Since joining the Company in 1967, Mr. Ballard has
held various positions, including Senior Vice President--Manufacturing
Operations, Senior Vice President of the Steelcase Systems business unit and
President of Steelcase Canada.
Alwyn Rougier-Chapman has been Senior Vice President--Finance of the Company
since 1983 and Chief Financial Officer and Treasurer of the Company since 1994
after having joined the Company in 1981. Mr. Rougier-Chapman served as
Secretary of the Company on an interim basis for part of 1997 until Mr.
Botsford's appointment in December 1997. From 1975 to 1981, Mr. Rougier-
Chapman was a partner with the accounting firm of BDO Seidman, LLP.
James G. Mitchell has been Senior Vice President--Sales, Marketing and
Dealer Alliances of the Company since 1995. Mr. Mitchell joined the Company in
1993 as President of Steelcase Canada. From 1989 to 1993, he held various
positions at Tambrands Inc., a consumer products company.
William P. Crawford has been President and Chief Executive Officer--
Steelcase Design Partnership since 1991. Mr. Crawford was elected to the Board
in 1979. From 1986 to 1991, he served as President of Stow & Davis Furniture
Company, a manufacturer of fine wood furniture, which was acquired by the
Company in 1985. Mr. Crawford also serves on the Board of Directors of Old
Kent Financial Corporation.
James R. Stelter has been Senior Vice President--Wood Furniture since 1993
and Senior Vice President--Turnstone since 1996. Since joining the Company in
1977, Mr. Stelter has held various positions, including President of Brayton
International Inc. from 1989 to 1993.
Robert W. Black has been Vice President--Marketing of the Company since
1996. Since joining the Company in 1994, Mr. Black has also served as Vice
President--Corporate Strategy and Development and Vice President--Corporate
and Service Marketing. From 1988 to 1994, Mr. Black was a senior engagement
manager at the consulting firm of McKinsey & Company, Inc.
Ann C. Jarvis has been Vice President--Advanced Concepts and Design of the
Company since 1996. Since joining the Company in 1976, Ms. Jarvis has held
various positions, including Senior Marketing Manager and Vice President--
Product Marketing and Design.
James P. Keane has been Vice President--Corporate Strategy and Development
of the Company since January 1997. From 1992 to January 1997, Mr. Keane was
Vice President and Chief Financial Officer of Cloud Corporation, a packaging
company. From 1987 to 1992, Mr. Keane was a senior engagement officer at the
consulting firm of McKinsey & Company, Inc.
Richard B. Yeates has been Vice President and General Sales Manager of the
Company since January 1997. Since joining the Company in 1982, Mr. Yeates has
held various positions, including Vice President and General Manager of
Steelcase International and Director of the Steelcase Export and Worldwide
Services division.
John L. Stasiw has been Vice President and General Manager--Steelcase
International since March 1997. From 1995 to March 1997, Mr. Stasiw served as
Vice President, Strategic Supply Chain Management of the Company and from 1994
to 1995 as President of the Company's lighting group. From 1987 to 1994, Mr.
Stasiw held various positions at Philips Lighting Co., a wholly owned
subsidiary of Philips International N.V., including Vice President and General
Manager and Director of Business Groups.
41
<PAGE>
Nancy W. Hickey has been Vice President--Dealer and Customer Alliances for
the Company since 1994. In May 1997, Ms. Hickey also became responsible for
FMC. Prior to joining the Company in 1986, Ms. Hickey held sales and marketing
management positions at Philips Information Systems, a division of Philips
International N.V.
Jon D. Botsford has been General Counsel and Secretary of the Company since
December 1997. From 1985 to December 1997, Mr. Botsford held various positions
at the Company, including Assistant General Counsel and Assistant Secretary.
Robert C. Pew III has been a member of the Board since 1987. From 1974 to
1984 and from 1988 to 1994, Mr. Pew held various positions at the Company,
including President of Steelcase North America and Executive Vice President--
Operations.
Peter M. Wege II has been a member of the Board since 1979. Mr. Wege has
been President and Chief Executive Officer of S & G Technologies Incorporated,
a supplier of lubrication and maintenance monitoring equipment for industrial
conveyors, since 1992, as well as several other companies since 1990. From
1981 to 1989, he held various positions at the Company, including President of
Steelcase Canada.
David D. Hunting, Jr., has been a member of the Board since 1960. After
joining the Company in 1948, Mr. Hunting held various positions, including
Executive Vice President--Subsidiaries, from 1981 until his retirement in
1989.
Frank H. Merlotti has been a member of the Board since 1973. After joining
the Company in 1961, Mr. Merlotti held various positions, including President
and Chief Operating Officer of the Company from 1980 and Chief Executive
Officer from 1988, in each case until 1991. Subsequent to his retirement, Mr.
Merlotti served as President and Chief Executive Officer of the Company on an
interim basis for part of 1994 until Mr. Hackett's appointment.
P. Craig Welch, Jr., has been a member of the Board since 1979. From 1967 to
1987, Mr. Welch held various positions at the Company, including Director of
Information Services, Director of Production Inventory Control and Manager of
Manufacturing Systems Data Processing.
Mr. Robert C. Pew II is the father of Robert C. Pew III and the uncle of
William P. Crawford and P. Craig Welch, Jr. Messrs. Pew III, Crawford and
Welch are first cousins. Mr. Peter M. Wege is the son of Peter M. Wege, Sr.,
who co-founded the Company in 1912, and the father of Peter M. Wege II.
It is expected that following consummation of the Offerings the Company will
increase the size of the Board by the appointment of two independent outside
directors.
Pursuant to the Articles and By-laws of the Company, beginning with the 1998
annual meeting of shareholders, the Board will be divided into three classes
of directors, denoted as Class I, Class II and Class III, serving staggered
three-year terms with one class elected each year. The initial terms of the
Class I, Class II and Class III directors will expire at the annual meeting of
the shareholders of the Company in 1999, 2000 and 2001, respectively. Officers
are elected by and serve at the discretion of the Board. See "Description of
Capital Stock--Certain Anti-Takeover Matters".
BOARD COMMITTEES
The Executive Committee exercises all the powers of the Board in the
management of the business affairs and property of the Company during
intervals between regular meetings of the Board.
The Audit Committee reviews the internal accounting procedures of the
Company and consults with and reviews the services provided by the Company's
independent public accountants.
42
<PAGE>
The Compensation Committee makes general policy and administrative decisions
relating to compensation and benefits for the Company's employees and
directors. Following completion of the Offerings, the Board of Directors
intends to change the members of the Compensation Committee to comply with the
Securities and Exchange Commission (the "Commission") and Internal Revenue
Service ("IRS") regulations.
Compensation Committee Interlocks and Insider Participation. Mr. Hackett,
President and Chief Executive Officer of the Company, is a member of the
Compensation Committee.
DIRECTORS' COMPENSATION
Directors who are not compensated as employees of the Company receive an
annual retainer fee in the amount of $20,000 as well as additional payments of
$1,500 for each Board meeting attended and $1,000 for each Committee meeting
attended, except that the Chairman of the Board receives only an annual
retainer fee in the amount of $40,000. Directors who are compensated as
employees of the Company receive no additional compensation for services
rendered as a director. All directors are eligible to participate in the
Steelcase Inc. Incentive Compensation Plan. See "Stock Incentive Plans--
Incentive Compensation Plan". The Company also reimburses each director for
out-of-pocket expenses incurred in connection with attending meetings of the
Board and its committees.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for Fiscal 1997, paid or
awarded to the Company's Chief Executive Officer and each of its four other
most highly compensated executive officers (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER LONG-TERM
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) PAYOUTS(4) COMPENSATION(5)
- ------------------ ------ --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
James P. Hackett
President, Chief
Executive Officer and
Director............... 1997 $561,538 $626,999 $26,539 $241,267 $18,750
Robert A. Ballard
Executive Vice
President--Business
Operations............. 1997 333,884 296,433 7,811 71,007 18,750
Alwyn Rougier-Chapman
Senior Vice President--
Finance, Chief
Financial Officer and
Treasurer.............. 1997 252,211 173,116 7,303 66,392 18,750
James G. Mitchell
Senior Vice President--
Sales, Marketing and
Dealer Alliances....... 1997 254,318 174,675 7,661 69,643 18,750
Robert W. Black
Vice President--
Marketing.............. 1997 235,900 161,974 5,018 45,620 18,750
</TABLE>
- -------
(1) Includes withholding amounts under the 401(k) Plan (as defined herein) and
deferred compensation under the applicable deferred compensation agreement
of the Named Executive Officer, if any.
(2) Represents amounts paid from the annual component of the Management
Incentive Plan (as defined herein).
(3) Represents earnings on amounts accrued under the Management Incentive Plan.
The interest rate on such amounts is based on the Company's annual return
on equity.
(4) Amounts paid from the long-term component of the Management Incentive Plan
in March 1997.
(5) Includes contribution amounts made by the Company to the Profit-Sharing
Plan (as defined herein) and the Money Purchase Plan (as defined herein).
These amounts contributed by the Company for each of the Named Executive
Officers are $11,250 and $7,500, respectively.
43
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has not entered into written employment agreements with any of
the Named Executive Officers.
OPTION GRANTS
The Named Executive Officers do not currently hold any options to purchase
common stock of the Company, nor were any Named Executive Officers granted any
such options in Fiscal 1997. In connection with the Offerings, the Named
Executive Officers will be granted options under the Incentive Compensation
Plan to purchase an aggregate of 670,000 shares of Class A Common Stock, with
James P. Hackett receiving an option to purchase up to 300,000 shares, Robert
A. Ballard receiving an option to purchase up to 150,000 shares, Alwyn
Rougier-Chapman receiving an option to purchase up to 95,000 shares, James G.
Mitchell receiving an option to purchase up to 75,000 shares and Robert W.
Black receiving an option to purchase up to 50,000 shares. Each of these
options will have an exercise price equal to the initial public offering price
and these options will vest pro rata over a five-year period.
STOCK INCENTIVE PLANS
The Purchase Plan and the Incentive Compensation Plan (referred to
collectively herein as the "Stock Incentive Plans") were adopted by the
Company and its shareholders on December 2, 1997. The Stock Incentive Plans
provide the employees of the Company and its designated subsidiaries an
opportunity to invest in shares of Class A Common Stock. In some instances,
these purchases may be on terms more favorable than would otherwise be
available. The Company believes that, by aligning the interests of the
participants and the Company, the implementation of the Stock Incentive Plans
will strengthen the commitment of the participants to the Company's success.
PURCHASE PLAN
The Company will reserve a maximum of 1,500,000 shares of Class A Common
Stock for use under the Purchase Plan, subject to equitable adjustments as the
Compensation Committee may deem necessary to prevent dilution or the
enlargement of rights of participants as a result of, among other things,
changes in the Company's capitalization or corporate structure. The aggregate
number of shares reserved for issuance under the Purchase Plan represents the
maximum number of shares that are issuable pursuant to the Employee Discount
Option Grant. The Purchase Plan will be administered by the Compensation
Committee and is intended to qualify under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"). Pursuant to the Purchase Plan, each
eligible employee, as of the start of any purchase period, electing to
participate will be granted an option to purchase a designated number of
shares of Class A Common Stock. The purchase price of shares of Class A Common
Stock to participating employees will be designated by the Compensation
Committee but in no event shall be less than 85% of the lower of the fair
market values of such shares on the first and last trading days of the
relevant purchase period. Payments for shares purchased under the Purchase
Plan will be made in the time and manner specified by the Compensation
Committee. An employee may terminate his or her participation in the Purchase
Plan by giving a notice of withdrawal to the Company or designated subsidiary,
as the case may be, sufficiently in advance of the last trading day of the
relevant purchase period, and all funds contributed to date will be refunded
to such employee.
Employees are eligible to participate in the Purchase Plan if they (i) are
customarily employed by the Company or any designated subsidiary for more than
five months in any calendar year, (ii) are not members of a collective
bargaining unit that has rejected participation in the Purchase Plan and (iii)
will not, immediately upon purchasing shares under the Purchase Plan, own
directly or indirectly 5% or more of the total combined voting power of all
outstanding shares of all classes of stock of the Company or any designated
subsidiary. Notwithstanding the foregoing, no employee may purchase
44
<PAGE>
shares under the Purchase Plan (or any other plan of the Company or a
designated subsidiary intended to qualify under Section 423 of the Code) in
any calendar year with an aggregate fair market value (as determined on the
first day of the relevant purchase period) in excess of $25,000. Participation
in the Purchase Plan ends automatically upon termination of employment with
the Company or designated subsidiary. Rights granted under the Purchase Plan
are not transferable other than by will or the laws of descent and
distribution.
The purchase period for the Employee Discount Option Grant will begin on the
date of the pricing of the Offerings (the "IPO Date") and end on the date 70
days after the IPO Date, or if such date is not a business day, the first
business day following such date, or such other date as the Compensation
Committee may designate. Eligible employees who wish to participate in the
Employee Discount Option Grant may purchase by the last day of such period a
maximum of 100 shares of Class A Common Stock at 85% of the initial public
offering price. The Company estimates that as of the IPO Date there will be
approximately 15,000 employees eligible to participate in the Employee
Discount Option Grant.
The Board may at any time amend or terminate the Purchase Plan so long as
such amendment or termination does not result in the failure of rights issued
under the Purchase Plan to meet the requirements for employee stock purchase
plans as defined in Section 423 of the Code.
INCENTIVE COMPENSATION PLAN
The Company will reserve for issuance under the Incentive Compensation Plan
a maximum of 150,000 shares of Class A Common Stock for the Employee Stock
Grant plus an
additional number of shares equal to 4% of the total outstanding shares of
Common Stock as of the IPO Date. The Incentive Compensation Plan will be
administered by the Compensation Committee. The Compensation Committee will
have full authority, subject to the provisions of the Incentive Compensation
Plan, to determine, among other things, the persons to whom awards under the
Incentive Compensation Plan ("Awards") will be made, the exercise price,
vesting, size and type of such Awards, and the specific performance goals,
restrictions on transfer and circumstances for forfeiture applicable to
Awards.
Awards may be made to employees and non-employee directors of the Company or
its subsidiaries or affiliates and other individuals designated by the
Compensation Committee. A variety of Awards may be granted under the Incentive
Compensation Plan including stock options, stock appreciation rights ("SARs"),
restricted stock, performance shares, performance units, cash-based awards,
phantom shares and other share-based awards as the Compensation Committee may
determine. Stock options granted under the Incentive Compensation Plan may be
either incentive stock options intended to qualify under Section 422 of the
Code or nonqualified stock options not so intended.
Provisions regarding the extent to which a participant shall have the right
to exercise and/or receive payment for any Award following termination of the
participant's employment, directorship or other relationship with the Company
shall be determined at the discretion of the Board. In the event of a "change
of control" (as defined in the Incentive Compensation Plan), (i) all
outstanding options and SARs granted under the Incentive Compensation Plan
will become immediately exercisable and remain exercisable throughout their
entire term, (ii) any performance-based conditions imposed with respect to
outstanding Awards shall be deemed to be fully earned and a pro rata portion
of each such outstanding Award granted for all outstanding performance periods
shall become payable in shares of Class A Common Stock, in the case of Awards
denominated in shares of Class A Common Stock, and in cash, in the case of
Awards denominated in cash, with the remainder of such Award being canceled
for no value and (iii) all restrictions imposed on restricted stock that are
not performance-based shall lapse. The Board may make equitable adjustments,
including with respect to the number and kind of
45
<PAGE>
shares issuable under, and the exercise price relating to, Awards as the Board
may deem necessary to prevent dilution or enlargement of the rights of
participants under the Incentive Compensation Plan as a result of changes in
the Company's corporate structure or capitalization.
Awards under the Incentive Compensation Plan are not transferable other than
by will or by the laws of descent and distribution, unless otherwise provided
by the Board. The Board may amend or terminate the Incentive Compensation Plan
so long as no amendment shall be made without shareholder approval if such
approval is necessary to comply with any applicable regulatory or tax
requirements. Notwithstanding the foregoing, in no event may an Award be
granted under the Incentive Compensation Plan on or after December 2, 2007.
Concurrently with the Offerings, the Company expects to effect the Employee
Stock Grant consisting of the gift of 10 shares of Class A Common Stock to
employees of the Company and its subsidiaries as the Compensation Committee
shall designate. The number of eligible employees for this special one-time
grant is estimated to be approximately 15,000.
Section 162(m) of the Code generally disallows a publicly-held corporation a
deduction for compensation in excess of $1 million per year paid to the Named
Executive Officers. Based upon a special transition rule contained in the
Treasury regulations issued pursuant to Section 162(m) of the Code that
applies to private corporations that complete an initial public offering, and
assuming no material modifications to the Incentive Compensation Plan, the
Company intends to treat all payments made to the Named Executive Officers
under the Incentive Compensation Plan until the annual meeting of shareholders
of the Company held in the year 2002 as not subject to the deduction
limitations of Section 162(m) of the Code. The deductibility of payments made
under the Incentive Compensation Plan resulting in total covered compensation
in excess of $1 million for the Named Executive Officers following the annual
meeting of shareholders of the Company held in the year 2002 and thereafter
will depend on whether the Company and the Incentive Compensation Plan comply
with the performance-based compensation exception to Section 162(m).
MANAGEMENT INCENTIVE PLAN
The Amended and Restated Steelcase Inc. Management Incentive Plan (the
"Management Incentive Plan") is an annual and long-term incentive compensation
program that provides eligible key employees of the Company and its
subsidiaries with cash payments based upon the achievement by the Company of
specified financial performance goals as measured by Economic Value Added
("EVA") (as defined in the Management Incentive Plan). The Management
Incentive Plan is administered by the Compensation Committee.
Each year the Compensation Committee establishes target incentives in the
form of target percentages of base salary. Actual incentive percentages and
related incentive pay will be higher or lower than these targets depending on
the actual performance of the Company, which is measured in terms of EVA. EVA
is a profit measurement that reflects all the costs of operating the Company
as a business, including the cost of capital. At the end of the Fiscal year,
actual EVA performance is calculated, compared to EVA targets and a bonus
multiple is derived. The bonus multiple is then multiplied by an employee's
target incentive percentage to arrive at the employee's actual incentive
percentage. The actual incentive percentage is then multiplied by base pay to
determine an employee's total annual and long-term incentive pay for that
Fiscal year.
Incentive compensation for a given year has an annual component, which
rewards managers based on the current year financial performance of the
Company, and a long-term component, which rewards managers for making
decisions that effect the long-term success and strength of the Company.
Annual bonuses are payable after the end of the Fiscal year, whereas long-term
bonus amounts are paid out over a three-year period commencing after the end
of the year following the year in which the incentive amount is earned. The
long-term amounts are paid in substantially equal
46
<PAGE>
installments over the three-year payment period and unpaid long-term amounts
are adjusted based on the Company's return on equity as determined each Fiscal
year.
The Management Incentive Plan may be amended or terminated by the Board so
long as such amendment or termination shall not reduce or eliminate amounts
credited to the long-term incentive compensation accounts of participants as
of the end of the Fiscal year preceding the later of the date on which the
amendment or termination became effective or was adopted. The Management
Incentive Plan is not intended to qualify as an "employee benefit plan" within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). In addition, the Company intends to treat all payments to the Named
Executive Officers pursuant to the Management Incentive Plan as not subject to
the limitations of Section 162(m) of the Code pursuant to the transition rule
described above under "Incentive Compensation Plan".
The following table sets forth long-term compensation amounts earned by the
Named Executive Officers for Fiscal 1997.
LONG-TERM INCENTIVE PLAN--AWARDS IN FISCAL 1997
<TABLE>
<CAPTION>
PERFORMANCE
PERIOD
UNTIL ESTIMATED FUTURE
NAME MATURATION TARGETED PAYOUTS(1)
- ---- ----------- -------------------
<S> <C> <C>
James P. Hackett................................ 3 years $1,039,496
Robert A. Ballard............................... 3 years 373,764
Alwyn Rougier-Chapman........................... 3 years 234,676
James G. Mitchell............................... 3 years 236,899
Robert W. Black................................. 3 years 199,388
</TABLE>
- --------
(1) This amount represents the long-term component of compensation earned
under the Management Incentive Plan. Such amount is payable in equal
annual installments over a three-year period beginning in March 1998.
Unpaid amounts are adjusted based on the Company's return on equity as
determined each Fiscal year.
RETIREMENT PLANS
The Steelcase Inc. Employees' Profit-Sharing Retirement Plan, as restated
and amended (the "Profit-Sharing Plan"), the Steelcase Inc. Employees' Money
Purchase Plan, as restated and amended (the "Money Purchase Plan", and the
Steelcase Inc. 401(k) Retirement Plan, as restated and amended (the "401(k)
Plan" and, together with the Profit-Sharing Plan and the Money Purchase Plan,
the "Retirement Plans"), are qualified retirement plans available to Named
Executive Officers and all other eligible employees (together, the
"Participants") of adopting divisions and subsidiaries of the Company.
Annual contributions by the Company ("Employer Contributions"), if any, are
declared by the Board at the end of each Fiscal year. Employer Contributions
under the Profit-Sharing Plan are at the discretion of the Company, although
historically, in all but a few years, the Company has contributed the maximum
permissible under the Code. Under the Money Purchase Plan, annual Employer
Contributions are required in the amount of 5% of eligible annual
compensation. Pursuant to the 401(k) Plan, employees may also make non-
matching contributions. Contributions to the Retirement Plans for highly
compensated employees are limited as required under the Code and its
regulations. The contribution amounts for the Named Executive Officers are
noted in the Summary Compensation Table under "All Other Compensation".
Contributions to the Retirement Plans are made to a trust where the funds
are invested in available investment options selected by the Participant and
managed by the trustee. The trust may
47
<PAGE>
be invested and reinvested in common or preferred stocks, bonds, mortgages,
leases, notes, debentures, mutual funds, guaranteed investment contracts and
other contracts and funds of insurance companies, other securities and other
real or personal property. The account balances grow until finally
distributed. Under the Profit-Sharing Plan and the Money Purchase Plan,
vesting occurs on a scaled basis, beginning with 20% after 3 years and fully
vesting after seven years. Notwithstanding the following, a participant's
vested percentage shall be 100% upon the earlier of the Participant's normal
retirement date or the date the Participant's employment terminated due to
death or total disability. Account balances in the 401(k) Plan are always 100%
vested. Upon the occurrence of a distributive event, a Participant may elect
to receive funds according to the respective plans' provisions. Pursuant to
these provisions, a Participant is also entitled to rollover eligible
distribution amounts into another eligible retirement plan.
The Company may amend the Retirement Plans and their associated trusts,
retroactively or prospectively, in its sole discretion, except where
prohibited by the Code or ERISA, and so long as such amendment does not
exclude a Participant, reduce a Participant's account, reduce a Participant's
vested percentage or modify the vesting schedule for a Participant eligible
under the Retirement Plans prior to the effective date of the amendment. The
Retirement Plans may be merged or consolidated, or their assets and
liabilities may be transferred, in whole or in part, to another qualified
retirement plan. The Company also reserves the right to terminate the
Retirement Plans and their associated trusts, or to cease or suspend further
contributions, upon which occurrence accounts of Participants shall become
nonforfeitable. The Retirement Plans are qualified retirement plans and trusts
under Section 401 of the Code, ERISA and all Regulations issued thereunder.
SUPPLEMENTAL PLAN
The Steelcase Inc. 1994 Executive Supplemental Retirement Plan (the
"Supplemental Plan") is a nonqualified deferred compensation and supplemental
retirement plan that is limited to a select group of management or highly
compensated employees. The Supplemental Plan is intended to attract and retain
highly qualified corporate executives and to enable such executives to devote
their full-time efforts to the Company by providing, in consideration of these
efforts, supplemental retirement income. The Supplemental Plan is administered
by the Compensation Committee.
An employee who is an officer of the Company elected by the Board and
designated by the Compensation Committee is eligible to participate in the
Supplemental Plan. Each participant, or in the event of such participant's
death his or her surviving spouse, will, upon the earliest to occur of (x) the
date on which such participant retires and has attained "normal retirement"
age (65) or "early retirement" age (the date on which the sum of such
participant's age and years of service equals 80) and (y) the date of such
participant's death become entitled to receive (i) five annual payments (the
"Five-Year Benefit") each equal to 70% of the participant's average base
salary for the three consecutive calendar years prior to retirement or death
multiplied by such participant's vested percentage and (ii) 15 annual payments
(the "15-Year Benefit") each equal to $50,000 multiplied by the participant's
vested percentage, in each case commencing on March 1 following the date such
participant attains age 65 or the date of such participant's death, as
applicable. In the event of early retirement, a participant may, with the
consent of the Compensation Committee, elect (the "Early Payment Election") to
receive the total amount of the Five-Year Benefit and/or the 15-Year Benefit
through payments of reduced annual income benefits commencing on March 1
following such retirement and ending on the date that the final annual payment
would have been paid if no Early Payment Election had been made. A
participant's vested percentage begins at 20% after three completed years of
service following such participant's eligibility under the Supplemental Plan
and increases by 20% increments annually until it becomes fully vested upon
seven completed years of service following such eligibility. The right to
receive payments under the Supplemental Plan, however, shall be forfeited upon
the occurrence of (i) the termination of a participant's employment prior to
48
<PAGE>
satisfaction of the conditions for either of normal retirement or early
retirement, (ii) termination of a participant's employment for cause, (iii)
the death of a participant without a surviving spouse or the death of a
participant's surviving spouse following the death of such participant and
(iv) without the consent of the Board, a participant's employment by or
performance of services for a competitor of the Company, its subsidiaries or
affiliates or a participant's engagement in competition with the Company, its
subsidiaries or affiliates.
The following table sets forth the estimated annual income benefits payable
upon satisfaction of Supplemental Plan requirements to each of the Named
Executive Officers, or his surviving spouse, during the five-year period
following the commencement of payments under the Supplemental Plan, assuming
that no Early Payment Election is made:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
--------------------------------------------------------------------
FINAL
AVERAGE
COMPENSATION 7 OR
(3 YEARS) 3 4 5 6 MORE
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$700,000 $108,000 $216,000 $324,000 $432,000 $540,000
650,000 101,000 202,000 303,000 404,000 505,000
600,000 94,000 188,000 282,000 376,000 470,000
550,000 87,000 174,000 261,000 348,000 435,000
500,000 80,000 160,000 240,000 320,000 400,000
450,000 73,000 146,000 219,000 292,000 365,000
400,000 66,000 132,000 198,000 264,000 330,000
350,000 59,000 118,000 177,000 236,000 295,000
300,000 52,000 104,000 156,000 208,000 260,000
250,000 45,000 90,000 135,000 180,000 225,000
200,000 38,000 76,000 114,000 152,000 190,000
</TABLE>
- --------
(1) These amounts are not subject to any deduction for Social Security or
other offsetting amounts.
Assuming that no Early Payment Election is made, for years 6 to 15 following
the commencement of payments under the Supplemental Plan, the annual income
benefits to each of the Named Executive Officers, or his surviving spouse, is
$50,000 multiplied by such Named Executive Officer's vested percentage.
As of the date of this Prospectus, the completed years of service under the
Supplemental Plan for each of the Named Executive Officers are as follows:
James P. Hackett (7), Robert A. Ballard (11), Alwyn Rougier-Chapman (14),
James G. Mitchell (2) and Robert W. Black (0).
The Supplemental Plan is intended to qualify as an unfunded plan within the
meaning of ERISA. The Board has full authority to amend or terminate the
Supplemental Plan at any time.
DEFERRED COMPENSATION AGREEMENTS
Each of James P. Hackett, Robert A. Ballard, Alwyn Rougier-Chapman and James
G. Mitchell (the "Executives") has entered into a deferred compensation
agreement (each a "Deferred Compensation Agreement") with the Company,
entitling each of them to defer a portion of their future compensation until
after their retirement or death. Such agreements are, and will continue to be,
limited to a select group of management or highly compensated employees. The
Board has full power and authority to interpret, construe and administer these
agreements.
The deferred amounts are deducted equally from each Executive's bi-weekly
payroll over a three- to five-year deferral period. If complete deferrals are
made from an Executive's compensation over the
49
<PAGE>
course of the deferral period, and if the Executive lives until age 70, the
Company will make corresponding annual payments to the Executive for fifteen
years commencing in the month of March after the Executive's 70th birthday. If
the Executive dies before reaching age 70, the Company will make the above
payments, in the same manner and over the same time period, to the beneficiary
designated by the Executive. If the Executive's compensation is not sufficient
to make the deferral from compensation with respect to any year, for any
reason other than death or discharge for cause, no further deferrals will be
made and the Company will make payments to the Executive on the number of
years with respect to which complete deferrals were made. Such payments will
be made in the manner and over the time period provided in the agreement. If
an Executive is discharged for cause, an amount equal to the compensation
actually deferred, if any, shall be paid to the Executive, without interest,
in five equal annual payments commencing after the discharge.
Entitlement to payments under the agreements is subject to a scaled vesting
requirement during the five years following the completed deferral period. If
an Executive ends his employment with the Company during the five year vesting
period for a reason other than qualified retirement, disability or death, the
Executive is entitled to receive a designated vested percentage of the above
payments, to be made in the same manner and over the same time period as
described in the previous paragraph. Amounts deferred under these agreements
are not subject to withdrawal, assignment, transfer, sale, pledge,
encumbrance, alienation or charge by any Executive or beneficiary.
The Company may use the funds deferred under these agreements in any manner
it desires. The Company may invest the funds, at its convenience, to assist in
providing the benefits promised under the agreements. In addition, the
Company, in its sole discretion, may establish a trust to assist in meeting
its obligations under these agreements and other similar agreements. The Board
has the power to amend these agreements, provided that no amendment shall have
any material, adverse effect on an Executive unless the Executive consents to
such amendment in writing, and provided that no amendment would alter the
irrevocable nature of the election to defer compensation.
Each Deferred Compensation Agreement is intended to qualify as an unfunded
plan within the meaning of ERISA.
50
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock on a pro forma basis giving effect to the
Recapitalization, the Repurchase and the Employee Stock Grant and as adjusted
to reflect the sale of the shares of Class A Common Stock in the Offerings by
(i) each of the Company's directors, (ii) each Named Executive Officer, (iii)
all directors and executive officers of the Company as a group and (iv) each
Selling Shareholder. Prior to the Offerings, no Class A Common Stock will be
outstanding. The shares of Class A Common Stock sold in the Offerings will
result from the conversion of shares of Class B Common Stock concurrently with
the consummation of such sale. See "Description of Capital Stock--
Recapitalization". Except as described in footnote 3 below, the Company does
not expect the shareholders listed below to own Class A Common Stock
immediately following the consummation of the Offerings.
<TABLE>
<CAPTION>
SHARES OF CLASS B COMMON STOCK
BENEFICIALLY OWNED(1) NUMBER OF POST-OFFERINGS(2)
------------------------------ SHARES OF ---------------------
PERCENT CLASS A
------------------- COMMON % OWNERSHIP
PRIOR TO AFTER STOCK % VOTING OF
NAME NUMBER OFFERINGS OFFERINGS TO BE SOLD POWER COMMON STOCK
- ---- ---------- --------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS(3):
Robert C. Pew II(4)..... 21,751,048 13.8% 15.1% 15.0% 13.9%
Peter M. Wege(5)........ 40,627,000 25.7 21.7 21.6 20.0
James P. Hackett(6)..... 81,900 * * * *
Robert A. Ballard....... 56,000 * * * *
Alwyn Rougier-
Chapman(7)............. 60,178 * * * *
James G. Mitchell....... 28,000 * * * *
William P. Crawford(8).. 12,314,833 7.8 8.5 8.5 7.9
Robert W. Black(9)...... 21,000 * * * *
Robert C. Pew III(10)... 1,284,696 * * * *
Peter M. Wege II(11).... 5,284,917 3.4 1.8 1.8 1.7
David D. Hunting,
Jr.(12)................ 3,628,873 2.3 2.5 2.5 2.3
Frank H. Merlotti(13)... 6,609 * * * *
P. Craig Welch,
Jr.(14)................ 5,115,270 3.2 3.6 3.5 3.3
Directors and executive
officers as a group (20
persons)............... 87,072,215 55.1 54.0 53.5 49.7
SELLING SHAREHOLDERS:
Peter Martin Wege
Trust(15).............. 22,496,142 14.2 14.4 1,739,043 14.3 13.3
The Wege Founda-
tion(16)............... 3,223,109 2.0 * 1,009,130 * *
Peter M. Wege Charitable
Remainder Trust........ 5,637,800 3.6 * 4,902,434 * *
William W. Idema Trust.. 10,679,090 6.8 6.9 804,695 6.8 6.3
John R. Hunting Charita-
ble Remainder
Unitrust # 1........... 4,225,200 2.7 1.3 2,385,696 1.3 1.2
John R. Hunting Charita-
ble Remainder
Unitrust # 2........... 281,400 * * 244,696 * *
John R. Hunting Charita-
ble Remainder
Unitrust # 3........... 281,400 * * 244,696 * *
John R. Hunting Charita-
ble Remainder
Unitrust # 4........... 281,400 * * 244,696 * *
John R. Hunting Charita-
ble Remainder
Unitrust # 5........... 281,400 * * 244,696 * *
John R. Hunting Charita-
ble Remainder
Unitrust # 6........... 281,400 * * 244,696 * *
Keith and Marie Ambs.... 3,500 * * 1,522 * *
Robert E. Hubling....... 38,478 * * 6,087 * *
Michael D. Olds......... 96,709 * * 7,304 * *
Ray Mortimer Olds Trust-
ee..................... 478,917 * * 60,869 * *
S. Suzanne Olds Revoca-
ble Trust.............. 57,717 * * 6,087 * *
Mitchell Partners, L.P.
....................... 3,500 * * 2,435 * *
Larry J. and Sally K.
Robson................. 700 * * 609 * *
Earl G. Sullivan Trust.. 35,224 * * 609 * *
</TABLE>
51
<PAGE>
- --------
*Less than 1%.
(1) Pursuant to Commission regulations, shares are deemed to be "beneficially
owned" by a person if such person directly or indirectly has or shares
the power to vote or dispose of such shares or the right to acquire the
power to vote or dispose of such shares within 60 days, including any
right to acquire through the exercise of any option, warrant or right,
whether or not such person has any pecuniary interest in such shares.
(2) Represents the percentage of total voting power and the percentage of
ownership of both classes of Common Stock beneficially owned by each
identified shareholder and all directors and executive officers as a
group immediately following the consummation of the Offerings, the
Repurchase and the Employee Stock Grant (assuming no exercise of options
granted pursuant to the Employee Discount Option Grant).
(3) In addition to the shares of Class B Common Stock listed in the table,
each executive officer of the Company, including the Named Executive
Officers, will be granted 10 shares of Class A Common Stock pursuant to
the Employee Stock Grant and an immediately exercisable option to
purchase a maximum of 100 shares of Class A Common Stock at 85% of the
initial public offering price pursuant to the Employee Discount Option
Grant.
(4) Includes (i) 321,309 shares held by Mr. Pew in a revocable trust, (ii)
5,029,461 shares held by Mr. Pew's wife in a revocable trust for which
Mr. Pew serves as co-trustee, (iii) 10,290,787 shares held by various
trusts for the benefit of Mr. Pew's family members, for which Mr. Pew
serves as co-trustee and shares voting and investment powers and (iv)
6,109,491 held in a revocable trust of which Mr. Pew is a beneficiary.
(5) Represents (i) 9,282,744 shares held by a trust of which Mr. Wege is the
grantor with a right to revoke the trust within 60 days, (ii) 22,483,347
shares held by the Peter Martin Wege Trust for which Mr. Wege shares
investment authority, (iii) 3,223,109 shares held by The Wege Foundation,
of which Mr. Wege is the sole member and one of six trustees and (iv)
5,637,800 shares held by the Peter M. Wege Charitable Remainder Trust,
the trustee of which is NBD Bank. Mr. Wege disclaims beneficial ownership
of the 5,637,800 shares held by the Peter M. Wege Charitable Remainder
Trust. The Peter Martin Wege Trust, The Wege Foundation and the Peter M.
Wege Charitable Remainder Trust are Selling Shareholders in the
Offerings. The 3,223,109 shares held by The Wege Foundation are also
listed as beneficially owned by Peter M. Wege II, who disclaims
beneficial ownership of such shares. See footnote 11.
(6) Mr. Hackett's shares are held by a trust for the benefit of Mr. Hackett's
family members, the trustee of which is Mr. Hackett.
(7) Includes 1,400 shares held by Mr. Rougier-Chapman's wife.
(8) Includes (i) 58,857 shares held by Mr. Crawford's wife, (ii) 667,100
shares held by trusts for which Mr. Crawford's wife serves as trustee,
(iii) 703,500 shares held by trusts for which Mr. Crawford serves as
trustee and (iv) 9,328,563 shares held by trusts for which Mr. Crawford
serves as co-trustee.
(9) Includes (i) 14,700 shares held by Mr. Black in a revocable trust and
(ii) 6,300 shares held in trusts for the benefit of members of Mr.
Black's family, for which Mr. Black serves as trustee.
(10) Includes (i) 37,800 shares held in accounts for the benefit of Mr. Pew's
family members, for which Mr. Pew has sole voting and investment power
and (ii) 570,500 shares held by a charitable foundation for which Mr. Pew
has sole voting and investment authority.
(11) Represents (i) 208,491 shares held by the Peter M. Wege II Trust, the
trustee of which is Peter M. Wege, (ii) 209,330 shares held by the
Kathleen M. Wege Trust, the trustee of which is Mr. Wege's spouse, (iii)
1,174,961 shares held by trusts for the benefit of Mr. Wege's family
members, the trustee of which is Mr. Wege's spouse, (iv) 469,026 shares
held by trusts for Mr. Wege's family members, the trustee of which is Mr.
Wege and (v) 3,223,109 shares held by The Wege Foundation, of which Mr.
Wege is one of six trustees. Mr. Wege disclaims beneficial ownership of
these shares. The Wege Foundation is a Selling Shareholder in the
Offerings. The 3,223,109 shares of The Wege Foundation are also listed as
beneficially owned by Peter M. Wege. See footnote 5.
(12) Represents 3,628,873 shares held by various trusts for the benefit of Mr.
Hunting's family members, for which Mr. Hunting serves as trustee.
(13) Represents shares held by Mr. Merlotti's wife.
(14) Includes (i) 78,317 shares held by Mr. Welch's wife, (ii) 3,833,721
shares held by trusts for which Mr. Welch serves as co-trustee, (iii)
112,000 shares held by trusts for which Mr. Welch serves as trustee, (iv)
187,895 shares held by trusts for which Mr. Welch's wife serves as co-
trustee, (v) 161,700 shares held by trusts for which Mr. Welch's wife
serves as trustee and (vi) and 570,500 shares held by the JCT Foundation
of which Mr. Welch is a member.
(15) Peter M. Wege, Vice Chairman of the Board and a director of the Company,
shares investment authority with respect to the Peter Martin Wege Trust.
(16) Peter M. Wege is the sole member and a trustee of The Wege Foundation and
Peter M. Wege II, a director of the Company, is a trustee of The Wege
Foundation. Excludes 5,637,600 shares held by the Peter M. Wege
Charitable Remainder Trust, of which The Wege Foundation is the remainder
beneficiary. In addition to the 1,009,130 shares offered in the
Offerings, The Wege Foundation will sell 1,650,000 shares to the Company
in connection with the Repurchase.
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DESCRIPTION OF CAPITAL STOCK
RECAPITALIZATION
Prior to the consummation of the Offerings, the Recapitalization will be
effected pursuant to which the following will occur:
(i) to facilitate the Stock Split described below and future issuances of
capital stock, the total number of authorized shares of capital stock of
the Company will be increased to one billion, consisting of 475,000,000
shares of Class A Common Stock, 475,000,000 shares of Class B Common Stock
and 50,000,000 shares of Preferred Stock, issuable in series;
(ii) each of the existing 201,150 shares of common stock, par value $50
per share (the "Existing Common Stock"), will be converted into one share
of Class B Common Stock, and the Class B Common Stock resulting from that
conversion will be split on a 700-for-1 basis (the "Stock Split"), effected
as a stock dividend of 699 additional shares of Class B Common Stock for
each then outstanding share; and
(iii) immediately following the Stock Split, (a) each of the 7,672.5
shares of Existing Class A Preferred Stock will be converted into that
number of shares of Class B Common Stock determined by dividing (x) $103 by
(y) the initial public offering price per share and (b) each of the 196,490
shares of Existing Class B Preferred Stock will be converted into that
number of shares of Class B Common Stock determined by dividing (x) $2,000
by (y) the initial public offering price per share.
Each share of Class A Common Stock to be sold in the Offerings will result
from the conversion of one share of Class B Common Stock concurrently with the
consummation of such sale.
After giving effect to the Recapitalization, the authorized capital stock of
the Company will consist of: (i) 475,000,000 shares of Class A Common Stock,
(ii) 475,000,000 shares of Class B Common Stock and (iii) 50,000,000 shares of
Preferred Stock, issuable in series. Upon completion of the Offerings, there
will be outstanding 12,300,000 shares of Class A Common Stock, 144,125,400
shares of Class B Common Stock (as adjusted to eliminate fractional shares
upon the conversion of the Existing Preferred Stock), and no Preferred Stock
will be outstanding. Set forth below is a summary description of all the
material terms of the capital stock of the Company. Such description is
qualified in its entirety by reference to the Articles and the By-laws, a copy
of each of which is filed as an exhibit to the Registration Statement on Form
S-1 of which this Prospectus forms a part.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
VOTING. The holders of Common Stock will generally be entitled to vote as a
single class on all matters upon which shareholders have a right to vote,
subject to the requirements of the applicable laws and the rights of any
series of Preferred Stock to a separate class vote. Each share of Class A
Common Stock entitles its holder to one vote and each share of Class B Common
Stock entitles its holder to 10 votes. Unless otherwise required by law, and
so long as their rights would not be adversely affected, the holders of Common
Stock will not be entitled to vote on any amendment to the Articles that
relates solely to the terms of one or more outstanding series of Preferred
Stock.
DIVIDENDS AND OTHER DISTRIBUTIONS. The holders of Class A Common Stock and
Class B Common Stock will be entitled to equal dividends when declared by the
Board of Directors, except that all dividends payable in Common Stock will be
paid in the form of Class A Common Stock to holders of Class A Common Stock
and in the form of Class B Common Stock to holders of Class B Common Stock.
Neither class of Common Stock may be split, divided or combined unless the
other class is proportionally split, divided or combined.
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In the event of a liquidation or winding up of the Company, the holders of
Class A Common Stock and Class B Common Stock will be treated on an equal per
share basis, and will be entitled to receive all of the remaining assets of
the Company following distribution of the preferential and/or other amounts to
be distributed to the holders of Preferred Stock.
ISSUANCE OF CLASS B COMMON STOCK, OPTIONS, RIGHTS OR WARRANTS. Subject to
certain provisions regarding dividends and other distributions described
above, the Company will not be entitled to issue additional shares of Class B
Common Stock, or issue options, rights or warrants to subscribe for additional
shares of Class B Common Stock, except that the Company may make a pro rata
offer to all holders of Common Stock of rights to purchase additional shares
of the class of Common Stock held by them. The Class A Common Stock and the
Class B Common Stock will be treated equally with respect to any offer by the
Company to holders of Common Stock of options, rights or warrants to subscribe
for any other capital stock of the Company.
MERGER. In the event of a merger, the holders of Class A Common Stock and
Class B Common Stock will be entitled to receive the same per share
consideration, if any, except that if such consideration includes voting
securities (or the right to acquire voting securities or securities
exchangeable for or convertible into voting securities), the Company may (but
is not required to) provide for the holders of Class B Common Stock to receive
consideration entitling them to 10 times the number of votes per share as the
consideration being received by holders of the Class A Common Stock.
CONVERSION OF CLASS B COMMON STOCK. The Class B Common Stock will be
convertible into Class A Common Stock on a share-for-share basis (i) at the
option of the holder thereof at any time, (ii) upon transfer to a person or
entity which is not a Permitted Transferee (as defined in the Articles), (iii)
with respect to shares of Class B Common Stock acquired after the
Recapitalization, at such time as a corporation, partnership, limited
liability company, trust or charitable organization ceases to be 100%
controlled by Permitted Transferees and (iv) on the date which the number of
shares of Class B Common Stock outstanding is less than 15% of the then
outstanding shares of Common Stock (without regard to voting rights).
In general, Permitted Transferees will include natural persons who receive
shares of Class B Common Stock in the Recapitalization, their spouses,
ancestors and descendants, their descendant's spouses and certain charitable
organizations and trusts (including charitable trusts) or other entities
controlled by such persons. Natural persons will be deemed to have received
shares of Class B Common Stock in the Recapitalization to the extent shares
are received by record nominees for, and certain trusts or accounts for the
benefit of or established by, such persons. In general, corporations,
partnerships and limited liability companies which receive Class B Common
Stock in the Recapitalization will not be entitled to acquire additional
shares of Class B Common Stock unless such entities are 100% controlled by
Permitted Transferees.
PREEMPTIVE RIGHTS. The holders of shares of capital stock of the Company
will not have any preemptive rights with respect to any outstanding or newly
issued capital stock of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is BankBoston, N.A.
PREFERRED STOCK
Pursuant to the Articles, the Company may issue up to 50,000,000 shares of
Preferred Stock in one or more series. The Board of Directors has the
authority, without any vote or action by the shareholders, to create one or
more series of Preferred Stock up to the limit of the Company's
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authorized but unissued shares of Preferred Stock and to fix the designations,
preferences, rights, qualifications, limitations and restrictions thereof,
including the voting rights, dividend rights, dividend rate, conversion
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series. Upon the completion of the Offerings, there will be no shares of
Preferred Stock outstanding. See "--Certain Anti-Takeover Matters--Blank Check
Preferred Stock".
LIMITATION OF LIABILITY
The Articles provide that, to the fullest extent permitted by the Michigan
Business Corporation Act or any other applicable laws, directors of the
Company will not be personally liable to the Company or its shareholders for
any acts or omissions in the performance of their duties. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. These provisions will not limit the liability
of directors under federal securities laws.
CERTAIN ANTI-TAKEOVER MATTERS
BUSINESS COMBINATION ACT
The Company is subject to the provisions of Chapter 7A (the "Business
Combination Act") of the Michigan Business Corporation Act. In general,
subject to certain exceptions, the Business Combination Act prohibits a
Michigan corporation from engaging in a "business combination" with an
"interested shareholder" for a period of five years following the date that
such shareholder became an interested shareholder, unless (i) prior to such
date the board of directors of the corporation approved the business
combination or (ii) on or subsequent to such date the business combination is
approved by at least 90% of the votes of each class of the corporation's stock
entitled to vote and by at least two-thirds such voting stock not held by the
interested shareholder or such shareholder's affiliates. The Business
Combination Act defines a "business combination" to include certain mergers,
consolidations, dispositions of assets or shares and recapitalizations. An
"interested shareholder" is defined by the Business Combination Act to include
a beneficial owner, directly or indirectly, of 10% or more of the voting power
of the outstanding voting shares of the corporation.
ARTICLE AND BY-LAW PROVISIONS
The Articles and By-laws include a number of provisions that may have the
effect of encouraging persons considering unsolicited tender offers or other
unilateral takeover proposals to negotiate with the Board rather than pursue
non-negotiated takeover attempts. These provisions include a classified Board,
an advance notice requirement for director nominations and actions to be taken
at annual meetings of shareholders, the inability of the shareholders to call
a special meeting of the shareholders, the requirements for approval by 66
2/3% of the shareholder votes to amend the By-laws or certain provisions of
the Articles, removal of a director only for cause and the availability of
authorized but unissued blank check Preferred Stock.
CLASSIFIED BOARD OF DIRECTORS
The Articles establish a classified Board, which will take effect at the
1998 annual meeting of shareholders. The Board will be divided into three
classes of approximately equal size, and at the 1998 annual meeting the
shareholders will elect directors for terms expiring in 1999 (Class I), 2000
(Class II) and 2001 (Class III). Thereafter, subject to the right of holders
of any series of Preferred Stock to elect directors, shareholders will elect
one class constituting approximately one-third of the Board for a three-year
term at each annual meeting of shareholders. See "Management--Directors and
Executive Officers". As a result, at least two annual meetings of shareholders
may be required for the shareholders to change a majority of the Board. The
classification of directors will effectively make it
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more difficult to change the composition of the Board of Directors and will
instead promote a continuity of existing management.
ADVANCE NOTICE REQUIREMENT
The By-laws set forth advance notice procedures with regard to shareholder
proposals relating to the nomination of candidates for election as directors
or new business to be presented at meetings of shareholders. These procedures
provide that notice of such shareholder proposals must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
action is to be taken. Generally, to be timely, notice must be received at the
principal executive offices of the Company not less than 70 days nor more than
90 days prior to the meeting. The advance notice requirement does not give the
Board of Directors any power to approve or disapprove shareholder director
nominations or proposals but may have the effect of precluding the
consideration of certain business at a meeting if the proper notice procedures
are not followed.
SPECIAL MEETINGS OF SHAREHOLDERS
The By-laws do not grant the shareholders the right to call a special
meeting of shareholders. Under the By-laws, special meetings of shareholders
may be called only by the Company's Chief Executive Officer or a majority of
the Board of Directors.
AMENDMENT OF ARTICLES AND BY-LAWS
The Articles and the By-laws require the affirmative vote of at least 66
2/3% of the voting power of all outstanding shares of capital stock entitled
to vote to amend or repeal certain provisions of the Articles, including those
described above, or any by-law. This requirement will render more difficult
the dilution of the anti-takeover effects of the Articles and the By-laws.
REMOVAL OF DIRECTORS ONLY FOR CAUSE
The Articles permit shareholders to remove directors only for cause and only
by the affirmative vote of the holders of a majority of the voting power of
the outstanding shares of capital stock of the Company entitled to vote. This
provision may restrict the ability of a third party to remove incumbent
directors and simultaneously gain control of the Board of Directors by filling
the vacancies created by removal with its own nominees.
BLANK CHECK PREFERRED STOCK
The Articles provide for 50,000,000 authorized shares of Preferred Stock,
none of which has been issued. The existence of authorized but unissued
Preferred Stock may enable the Board of Directors to render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise. For example, if in the due exercise
of its fiduciary obligations, the Board of Directors were to determine that a
takeover proposal is not in the Company's best interests, the Board of
Directors could cause shares of Preferred Stock to be issued without
shareholder approval in one or more private offerings or other transactions
that might dilute the voting or other rights of the proposed acquirer or
insurgent shareholder or shareholder group. In this regard, the Articles grant
the Board of Directors broad power to establish the rights and preferences of
authorized and unissued Preferred Stock. The issuance of shares of Preferred
Stock pursuant to the Board of Directors' authority described above could
decrease the amount of earnings and assets available for distribution to
holders of Common Stock and adversely affect the rights, including voting
rights in the event a particular series of Preferred Stock is given a
disproportionately large number of votes per share, of such holders and may
have the effect of delaying, deferring or preventing a change in control of
the Company that may be favored by certain shareholders. The Board of
Directors does not currently intend to seek shareholder approval prior to any
issuance of Preferred Stock, unless required by law.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Repurchase and the Employee Stock
Grant, the Company will have outstanding 156,425,400 shares of Common Stock,
consisting of the 12,150,000 shares of Class A Common Stock offered hereby,
150,000 shares of Class A Common Stock granted pursuant to the Employee Stock
Grant and 144,125,400 shares of Class B Common Stock (including 17,120,400
shares of Class B Common Stock issuable upon conversion of the Existing
Preferred Stock in the Recapitalization, as adjusted to eliminate fractional
shares). In addition, the Company will grant immediately exercisable options
to purchase a maximum of 1,500,000 shares of Class A Common Stock pursuant to
the Employee Discount Option Grant and options to purchase up to 2,800,000
shares of Class A Common Stock pursuant to the Incentive Compensation Plan.
See "Management--Stock Incentive Plans".
Subject to the lock-up provisions discussed in the paragraph below, all the
shares of Class A Common Stock sold in the Offerings, all of the shares of
Class A Common Stock issued pursuant to the Employee Stock Grant and all the
shares of Class A Common Stock issued upon the exercise of options discussed
above will be freely transferable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined in Rule 144, generally may only be sold
subject to certain restrictions as to timing, manner and volume. Any shares of
Class A Common Stock outstanding as a result of the conversion of shares of
Class B Common Stock subsequent to the Offerings and all the shares of Class B
Common Stock, representing 92.1% of the outstanding Common Stock upon
completion of the Offerings, the Repurchase and the Employee Stock Grant, will
be deemed to be "restricted securities" under the Securities Act. However,
beginning approximately 90 days after the consummation of the Offerings, such
shares of Common Stock, other than those held by "affiliates" and 10,500
shares held by a former employee of the Company, will be freely tradeable
pursuant to Rule 144(k) under the Securities Act (described below).
The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the
date of this Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any securities of the Company that are substantially similar to the
Class A Common Stock, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
Class A Common Stock or any such substantially similar securities (other than
pursuant to the Recapitalization or pursuant to the Purchase Plan, the
Incentive Compensation Plan and the Nonqualified Plan, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of the
date of the Underwriting Agreement), without the prior written consent of
Goldman, Sachs & Co. In addition, the Company's directors and executive
officers, and certain of its shareholders who represent in the aggregate 93.3%
of the outstanding Class B Common Stock after the Offerings, have agreed,
during the period beginning from the date of this Prospectus, not to, directly
or indirectly, offer, pledge, sell, contract to sell or otherwise dispose of
any securities of the Company outstanding as of the date of this Prospectus,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive any Common Stock or
substantially similar securities, or enter into any swap or other arrangement
that transfers, in whole or in part, the economic consequences of ownership of
any securities of the Company, without the prior written consent of Goldman,
Sachs & Co., other than (i) the conversion or exchange of convertible or
exchangeable securities outstanding as of the date of this Prospectus to be
issued in the Recapitalization, (ii) the shares of Class A Common Stock
offered hereby, (iii) the Repurchase or (iv) the transfer of securities of the
Company by sale or gift, provided the transferee agrees in writing to the same
terms and conditions binding the transferor.
In general, under Rule 144 as currently in effect, a shareholder, including
an "affiliate", who has beneficially owned his or her restricted securities
(as that term is defined in Rule 144) for at least one year from the later of
the date such securities were acquired from the Company or (if applicable) the
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date they were acquired from an affiliate is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater
of 1% of the then outstanding shares of Common Stock or the average weekly
trading volume in the Common Stock during the four calendar weeks preceding
the date on which notice of such sale was filed under Rule 144, provided
certain requirements concerning availability of public information, manner of
sale and notice of sale are satisfied. The Company will satisfy the
availability of public information requirement approximately 90 days after the
consummation of the Offerings. In addition, under Rule 144(k), if a period of
at least two years has elapsed between the later of the date restricted
securities were acquired from the Company or (if applicable) the date they
were acquired from an affiliate of the Company, a shareholder who is not an
affiliate of the Company at the time of sale and has not been an affiliate of
the Company for at least three months prior to the sale is entitled to sell
the shares immediately without compliance with the foregoing requirements
under Rule 144.
Except as indicated above, the Company is unable to estimate the amount,
timing and nature of future sales of outstanding Common Stock. Prior to the
Offerings, there has been no public market for the Common Stock, and no
prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of shares for sale will have on the market
price of the Class A Common Stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of Common Stock in the public market
could adversely affect the market price of the Class A Common Stock and could
impair the Company's ability to raise capital through an offering of its
equity securities. See "Risk Factors--Shares Eligible for Future Sale" and
"Underwriting".
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material U.S. Federal income
and estate tax consequences of the ownership and disposition of Class A Common
Stock by a "Non-U.S. Holder". For purposes of this discussion, a "Non-U.S.
Holder" is a person or entity that, for U.S. Federal income tax purposes, is
either a non-resident alien individual, a foreign corporation, a foreign
partnership or a foreign estate or trust in each case not subject to U.S.
Federal income tax on a net income basis in respect of income or gain with
respect to Class A Common Stock. An individual may be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States on at least 31 days during the calendar year and for an
aggregate of 183 days during the calendar year and the two preceding calendar
years (counting, for such purposes, all the days present in the current year,
one-third of the days present in the immediately preceding year and one-sixth
of the days present in the second preceding year). In addition to the
"substantial presence test" described in the immediately preceding sentence,
an individual may be treated as a resident alien if he or she (i) meets a
lawful permanent residence test (a so-called "green card" test) or (ii) elects
to be treated as a U.S. resident and meets the "substantial presence test" in
the immediately following year. Generally, resident aliens are subject to U.S.
Federal income and estate tax in the same manner as U.S. citizens and
residents.
This discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), final, temporary and proposed regulations promulgated thereunder
and administrative and judicial interpretations thereof, all as in effect on
the date hereof and all of which are subject to change, possibly with
retroactive effect. This discussion does not address all aspects of Federal
income and estate taxation that may be relevant in light of a Non-U.S.
Holder's particular facts and circumstances (such as being a U.S. expatriate)
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
The Company has not and will not seek a ruling from the Internal Revenue
Service (the "IRS") with respect to the U.S. Federal income and estate tax
consequences described below and as a result, there can be no assurance that
the IRS will not disagree with or challenge any of the conclusions set forth
in this discussion.
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EACH PROSPECTIVE NON-U.S. HOLDER IS ADVISED TO CONSULT ITS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF OWNING AND DISPOSING OF CLASS A COMMON
STOCK.
DIVIDENDS
Dividends paid with respect to the Class A Common Stock to a Non-U.S. Holder
generally will be subject to U.S. Federal withholding tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. For
purposes of determining whether tax with respect to dividends paid on or
before December 31, 1998 is to be withheld at a 30% rate or a reduced rate as
specified by an income tax treaty, the Company ordinarily will presume that
dividends paid to an address in a foreign country are paid to a resident of
such country absent knowledge that such presumption is not warranted. However,
under final regulations with respect to withholding, backup withholding and
information reporting issued by the IRS on October 6, 1997 (the "Final
Regulations"), in order to claim the benefit of a tax treaty with respect to
dividends paid after December 31, 1998, a Non-U.S. Holder of Class A Common
Stock will have to comply with certain certification requirements. In
addition, the Final Regulations require, in the case of Class A Common Stock
held by a foreign partnership, that (x) the certification requirements
described in the previous sentence be provided by the partners rather than by
the foreign partnership and (y) the partnership provide certain information,
including a U.S. taxpayer identification number. A look-through rule applies
in the case of tiered partnerships.
Upon the filing of an IRS Form 4224 with the Company or its dividend paying
agent, there will be no withholding tax with respect to dividends that are
effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States (and that are attributable to a U.S.
permanent establishment of such holder, if an applicable income tax treaty so
requires as a condition for the non-U.S. holder to be subject to U.S. income
tax on a net income basis in respect of such dividends). Instead, the
effectively connected dividends will be subject to U.S. Federal income tax in
the same manner as dividends paid to a U.S. resident. A non-U.S. corporation
receiving effectively connected dividends also may be subject to an additional
"branch profits tax" which is imposed, under certain circumstances, at a 30%
rate (or such lower rate as may be specified by an applicable treaty) of the
non-U.S. corporation's effectively connected earnings and profits, subject to
certain adjustments.
A Non-U.S. Holder of Class A Common Stock that is eligible for a reduced
rate of U.S. withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for
refund with the IRS.
SALE OR DISPOSITION OF CLASS A COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. Federal income or
withholding tax on any gain recognized on the sale or other disposition of
Class A Common Stock unless (i) the gain is effectively connected with the
conduct of a trade or business of such Non-U.S. Holder within the United
States (which gain, in the case of a foreign corporation, must also be taken
into account for branch profits tax purposes); (ii) in the case of a Non-U.S.
Holder who is an individual and holds the Class A Common Stock as a capital
asset (within the meaning of Section 1221 of the Code), such holder is present
in the United States for 183 or more days in the taxable year of the
disposition and either (a) has a "tax home" for Federal income tax purposes in
the United States or (b) has an office or other fixed place of business in the
United States to which the gain is attributable; or (iii) the Company is or
has been a "U.S. real property holding corporation" within the meaning of
Section 897(c)(2) of the Code at any time within the shorter of the five-year
period preceding such disposition or such Non-U.S. Holder's holding period.
The Company believes it currently is not a U.S. real property holding
corporation and does not anticipate becoming such a corporation. Further, even
if the Company were to become a U.S. real property holding corporation, any
gain recognized by a Non-U.S. Holder still would not be subject to U.S. tax if
the shares were considered to be "regularly traded" (within the
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meaning of applicable U.S. Treasury regulations) on an established securities
market (e.g., the NYSE, on which the Class A Common Stock will be listed), and
the Non-U.S. Holder did not own, directly or indirectly, at any time during
the five-year period ending on the date of the disposition, more than 5% of
the Class A Common Stock.
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, such
holder, regardless of whether any tax was actually withheld. This information
may also be made available to the tax authorities in the Non-U.S. Holder's
country of residence. United States backup withholding (which generally is
imposed at a 31% rate) generally will not apply to the payment of dividends
with respect to Class A Common Stock to a Non-U.S. Holder at an address
outside the United States on or before December 31, 1998. Under the Final
Regulations, the payment of dividends with respect to Class A Common Stock to
a Non-U.S. Holder at an address outside the United States after December 31,
1998 may be subject to 31% backup withholding unless such Non-U.S. Holder
satisfies certain certification requirements. See the discussion above with
respect to the rules applicable to foreign partnerships under the Final
Regulations.
Information reporting and 31% backup withholding will apply to the payment
of the proceeds of a sale of Class A Common Stock to or through a U.S. office
of a broker unless the disposing Non-U.S. Holder certifies as to its non-U.S.
status under penalties of perjury or otherwise establishes an exemption. A
Non-U.S. Holder may establish non-U.S. status by filing IRS Form W-8 with the
broker. Generally, U.S. information reporting and 31% backup withholding will
not apply to a payment of disposition proceeds if the payment is made outside
the U.S. through a non-U.S. office of a non-U.S. broker. However, U.S.
information reporting requirements (but not backup withholding) will apply to
a payment of disposition proceeds outside the United States if (i) the payment
is made through an office outside the United States of a broker that is either
(a) a U.S. Person, (b) a foreign person 50% or more of whose gross income from
all sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities which are effectively connected
with the conduct of a trade or business within the United States or (c) a
"controlled foreign corporation" for U.S. Federal income tax purposes and (ii)
the broker fails to maintain documentary evidence that the holder is a Non-
U.S. Holder and that certain conditions are met, or that the holder otherwise
is entitled to an exemption.
Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit against
such Non-U.S. Holder's Federal income tax liability, if any, provided that the
required information is furnished to the IRS.
FEDERAL ESTATE TAX CONSEQUENCES
An individual Non-U.S. Holder who is treated as the owner of or has made
certain lifetime transfers of an interest in Class A Common Stock will be
required to include the value thereof in such individual's gross estate for
U.S. Federal estate tax purposes, and may be subject to U.S. Federal estate
tax unless an applicable estate tax treaty provides otherwise.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF CLASS A
COMMON STOCK BY NON-U.S. HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION AND EFFECT OF THE FINAL
REGULATIONS AND THE FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF CLASS A COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT OF
THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION.
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VALIDITY OF CLASS A COMMON STOCK
The Company has been represented by Cravath, Swaine & Moore, New York, New
York, and with respect to matters of Michigan law by Honigman Miller Schwartz
and Cohn, Detroit, Michigan. The validity of the Class A Common Stock will be
passed on for the Underwriters by Sullivan & Cromwell, New York, New York in
reliance on Honigman Miller Schwartz and Cohn for all matters pertaining to
Michigan law. Certain legal matters will be passed upon for the Selling
Shareholders by Curtis, Mallet-Prevost, Colt & Mosle, New York, New York,
Roberts, Sheridan & Kotel, New York, New York, and Warner Norcross & Judd LLP,
Grand Rapids, Michigan.
EXPERTS
The Consolidated Financial Statements and schedule of the Company included
in this Prospectus and in the Registration Statement have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the periods set forth in their reports appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement (which term shall include all
amendments, exhibits and schedules thereto) on Form S-1 under the Securities
Act with respect to the shares of Class A Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, omits
certain of the information contained in the Registration Statement. Reference
is hereby made to the Registration Statement for further information with
respect to the Company and the Class A Common Stock offered hereby. Any
statements contained herein concerning the provisions of any contract or other
document are not necessarily complete, and where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified by the provisions in such exhibit, to which reference is hereby
made. The Commission maintains a Web site at http://www.sec.gov that contains
the Registration Statement. Copies of the Registration Statement may be
examined or copied at the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at Citicorp Center, 500 Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies can also be obtained by mail
at prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. The Company intends to furnish to its shareholders annual reports
containing audited financial statements and a report thereon expressed by
independent certified accountants.
61
<PAGE>
STEELCASE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants......................... F-2
Consolidated Statements of Income for the Years Ended February 28, 1995,
February 23, 1996 and February 28, 1997 and for the Nine Months Ended
November 22, 1996 and November 28, 1997 .................................. F-3
Consolidated Balance Sheets as of February 23, 1996, February 28, 1997 and
November 28, 1997 and on a Pro Forma basis as of November 28, 1997........ F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended February 28, 1995, February 23, 1996 and February 28, 1997 and for the
Nine Months Ended November 28, 1997....................................... F-6
Consolidated Statements of Cash Flows for the Years Ended February 28,
1995, February 23, 1996 and February 28, 1997 and for the Nine Months Ended
November 22, 1996 and November 28, 1997................................... F-7
Notes to Consolidated Financial Statements................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
STEELCASE INC.
GRAND RAPIDS, MICHIGAN
We have audited the accompanying consolidated balance sheets of Steelcase
Inc. and subsidiaries as of February 23, 1996 and February 28, 1997, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended February 28, 1997.
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Steelcase
Inc. and subsidiaries as of February 23, 1996 and February 28, 1997, and the
results of their operations and their cash flows for each of the three years
in the period ended February 28, 1997, in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Grand Rapids, Michigan
March 21, 1997
F-2
<PAGE>
STEELCASE INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.............. $2,048.7 $2,155.9 $2,408.4 $1,775.1 $2,060.5
Cost of sales.......... 1,451.8 1,468.2 1,551.6 1,150.7 1,316.5
-------- -------- -------- -------- --------
Gross profit........... 596.9 687.7 856.8 624.4 744.0
Selling, general and
administrative
expenses.............. 518.7 524.1 630.4 464.9 499.1
Patent litigation ex-
pense (Note 10)....... -- -- 84.8 84.8 --
-------- -------- -------- -------- --------
Operating income....... 78.2 163.6 141.6 74.7 244.9
Patent litigation
interest expense
(Note 10)............. -- -- (111.7) (111.7) --
Other income, net (Note
11)................... 27.1 24.0 21.4 18.4 15.7
-------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes and equity in
net income (loss) of
joint ventures and
dealer transitions.... 105.3 187.6 51.3 (18.6) 260.6
Provision for income
taxes (Note 12)....... 40.9 68.1 23.6 (8.6) 100.3
-------- -------- -------- -------- --------
Income (loss) before
equity in net income
(loss) of joint
ventures and dealer
transitions........... 64.4 119.5 27.7 (10.0) 160.3
Equity in net income
(loss) of joint ven-
tures and dealer tran-
sitions (Note 6)...... (0.2) 4.0 -- 1.2 3.0
-------- -------- -------- -------- --------
Net income (loss)...... $ 64.2 $ 123.5 $ 27.7 $ (8.8) $ 163.3
======== ======== ======== ======== ========
Unaudited Pro Forma Per
Share Data (Note 2):
Net income........... $ 27.7 $ 163.3
Pro forma
adjustments:
Retained earnings
reduction for
conversion of
Existing Preferred
Stock.............. (383.2) --
Net income reduction
for Employee Stock
Grant.............. -- (2.1)
-------- --------
Net income (loss)
attributable to
holders of Common
Stock............... $ (355.5) $ 161.2
======== ========
Net income (loss) per
share of Common
Stock............... $ (2.25) $ 1.02
======== ========
Weighted average
shares of Common
Stock outstanding... 158.1 158.3
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STEELCASE INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
NOVEMBER 28,
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28, 1997
1996 1997 1997 (NOTE 2)
------------ ------------ ------------ ------------
ASSETS
------ (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equiva-
lents.................. $ 209.0 $ 174.0 $ 322.9 $ 136.2
Short-term investments.. 15.3 13.6 28.9 28.9
Accounts receivable,
less allowances for
losses of $20.4 and
$23.0.................. 267.3 327.6 366.0 366.0
Notes receivable and
leased assets (Note
5)..................... 101.4 124.9 157.3 157.3
Income tax receivable... -- 22.6 -- --
Inventories (Note 3).... 138.8 108.0 103.6 103.6
Prepaid expenses........ 8.8 5.8 7.4 7.4
Deferred income taxes
(Note 12).............. 50.7 48.1 52.1 52.1
-------- -------- -------- --------
Total current assets...... 791.3 824.6 1,038.2 851.5
-------- -------- -------- --------
Property and equipment,
net (Note 4)............. 624.3 644.7 660.3 660.3
Notes receivable and
leased assets (Note 5)... 76.3 98.7 142.9 142.9
Joint ventures and dealer
transitions (Note 6)..... 163.4 126.1 108.2 108.2
Deferred income taxes
(Note 12)................ 47.3 53.6 47.1 47.1
Goodwill and other intan-
gible assets, net of ac-
cumulated amortization of
$23.9 and $17.3.......... 79.1 69.5 65.8 65.8
Other assets (Note 7)..... 102.8 104.9 108.9 108.9
-------- -------- -------- --------
Total assets.............. $1,884.5 $1,922.1 $2,171.4 $1,984.7
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STEELCASE INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
NOVEMBER 28,
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28, 1997
1996 1997 1997 (NOTE 2)
------------ ------------ ------------ ------------
LIABILITIES AND (UNAUDITED)
SHAREHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts and notes pay-
able.................... $ 91.8 $ 105.1 $ 97.5 $ 97.5
Accrued expenses:
Employee compensation.. 60.7 76.5 145.6 145.6
Employee benefit plan
obligations (Note 8).. 36.8 43.1 48.3 48.3
Other.................. 126.4 125.3 195.6 194.2
-------- -------- -------- --------
Total current liabilities.. 315.7 350.0 487.0 485.6
-------- -------- -------- --------
Long-term liabilities:
Employee benefit plan ob-
ligations (Note 8)...... 162.4 176.6 187.8 187.8
Other long-term liabili-
ties.................... 12.8 15.5 13.6 13.6
-------- -------- -------- --------
Total long-term liabili-
ties...................... 175.2 192.1 201.4 201.4
-------- -------- -------- --------
Total liabilities.......... 490.9 542.1 688.4 687.0
-------- -------- -------- --------
Commitments and contingen-
cies (Notes 2, 5, 13 and
14)
Shareholders' equity (Notes
2 and 9):
Preferred Stock--Class A,
$100 par value; 20,000
shares authorized,
7,672.5 shares issued
and outstanding......... 0.8 0.8 0.8 --
Preferred Stock--Class B,
$50 par value; 200,000
shares authorized,
196,490 shares issued
and outstanding......... 9.8 9.8 9.8 --
Preferred Stock--no par
value; 50,000,000 shares
authorized, none issued
and outstanding (Note
2)...................... -- -- -- --
Common Stock--$50 par
value; 220,000 shares
authorized, 200,732 and
201,150 shares issued
and outstanding......... 10.0 10.0 10.0 --
Class A Common Stock--no
par value; 475,000,000
shares authorized,
12,300,000 shares issued
and outstanding (Note
2)...................... -- -- -- 35.0
Class B Common Stock--no
par value; 475,000,000
shares authorized,
144,125,400 shares
issued and outstanding
(Note 2)................ -- -- -- 341.6
Additional paid-in capi-
tal..................... 3.7 5.1 5.1 --
Cumulative translation
adjustment.............. 0.8 (0.1) (15.5) (15.5)
Retained earnings........ 1,368.5 1,354.4 1,472.8 936.6
-------- -------- -------- --------
Total shareholders' equi-
ty........................ 1,393.6 1,380.0 1,483.0 1,297.7
-------- -------- -------- --------
Total liabilities and
shareholders' equity...... $1,884.5 $1,922.1 $2,171.4 $1,984.7
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STEELCASE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
PREFERRED STOCK ADDITIONAL CUMULATIVE TOTAL
--------------- COMMON PAID-IN TRANSLATION RETAINED SHAREHOLDERS'
CLASS A CLASS B STOCK CAPITAL ADJUSTMENT EARNINGS EQUITY
------- ------- ------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
February 28, 1994....... $0.8 $9.8 $10.0 $3.7 $(13.5) $1,253.6 $1,264.4
Redemption of Preferred
Stock.................. (0.7) (0.7)
Foreign currency
translation
adjustment............. 6.6 6.6
Preferred Stock
dividends.............. (19.7) (19.7)
Common Stock dividends.. (12.6) (12.6)
Net income.............. 64.2 64.2
---- ---- ----- ---- ------ -------- --------
February 28, 1995....... 0.8 9.8 10.0 3.7 (6.9) 1,284.8 1,302.2
Foreign currency
translation
adjustment............. 7.7 7.7
Preferred Stock
dividends.............. (19.7) (19.7)
Common Stock dividends.. (20.1) (20.1)
Net income.............. 123.5 123.5
---- ---- ----- ---- ------ -------- --------
February 23, 1996....... 0.8 9.8 10.0 3.7 0.8 1,368.5 1,393.6
Issuance of Common
Stock.................. 1.4 1.4
Foreign currency
translation
adjustment............. (0.9) (0.9)
Preferred Stock
dividends.............. (19.7) (19.7)
Common Stock dividends.. (22.1) (22.1)
Net income.............. 27.7 27.7
---- ---- ----- ---- ------ -------- --------
February 28, 1997....... 0.8 9.8 10.0 5.1 (0.1) 1,354.4 1,380.0
Foreign currency
translation
adjustment............. (15.4) (15.4)
Preferred Stock
dividends.............. (14.7) (14.7)
Common Stock dividends.. (30.2) (30.2)
Net income.............. 163.3 163.3
---- ---- ----- ---- ------ -------- --------
November 28, 1997
(unaudited)............ $0.8 $9.8 $10.0 $5.1 $(15.5) $1,472.8 $1,483.0
==== ==== ===== ==== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
STEELCASE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....... $ 64.2 $ 123.5 $ 27.7 $ (8.8) $163.3
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization.......... 97.0 92.5 93.4 70.0 76.8
Postretirement benefit
cost.................. 13.9 13.9 14.2 10.8 11.1
Loss on disposal of
assets................ 11.0 4.6 14.0 12.8 3.4
Deferred income
taxes................. 0.4 (12.2) 1.8 (2.9) 2.5
Equity in net loss
(income) of joint
ventures and dealer
transitions........... 0.2 (4.0) -- (1.2) (3.0)
Changes in operating
assets and
liabilities, net of
corporate
acquisitions:
Accounts receivable.. (65.6) 25.9 (59.9) (41.3) (40.4)
Notes receivable and
leased assets....... (60.2) (63.4) (45.9) (18.3) (69.2)
Inventories.......... (36.4) 15.5 31.5 22.3 4.4
Prepaids and other
assets.............. 12.1 3.8 (3.5) 9.4 (5.3)
Accounts and notes
payable............. 15.1 0.1 12.3 -- (7.6)
Accrued expenses and
other liabilities... (9.5) 0.5 (4.8) 22.4 170.1
------ ------- ------- ------ ------
Net cash provided by
operating activities... 42.2 200.7 80.8 75.2 306.1
------ ------- ------- ------ ------
INVESTING ACTIVITIES
Capital expenditures.... (94.8) (104.6) (122.0) (95.7) (96.9)
Proceeds from the sale
of facilities.......... 25.7 -- 7.5 7.5 --
Net change in
investments............ (13.1) 5.3 6.6 (2.0) (15.6)
Joint ventures and
dealer transitions..... 13.5 (2.6) 36.5 (8.0) 0.2
Corporate acquisitions,
net of cash acquired... -- (14.0) (4.0) -- --
------ ------- ------- ------ ------
Net cash used in
investing activities... (68.7) (115.9) (75.4) (98.2) (112.3)
------ ------- ------- ------ ------
FINANCING ACTIVITIES
Issuance (redemption) of
stock.................. (0.7) -- 1.4 1.4 --
Dividends paid.......... (32.3) (39.8) (41.8) (29.7) (44.9)
------ ------- ------- ------ ------
Net cash used in
financing activities... (33.0) (39.8) (40.4) (28.3) (44.9)
------ ------- ------- ------ ------
Net increase (decrease)
in cash and cash
equivalents............ (59.5) 45.0 (35.0) (51.3) 148.9
Cash and cash
equivalents, beginning
of period.............. 223.5 164.0 209.0 209.0 174.0
------ ------- ------- ------ ------
Cash and cash
equivalents, end of
period................. $164.0 $ 209.0 $ 174.0 $157.7 $322.9
====== ======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Steelcase Inc. (the "Company") is the world's largest manufacturer and
provider of office furniture, office furniture systems and related products
and services. The Company manufactures at 31 facilities in the United States,
Canada and Mexico and, through international subsidiaries, joint ventures and
licensing arrangements, at 20 facilities throughout the rest of the world. The
Company distributes its products through a worldwide network of independent
dealers in more than 650 locations including more than 450 in the United
States and Canada and more than 200 throughout the rest of the world. The
Company operates on a worldwide basis within a single industry segment.
Steelcase Strafor, a 50% joint venture with Strafor Facom S.A., is a leading
office furniture company in Europe with 14 manufacturing facilities and
dealers in more than 170 locations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Steelcase Inc.
and its majority-owned subsidiaries, except for dealers which the Company has
acquired with the intention of reselling as soon as practicable ("dealer
transitions"). During the three years in the period ended February 28, 1997,
the Company closed a series of non-dealer acquisitions, none of which were
material individually, or in the aggregate, to the financial position or
results of operations of the Company. All significant intercompany accounts,
transactions and profits have been eliminated in consolidation.
Foreign currency-denominated assets and liabilities are translated into U.S.
dollars at the exchange rates existing at the balance sheet date. Income and
expense items are translated at the average exchange rates during the
respective periods. Translation adjustments resulting from fluctuations in the
exchange rates are recorded as a component of shareholders' equity. Gains and
losses resulting from exchange rate fluctuations on transactions denominated
in currencies other than the functional currency are not material.
The Company's investments in joint ventures and dealer transitions are
carried at its equity in the net assets of those entities primarily based on
audited financial statements for each applicable year.
FISCAL YEAR END AND UNAUDITED INTERIM RESULTS
Effective March 1, 1995, the Company changed its fiscal year-end from
February 28 to the last Friday of February. In addition, the Company
standardized its fiscal quarters to include 13 weeks, except for the quarter
ended February 28, 1997 which included 14 weeks. Accordingly, Fiscal 1996
included 52 weeks, while Fiscal 1997 included 53 weeks. As used herein, in
conjunction with any given year, the term "Fiscal" refers to the fiscal year
of the Company. For example, Fiscal 1996 ended on February 23, 1996.
The results of operations for the nine months ended November 28, 1997 are
not necessarily indicative of the results to be expected for Fiscal 1998. All
information as of November 28, 1997 and for the nine months ended November 22,
1996 and November 28, 1997 is unaudited but, in the opinion of management,
includes all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial condition, results of operations and
cash flows of the Company.
REVENUE RECOGNITION
Net sales include product sales, service revenues and leasing revenues.
Product sales and service revenues are recognized as products are shipped and
services are rendered. Leasing revenue includes interest earned on the net
investments in leased assets, which is recognized over the lease term as a
constant percentage return. Service and leasing revenues are not material.
F-8
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments, primarily interest-
earning deposits, treasury notes and commercial paper, with an original
maturity of three months or less. Cash equivalents are reported at amortized
cost and approximated $235.8 million and $191.5 million as of February 23,
1996 and February 28, 1997, respectively.
INVESTMENTS
Investments typically include tax-exempt municipal bonds and other debt
securities which the Company has the positive intent and ability to hold until
maturity. These investments are reported at amortized cost; gross unrealized
gains and losses are insignificant.
INVENTORIES
Substantially all inventories are valued based upon last-in, first-out
(LIFO) cost, not in excess of market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, which
average 26 years for buildings and improvements and eight years for all other
property and equipment. In addition, internal-use software applications and
related development efforts are capitalized and amortized over the estimated
useful lives of the applications. Software maintenance, year 2000 related
matters and training costs are expensed as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets resulting from business acquisitions
are stated at cost and amortized on a straight-line basis over a period of 15
years if acquired subsequent to February 28, 1995, or 40 years if acquired
prior thereto. Amortization expense approximated $3.1 million, $2.6 million
and $4.0 million for Fiscal 1995, 1996 and 1997, respectively.
LONG-LIVED ASSETS
The Company reviews long-lived assets, including goodwill and other
intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. If
it is determined that an impairment loss has occurred based on expected future
cash flows, a current charge to income is recognized. The adoption of
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
during Fiscal 1997, did not have a material impact on the financial condition
or results of operations of the Company.
PRODUCT RELATED EXPENSES
Research and development expenses, which are expensed as incurred,
approximated $40 million, $50 million and $65 million for Fiscal 1995, 1996
and 1997, respectively.
SELF-INSURANCE
The Company is self-insured for certain losses relating to workers'
compensation claims, employee medical benefits and product liability claims.
The Company has purchased stop-loss coverage in order to limit its exposure to
any significant levels of workers' compensation and product liability claims.
Self-insured losses are accrued based upon the Company's estimates of the
aggregate
F-9
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liability for uninsured claims incurred using certain actuarial assumptions
followed in the insurance industry and the Company's historical experience.
The accrued liabilities for self-insured losses included in other accrued
expenses in the accompanying consolidated balance sheets are as follows (in
millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Workers' compensation claims....................... $15.1 $16.1
Product liability claims........................... 10.2 9.6
----- -----
$25.3 $25.7
===== =====
</TABLE>
The Company maintains a Voluntary Employees' Beneficiary Association (VEBA)
to fund employee medical claims covered under self-insurance. The estimates
for incurred but not reported medical claims have been fully funded by the
Company as of February 23, 1996 and February 28, 1997.
PRODUCT WARRANTY
The Company offers a lifetime warranty on Steelcase brand products, subject
to certain exceptions, which provides for the free repair or replacement of
any covered product or component that fails during normal use because of a
defect in design, materials or workmanship. Accordingly, the Company provides,
by a current charge to sales returns and allowances, an amount it estimates
will be needed to cover future warranty obligations for products sold. The
accrued liability for warranty costs included in other accrued expenses in the
accompanying consolidated balance sheets approximated $6.7 million and $15.7
million as of February 23, 1996 and February 28, 1997, respectively.
ENVIRONMENTAL MATTERS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
allegedly caused by past operations, that do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
material environmental assessments and remedial efforts are probable, and the
costs can be reasonably estimated. Generally, the timing of these accruals
coincides with completion of a feasibility study or the Company's commitment
to a formal plan of action. The accrued liability for environmental
contingencies included in other accrued expenses in the accompanying
consolidated balance sheets approximated $11.5 million and $11.2 million as of
February 23, 1996 and February 28, 1997, respectively. Based on the Company's
ongoing oversight of these matters, the Company believes that it has accrued
sufficient reserves to absorb the remediation costs of all known sites.
ADVERTISING
Advertising costs, which are expensed as incurred, approximated $4.0
million, $9.0 million and $6.0 million for Fiscal 1995, 1996 and 1997,
respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and are measured using enacted tax rates expected to
apply to taxable income in the years in which the temporary differences are
expected to reverse.
F-10
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, consisting of
cash equivalents, investments, accounts and notes receivable, accounts and
notes payable and certain other long-term liabilities, approximates their fair
value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
2. INITIAL PUBLIC OFFERING (UNAUDITED)
On September 17, 1997, the Board of Directors of the Company (the "Board")
authorized management to begin the process necessary for registration of the
Company's Common Stock under the Securities Act of 1933, as amended, in order
to permit the Company's shareholders to make a U.S. and international public
offering (the "Offerings") of a portion of their shares (the "Selling
Shareholders"). On October 27, 1997, the Board (i) declared a special dividend
in the aggregate amount of $150.9 million, which was paid on January 9, 1998
to Common Stock holders of record as of December 2, 1997 (the "Special
Dividend"), and (ii) approved a proposal which was presented to the
shareholders by proxy and subsequently approved on December 2, 1997 at a
special meeting. In general, the approved proposal will (a) effect a
recapitalization of the Company's capital stock (the "Recapitalization"), (b)
make certain other changes to the Restated Articles of Incorporation and By-
laws which are typical of public companies and (c) provide for the adoption of
equity-based incentive and investment plans for employees of the Company
(collectively, the "Stock Incentive Plans").
While the Stock Incentive Plans became effective upon approval by the
Company's shareholders on December 2, 1997, the Recapitalization and other
changes to the Restated Articles of Incorporation and By-laws will become
effective upon their filing with the State of Michigan which is expected to
occur prior to the consummation of the Offerings. Completion of the Offerings
remains subject to satisfactory completion of the registration and offering
process. The historical financial statements do not give effect to the
Recapitalization.
RECAPITALIZATION
Pursuant to the Recapitalization, the following will occur:
(i) to facilitate the Stock Split described below and future issuances of
capital stock, the total number of authorized shares of capital stock of
the Company will be increased to one billion, consisting of 475,000,000
shares of Class A Common Stock, 475,000,000 shares of Class B Common Stock
and 50,000,000 shares of Preferred Stock, issuable in series;
(ii) each of the existing shares of Common Stock will be converted into
one share of Class B Common Stock, and the Class B Common Stock resulting
from that conversion will be split on a 700-for-1 basis (the "Stock
Split"), effected as a stock dividend of 699 additional shares of Class B
Common Stock for each then outstanding share; and
F-11
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(iii) immediately following the Stock Split, each of the existing shares
of Class A Preferred Stock and Class B Preferred Stock (collectively, the
"Existing Preferred Stock") will be converted into that number of shares of
Class B Common Stock determined by dividing their redemption values ($103
and $2,000, respectively) by the initial public offering price per share of
Class A Common Stock.
Each share of Class A Common Stock to be sold in the Offerings will result
from the conversion of one share of Class B Common Stock concurrently with the
consummation of such sale. While the Common Stock conversions will result in
reclassifications between Common Stock and additional paid-in capital, the
conversion of the Existing Preferred Stock will increase Common Stock by
$393.8 million, decrease Class A Preferred Stock and Class B Preferred Stock
by $0.8 million and $9.8 million, respectively, and result in a reduction of
retained earnings in the amount of $383.2 million.
Terms of Class A Common Stock and Class B Common Stock
The holders of Common Stock will generally be entitled to vote as a single
class on all matters upon which shareholders have a right to vote, subject to
the requirements of the applicable laws and the rights of any series of
Preferred Stock to a separate class vote. Each share of Class A Common Stock
entitles its holders to one vote, and each share of Class B Common Stock
entitles its holder to 10 votes.
The Class B Common Stock will be convertible into Class A Common Stock on a
share-for-share basis (i) at the option of the holder thereof at any time,
(ii) upon transfer to a person or entity which is not a Permitted Transferee
(as defined in the Second Restated Articles of Incorporation) (iii) with
respect to shares of Class B Common Stock acquired after the Recapitalization,
at such time as a corporation, partnership, limited liability company, trust
or charitable organization ceases to be 100% controlled by Permitted
Transferees and (iv) on the date which the number of shares of Class B Common
Stock outstanding is less than 15% of the then outstanding shares of Common
Stock (without regard to voting rights).
Except for the voting and conversion features, the terms of Class A Common
Stock and Class B Common Stock are generally similar. That is, the holders
will be entitled to equal dividends when declared by the Board, generally
receive the same per share consideration in the event of a merger, and be
treated on an equal per share basis in the event of a liquidation or winding
up of the Company. In addition, the Company will not be entitled to issue
additional shares of Class B Common Stock, or issue options, rights or
warrants to subscribe for additional shares of Class B Common Stock, except
that the Company may make a pro rata offer to all holders of Common Stock of
rights to purchase additional shares of the class of Common Stock held by
them.
Preferred Stock
The Second Restated Articles of Incorporation authorize the Board, without
any vote or action by the shareholders, to create one or more series of
Preferred Stock up to the limit of the Company's authorized but unissued
shares of Preferred Stock and to fix the designations, preferences, rights,
qualifications, limitations and restrictions thereof, including the voting
rights, dividend rights, dividend rate, conversion rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series.
F-12
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STOCK INCENTIVE PLANS
The Stock Incentive Plans for employees and affiliates of the Company
include the Steelcase Inc. Employee Stock Purchase Plan (the "Purchase Plan")
and the Steelcase Inc. Incentive Compensation Plan (the "Incentive
Compensation Plan").
Purchase Plan
The Company will reserve a maximum of 1,500,000 shares of Class A Common
Stock for use under the Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
Pursuant to the Purchase Plan, each eligible employee, as of the start of any
purchase period, will be granted an option to purchase a designated number of
shares of Class A Common Stock. The purchase price of shares of Class A Common
Stock to participating employees will be designated by the Compensation
Committee but in no event shall be less than 85% of the lower of the fair
market values of such shares on the first and last trading days of the
relevant purchase period. However, no employee may purchase shares under the
Purchase Plan in any calendar year with an aggregate fair market value (as
determined on the first day of the relevant purchase period) in excess of
$25,000. The Board may at any time amend or terminate the Purchase Plan.
The initial purchase period under the Purchase Plan will begin on the date
of the pricing of the Offerings and end on the date 70 days thereafter.
Eligible employees who wish to participate in the Purchase Plan may purchase
by the last day of such period a maximum of 100 shares of Class A Common Stock
at 85% of the initial public offering price (the "Employee Discount Option
Grant"). The Company estimates that as of the date of the pricing of the
Offerings there will be approximately 15,000 employees eligible to participate
in the Purchase Plan during the initial purchase period. Pursuant to APB
Opinion No. 25, Accounting for Stock Issued to Employees, the Employee
Discount Option Grant will not result in any compensation expense to be
recognized by the Company.
Incentive Compensation Plan
The Company will reserve for issuance under the Incentive Compensation Plan
a maximum of 150,000 shares of Class A Common Stock for a special one-time
grant on the date of the pricing of the Offerings plus an additional number of
shares equal to 4% of the total outstanding shares of Common Stock as of such
date. The Compensation Committee will have full authority, subject to the
provisions of the Incentive Compensation Plan, to determine, among other
things, the persons to whom awards under the Incentive Compensation Plan
("Awards") will be made, the exercise price, vesting, size and type of such
Awards, and the specific performance goals, restrictions on transfer and
circumstances for forfeiture applicable to Awards.
Awards may be made to employees and non-employee directors of the Company or
its affiliates. A variety of Awards may be granted under the Incentive
Compensation Plan including stock options, stock appreciation rights ("SARs"),
restricted stock, performance shares, performance units, cash-based awards,
phantom shares and other share-based awards as the Compensation Committee may
determine. Stock options granted under the Incentive Compensation Plan may be
either incentive stock options intended to qualify under Section 422 of the
Code or nonqualified stock options not so intended. The Board may amend or
terminate the Incentive Compensation Plan.
In the event of a "change of control", as defined in the Incentive
Compensation Plan, (i) all outstanding options and SARs granted under the
Incentive Compensation Plan will become immediately exercisable and remain
exercisable throughout their entire term, (ii) any performance-based
conditions imposed with respect to outstanding Awards shall be deemed to be
fully earned and a pro rata portion of each such outstanding Award granted for
all outstanding performance periods
F-13
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shall become payable in shares of Class A Common Stock, in the case of Awards
denominated in shares of Class A Common Stock, and in cash, in the case of
Awards denominated in cash, with the remainder of such Award being canceled
for no value, and (iii) all restrictions imposed on restricted stock that are
not performance-based shall lapse.
Concurrently with the Offerings, the Company expects to issue 10 shares of
Class A Common Stock each to certain employees of the Company and its
subsidiaries as the Compensation Committee shall designate (the "Employee
Stock Grant"). The number of eligible employees for this special one-time
grant is estimated to be approximately 15,000. The Employee Stock Grant will
result in $3.5 million of compensation expense (assuming an initial public
offering price of $23.00 per share) which will be recognized by the Company
upon issuance of the special one-time grant.
In addition, the Company expects to issue options to purchase up to
2,800,000 shares of Class A Common Stock to certain employees and non-employee
directors of the Company in connection with the Offerings. These stock options
will have an exercise price equal to the initial public offering price per
share and will primarily vest over a period of five years. Pursuant to APB
Opinion No. 25, these stock options will not result in any material
compensation expense to be recognized by the Company.
The Company intends to purchase 1,650,000 shares of Class B Common Stock
from the Selling Shareholders at the same price at which the shares of Class A
Common Stock are being sold to the Underwriters in the Offerings to avoid
equity dilution in connection with the Employee Stock Grant and the Employee
Discount Option Grant (the "Repurchase").
UNAUDITED PRO FORMA DATA
The Offerings will include 12,150,000 shares of Class A Common Stock
(assuming no exercise of the Underwriters' over-allotment options for
1,822,500 additional shares) and it is currently estimated that the initial
public offering price per share will be between $23.00 and $26.00. The
unaudited pro forma data presented herein assumes an initial public offering
price of $23.00 per share. Upon completion of the Recapitalization, the
Offerings, the Repurchase and the Employee Stock Grant, there will be
outstanding 12,300,000 shares of Class A Common Stock (assuming no exercise of
the Underwriters' over-allotment options) and 144,125,400 shares of Class B
Common Stock (including 17,120,400 shares of Class B Common Stock issuable
upon the conversion of the Existing Preferred Stock in the Recapitalization,
as adjusted to eliminate fractional shares), and no Preferred Stock will be
outstanding. Pro forma shares outstanding include 150,000 shares of Class A
Common Stock which will be issued pursuant to the Employee Stock Grant and
exclude 1,500,000 shares of Class A Common Stock to be issued upon exercise of
the options to be granted pursuant to the Employee Discount Option Grant.
The unaudited pro forma per share data gives effect to the Recapitalization
and the Employee Stock Grant as if the Recapitalization had occurred on
February 24, 1996 and the Employee Stock Grant had occurred on March 1, 1997.
Because of the significant impact of the Recapitalization on net income (loss)
per share of Common Stock, historical amounts have not been presented.
The unaudited pro forma balance sheet data gives effect to (i) the
declaration and payment of the Special Dividend, (ii) the Recapitalization,
(iii) the Offerings, (iv) the Repurchase and (v) the Employee Stock Grant, as
if the Special Dividend, the Recapitalization, the Offerings, the Repurchase
and the Employee Stock Grant had occurred as of November 28, 1997.
F-14
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Finished goods........................ $ 50.3 $ 44.3 $ 51.7
Work in process....................... 32.3 30.8 29.8
Raw materials......................... 109.5 84.1 73.3
------ ------ ------
192.1 159.2 154.8
LIFO reserve.......................... (53.3) (51.2) (51.2)
------ ------ ------
$138.8 $108.0 $103.6
====== ====== ======
</TABLE>
The effect of LIFO liquidations on net income was $2.9 million and $5.4
million for Fiscal 1996 and 1997, respectively, and was not significant for
Fiscal 1995.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Land................................ $ 33.7 $ 35.5 $ 35.5
Buildings and improvements.......... 588.9 610.7 614.9
Machinery and equipment............. 859.5 918.4 906.7
Furniture and fixtures.............. 69.5 70.4 71.0
Leasehold improvements.............. 38.9 39.0 40.7
Software............................ 14.6 26.9 33.7
Construction in progress............ 80.2 45.6 88.5
-------- -------- --------
1,685.3 1,746.5 1,791.0
Accumulated depreciation and amorti-
zation............................. 1,061.0 1,101.8 1,130.7
-------- -------- --------
$ 624.3 $ 644.7 $ 660.3
======== ======== ========
</TABLE>
Depreciation and amortization expense approximated $93.9 million, $89.9
million and $89.4 million for Fiscal 1995, 1996 and 1997, respectively.
Construction in progress consists of numerous equipment and facility projects,
none of which are material individually or in the aggregate.
F-15
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. NOTES RECEIVABLE AND LEASED ASSETS
The components of notes receivable and leased assets are summarized as
follows (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Notes receivable:
Project financing.................. $ 40.7 $ 30.4 $ 46.3
Asset-based lending................ 31.7 57.3 57.3
Ownership transition financing..... 72.1 55.9 56.9
Net investment in leased assets...... 42.3 89.2 148.3
Allowance for losses................. (9.1) (9.2) (8.6)
------ ------ ------
177.7 223.6 300.2
Less current portion................. 101.4 124.9 157.3
------ ------ ------
Long-term portion.................... $ 76.3 $ 98.7 $142.9
====== ====== ======
</TABLE>
Notes receivable include three distinct programs of dealer financing:
project financing; asset-based lending; and ownership transition financing.
Through these programs, the Company helps dealers secure interim financing,
establish working capital lines of credit, finance ownership changes and
restructure debt.
The terms of notes receivable range from a few months for project financing
to 10 years for certain ownership transition financing. Interest rates are
both floating and fixed, reaching up to 12% as of February 28, 1997. The loans
are generally secured by certain dealer assets and, in some cases, the common
stock of the dealership. Unused asset-based lending credit lines approximated
$36.1 million as of February 28, 1997, subject to available collateral. These
commitments generally expire in one year and are reviewed periodically for
renewal.
The Company's net investment in leased assets includes both direct financing
and operating leases. Direct financing leases consist of the present value of
the future minimum lease payments receivable (typically over three to five
years) plus the present value of the estimated residual value (collectively
referred to as the net investment). Residual value is an estimate of the fair
value of the leased equipment at the end of the lease term. The Company
records residual values based on market studies conducted by independent third
parties. Operating leases as of February 23, 1996 and February 28, 1997 were
not material.
6. JOINT VENTURES AND DEALER TRANSITIONS
The Company's investments in and advances to its unconsolidated joint
ventures and dealer transitions are summarized as follows (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Investment in Steelcase Strafor...... $107.0 $107.3 $ 97.7
Note receivable--Steelcase Strafor... 43.0 -- --
Investments in dealer transitions.... 10.0 16.3 8.6
Other joint ventures................. 3.4 2.5 1.9
------ ------ -------
$163.4 $126.1 $ 108.2
====== ====== =======
</TABLE>
F-16
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During Fiscal 1996 and 1997, translation adjustments of $5.6 million and
$(0.2) million, respectively, resulting from foreign currency denominated
assets and liabilities of Steelcase Strafor and related fluctuations in
exchange rates, were charged directly to a component of shareholders' equity
in the accompanying consolidated balance sheets. In addition, the Company
reduced its investment in Steelcase Strafor by $1.4 million during Fiscal 1997
for dividends received from the joint venture.
Investments in dealer transitions represent dealers which the Company has
acquired with the intention of reselling as soon as practicable. Accordingly,
the Company recognizes its share of earnings and losses from dealer
transitions pursuant to the equity method of accounting. Accounts and notes
receivable from these dealers approximated $29.1 million and $57.0 million as
of February 23, 1996 and February 28, 1997, respectively.
The Company's equity in net income (loss) of joint ventures and dealer
transitions consists of (in millions):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
50% share of Steelcase
Strafor net income
(loss)................. $(0.8) $ 3.9 $ 2.0 $ 2.2 $ 3.5
Net income (loss) of
dealer transitions..... 0.9 -- (1.7) (0.4) (0.1)
Other joint ventures,
net.................... (0.3) 0.1 (0.3) (0.6) (0.4)
----- ----- ----- ----- -----
$(0.2) $ 4.0 $ -- $ 1.2 $ 3.0
===== ===== ===== ===== =====
</TABLE>
Summarized financial information for Steelcase Strafor, as of December 31,
1995 and 1996 and the three years ended December 31, 1996, is as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Balance Sheet:
Current assets............................................... $273.6 $278.9
Property and equipment....................................... 162.7 148.7
Other assets................................................. 98.1 103.0
------ ------
Total assets............................................... 534.4 530.6
------ ------
Current liabilities.......................................... 221.5 229.3
Long-term liabilities........................................ 97.7 85.0
------ ------
Total liabilities.......................................... 319.2 314.3
------ ------
Net assets................................................. $215.2 $216.3
====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Results of Operations:
Revenues.......................................... $ 415.7 $ 471.0 $ 494.9
Operating income.................................. 19.4 25.0 27.6
Net income (loss)................................. (1.6) 7.8 4.0
</TABLE>
F-17
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. OTHER ASSETS
Other assets consist of (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash surrender value of life insur-
ance.............................. $ 64.9 $ 79.0 $ 82.4
Long-term investments.............. 30.6 11.6 8.5
Other.............................. 7.3 14.3 18.0
------ ------ ------
$102.8 $104.9 $108.9
====== ====== ======
</TABLE>
Long-term investments as of February 28, 1997 primarily include treasury
notes which mature over the next three years.
8. EMPLOYEE BENEFIT PLAN OBLIGATIONS
Employee benefit plan obligations consist of (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Profit-sharing and pension plans..... $ 26.7 $ 32.5 $ 36.1
Postretirement insurance benefits.... 135.8 143.1 148.5
Management incentive and executive
supplemental retirement and deferred
compensation plans.................. 36.7 44.1 51.5
------ ------ ------
199.2 219.7 236.1
Current portion...................... 36.8 43.1 48.3
------ ------ ------
Long-term portion.................... $162.4 $176.6 $187.8
====== ====== ======
</TABLE>
PROFIT-SHARING AND PENSION PLANS
Substantially all employees are covered under the Steelcase Inc. Employees'
Profit-Sharing Retirement Plan and the Steelcase Inc. Employees' Money
Purchase Plan or under similar subsidiary plans. Annual discretionary Company
contributions under the Steelcase Inc. Employees' Profit-Sharing Retirement
Plan and similar subsidiary plans are declared by the Board at the end of each
Fiscal year. Under the Steelcase Inc. Employees' Money Purchase Plan, annual
Company contributions are required in the amount of 5% of eligible annual
compensation. Total expense under these plans approximated $47.7 million,
$58.9 million and $67.2 million for Fiscal 1995, 1996 and 1997, respectively.
F-18
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
POSTRETIREMENT INSURANCE BENEFITS
The Company and certain of its subsidiaries have postretirement benefit
plans that provide medical and life insurance benefits to retirees and
eligible dependents. The Company accrues the cost of postretirement insurance
benefits during the service lives of employees. The following table sets forth
the plans' combined accumulated postretirement benefit obligation (in
millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents........................ $ 55.3 $ 72.4
Employees fully eligible....................... 24.8 26.0
Employees not yet fully eligible............... 72.4 53.1
------ ------
152.5 151.5
Unrecognized loss................................ (16.7) (8.4)
------ ------
Accrued postretirement benefit obligation........ $135.8 $143.1
====== ======
</TABLE>
The Company charges postretirement benefit costs as accrued, based on
actuarial calculations for each plan. Net postretirement benefit cost charged
to income includes the following components (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Service cost for benefits earned
during the period.................. $ 3.6 $ 3.2 $ 3.0
Interest cost on the accumulated
postretirement benefit obligation.. 10.1 10.7 11.2
Amortization of unrecognized loss... 0.2 -- --
----- ----- -----
Net postretirement benefit cost..... $13.9 $13.9 $14.2
===== ===== =====
</TABLE>
The significant assumptions used in determining the accumulated
postretirement benefit obligation were as follows:
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Discount rate...................................... 7.75% 7.75%
Rate of salary progression......................... 5.00% 5.00%
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost
of covered benefits (estimate of medical inflation rate) is 8.0% for Fiscal
1998, gradually declining to 5.5% in Fiscal 2004 and thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. For example, a 1.0% increase in the assumed medical inflation rate
would increase the accumulated postretirement benefit obligation as of
February 28, 1997 by approximately $18.3 million and the annual net
postretirement benefit cost by approximately $1.6 million.
MANAGEMENT INCENTIVE AND EXECUTIVE SUPPLEMENTAL RETIREMENT AND DEFERRED
COMPENSATION PLANS
Management Incentive Plan
The Amended and Restated Steelcase Inc. Management Incentive Plan is an
annual and long-term incentive compensation program that provides eligible key
employees of the Company with cash
F-19
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payments based upon the achievement by the Company of specified financial
performance goals as measured by Economic Value Added ("EVA"), as defined in
the plan. Annual bonuses are payable after the end of the Fiscal year and,
therefore, are included in accrued compensation in the accompanying
consolidated balance sheets, whereas long-term bonus amounts are paid out over
a three-year period commencing after the end of the year following the year in
which the incentive amount is earned. The long-term amounts are paid in
substantially equal installments over the three-year payment period and unpaid
long-term amounts are adjusted based on the Company's return on equity as
determined each Fiscal year.
Prior to implementation of the long-term component of the Management
Incentive Plan, the Company had similar agreements with certain employees
providing for incentive payments based on the change each year in the book
value, as defined in the plan, of the Company's Common Stock. This plan was
terminated during Fiscal 1996 and all remaining participant balances are being
paid over a four-year period which began March 1996.
Executive Supplemental Retirement Plan
The Steelcase Inc. 1994 Executive Supplemental Retirement Plan (the
"Supplemental Plan") is a nonqualified deferred compensation and supplemental
retirement plan that is limited to a select group of management or highly
compensated employees. The Supplemental Plan is intended to attract and retain
highly qualified corporate executives and to enable such executives to devote
their full-time efforts to the Company by providing, in consideration of these
efforts, supplemental retirement income.
In general, upon satisfying the requirements of the Supplemental Plan
executives are entitled to receive five annual payments each equal to 70% of
the participant's average base salary for the three consecutive years prior to
retirement or death and 15 annual payments each equal to $50,000 multiplied by
the participant's vested percentage. A participant's vested percentage begins
at 20% after three completed years of service following such participant's
eligibility under the Supplemental Plan and increases by 20% increments
annually until it becomes fully vested upon seven completed years of service
following such eligibility.
Deferred Compensation Agreements
The Company has future retirement obligations to certain employees in return
for agreeing not to receive part of their compensation for a period of three
to five years. Compensation withheld has been invested in corporate-owned life
insurance, which is expected to be sufficient to cover such future
obligations.
Long-term management incentive and total executive supplemental retirement
and deferred compensation expense approximated $6.2 million, $13.5 million and
$9.7 million for Fiscal 1995, 1996 and 1997, respectively.
9. PREFERRED AND COMMON STOCK
Class A Preferred Stock pays dividends at a rate of 5% per year and is
redeemable at the option of the Board at $103 per share. The dividends are
cumulative and will be paid, or set aside, before any distribution on Class B
Preferred Stock or Common Stock is declared.
Class B Preferred Stock pays dividends at a rate of $100 per year and is
redeemable at the option of the Board at $2,000 per share. The dividends are
cumulative and will be paid, or set aside, before any distribution on Common
Stock is declared.
F-20
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
See Note 2 to Consolidated Financial Statements regarding the
Recapitalization which is expected to occur prior to the consummation of the
Offerings.
10. PATENT LITIGATION EXPENSE
In November 1985, Haworth, Inc. ("Haworth") filed suit against the Company
alleging infringement of two patents covering powered panels used in furniture
systems sold since 1978. The trial court ruled for the Company. Haworth
subsequently appealed to the U.S. Court of Appeals for the Federal Circuit,
which reversed the trial court's decision in January 1989, and held that the
Company infringed. Upon remand for determination of damages, the parties
consented to the appointment of a Special Master to oversee further
proceedings, including the binding, non-appealable determination of damages
for the established infringement and resolution of related issues. The
proceedings concluded in December 1996 resulting in a lump sum payment by the
Company to Haworth in the amount of $211.5 million, representing $96.8 million
in damages and $114.7 million in interest which accrued over the 17 years
covered by the litigation. The charges reflected in the accompanying
consolidated statement of income for Fiscal 1997 are net of reserve estimates
provided during Fiscal 1994, which represented management's best estimate of
the outcome of the proceedings at that time.
11. OTHER INCOME, NET
Other income, net consists of (in millions):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income......... $24.9 $28.5 $26.6 $20.6 $21.5
Gain on sale of stock... 8.0 -- -- -- --
Loss on dealer
transitions............ (3.1) (0.3) (2.5) -- (2.4)
Interest expense........ (1.6) (1.5) (2.1) (1.3) (1.4)
Miscellaneous--net...... (1.1) (2.7) (0.6) (0.9) (2.0)
----- ----- ----- ----- -----
$27.1 $24.0 $21.4 $18.4 $15.7
===== ===== ===== ===== =====
</TABLE>
F-21
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES
The provision for income taxes on income (loss) before equity in net income
(loss) of joint ventures and dealer transitions consists of (in millions):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28, NOVEMBER 22, NOVEMBER 28,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current income taxes:
Federal............... $36.8 $ 72.8 $17.6 $(3.3) $ 86.9
State and local....... 2.7 8.5 4.2 (2.4) 10.9
Foreign............... 1.0 (1.0) -- -- --
----- ------ ----- ----- ------
40.5 80.3 21.8 (5.7) 97.8
----- ------ ----- ----- ------
Deferred income taxes:
Federal............... (0.1) (12.4) 1.3 (2.8) 2.4
State and local....... 0.4 0.2 0.5 (0.1) 0.1
Foreign............... 0.1 -- -- -- --
----- ------ ----- ----- ------
0.4 (12.2) 1.8 (2.9) 2.5
----- ------ ----- ----- ------
$40.9 $ 68.1 $23.6 $(8.6) $100.3
===== ====== ===== ===== ======
</TABLE>
Undistributed earnings of foreign joint ventures and subsidiaries are not
material.
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
deferred income taxes relate to the following (in millions):
<TABLE>
<CAPTION>
FEBRUARY 23, FEBRUARY 28, NOVEMBER 28,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred income tax assets:
Employee benefit plan obliga-
tions............................ $ 65.1 $ 71.6 $ 74.2
Accrued compensation.............. 7.1 7.9 10.3
Reserves and allowances........... 33.6 33.1 34.9
Foreign losses.................... 6.2 8.2 7.2
Other............................. 7.7 10.9 11.0
------ ------ ------
Total deferred income tax assets.... 119.7 131.7 137.6
Deferred income tax liability--
property and equipment............. (21.7) (30.0) (38.4)
------ ------ ------
Net deferred income tax assets...... 98.0 101.7 99.2
Current portion..................... 50.7 48.1 52.1
------ ------ ------
Non-current portion................. $ 47.3 $ 53.6 $ 47.1
====== ====== ======
</TABLE>
The Company has recorded a deferred tax asset as of February 28, 1997 of
$8.2 million reflecting the benefit of foreign operating loss carryforwards
that expire over the next five years. Realization is dependent on future
taxable income of the related foreign operations and tax planning strategies
available to the Company. Although realization is not assured, management
believes it is more likely than not that all of the deferred tax assets will
be realized. Accordingly, no valuation allowance has been established for the
deferred tax assets.
F-22
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effective income tax rate on income before equity in net income (loss)
of joint ventures and dealer transitions varied from the statutory federal
income tax rate as set forth in the following table:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 23, FEBRUARY 28,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Statutory federal income tax rate... 35.0% 35.0% 35.0%
State and local income taxes........ 1.1 2.6 4.3
Tax exempt interest................. (0.6) (0.2) (1.3)
Goodwill and intangible asset
amortization and write-offs........ 0.6 0.3 5.0
Research and development credit..... (0.5) (1.6) --
Other............................... 3.2 0.2 3.0
---- ---- ----
Effective income tax rate........... 38.8% 36.3% 46.0%
==== ==== ====
</TABLE>
The Company made income tax payments of $50.7 million, $78.1 million and
$44.0 million during Fiscal 1995, 1996 and 1997, respectively.
13. FINANCIAL INSTRUMENTS, CONCENTRATIONS OF CREDIT RISK AND OFF-BALANCE-SHEET
RISK
Financial instruments, which potentially subject the Company to
concentrations of investment and credit risk, primarily consist of cash
equivalents, investments, accounts receivable and notes receivable and leased
assets. The Company places its cash with high quality financial institutions
and invests in high quality securities and commercial paper. The Company
limits its exposure, by policy, to any one financial institution or debtor.
The Company's customers consist primarily of independent dealers in the
office environment industry. They are dispersed globally, primarily across all
North American geographic areas. All probable uncollectible accounts and notes
receivable and leased assets have been appropriately considered in
establishing the allowance for losses. In general, the Company obtains
security interests in the assets of the customer. These security interests are
generally secondary to the interest of the customer's primary lenders.
Guarantees of debt obligations are conditional commitments issued by the
Company to guarantee the performance of certain unconsolidated dealers and
joint ventures to a third party. These guarantees are primarily issued to
support private borrowing arrangements. The Company has guaranteed
approximately $28.0 million and $34.0 million of debt obligations of
unconsolidated dealers and joint ventures as of February 23, 1996 and February
28, 1997, respectively. Although this amount represents the maximum exposure
to loss, management believes the actual risk of loss to be insignificant.
The Company uses financial instruments, principally forward contracts and
swaps, to manage foreign currency exposures related to purchases and sales.
These contracts hedge transactions and balances for periods and amounts
consistent with its committed exposures and do not constitute investments
independent of these exposures. The Company does not use these financial
instruments for speculative or trading purposes. Gains and losses on currency
forward contracts and swaps that are designated and effective as hedges of
anticipated transactions, for which a firm commitment has been attained, are
deferred and recognized in income in the same period that the underlying
F-23
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
transactions are settled, and generally offset. Forward contracts and swaps
outstanding as of February 23, 1996 and February 28, 1997 were not material.
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain sales offices, showrooms and equipment under
noncancelable operating leases that expire at various dates through Fiscal
2005. Minimum annual rental commitments under noncancelable operating leases
that have initial or remaining lease terms in excess of one year as of
February 28, 1997, are as follows (in millions):
<TABLE>
<CAPTION>
FISCAL AMOUNT
------ ------
<S> <C>
1999.................................................................. $23.0
2000.................................................................. 13.0
2001.................................................................. 10.0
2002.................................................................. 7.0
2003.................................................................. 5.0
Thereafter............................................................ 10.0
-----
$68.0
=====
</TABLE>
Rent expense under all operating leases approximated $31.7 million, $38.7
million and $45.3 million for Fiscal 1995, 1996 and 1997, respectively.
The Company is involved in litigation from time to time in the ordinary
course of its business. Based on known information, management believes that
the Company is not currently party to any material litigation.
15. UNAUDITED QUARTERLY RESULTS
The following sets forth summary unaudited information on a quarterly basis
for the Company (in millions):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1996 QUARTER QUARTER QUARTER QUARTER TOTAL
----------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales......................... $535.2 $544.1 $548.9 $527.7 $2,155.9
Gross profit...................... 168.4 180.6 166.6 172.1 687.7
Operating income.................. 45.3 51.5 35.3 31.5 163.6
Net income........................ 30.0 38.0 25.9 29.6 123.5
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1997 QUARTER QUARTER QUARTER QUARTER TOTAL
----------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales......................... $572.2 $579.9 $623.0 $633.3 $2,408.4
Gross profit...................... 197.6 205.5 221.3 232.4 856.8
Operating income (loss)........... 51.1 45.4 (21.8) 66.9 141.6
Net income (loss)................. 36.7 30.9 (76.4) 36.5 27.7
<CAPTION>
NINE MONTHS ENDED FIRST SECOND THIRD
NOVEMBER 28, 1997 QUARTER QUARTER QUARTER TOTAL
------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales......................... $663.2 $695.3 $702.0 $2,060.5
Gross profit...................... 241.5 259.9 242.6 744.0
Operating income.................. 76.9 99.2 68.8 244.9
Net income........................ 47.2 66.3 49.8 163.3
</TABLE>
F-24
<PAGE>
STEELCASE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the second quarter of Fiscal 1997, one of the Company's subsidiaries
recorded a restructuring charge, including an intangible asset write-off,
aggregating approximately $8.6 million. In addition, during the third quarter
of Fiscal 1997, certain patent litigation was resolved. See Note 10 to
Consolidated Financial Statements.
During the second quarter of Fiscal 1998, the Company received a net
litigation settlement in the amount of $9.8 million. In addition, during the
third quarter of Fiscal 1998, the Company incurred incremental costs in the
aggregate amount of $15.8 million related to furniture distribution process
changes, the restructuring and disposition of a non-furniture related
manufacturing facility, the relocation of a showroom facility and certain
manufacturing equipment write-offs.
F-25
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Selling Shareholders have agreed to sell to each of the U.S. Underwriters
named below, and each of such U.S. Underwriters, for whom Goldman, Sachs &
Co., Bear, Stearns & Co. Inc., Morgan Stanley & Co. Incorporated and Smith
Barney Inc. are acting as representatives, has severally agreed to purchase
from the Selling Shareholders, the respective number of shares of Class A
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co. ...........................................
Bear, Stearns & Co. Inc. .......................................
Morgan Stanley & Co. Incorporated...............................
Smith Barney Inc................................................
---------
Total......................................................... 9,720,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Company and the Selling Shareholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters
of the international offering (the "International Underwriters") providing for
the concurrent offer and sale of 2,430,000 shares of Class A Common Stock by
the Selling Shareholders in an international offering outside the United
States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International
Underwriters are Goldman Sachs International, Bear, Stearns International
Limited, Morgan Stanley & Co. International Limited and Smith Barney Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution
of the shares offered hereby and subject to certain exceptions, it will offer,
sell or deliver the shares of Class A Common Stock, directly or indirectly,
only in the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") and to U.S. persons, which term shall mean,
for purposes of this paragraph: (a) any individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof
and whose office most directly involved with the purchase is located in the
U-1
<PAGE>
United States. Each of the International Underwriters has agreed pursuant to
the Agreement Between that, as a part of the distribution of the shares
offered as a part of the International Offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Class A Common Stock (a) in the United States or to any U.S. persons
or (b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (ii) cause any dealer
to whom it may sell such shares at any concession to agree to observe a
similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of share of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the initial public offering price, less an amount not greater
that the selling concession.
The Selling Shareholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 1,458,000 additional shares of Class A Common Stock solely to
cover over-allotments, if any. If the U.S. Underwriters exercise their over-
allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the 9,720,000 shares of Class A Common Stock
offered. The Selling Shareholders have granted the International Underwriters
a similar option to purchase up to an aggregate of 364,500 additional shares
of Class A Common Stock.
The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the
date of this Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any securities of the Company that are substantially similar to the
Shares, including but not limited to any securities that are convertible into
or exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to the Recapitalization
or pursuant to the Purchase Plan, the Incentive Compensation Plan and the
Nonqualified Plan, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of the date of the Underwriting
Agreement), with out the prior written consent of Goldman, Sachs & Co. In
addition, the Company's directors and executive officers, and certain of its
shareholders who represent in the aggregate 93.3% of the outstanding Class B
Common Stock after the Offerings, have agreed, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of this Prospectus, not to, directly or indirectly, offer,
pledge, sell, contract to sell or otherwise dispose of any securities of the
Company outstanding as of the date of this Prospectus, including but not
limited to any securities that are convertible into or exchangeable for, or
that represent the right to receive any Common Stock or substantially similar
securities, or enter into any swap or other arrangement that transfers, in
whole or in part, the economic consequences of ownership of any securities of
the Company, without the prior written consent of Goldman, Sachs & Co., other
than (i) the conversion or exchange of convertible or exchangeable securities
outstanding on the date of this Prospectus to be issued in the
Recapitalization, (ii) the shares of Class A Common Stock offered hereby,
(iii) the Repurchase or (iv) the transfer of securities of the Company by sale
or gift, provided the transferee agrees in writing to the same terms and
conditions binding the transferor.
In connection with the Offerings, the Underwriters may purchase and sell the
Class A Common Stock in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the Offerings. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Class A Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of Class A Common Stock than they are required to purchase from the
Selling Shareholders in the Offerings. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities
U-2
<PAGE>
sold in the Offerings for their account may be reclaimed by the syndicate if
such securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Class A Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the NYSE, the over-the-counter market or otherwise.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Class A Common Stock offered by them.
Prior to the Offerings, there has been no public market for the Class A
Common Stock. The initial public offering price will be negotiated among the
Company, the Selling Shareholders (or their representatives), and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Class A Common Stock, in addition to prevailing market
conditions, will be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relating to
market valuation of companies in related businesses.
The Class A Common Stock has been approved for listing on the NYSE under the
symbol "SCS", subject to notice of official issuance. In order to meet one of
the requirements for listing the Class A Common Stock on the NYSE, the U.S.
Underwriters have undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial holders.
Each of the Company and the Selling Shareholders has agreed to indemnify the
several U.S. Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. In addition, the Company has agreed to
indemnify the Selling Shareholders against certain liabilities, including
liabilities under the Securities Act of 1933.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold
in the international offering, to persons located in the United States.
U-3
<PAGE>
The Steelcase Leadership
Community is a unique workspace
for the Company's executive
management team. Eighty percent
of the space is shared and
includes a range of settings to
serve various work
[PHOTOS OF THE STEELCASE
LEADERSHIP COMMUNITY AND PHOTOS
OF THE LEADERSHIP CENTER]
[LOGO OF STEELCASE]
needs from individual offices to
team workspaces, conference
rooms, as well as informal
gathering areas. The Leadership
Center is the focal point and
provides for easy access to
interactive technology and on-
demand visual display of
operation results.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
The Company.............................................................. 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 40
Principal and Selling Shareholders....................................... 51
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 57
Certain United States Federal Income Tax Considerations.................. 58
Validity of Class A Common Stock......................................... 61
Experts.................................................................. 61
Available Information.................................................... 61
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12,150,000 SHARES
STEELCASE INC.
CLASS A COMMON STOCK
-----------
LOGO
-----------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee, the NYSE filing
fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 107,170
NASD Filing Fee.................................................. 30,500
NYSE Listing Fee................................................. 112,600
Transfer Agent and Registrar Fees................................ 10,000
Accounting Fees and Expenses..................................... 300,000
Legal Fees and Expenses(1)....................................... 1,500,000
Printing, Engraving and Mailing Expenses......................... 275,000
Miscellaneous.................................................... 664,730
----------
Total.......................................................... $3,000,000
==========
</TABLE>
- --------
(1)Approximately $360,000 will be paid by certain Selling Shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 561 of the Michigan Business Corporation Act ("Section 561")
provides that a Michigan corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative
or investigative), other than an action by or in the right of the corporation,
by reason of the fact that he or she is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders, and with respect to
any criminal action or proceeding, if the person had no reasonable cause to
believe his or her conduct was unlawful. In addition, Section 561 provides
that a Michigan corporation may indemnify a person who was or is a party or is
threatened to be made a party to a threatened, pending or completed action or
suit by or in the right of the corporation by reason of the fact that he or
she is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) and amounts paid in settlement actually and reasonably incurred by the
person in connection with the action or suit, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation or its shareholders. Section 561 does
not permit indemnification for a claim, issue or matter in which the person
has been found liable to the corporation unless application for
indemnification is made to, and approved by, the court conducting the
proceeding or another court of competent jurisdiction.
The Registrant's Articles provide that, to the fullest extent permitted by
the Michigan Business Corporation Act, no director of the Registrant shall be
personally liable to the Registrant or its shareholders for or with respect to
any acts or omissions in the performance of his or her duties as a
II-1
<PAGE>
director of the Registrant. The Registrant's By-laws generally provide that,
to the fullest extent permitted by the Michigan Business Corporation Act, the
Registrant shall (i) indemnify any person who was, is or is threatened to be
made, a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was a director, officer or employee
of the Registrant, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation (including a
subsidiary corporation), limited liability company, partnership, joint
venture, trust, employee benefit plan or other enterprise, or by reason of
anything done by such person in such capacity (collectively, "Covered
Matters") and (ii) pay or reimburse the reasonable expenses incurred by such
person in connection with any Covered Matter in advance of final disposition
of such Covered Matter. In addition, the Registrant's By-laws allow the
Registrant's Board of Directors to authorize such other indemnification to
directors, officers, employees and agents by insurance, contract or otherwise
as is permitted by law.
The foregoing statements are subject to the detailed provisions of the
Michigan Business Corporation Act, the Registrant's Articles and the
Registrant's By-laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 29, 1996, the Company sold 418 shares of common stock, par value
$50.00 per share, to certain officers of the Company for an aggregate purchase
price of $1,463,000, pursuant to an exemption from registration under Section
4(2) of the Securities Act.
On December 2, 1997, the shareholders of the Company approved the
Recapitalization, pursuant to which (i) each outstanding share of Existing
Common Stock will be converted into Class B Common Stock and (ii) each
outstanding share of Existing Preferred Stock will be converted into Class B
Common Stock on the basis described under "Description of Capital Stock--
Recapitalization". The Recapitalization will be effective prior to the
consummation of the Offerings, and will be effected pursuant to Section 4(2)
of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement
1.2 --Form of International Underwriting Agreement
3.1+ --Second Restated Articles of Incorporation of the Registrant
3.2+ --Amended By-laws of the Registrant
4.1 --Specimen Certificate for shares of Class A Common Stock of the
Registrant
4.2 --Form of Lock-up Agreement
5.1 --Opinion of Honigman Miller Schwartz and Cohn with respect to
the validity of the Class A Common Stock being offered
10.1 --Deferred Compensation Agreement dated January 12, 1998, between
Steelcase Inc. and James Hackett
10.2 --Deferred Compensation Agreement dated January 12, 1998, between
Steelcase Inc. and Robert Ballard
10.3+ --Deferred Compensation Agreement dated January 12, 1998, between
Steelcase Inc. and Alwyn Rougier-Chapman
10.4 --Deferred Compensation Agreement dated January 13, 1998, between
Steelcase Inc. and James Mitchell
10.5+ --Steelcase Inc. Incentive Compensation Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.6+ --Amended and Restated Steelcase Inc. Management Incentive Plan
10.7+ --Steelcase Inc. 1994 Executive Supplemental Retirement Plan
11.1 --Statement Regarding Computation of Net Income Per Share of
Common Stock
21.1+ --Subsidiaries of the Registrant
23.1 --Consent of Honigman Miller Schwartz and Cohn (included in
Exhibit 5.1)
23.2 --Consent of BDO Seidman, LLP
24.1+ --Power of Attorney
27.1 --Financial Data Schedule
</TABLE>
- --------
+ Previously filed.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts (included on Page S-2)
All other schedules have been omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Articles and the By-
laws of the Registrant and the laws of the State of Michigan, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements, respectively,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF GRAND RAPIDS, STATE OF MICHIGAN, ON THIS 20TH DAY OF JANUARY,
1998.
STEELCASE INC.
/s/ Alwyn Rougier-Chapman
By: _________________________________
Name: Alwyn Rougier-Chapman
Title: Senior Vice President--
Finance, Chief Financial
Officer and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 2 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED BELOW ON THIS 20TH DAY OF
JANUARY, 1998.
SIGNATURE TITLE
* President, Chief Executive Officer
- ------------------------------------- and Director (Principal Executive
(JAMES P. HACKETT) Officer)
Senior Vice President--Finance,
/s/ Alwyn Rougier-Chapman Chief Financial Officer and
- ------------------------------------- Treasurer (Principal Financial
(ALWYN ROUGIER-CHAPMAN) Officer and Principal Accounting
Officer)
* President and Chief Executive
- ------------------------------------- Officer--Steelcase Design
(WILLIAM P. CRAWFORD) Partnership and Director
II-4
<PAGE>
SIGNATURE TITLE
* Chairman of the Board of Directors
- ------------------------------------- and Director
(ROBERT C. PEW II)
* Vice Chairman of the Board of
- ------------------------------------- Directors and Director
(PETER M. WEGE)
* Director
- -------------------------------------
(ROBERT C. PEW III)
* Director
- -------------------------------------
(PETER M. WEGE II)
* Director
- -------------------------------------
(DAVID D. HUNTING, JR.)
* Director
- -------------------------------------
(FRANK H. MERLOTTI)
* Director
- -------------------------------------
(P. CRAIG WELCH, JR.)
/s/ Alwyn Rougier-Chapman
*By__________________________________
ALWYN ROUGIER-CHAPMAN
ATTORNEY-IN-FACT
II-5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Steelcase Inc.
Grand Rapids, Michigan
The audit referred to in our report to Steelcase Inc. dated March 21, 1997,
which is contained in the Prospectus constituting a part of this Registration
Statement, included the audit of the financial statement schedule listed under
item 16(b) for each of the three years in the period ended February 28, 1997.
The financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audit.
In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
March 21, 1997
S-1
<PAGE>
SCHEDULE II
STEELCASE INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------------------------------- ---------- -------------
ADDITIONS
BALANCE AT ---------------------------------
BEGINNING CHARGED TO COSTS CHARGED TO OTHER BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ---------- ---------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Reserves deducted in the
consolidated balance
sheet from the assets
to which they apply:
Year ended February 28,
1997:
Allowances for losses
on Accounts
Receivable............ $20.4 $4.8 $2.2(A) $23.0
Allowance for losses on
Notes Receivable...... $ 9.1 $7.7 $7.6(A) $ 9.2
Year ended February 28,
1996:
Allowances for losses
on Accounts
Receivable............ $14.7 $8.7 $3.0(A) $20.4
Allowance for losses on
Notes Receivable...... $ 9.1 $2.0 $2.0(A) $ 9.1
Year ended February 28,
1995:
Allowances for losses
on Accounts
Receivable............ $14.7 $3.1 $3.1(A) $14.7
Allowance for losses on
Notes Receivable...... $10.2 $2.3 $3.4(A) $ 9.1
</TABLE>
Note (A)--Excess of accounts written off over recoveries.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
1.1 --Form of Underwriting Agreement
1.2 --Form of International Underwriting Agreement
3.1+ --Second Restated Articles of Incorporation of the
Registrant
3.2+ --Amended By-laws of the Registrant
4.1 --Specimen Certificate for shares of Class A Common Stock
of the Registrant
4.2 --Form of Lock-up Agreement
5.1 --Opinion of Honigman Miller Schwartz and Cohn with respect
to the validity of the Class A Common Stock being offered
10.1 --Deferred Compensation Agreement dated January 12, 1998,
between Steelcase Inc. and James Hackett
10.2 --Deferred Compensation Agreement dated January 12, 1998,
between Steelcase Inc. and Robert Ballard
10.3+ --Deferred Compensation Agreement dated January 12, 1998,
between Steelcase Inc. and Alwyn Rougier-Chapman
10.4 --Deferred Compensation Agreement dated January 13, 1998,
between Steelcase Inc. and James Mitchell
10.5+ --Steelcase Inc. Incentive Compensation Plan
10.6+ --Amended and Restated Steelcase Inc. Management Incentive
Plan
10.7+ --Steelcase Inc. 1994 Executive Supplemental Retirement
Plan
11.1 --Statement Regarding Computation of Net Income Per Share
of Common Stock
21.1+ --Subsidiaries of the Registrant
23.1 --Consent of Honigman Miller Schwartz and Cohn (included in
Exhibit 5.1)
23.2 --Consent of BDO Seidman, LLP
24.1+ --Power of Attorney
27.1 --Financial Data Schedule
</TABLE>
- --------
+ Previously filed.
<PAGE>
EXHIBIT 1.1
-----------
STEELCASE INC.
CLASS A COMMON STOCK
_____________
UNDERWRITING AGREEMENT
(U.S. Version)
--------------------------
, 1998
Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc.,
Morgan Stanley & Co. Incorporated,
Smith Barney Inc.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Certain shareholders named in Schedule II hereto (the "Selling
Shareholders") of Steelcase Inc., a Michigan corporation (the "Company"),
propose, subject to the terms and conditions stated herein, to sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
9,720,000 shares (the "Firm Shares") and, at the election of the Underwriters,
up to 1,458,000 additional shares (the "Optional Shares") of Class A Common
Stock ("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares").
It is understood and agreed to by all parties that the Company and the
Selling Shareholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Selling
Shareholders of up to a total of 2,430,000 shares of Stock (the "International
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters outside the United States (the "International
Underwriters"), for whom Goldman Sachs International, Bear, Stearns
International Limited, Morgan Stanley & Co. International Limited and Smith
Barney Inc. are acting as lead managers. Anything herein or therein to the
contrary notwithstanding, the respective closings under this Agreement and the
International Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of
<PAGE>
Stock between the two syndicates. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages. Except as used in Sections 2, 3, 4,
9 and 11 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the U.S.
and the international versions thereof.
Unless otherwise indicated herein, the provisions of this Agreement assume
that the Recapitalization (the "Recapitalization") described under the caption
"Description of Capital Stock-Recapitalization" in the Prospectus has been
consummated.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-41647)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-
effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto, for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document
with respect to the Initial Registration Statement has heretofore been
filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-
effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule
462(b) Registration Statement, if any, including all exhibits thereto
and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration
Statement at the time it was declared effective, each as amended at
the time such part of the registration statement became effective or
such part of the rule 462(b) Registration Statement, if any, became or
hereinafter becomes effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
2
<PAGE>
(ii) No order preventing or suspending the use of the Preliminary
Prospectus dated January 20, 1998, or any Preliminary Prospectus
dated subsequent thereto, has been issued by the Commission, and such
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus which would individually or in the aggregate result in a
material adverse change, or involve a prospective material adverse
change, in or affecting the general affairs, prospects, management,
consolidated financial position, shareholders' equity or results of
operations of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"); and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock of the
Company or the Subsidiaries (as defined herein), or the short-term
(not including accounts payable) or long-term debt of the Company or
the Company and its subsidiaries on a consolidated basis (other than
changes not in excess of $5 million) or any change that would
constitute a Material Adverse Effect, otherwise than as set forth or
contemplated in the Prospectus;
3
<PAGE>
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the business of the
Company or value of such property and do not interfere materially with
the use made and proposed to be made of such property by the Company
and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere materially with the use made and
proposed to be made of such property and buildings by the Company and
its subsidiaries;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Michigan,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company
listed in Exhibit 21.1 of the Initial Registration Statement (each a
"Subsidiary", and collectively, the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation;
(vii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares to be sold by the Selling
Shareholders hereunder and under the International Underwriting
Agreement) have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; and all of the issued shares of capital
stock of each Subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable and (except for directors'
qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims; and all
of the shares of Steelcase Strafor, S.A. ("Steelcase Strafor") have
been duly and validly authorized and issued, are fully paid and non-
assessable and the Company owns directly 49.9% of the issued and
outstanding shares of Steelcase Strafor and its employees who are
directors of Steelcase Strafor own .01% of the issued and outstanding
shares of Steelcase Strafor, in each case free and clear of all liens,
encumbrances, equities or claims.
4
<PAGE>
(viii) Each of this Agreement and the International Underwriting
Agreement has been duly authorized, executed and delivered by the
Company;
(ix) The compliance by the Company with all of the provisions of
this Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject which would individually or in the aggregate
have a Material Adverse Effect, nor will such action result in any
violation of the provisions of the Company's restated articles of
incorporation as in effect on the date hereof (the "Restated Articles
of Incorporation"), the Company's second restated articles of
incorporation (the "Second Restated Articles of Incorporation") in the
form previously furnished to you and to be filed prior to the First
Time of Delivery (as defined in Section 4 hereof), or the by-laws of
the Company in effect on the date hereof or the amended by-laws of the
Company (the "Amended By-Laws") to be effective upon filing the Second
Restated Articles of Incorporation of the Company or any statute or
any order, rule or regulation of any court or governmental agency or
body (hereinafter referred to as a "Governmental Agency") having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such Governmental Agency
(hereinafter referred to as a "Governmental Authorization") is
required for the sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration under
the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters and the
International Underwriters;
(x) Neither the Company nor any of its subsidiaries is (i) in
violation of its constating governing documents or (ii) in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound
which would individually or in the aggregate have a Material Adverse
Effect;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
a
5
<PAGE>
summary of the terms of the Stock, under the caption "Certain United
States Federal Income Tax Considerations", insofar as they purport to
describe the material tax consequences of an investment in the Stock,
and under the caption "Underwriting", insofar as they purport to
describe the provisions of this Agreement and the International
Underwriting Agreement, fairly summarize the matters therein
described;
(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect; and,
to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(xiii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(xv) BDO Seidman, LLP who have certified certain consolidated
financial statements of the Company, are independent public
accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(xvi) The Company's Board of Directors and shareholders have each
duly approved the Second Restated Articles of Incorporation; and
(xvii) The Company and its shareholders have taken all action
necessary to authorize the Recapitalization; upon filing of the Second
Restated Articles of Incorporation with the Michigan Department of
Consumer and Industry Services and prior to the First Time of Delivery
(as defined in Section 4), all shares of common stock and preferred
stock of the Company outstanding on the date hereof will convert into
shares of Class B Common Stock of the Company (the "Class B Common
Stock") and, after giving effect to the Second Restated Articles of
Incorporation, a stock split will occur pursuant to which each share
of Class B common Stock then outstanding shall receive a stock
dividend of 699 shares of Class B Common Stock; pursuant to the terms
of the Second Restated Articles of Incorporation, each share of Class
B Common Stock to be sold by the Selling Shareholders pursuant to this
Agreement and the International
6
<PAGE>
Underwriting Agreement will convert into one share of Class A Common
Stock concurrently with the consummation of such sale; there are no
conditions precedent to, or further actions necessary for, the
Recapitalization to take effect other than the filing of the Second
Restated Articles of Incorporation with the appropriate official of
the State of Michigan and there are no conditions precedent to or
further actions necessary for the conversion of the shares of Class B
Common to shares of Class A Common Stock, except for the execution and
delivery of this Agreement, the International Underwriting Agreement
and the Power of Attorney.
(b) Each of the Selling Shareholders severally represents and
warrants to, and agrees with, each of the Underwriters and the Company that:
[if Selling Shareholder is a corporation or partnership--add
representation regarding due incorporation or formation]
(i) All Governmental Authorizations necessary for the execution
and delivery by such Selling Shareholder of this Agreement, the
International Underwriting Agreement, the Power of Attorney and the
Custody Agreement hereinafter referred to, and for the sale and
delivery of the Shares to be sold by such Selling Shareholder
hereunder and under the International Underwriting Agreement, have
been obtained (other than state blue sky laws); and such Selling
Shareholder has full right, power and authority to enter into this
Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Shareholder hereunder
and under the International Underwriting Agreement;
(ii) Each of this Agreement and the International Underwriting
Agreement has been duly authorized (if such Selling Shareholder is a
corporation or partnership), and has been duly executed and delivered
by or on behalf of such Selling Shareholder;
(iii) Each of the Power of Attorney and the Custody Agreement
has been duly authorized (if such Selling Shareholder is a corporation
or partnership), and has been duly executed and delivered by such
Selling Shareholder and constitutes a valid and binding agreement of
such Selling Shareholder in accordance with its terms;
(iv) The sale of the Shares to be sold by such Selling
Shareholder hereunder and under the International Underwriting
Agreement and the compliance by such Selling Shareholder with all of
the provisions of this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or
7
<PAGE>
constitute a default under, any statute, or any material indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Shareholder is a party or by which
such Selling Shareholder is bound, or to which any of the property or
assets of such Selling Shareholder is subject, nor will such action
result in any violation of the provisions of the Articles of
Incorporation or By-laws of such Selling Shareholder if such Selling
Shareholder is a corporation, the Partnership Agreement of such
Selling Shareholder if such Selling Shareholder is a partnership or
any statute or any order, rule or regulation of any Governmental
Agency having jurisdiction over such Selling Shareholder or the
property of such Selling Shareholder;
(v) Such Selling Shareholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling
Shareholder will have, good and valid title to the Shares to be sold
by such Selling Shareholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the International
Underwriters, as the case may be;
(vi) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, such Selling Stockholder will not, directly or indirectly,
offer, pledge, sell, contract to sell or otherwise dispose of, except
as provided hereunder or under the International Underwriting
Agreement, any securities of the Company that are substantially
similar to the Shares, including but not limited to any securities
that are convertible into or exchangeable for, or that represent the
right to receive, Stock or any such substantially similar securities
without the prior written consent of Goldman, Sachs & Co. (other than
pursuant to (i) the conversion or exchange of convertible or
exchangeable securities outstanding as of the date hereof or to be
issued in the Recapitalization, (ii) the Shares, (iii) the shares of
Class B Common Stock to be sold to the Company in connection with the
offering or (iv) a transfer by gift or sale of Class A Common Stock or
Class B Common Stock; provided the transferee agrees in writing to the
same terms and conditions set forth herein).
(vii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(viii) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any
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amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement
and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(ix) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Shareholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(x) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Shareholder hereunder and under the
International Underwriting Agreement have been placed in custody under
a Custody Agreement, in the form heretofore furnished to you (the
"Custody Agreement"), duly executed and delivered by such Selling
Shareholder to the Company, as custodian (the "Custodian"), and such
Selling Shareholder has duly executed and delivered a Power of
Attorney, in the form heretofore furnished to you (the "Power of
Attorney"), appointing the persons indicated in Schedule II hereto,
and each of them, as such Selling Shareholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this
Agreement and the International Underwriting Agreement on behalf of
such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters and the International Underwriters to the Selling
Shareholders as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Shareholder
hereunder and otherwise to act on behalf of such Selling Shareholder
in connection with the transactions contemplated by this Agreement,
the International Underwriting Agreement and the Custody Agreement;
and
(xi) The Shares represented by the certificates held in custody
for such Selling Shareholder under the Custody Agreement are subject
to the interests of the Underwriters hereunder and the International
Underwriters under the International Underwriting Agreement; the
arrangements made by such Selling Shareholder for such custody, and
the appointment by such Selling Shareholder of the Attorneys-in-Fact
by the
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Power of Attorney, are to that extent irrevocable; the obligations of
the Selling Shareholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual
Selling Shareholder or, in the case of an estate or trust, by the
death or incapacity of any executor or trustee or the termination of
such estate or trust, or in the case of a partnership or corporation,
by the dissolution of such partnership or corporation, or by the
occurrence of any other event; if any individual Selling Shareholder
or any such executor or trustee should die or become incapacitated, or
if any such estate or trust should be terminated, or if any such
partnership or corporation should be dissolved, or if any other such
event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on
behalf of the Selling Shareholders in accordance with the terms and
conditions of this Agreement, of the International Underwriting
Agreement and of the Custody Agreements; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Shareholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Shareholders, at a purchase price per share of
$...................., the number of Firm Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Shares to be sold by each of the Selling Shareholders as set forth opposite
their respective names in Schedule II hereto by a fraction, the numerator of
which is the aggregate number of Firm Shares to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from all of the Selling Shareholders hereunder, and (b)
in the event and to the extent that the Underwriters shall exercise the election
to purchase Optional Shares as provided below, each of the Selling Shareholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Shareholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Selling Shareholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their
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<PAGE>
election up to 1,458,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares shall be made in proportion to the number of Optional Shares to
be sold by each Selling Shareholder. Any such election to purchase Optional
Shares may be exercised by written notice from you to the Company and the
Attorneys-in-Fact, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise
agree in writing, earlier than two or later than ten business days after the
date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Selling Shareholders, shall be delivered by or on behalf of the
Selling Shareholders to Goldman, Sachs & Co., through the facilities of The
Depository Trust Company ("DTC"), for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of same-day funds payable to the order of the Custodian, as their
interests may appear. The Custodian will cause the certificates representing
the Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1998 or on such other time and date as Goldman, Sachs & Co. and
the Selling Shareholders may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York City time, on the date specified by
Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Selling Shareholders agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called the "First
Time of Delivery", such time and date for delivery of the Optional Shares, if
not the First Time of Delivery, is herein called the "Second Time of Delivery",
and each such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(l) hereof will be delivered at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at each Time of
Delivery. A meeting will be held at the Closing Location at ..............p.m.,
New York City time, on the New York Business Day next preceding each Time of
Delivery, at which meeting the final drafts of the documents to
11
<PAGE>
be delivered pursuant to the preceding sentence will be available for review by
the parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you copies thereof; to advise you,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City Time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
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<PAGE>
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such period to amend or supplement the Prospectus
in order to comply with the Act, to notify you and upon your request to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time
of issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to the
Recapitalization or the Steelcase Inc. Employee Stock Purchase Plan, the
Steelcase Inc. Incentive Compensation Plan and the Steelcase Inc.
Nonqualified Stock Option Plan, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without the prior written consent of Goldman, Sachs & Co.;
(f) To furnish to its shareholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its shareholders consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished or made available to
shareholders generally, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission or any national
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<PAGE>
securities exchange on which any class of securities of the Company is
listed (such financial statements to be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are consolidated in
reports furnished to its shareholders generally or to the Commission);
and (ii) after entering into an appropriate confidentiality undertaking
such additional information concerning the business and financial condition
of the Company as you may from time to time reasonably request;
(h) If the Company or the Selling Shareholders elect to rely upon Rule
462(b), the Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 P.M. Washington,
D.C. time, on the date of this Agreement, and the Company shall at the time
of filing either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment of
such fee pursuant to Rule 111(b) under the Act;
(i) To use its best efforts to list, subject to notice of issuance,
the Shares on The New York Stock Exchange, Inc. (the "Exchange"); and
(j) To cause the Second Restated Articles of Incorporation to be duly
executed, filed and recorded in accordance with the laws of the State of
Michigan prior to the First Time of Delivery and to cause all such other
actions that are necessary to effect the Recapitalization prior to the
First Time of Delivery.
6. (a) The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky surveys; (iv) all fees and expenses in connection with listing the
Shares on the Exchange; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; (viii) the fees
and expenses of Roberts, Sheridan & Kotel, counsel for certain Selling
Shareholders; and (ix) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section; and (b) each Selling Shareholder covenants and agrees with the
Company and the several Underwriters that (unless otherwise provided in a
separate agreement entered into prior to the date hereof between the Company and
such Selling Shareholder pursuant to which the Company has agreed to pay or
cause to be paid certain additional costs and expenses of such Selling
Shareholder) such Selling Shareholder will pay or
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<PAGE>
cause to be paid all costs and expenses incident to the performance of such
Selling Shareholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
such Selling Shareholder, if such counsel is other than Roberts, Sheridan &
Kotel, (ii) all taxes incident to the sale and delivery of the Shares to be sold
by such Selling Shareholder to the Underwriters hereunder. In connection with
clause (b) (ii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay
New York State stock transfer tax, and the Selling Shareholder agrees to
reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment
is not rebated in accordance with New York Tax Law Section 280-a(6)[; provided,
however, that the Selling Shareholder shall have no obligation to reimburse
Goldman, Sachs & Co. if the failure to receive a rebate in accordance with New
York Tax Law Section 280-a(6) is attributable to any act (or omission) on the
part of Goldman, Sachs & Co. or its officers, agents, employees, successors or
assigns]. It is understood, however, that the Company shall bear, and the
Selling Shareholders shall not be required to pay or to reimburse the Company
for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Shareholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Shareholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the incorporation of the Company, the validity of the
Shares being delivered at such Time of Delivery, the Registration
Statement, the Prospectus as well as such related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
15
<PAGE>
(c) Cravath, Swaine & Moore, counsel for the Company, shall have
furnished to you their written opinion (a draft of which is attached as
Annex II(a)), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) This Agreement and the International Underwriting Agreement
have been duly executed and delivered by the Company;
(ii) No authorization, approval or other action by, and no notice
to, consent of, order of, or filing with, any United States Federal or
New York governmental authority or regulatory body is required for the
consummation of the transactions contemplated by this Agreement and
the International Underwriting Agreement, except such as have been
obtained under the Act and such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
(iii) None of the issue and sale of the Shares, the consummation
of any other of the transactions contemplated by this Agreement and
the International Underwriting Agreement or the performance of the
terms of this Agreement and the International Underwriting Agreement
will contravene any law, rule or regulation of the United States or
the State of New York or, to such counsel's knowledge, any order or
decree of any court or government agency or instrumentality;
(iv) The statements made in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
summaries of the terms of the Stock, under the caption "Certain United
States Federal Income Tax Consideration", insofar as they purport to
describe the material tax consequences of an investment in the Stock,
and under the caption "Underwriting", insofar as they purport to
summarize the terms of the Agreement and the International
Underwriting Agreement, fairly summarize the matters therein
described;
(v) To such counsel's knowledge, there is no contract, indenture,
mortgage, loan agreement, note, lease or other document of a character
required to be described in the Registration Statement or Prospectus,
or to be filed as an exhibit, which is not described or filed as
required;
(vi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940; and
(vii) The compliance by the Company with all of the provisions of
the Underwriting Agreement and the International Underwriting
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property
or assets of the Company or its subsidiaries is subject, nor will
such action result in any violation of the provisions of the Restated
Articles of Incorporation or Amended By-laws of the Company or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
16
<PAGE>
(d) Honigman Miller Schwartz and Cohn, Michigan counsel for the
Company, shall have furnished to you their written opinion (a draft of which is
attached as Annex II(b)), dated such Time of Delivery, in form and substances
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Michigan, with
full corporate power and authority to own its properties and conduct its
businesses as described in the Prospectus;
(ii) Steelcase Financial Services Inc., a subsidiary of the
Company, is a corporation validly existing and in good standing under the
laws of the State of Michigan; and all the issued shares of capital stock
of each such subsidiary are, to such counsel's knowledge, owned directly
or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(iii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered as of such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the Shares conform to the description of the Stock
contained in the Prospectus;
(iv) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
17
<PAGE>
(v) None of the issue and sale of the Shares, consummation of any
other of the transactions contemplated by this Agreement and the
International Underwriting Agreement or the compliance by the Company with
all of the terms of this Agreement or the International Underwriting
Agreement will result in any violation of the Second Restated Articles of
Incorporation or Amended By-laws or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency or
body located in Michigan having jurisdiction over the Company or any of its
properties;
(vi) No authorization, approval or other action by, and no notice
to, consent of, order of, or filing with, any Michigan governmental
authority or regulatory body is required for the consummation of the
transactions contemplated by this Agreement or the International
Underwriting Agreement, except for the filing of the Second Restated
Articles of Incorporation with the Michigan Department of Consumer and
Industry Services and except such as may be required under the blue sky
laws of the State of Michigan in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters; and
(vii) The Company's Board of Directors and shareholders have each
duly approved the Second Restated Articles of Incorporation and the Company
has taken all corporate action necessary to authorize the Recapitalization;
upon filing the Second Restated Articles of Incorporation with the Michigan
Department of Consumer and Industry Services, the Recapitalization will be
complete and all shares of common stock and preferred stock of the Company
outstanding on the date thereof will convert into shares of Class B Common
Stock of the Company ("Class B Common Stock"); the Board of Directors of
the Company has duly authorized a stock split pursuant to which each share
of Class B Common Stock then outstanding shall receive a stock dividend of
699 shares of Class B Common Stock (the "Stock Split") and the Board of
Directors has taken all corporate action necessary to effect the Stock
Split; pursuant to the terms of the Second Restated Articles of
Incorporation, each share of Class B Common Stock to be sold by the Selling
Stockholders pursuant to the Underwriting Agreement and the International
Underwriting Agreement will automatically convert into one share of Class A
Common Stock concurrently with the consummation of such sale without any
further action necessary by the Board of Directors.
In rendering such opinion, Honigman Miller Schwartz and Cohn may
state that they express no opinion as to the laws of any jurisdiction
outside the State of Michigan.
(e) Jon D. Botsford, Esq., General Counsel of the Company, shall
have furnished to you his written opinion (a draft of which is attached as
Annex II(c)), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
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(i) Each of the Company and Steelcase Financial Services,
Inc., is duly qualified as a foreign corporation to transact
business and is in good standing under the laws of each
jurisdiction in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, other
than jurisdictions in which the failure so to qualify would not
have a Material Adverse Effect;
(ii) To such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company or any of
its
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subsidiaries is a party or of which any property of which the
Company or any of its subsidiaries is subject, which, if
determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a Material Adverse
Effect; and to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by government
authorities or threatened by others;
(iii) To such counsel's knowledge, neither the Company nor
any of its subsidiaries is in violation of its Articles of
Incorporation or By-Laws or in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or by which it or any of its properties may
be bound;
(iv) In addition, such counsel shall deliver at such Time
of Delivery a statement (which may be contained in a separate
letter) to the effect that: although such counsel does not assume
any responsibility for the accuracy or completeness of the
statements made in the Registration Statement and Prospectus,
except insofar as such statements relate to such counsel and
except to the extent set forth in paragraph (iii) above, such
counsel's work in connection with the preparation of the
Registration Statement and Prospectus did not disclose any
information that gave them reason to believe that: (A) the
Registration Statement, at the time the Registration Statement
became effective or was last amended or deemed to be amended, or
the Prospectus, as of its date, and at the Time of Delivery (in
each case except the financial statements and other information of
an accounting or financial nature included therein, as to which
such counsel need not express any views), was not appropriately
responsive in all material respects to the requirements of the
Securities Act and the applicable rules and regulations of the
Commission thereunder, or (B) the Registration Statement, at the
time the Registration Statement became effective or was last
amended or deemed to be amended, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, as of its date, and at the
Time of Delivery, includes an untrue statement of a material fact
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading (in each case except for the
financial statements and other information of an accounting or
financial nature included therein, as to which such counsel need
not express any view).
In rendering such opinion, Mr. Botsford may state that he
expresses no opinion as to the laws of any jurisdiction outside the State
of Michigan.
(f) Stibbe Simont Monahan Duhot, French counsel for the Company,
shall have furnished to you their written opinion (a draft of is which
attached as Annex II (d)), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that Steelcase Strafor has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the France; all of the shares of Capital Stock
of Steelcase Strafor, S.A. have been duly and validly authorized
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and, the Company owns directly or indirectly 50% of the outstanding
shares of capital stock of Steelcase Strafor, free and clear of all liens,
encumbrances, equities or claims (in each case such counsel being entitled
to rely in respect of matters of fact upon certificates of officers of the
Company, its subsidiaries or Steelcase Strafor, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates).
In rendering such opinion, Stibbe Simont Monahan Duhot may state
that they express no opinion as to the laws of any jurisdiction outside
of France.
(g) Tory Tory DesLauriers & Binnington, Canadian counsel for the
Company, shall have furnished to you their written opinion (a draft of
which is attached as Annex II(e)), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that Steelcase Canada Ltd., a
subsidiary of the Company, has been duly incorporated and is a corporation
validly existing under the laws of Canada; and all the issued shares of
capital stock of Steelcase Canada Ltd. have been duly and validly
authorized and issued, are fully paid and non-assessable and (except for
directors' qualifying shares); are owned directly or indirectly by the
Company, free and clear and all liens, encumbrances, equities or claims;
In rendering such opinion, Tory Tory DesLauriers & Binnington may
state that they express no opinion as to the laws of any jurisdiction
outside of Canada.
(h) The respective counsel for each of the Selling Shareholders,
as indicated in Schedule II hereto, each shall have furnished to you their
written opinion (a draft of each such opinion is attached respectively as
Annex II(f), (g) and (h) hereto) with respect to each of the Selling
Shareholders for whom they are acting as counsel, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been
duly authorized (if such Selling Shareholder is a corporation or a
partnership), executed and delivered by such Selling Shareholder
and constitute valid and binding agreements of such Selling
Shareholder in accordance with their terms;
(ii) This Agreement and the International Underwriting
Agreement have been duly authorized (if such Selling Shareholder
is a corporation or a partnership), executed and delivered by or
on behalf of such Selling Shareholder; and the sale of the Shares
to be sold by such Selling Shareholder hereunder and thereunder
and the compliance by such Selling Shareholder with all of the
provisions of this Agreement and the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which such
Selling Shareholder is a
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party or by which such Selling Shareholder is bound, or to which any
of the property or assets of such Selling Shareholder is subject, nor
will such action result in any violation of the provisions of the
Articles of Incorporation or By-laws of such Selling Shareholder if
such Selling Shareholder is a corporation, the Partnership Agreement
of such Selling Shareholder if such Selling Shareholder is a
partnership or, to the best of such counsel's knowledge after
reasonable investigation, any material order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over such Selling Shareholder or the property of such
Selling Shareholder (other than blue sky laws);
(iii) Other than consents, approvals and authorizations under the
Act and such as may be required under foreign securities or Blue Sky
laws in connection with the purchase and distribution of such Shares
by the Underwriters or the International Underwriters with respect to
which no opinion is given, no consent, approval, authorization or
order of any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement and
the International Underwriting Agreement in connection with the Shares
to be sold by such Selling Shareholder hereunder or thereunder, except
authorizations which have been duly obtained and are in full force and
effect;
(iv) Immediately prior to the Time of Delivery such Selling
Shareholder had good and valid title to the Shares to be sold at the
Time of Delivery by such Selling Shareholder under this Agreement and
the International Underwriting Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and authority
to sell, assign, transfer and deliver the Shares to be sold by such
Selling Shareholder hereunder and thereunder; and
(v) Upon delivery of the Shares to be sold by each Selling
Shareholder pursuant to this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement against
payment therefor, and assuming that such Shares are purchased in good
faith and without notice of any adverse claim (in each case within the
meaning of the Uniform Commercial Code), the Underwriters and the
International Underwriters (as the case may be), purchasing such
Shares will acquire good and valid title to such Shares free and clear
of any adverse claim pursuant to Section 8-302 of the Uniform
Commercial Code.
In rendering such opinion, such counsel may state that such opinions are
limited to (a) U.S. Federal laws or (b) New York, Michigan, Florida or
California law (to the extent relevant to such opinion and as may be reasonably
requested by the Underwriters) in rendering the opinion in subparagraph (iv)
such counsel may rely upon a Certificates of such Selling Shareholder in respect
of matters of fact as to ownership of, and liens, encumbrances, equities or
claims on or the existence of agreements to which it is a party affecting, the
Shares sold by such Selling Shareholder, provided that such counsel shall state
that they
22
<PAGE>
believe that both you and they have no reason to believe that you are not
justified in relying upon such Certificates;
(i) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, BDO
Seidman, LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(j)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock of the
Company or its Subsidiaries or in the short-term (not including accounts
payable) or long-term debt of the Company or the Company's subsidiaries on
a consolidated basis (other than changes not in excess of $5 million) or
any change which would constitute a Material Adverse Effect, otherwise than
as set forth or contemplated in the Prospectus, the effect of which, in any
such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(k) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the Exchange;
(iii) a general moratorium on commercial banking activities declared by
either Federal or New York or Michigan State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(l) The Shares to be sold by the Selling Shareholders at such Time of
Delivery shall have been duly listed, subject to notice of issuance, on the
Exchange;
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(m) The Company has obtained and delivered to the Underwriters
executed copies of an agreement referred to in Subsection 1(b)(vi) hereof
from its directors, its executive officers and shareholders representing
93.3% of the outstanding shares of Stock and Class B Stock as of the date
hereof to the effect set forth in Annex III hereto in form and substance
satisfactory to you;
(n) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(o) The Company and the Selling Shareholders shall have furnished or
caused to be furnished to you at such Time of Delivery Certificates of
officers of the Company and of the Selling Shareholders, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Shareholders, respectively,
herein at and as of such Time of Delivery, as to the performance by the
Company and the Selling Shareholders of all of their respective obligations
hereunder to be performed at or prior to such Time of Delivery, and as to
such other matters as you may reasonably request, and the Company shall
have furnished or caused to be furnished Certificates as to the matters set
forth in subsections (a) and (f) of this Section, and as to such other
matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co.
(b) Each of the Selling Shareholders will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or
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<PAGE>
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Selling Shareholder,
whether directly or through the Attorneys-in-Fact, expressly for use
therein; and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that such Selling Shareholder shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman,
Sachs & Co. expressly for use therein.
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Shareholder against any losses, claims, damages or liabilities
to which the Company or such Selling Shareholder may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through Goldman, Sachs & Co. expressly for use therein;
and will reimburse the Company and each Selling Shareholder for any legal
or other expenses reasonably incurred by the Company or such Selling
Shareholder in connection with investigating or defending any such action
or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel appointed by the indemnifying party with the consent of such
indemnified party (provided that such counsel shall not, except with the
consent of the indemnified party, be counsel
25
<PAGE>
to the indemnifying party), and, after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party under
such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent
to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise
or judgment (i) includes an unconditional release of the indemnified party
from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Selling Shareholders on the one hand and the Underwriters on the other
from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection
(d) above, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company and the Selling Shareholders bear to the
total underwriting discounts and commissions received by the Underwriters
with respect to the Shares purchased under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company or the Selling Shareholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company, each of the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a
26
<PAGE>
result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (e) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (e) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Shareholders under
this Section 8 shall be in addition to any liability which the Company and
the respective Selling Shareholders may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the Company
(including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to
each person, if any, who controls the Company or any Selling Shareholder
within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Selling Shareholders shall be entitled to a further period
of thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Selling Shareholders
that you have so arranged for the purchase of such Shares, or the Selling
Shareholders notify you that they have so arranged for the purchase of such
Shares, you or the Selling Shareholders shall have the right to postpone such
Time of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Selling Shareholders as provided in subsection (a) above, the aggregate
number of such Shares which remains
27
<PAGE>
unpurchased does not exceed one-eleventh of the aggregate number of all of
the Shares to be purchased at such Time of Delivery, then the Selling
Shareholders shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed
to purchase hereunder at such Time of Delivery and, in addition, to require
each non-defaulting Underwriter to purchase its pro rata share (based on
the number of Shares which such Underwriter agreed to purchase hereunder)
of the Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Selling Shareholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of
Delivery, or if the Selling Shareholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligations
of the Underwriters to purchase and of the Selling Shareholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part
of any non-defaulting Underwriter or the Company or the Selling
Shareholders, except that the parties will remain liable for their
respective expenses as provided in Section 6 hereof and for the indemnity
and contribution agreements contained in Section 8 hereof; provided,
however nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Shareholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Shareholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Selling Shareholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Selling Shareholders as provided herein, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Shareholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
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12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Shareholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Shareholder made or given by any
or all of the Attorneys-in-Fact for such Selling Shareholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Shareholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Shareholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(e) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Shareholders by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Shareholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Shareholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us ten (10) counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding
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agreement among each of the Underwriters, the Company and each of the Selling
Shareholders. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company and the Selling Shareholders for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
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Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Steelcase Inc.
By: ________________________________________
Name:
Title:
Peter Martin Wege Trust
The Wege Foundation
Peter M. Wege Charitable Remainder Trust
William W. Idema Trust
John R. Hunting Charitable Remainder
Unitrust # 1
John R. Hunting Charitable Remainder
Unitrust # 2
John R. Hunting Charitable Remainder
Unitrust # 3
John R. Hunting Charitable Remainder
Unitrust # 4
John R. Hunting Charitable Remainder
Unitrust # 5
John R. Hunting Charitable Remainder
Unitrust # 6
Keith and Marie Ambs
Robert E. Hubling
Michael D. Olds
Ray Mortimer Olds Trustee
S. Suzanne Olds Revocable Trust
Mitchell Partners, L.P.
Larry J. and Sally K. Robson
Earl G. Sullivan Trust
By: ________________________________
Name:
As Attorney-in-Fact acting on behalf of
each of the Selling Shareholders named
in Schedule II to this Agreement.
31
<PAGE>
Accepted as of the date hereof:
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
By: _______________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
32
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
SHARES TO BE
TOTAL NUMBER PURCHASED IF
OF FIRM MAXIMUM
SHARES TO BE OPTION
PURCHASED EXERCISED
------------ ------------
<S> <C> <C>
Goldman, Sachs & Co...............
Bear, Stearns & Co. Inc...........
Morgan Stanley & Co. Incorporated.
Smith Barney Inc..................
------------ ------------
Total.........................
============ ============
</TABLE>
33
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
TOTAL NUMBER OF FIRM SHARES TO BE SOLD IF
SHARES MAXIMUM OPTION
NAME OF SELLING SHAREHOLDERS TO BE SOLD EXERCISED
---------------------------- -------------------- --------------------
<S> <C> <C>
Peter Martin Wege Trust (a)............................... 1,391,235 208,685
The Wege Foundation (a)................................... 807,304 121,096
Peter M. Wege Charitable Remainder Trust (a).............. 3,921,948 588,292
William W. Idema Trust (b)................................ 643,757 96,563
John R. Hunting Charitable Remainder Unitrust # 1 (c)..... 1,908,557 286,283
John R. Hunting Charitable Remainder Unitrust # 2 (c)..... 195,756 29,364
John R. Hunting Charitable Remainder Unitrust # 3 (c)..... 195,756 29,364
John R. Hunting Charitable Remainder Unitrust # 4 (c)..... 195,756 29,364
John R. Hunting Charitable Remainder Unitrust # 5 (c)..... 195,756 29,364
John R. Hunting Charitable Remainder Unitrust # 6 (c)..... 195,756 29,364
Keith and Marie Ambs (b).................................. 1,217 183
Robert E. Hubling (b)..................................... 4,870 730
Michael D. Olds (b)....................................... 5,844 876
Ray Mortimer Olds Trustee (b)............................. 48,696 7,304
S. Suzanne Olds Revocable Trust (b)....................... 4,870 730
Mitchell Partners, L.P. (b)............................... 1,948 292
Larry J. and Sally K. Robson (b).......................... 487 73
Earl G. Sullivan Trust (b)................................ 487 73
-------------------- -------------------
Total............................................ 9,720,000 1,458,000
==================== ===================
</TABLE>
(a) This Selling Shareholder is represented by Hugh H. Makens, Esq., Warner
Norcross & Judd LLP and has appointed Robert C. Pew, James P. Hackett, Peter M.
Wege and John Hunting and, each of them, as the Attorneys-in-Fact for such
Selling Shareholder.
(b) This Selling Shareholder is represented by Kevin Sheridan, Esq., Roberts,
Sheridan & Kotel and has appointed Robert C. Pew, James P. Hackett, Peter M.
Wege and John Hunting, and each of them, as the Attorneys-in-Fact for such
Selling Shareholder.
(c) This Selling Shareholder is represented by Jeremiah T. Mulligan, Esq.,
Curtis, Mallet, Prevost-Colt & Mosle and has appointed Robert C. Pew, James P.
Hackett, Peter M. Wege and John Hunting, and each of them, as the Attorneys-in-
Fact for such Selling Shareholder.
34
<PAGE>
ANNEX I
Pursuant to Section 7(i) of the Underwriting Agreement, the accountants shall
furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included in the
Prospectus or the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations thereunder; and, if applicable, they
have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards established by
the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus as indicated
in their reports thereon copies of which have been separately furnished to
the Representatives; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for financial
and accounting matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply as to
form in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations, nothing came to
their attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis
of
<PAGE>
limited procedures specified in such letter nothing came to their attention
as a result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K;
(vi) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the Company
and its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications should be made
to the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to in
Clause (B) were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements included in
the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in
the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock
2
<PAGE>
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt or short-term debt of
the Company and its subsidiaries, or any decreases in consolidated net
current assets or shareholders' equity or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each case
for decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which appear
in the Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them to
be in agreement.
3
<PAGE>
ANNEX I(a)&(b)
[Executed accountant's comfort letter, dated the effective date, and form of
bring down comfort letter]
4
<PAGE>
ANNEX II
[Form of opinions of regular and corporate counsel for the Company and counsel
for the Selling Shareholders]
5
<PAGE>
EXHIBIT 1.2
STEELCASE INC.
CLASS A COMMON STOCK
_____________
Underwriting Agreement
(International Version)
---------------------------
, 1998
Goldman Sachs International,
Bear, Stearns International Limited
Morgan Stanley & Co. International Limited
Smith Barney Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Certain shareholders named in Schedule II hereto (the "Selling Shareholders")
of Steelcase, a Michigan corporation (the "Company"), propose, subject to the
terms and conditions stated herein, to sell to the Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 2,430,000 shares (the
"Firm Shares") and, at the election of the Underwriters, up to 364,500
additional shares (the "Optional Shares") of Class A Common Stock ("Stock") of
the Company (the Firm Shares and the Optional Shares which the Underwriters
elect to purchase pursuant to Section 2 hereof are herein collectively called
the "Shares").
It is understood and agreed to by all parties that the Company and the Selling
Shareholders are concurrently entering into an agreement, a copy of which is
attached hereto (the "U.S. Underwriting Agreement"), providing for the sale by
the Selling Shareholders of up to a total of 11,178,000 shares of Stock (the
"U.S. Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters in the United States (the "U.S.
Underwriters"), for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Morgan
Stanley & Co. Incorporated and Smith Barney Inc. are acting as representatives.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the U.S. Underwriting Agreement are hereby
expressly made conditional on one another. The Underwriters hereunder and the
U.S. Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two
<PAGE>
syndicates and for consultation by the Lead Managers hereunder with Goldman,
Sachs & Co. prior to exercising the rights of the Underwriters under Section 7
hereof. Two forms of prospectus are to be used in connection with the offering
and sale of shares of Stock contemplated by the foregoing, one relating to the
Shares hereunder and the other relating to the U.S. Shares. The latter form of
prospectus will be identical to the former except for certain substitute pages.
Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as context may
otherwise require, references hereinafter to the Shares shall include all of the
shares of Stock which may be sold pursuant to either this Agreement or the U.S.
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof.
In addition, this Agreement incorporates by reference certain provisions from
the U.S. Underwriting Agreement (including the related definitions of terms,
which are also used elsewhere herein) and, for purposes of applying the same,
references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Shareholders hereby make to
the Underwriters the same respective representations, warranties and agreements
as are set forth in Section 1 of the U.S. Underwriting Agreement, which Section
is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) each of the
Selling Shareholders agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Shareholders, at a purchase price per share of
$................, the number of Firm Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Shares to be sold by each of the Selling Shareholders as set forth opposite
their respective names in Schedule II hereto by a fraction, the numerator of
which is the aggregate number of Firm Shares to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from all the Selling Shareholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, each of the Selling Shareholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Shareholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be
-2-
<PAGE>
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Selling Shareholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 364,500 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the number of Optional
Shares to be sold by each Selling Shareholder. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Attorneys-in-Fact, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise
agree in writing, earlier than two or later than ten business days after the
date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to
and with the Company and the Selling Shareholders the representations and
agreements of such Underwriter as a member of the selling group contained in
Sections 3(d) and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Selling Shareholders shall be delivered by or on behalf of the
Selling Shareholders to Goldman, Sachs & Co., through the facilities of The
Depository Trust Company ("DTC"), for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of same day funds payable to the order of the Custodian, as their
interests may appear. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1998 or such other time and date as Goldman, Sachs & Co. and the
Selling Shareholders may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Selling Shareholders may agree
-3-
<PAGE>
upon in writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery", such time and date for delivery of the Firm
Optional Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein called a
"Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross-receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(o) of the U.S.
Underwriting Agreement, will be delivered at the offices of Sullivan & Cromwell,
125 Broad Street, New York, New York 10004 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at each Time of Delivery.
A meeting will be held at the Closing Location at ..............p.m., New York
City time, on the New York Business Day next preceding each Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company hereby makes with the Underwriters the same agreements as are
set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Shareholders, and the Underwriters hereby
agree with respect to certain expenses on the same terms as are set forth in
Section 6 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company, and the Selling Shareholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Shareholders shall have performed all of their
respective obligations hereunder theretofore to be performed, and additional
conditions identical to those set forth in Section 7 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any
-4-
<PAGE>
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein.
(b) Each Selling Shareholder will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Selling
Stockholder expressly for use therein; and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that such Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through GSI expressly for use
therein.
(c) Each Underwriter will indemnify and hold harmless the Company and each
Selling Shareholder against any losses, claims, damages or liabilities to which
the Company or such Selling Shareholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company and each Selling Shareholder for any legal or other expenses reasonably
incurred by the Company or such
-5-
<PAGE>
Selling Shareholder in connection with investigating or defending any such
action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a), (b)
or (c) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Shareholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Shareholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before
-6-
<PAGE>
deducting expenses) received by the Company and the Selling Shareholders bear to
the total underwriting discounts and commissions received by the Underwriters
with respect to the Shares purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Shareholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Shareholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Shareholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Shareholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Shareholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Selling Shareholders shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Selling Shareholders
that you have so arranged for the purchase of such Shares, or the Selling
Shareholders notify you
-7-
<PAGE>
that they have so arranged for the purchase of such Shares, you or the Selling
Shareholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Shareholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Shareholders shall have the right to require each non-defaulting
Underwriter to purchase the number of shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Shareholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Selling
Shareholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Selling Shareholders to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Shareholders, except for the expenses to be borne by the Company
and the Selling Shareholders and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any of the Selling Shareholders, or any officer
or director or controlling person of the Company or any controlling person of
any Selling Shareholders, and shall survive delivery of and payment for the
Shares.
-8-
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Shareholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Selling Shareholders as provided herein, each of the Selling
Shareholders pro rata (based on the number of Shares to be sold by such Selling
Shareholder hereunder) will reimburse the Underwriters through GSI for all out-
of-pocket expenses approved in writing by GSI, including fees and disbursements
of counsel, reasonably incurred by the Underwriters in making preparations for
the purchase, sale and delivery of the Shares not so delivered, but the Company
and the Selling Shareholders shall then be under no further liability to any
Underwriter in respect of the Shares not so delivered except as provided in
Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters; and in all dealings with any Selling Shareholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Shareholder made or given by any
or all of the Attorneys-in-Fact for such Selling Shareholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Shareholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Shareholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Shareholders by GSI upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit of,
the Underwriters, the Company and the Selling Shareholders and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company, any Selling Shareholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
-9-
<PAGE>
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us ten (10) counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Shareholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters (International
Version), the form of which shall be furnished to the Company and the Selling
Shareholders for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
-10-
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Steelcase Inc.
By: _________________________________
Name:
Title:
Peter Martin Wege Trust
The Wege Foundation
Peter M. Wege Charitable Remainder Trust
William W. Idema Trust
John R. Hunting Charitable Remainder
Unitrust # 1
John R. Hunting Charitable Remainder
Unitrust # 2
John R. Hunting Charitable Remainder
Unitrust # 3
John R. Hunting Charitable Remainder
Unitrust # 4
John R. Hunting Charitable Remainder
Unitrust # 5
John R. Hunting Charitable Remainder
Unitrust # 6
Keith and Marie Ambs
Robert E. Hubling
Michael D. Olds
Ray Mortimer Olds Trustee
S. Suzanne Olds Revocable Trust
Mitchell Partners, L.P.
Larry J. and Sally K. Robson
Earl G. Sullivan Trust
By: __________________________________
Name:
As Attorney-in-Fact acting on behalf of each of
the Selling Shareholders named in Schedule II to
this Agreement.
-11-
<PAGE>
Accepted as of the date hereof:
Goldman Sachs International
Bear, Stearns International Limited
Morgan Stanley & Co. International Limited
Smith Barney Inc.
By: Goldman Sachs International
By: _______________________________________
(Attorney-in-fact)
On behalf of each of the Underwriters
-12-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- ---------------- -------------------
<S> <C> <C>
Goldman Sachs International...............................
Bear, Stearns International Limited.......................
Morgan Stanley & Co. International Limited................
Smith Barney Inc..........................................
---------------- -------------------
Total................................................
================ ===================
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
Name of Selling Shareholders to be Sold Exercised
---------------------------- ---------------- ------------------
<S> <C> <C>
Peter Martin Wege Trust (a)............................... 347,808 52,171
The Wege Foundation (a)................................... 201,826 30,274
Peter M. Wege Charitable Remainder Trust (a).............. 980,487 147,073
William W. Idema Trust (b)................................ 160,939 24,141
John R. Hunting Charitable Remainder Unitrust # 1 (c)..... 477,139 71,571
John R. Hunting Charitable Remainder Unitrust # 2 (c)..... 48,939 7,341
John R. Hunting Charitable Remainder Unitrust # 3 (c)..... 48,939 7,341
John R. Hunting Charitable Remainder Unitrust # 4 (c)..... 48,939 7,341
John R. Hunting Charitable Remainder Unitrust # 5 (c)..... 48,939 7,341
John R. Hunting Charitable Remainder Unitrust # 6 (c)..... 48,939 7,341
Keith and Marie Ambs (b).................................. 304 46
Robert E. Hubling (b)..................................... 1,216 182
Michael D. Olds (b)....................................... 1,461 219
Ray Mortimer Olds Trustee (b)............................. 12,174 1,826
S. Suzanne Olds Revocable Trust (b)....................... 1,216 183
Mitchell Partners, L.P. (b)............................... 487 73
Larry J. and Sally K. Robson (b).......................... 122 18
Earl G. Sullivan Trust (b)................................ 122 18
---------------- ------------------
Total.................................................. 2,430,000 364,500
================ ==================
</TABLE>
(a) This Selling Shareholder is represented by Hugh H. Makens, Esq.,
Warner Norcross & Judd LLP and has appointed Robert C. Pew, James P. Hackett,
Peter M. Wege and John Hunting, and each of them, as the Attorneys-in-Fact for
such Selling Shareholder.
(b) This Selling Shareholder is represented by Kevin Sheridan, Esq.,
Roberts, Sheridan & Kotel and has appointed Robert C. Pew, James P. Hackett,
Peter M. Wege and John Hunting, and each of them, as the Attorneys-in-Fact for
such Selling Shareholder.
(c) This Selling Shareholder is represented by Jeremiah T. Mulligan,
Esq., Curtis, Mallet, Prevost-Colt & Mosle and has appointed Robert C. Pew,
James P. Hackett, Peter M. Wege and John Hunting, and each of them, as the
Attorneys-in-Fact for such Selling Shareholder.
-14-
<PAGE>
NUMBER_________
NO PAR VALUE CLASS A COMMON STOCK
INCORPORATED UNDER THE LAWS ____________SHARES
OF THE STATE OF MICHIGAN
THIS CERTIFICATE IS TRANSFERABLE CUSIP___________
IN THE CITIES OF SEE REVERSE FOR IMPORTANT NOTICE ON
Boston, MA or New York, NY TRANSFER RESTRICTIONS AND OTHER
INFORMATION
STEELCASE INC.
THIS CERTIFIES THAT_____________________________________________________________
IS THE OWNER OF_________________________________________________________________
FULLY PAID AND NONASSESSABLE SHARES OF THE CLASS A COMMON STOCK OF
Steelcase Inc. (the "Corporation") transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Articles of Incorporation and the By-laws of the Corporation and any amendments
thereto. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be executed
on its behalf by its duly authorized officers.
Dated:______________________
COUNTERSIGNED AND REGISTERED:
Bank Boston, N.A.
TRANSFER AGENT AND REGISTRAR
BY__________________ _______________ ____________
AUTHORIZED SIGNATURE SECRETARY CHAIRMAN
[CORPORATE SEAL]
<PAGE>
STEELCASE INC.
THE CORPORATION IS AUTHORIZED TO ISSUE CLASS A COMMON STOCK, CLASS B COMMON
STOCK AND PREFERRED STOCK (ISSUABLE IN SERIES). THE CORPORATION WILL FURNISH TO
A SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE
DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH
CLASS AUTHORIZED TO BE ISSUED, AND THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES
AND LIMITATIONS OF EACH SERIES OF PREFERRED STOCK SO FAR AS THE SAME HAVE BEEN
PRESCRIBED AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND
PRESCRIBE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. ANY
SUCH REQUEST SHOULD BE MADE TO THE OFFICE OF THE SECRETARY OF THE CORPORATION,
AT THE CORPORATION'S PRINCIPAL EXECUTIVE OFFICE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ___________________ Custodian _________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
_______________________________________________
(State)
UNIF TRF MIN ACT - ___________________ Custodian (until age _____)
(Cust)
_______________________ under Uniform Transfers
(Minor)
to Minors Act _________________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assigned and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
Dated
----------------------------
X
--------------------------------------
X
--------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
-------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.2
-----------
STEELCASE INC.
--------------
LOCK-UP AGREEMENT
-----------------
Steelcase Inc.
P.O. Box 1967
Grand Rapids, MI 49501-1967
The several U.S. Underwriters The several International
Underwriters
Ladies and Gentlemen:
The undersigned (the "Shareholder") understands that Steelcase Inc., a
Michigan corporation (the "Company"), intends to file a Registration Statement
on Form S-1 under the Securities Act of 1933, as amended, in connection with an
initial public offering of its common stock (the "IPO"). The Shareholder has
previously received from the Company a Notice to Shareholders of Opportunity to
Sell Shares in an Initial Public Offering dated October 28, 1997 (the "Notice"),
offering the Shareholder, as a shareholder of the Company, the opportunity to
sell certain shares of common stock of the Company in the IPO. The Shareholder
has also received the Proxy Statement dated October 28, 1997 (the "Proxy
Statement") and understands that, if the Recapitalization (as defined in the
Proxy Statement) is consummated, the existing equity securities of the Company
(the "Old Stock") will be exchanged for Class B Common Stock of the Company (the
"Class B Common Stock"), which Class B Common Stock will be convertible into
Class A Common Stock of the Company (the "Class A Common Stock" and, together
with the Class B Common Stock, the "New Common Stock") on a share-for-share
basis. Any Class B Common Stock to be sold in the IPO will automatically convert
into Class A Common Stock in connection with such sale.
In consideration for the Company undertaking the IPO and giving the
Shareholder the opportunity to sell New Common Stock in the IPO, the Shareholder
hereby irrevocably confirms, covenants and agrees for the benefit of the Company
and the underwriters in the IPO (the "Underwriters") that:
(a) During the period beginning on the date hereof and continuing to
and including the date 180 days after the date of the final prospectuses used in
connection with the proposed IPO, the Shareholder will not, directly or
indirectly, (i) offer, pledge, sell, contract to sell, sell or grant any option,
right or warrant to purchase, lend or otherwise transfer or otherwise dispose
of, any Old Stock or shares of New Common Stock (collectively, the "Applicable
Securities") or any securities of the Company that are substantially similar to
the Applicable Securities, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
any Applicable Securities or any such substantially similar securities, or (ii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic
<PAGE>
consequences of ownership of any Applicable Securities, whether any such
transaction described in (i) or (ii) above is to be settled by delivery of any
Applicable Security or any other security, in cash or otherwise.
Notwithstanding the foregoing, the restrictions contained in this paragraph
shall not apply to (a) the conversion or exchange of convertible or exchangeable
securities outstanding as of the date of this Agreement or to be issued in the
Recapitalization, (b) the New Common Stock to be sold in the IPO, (c) any New
Common Stock sold to the Company, (d) a transfer by gift or sale so long as the
transferee of the Applicable Security enters into and delivers to the Company a
Lock-up Agreement on the same terms and conditions as this Agreement, or (e) any
other transactions approved in writing by the Company and the Underwriters
through their lead representative;
(b) The undersigned has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Applicable Securities, or which has otherwise constituted or will constitute
any prohibited bid for or purchase of the Applicable Securities or any related
securities; and
(c) The undersigned acknowledges and agrees that the covenants and
agreements set forth herein supersede, to the extent of the subject matter
thereof, the provisions of any agreements or instruments defining the rights of
the undersigned with respect to the Applicable Securities.
In the event that the IPO is not consummated on or prior to May 31,
1998, this Agreement shall automatically terminate and become null and void.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
Very truly yours,
NAME OF INDIVIDUAL OR ENTITY OWNER:
Dated: ______________, 1997 ________________________________________
(Insert Name as it Appears on Proxy)
SIGNED: ________________________________
(Sign exactly as name(s)
appear(s) above or as authorized
representative of entity)
NOTE: THIS LOCK-UP AGREEMENT IS EFFECTIVE AS OF THE DATE IT IS SIGNED UNTIL AND
INCLUDING THE DATE 180 DAYS AFTER THE DATE OF THE FINAL PROSPECTUSES USED IN
CONNECTION WITH THE IPO.
<PAGE>
January 20, 1998
Steelcase Inc.
901 44th Street
Grand Rapids, Michigan 49508
Re: Registration Statement on Form S-1
File No. 333-41647
(the "Registration Statement")
------------------------------
Ladies and Gentlemen:
We have represented Steelcase Inc., a Michigan corporation (the "Company"),
-------
in connection with the preparation and filing with the Securities and Exchange
Commission (the "Commission") of the Registration Statement, for registration
----------
under the Securities Act of 1933, as amended (the "Securities Act"), of a
--------------
maximum of 13,972,500 of the Company's shares of Class A Common Stock (the
"Class A Common Stock").
--------------------
Based upon our examination of such documents and other matters as we deem
relevant, it is our opinion that, when the Registration Statement has become
effective and upon filing of the Company's Second Restated Articles of
Incorporation (in the form of Exhibit 3.1 to the Registration Statement) with
the Michigan Department of Consumer and Industry Services, the shares of the
Class A Common Stock covered by the Registration Statement, and to be issued by
the Company upon conversion of shares of the Company's Class B Common Stock in
connection with the offering of shares contemplated in the Registration
Statement, (1) will have been duly authorized and (2) when issued by the Company
upon conversion of the Company's Class B Common Stock, will have been validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Validity of
Class A Common Stock" in the Prospectus included in the Registration Statement.
In giving such consents, we do not admit hereby that we come within the category
of persons whose consent is required under Section 7 of the Securities Act or
the Rules and Regulations of the Commission thereunder.
Very truly yours,
/s/ HONIGMAN MILLER SCHWARTZ AND COHN
HONIGMAN MILLER SCHWARTZ AND COHN
CZM/NHB/LZM
<PAGE>
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into this 12th day of January,
1998, by and between STEELCASE INC., a Michigan corporation ("Company") and
JAMES HACKETT ("Executive").
WHEREAS, the Executive is presently an employee of the Company;
WHEREAS, the Executive has elected to defer a portion of his future
compensation until after his retirement or death and may do so again in the
future; and
WHEREAS, the Company has agreed to pay deferred compensation to the
Executive in consideration of such deferral and may do so in the future; and
WHEREAS, the parties wish to substitute the following agreement for
any and all prior agreements relating to such deferrals and to provide hereby
for future deferrals;
NOW THEREFORE, the parties agree as follows:
1. Deferral Election and Amount. Attachment A sets forth amounts deferred
----------------------------
by Executive under one or more prior agreements. Any future deferrals agreed to
between Executive and Company will be evidenced by separate Attachments,
executed by or on behalf of both parties. Any election to defer is irrevocable
and the compensation which is deferred must be compensation payable for services
to be performed on or after the date of execution of the election to defer. In
consideration of such deferral, the Company agrees to pay benefits as set forth
in the Attachment.
2. Source of Amounts Deferred. The Company shall deduct compensation
--------------------------
deferred hereunder equally from the Executive's bi-weekly payroll, unless
otherwise specified in the Attachment.
3. Account. The Company shall maintain a bookkeeping account indicating
-------
the cumulative amount of compensation deferred by the Executive.
4. Payments.
--------
(a) General. Each Attachment will describe the amount of payments to be
-------
made by the Company in respect of the deferral, and any vesting
requirements.
In the event deferrals cease before completion for any reason
other than Executive's death, the Company will only make those payments
identified in the Appendix in the event of less than complete deferral.
<PAGE>
(b) Discharge for Cause. If the Executive is discharged for cause, an
-------------------
amount equal to the compensation actually deferred, if any, shall be paid
to the Executive, without interest, in five equal annual payments
commencing in the month of March following the discharge. Amounts payable
under this subparagraph may be prepaid at the option of the Company. For
purposes of this Agreement, discharge "for cause" shall mean discharge by
reason of gross insubordination, proven dishonesty injurious to the
Company, the commission of a felony or misdemeanor injurious to the
Company, or the engagement in business or practice in competition with the
Company without the Company's prior written consent.
(c) Competition. If the Executive enters into competition with the
-----------
Company, without prior approval of the Board of Directors of the Company,
and the benefits paid to the Executive hereunder exceed the amount of
compensation actually deferred, no further payments shall be made to the
Executive or a designated beneficiary. If the amount of compensation
actually deferred exceeds the benefits paid to the Executive hereunder, the
difference between such amounts shall be paid to the Executive, without
interest, in five equal annual payments commencing in the month of March
following the entry of the Executive into competition with the Company.
Amounts payable under this subparagraph may be prepaid at the option of the
Company.
(d) Suicide. If the Executive dies by suicide within one year of the
-------
onset of any deferral period, the amount of compensation actually deferred,
if any, pursuant to that deferral election shall be paid to the beneficiary
designated by the Executive, without interest, within 60 days of the date
of death.
(e) Minimum Payments. The Executive, together with his designated
----------------
beneficiary shall in no event receive an aggregate amount which is less
than the total which has been deferred by the Executive.
(f) Payment by Company or Trust. If a trust is established as described
---------------------------
in Section 7 below and funds have been set aside in the trust, amounts
payable under this agreement may be paid by the Company or from the trust.
The Company shall determine the source of the payments. Establishment of
the trust shall not relieve the Company of its obligations under this
agreement except to the extent that payments are actually made from the
trust.
5. Beneficiary Designation. The Executive may designate a beneficiary to
-----------------------
receive the benefits as set forth above, including the benefits provided under
Paragraphs 4(d) and 4(e), following his death. Such designation shall be
substantially in the form attached hereto. In the absence of a designation by
the Executive, the Executive shall be deemed to have designated that any unpaid
installments shall be payable to his surviving spouse, and that installments
remaining unpaid upon the spouse's death shall be paid to the spouse's estate.
If the Executive dies without a surviving spouse and has failed to make a
designation, remaining unpaid installments shall be paid in equal shares to the
Executive's living children.
2
<PAGE>
6. Limitations.
-----------
(a) No Withdrawal. Amounts which have been deferred under this agreement
-------------
are not subject to withdrawal by the Executive and shall be paid only in
accordance with the terms hereof.
(b) No Assignment. No amount payable under this agreement shall be
-------------
subject to assignment, transfer, sale, pledge, encumbrance, alienation or
charge by the Executive or any beneficiary. Any attempt to assign,
transfer, sell, pledge, encumber, alienate or charge any amount hereunder
shall be without effect.
(c) Unsecured. Neither the Executive nor any beneficiary, nor any other
---------
person shall be deemed to have, pursuant to this agreement, any property
interest, legal or equitable, in any specific asset of the Company. The
Executive is a general, unsecured creditor with respect to the promises of
the Company made herein.
7. Investment. The Company may use the funds deferred hereunder in any
----------
manner desired by the Company. The Company may but is under no obligation to,
invest the funds, at the Company's convenience, to assist in providing the
benefits promised herein. Any investment, reserve or other funding arrangement
shall belong solely to the Company, shall be subject to the Company's sole
control, and shall be subject to the claims of creditors of the Company.
Neither the Executive nor any beneficiary shall have any legal or equitable
interest in any such investment, reserve or other funding arrangement. If the
Company purchases life insurance in connection with this agreement, the Company
shall be the owner and beneficiary of all such policies.
The Company, in its sole discretion, may determine to establish a
trust to assist in meeting its obligations under this agreement and other
similar agreements. If established, the trust shall conform to the requirements
of Revenue Procedure 92-64, as amended or superseded.
8. Interpretation. The Board of Directors of the Company shall have full
--------------
power and authority to interpret, construe and administer this agreement, the
Board's interpretations, constructions, and actions hereunder shall be binding
and conclusive on all persons fore all purposes. No member of the Board shall
be liable to any person for any action taken or omitted in connection with this
agreement, unless attributable to his own willful misconduct or lack of good
faith.
In the event of the Executive disagrees with any determination of the
Board of Directors hereunder the Executive shall have the right and obligation
to make written request to the Board of Directors within 60 days of notice of
their decision to review that decision. The Directors must issue their decision
or review within 120 days after delivery of the request or the request is deemed
denied.
3
<PAGE>
9. Amendment. The Board of Directors of the Company shall have the
---------
power to amend this agreement; provided, however, that no amendment shall have
any material, adverse effect on the Executive unless he consents to such
amendment in writing. No amendment may be made which would alter the
irrevocable nature of the election to defer compensation.
IN WITNESS WHEREOF, the parties have executed this agreement the
12th day of January, 1998.
STEELCASE INC.
/s/ A. Rougier-Chapman
By ____________________________________
Its_________________________________
/s/ James Hackett
_______________________________________
Executive
4
<PAGE>
ATTACHMENT A
Executive: James Hackett
Date of Deferral
Agreement: February 16, 1996
Deferral Period: 5 Years (3/1/96 + 2/28/2001)
Deferred Amounts: $50,000/year
Annual Benefit
Payments: $300,000, paid each March for 15 years beginning the March
after Executive attains age 70, provided that he does attain age
70.
Vesting Schedule: The vested percentage is determined by the number of whole
years of employment following completion of the full deferral:
Years of Vested Percentage
Vesting Service -----------------
- ------------------
Less than 1 65%
1 72%
2 79%
3 86%
4 93%
5 100%
100% vesting also occurs at the earlier of age 65 or when the rule of 80 is
satisfied according to the Steelcase Benefits Booklet, or in the event of total
and permanent disability.
Death Prior to
Attaining Age 70: $192,000 per year for 15 years; starting March after death if
death occurs prior to age 60 or prior to complete deferral.
$220,000 per year for 15; years starting March after death,
if death occurs during ages 60 through 64 and after complete
deferral. $250,000 per year for 15 years; starting March
after death, if death occurs during ages 65 through 69 and
after complete deferral.
<PAGE>
Less than Complete Deferral:
Number of Years of Payments
Complete Deferral -------------------------
-------------------
0 $0
1 $50,000 (lump sum)
2 $15,000/year for 10 years
3 $22,000/year for 10 years
4 $30,000/year for 10 years
(Plus refund of any partial year deferral)
Payments will be made (or begin) in the March following cessation of
deferrals.
Acknowledged:
Steelcase, Inc.
/s/ A. Rougier-Chapman
By:_______________________________
/s/ James Hackett
__________________________________
James Hackett
<PAGE>
EXHIBIT 10.2
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into this 12th day of January,
1998, by and between STEELCASE INC., a Michigan corporation ("Company") and
ROBERT BALLARD ("Executive").
WHEREAS, the Executive is presently an employee of the Company;
WHEREAS, the Executive has elected to defer a portion of his future
compensation until after his retirement or death and may do so again in the
future; and
WHEREAS, the Company has agreed to pay deferred compensation to the
Executive in consideration of such deferral and may do so in the future; and
WHEREAS, the parties wish to substitute the following agreement for
any and all prior agreements relating to such deferrals and to provide hereby
for future deferrals;
NOW THEREFORE, the parties agree as follows:
1. Deferral Election and Amount. Attachment A sets forth amounts deferred
----------------------------
by Executive under one or more prior agreements. Any future deferrals agreed to
between Executive and Company will be evidenced by separate Attachments,
executed by or on behalf of both parties. Any election to defer is irrevocable
and the compensation which is deferred must be compensation payable for services
to be performed on or after the date of execution of the election to defer. In
consideration of such deferral, the Company agrees to pay benefits as set forth
in the Attachment.
2. Source of Amounts Deferred. The Company shall deduct compensation
--------------------------
deferred hereunder equally from the Executive's bi-weekly payroll, unless
otherwise specified in the Attachment.
3. Account. The Company shall maintain a bookkeeping account indicating
-------
the cumulative amount of compensation deferred by the Executive.
4. Payments.
--------
(a) General. Each Attachment will describe the amount of payments to be
-------
made by the Company in respect of the deferral, and any vesting
requirements.
In the event deferrals cease before completion for any reason
other than Executive's death, the Company will only make those payments
identified in the Appendix in the event of less than complete deferral.
<PAGE>
(b) Discharge for Cause. If the Executive is discharged for cause, an
-------------------
amount equal to the compensation actually deferred, if any, shall be paid
to the Executive, without interest, in five equal annual payments
commencing in the month of March following the discharge. Amounts payable
under this subparagraph may be prepaid at the option of the Company. For
purposes of this Agreement, discharge "for cause" shall mean discharge by
reason of gross insubordination, proven dishonesty injurious to the
Company, the commission of a felony or misdemeanor injurious to the
Company, or the engagement in business or practice in competition with the
Company without the Company's prior written consent.
(c) Competition. If the Executive enters into competition with the
-----------
Company, without prior approval of the Board of Directors of the Company,
and the benefits paid to the Executive hereunder exceed the amount of
compensation actually deferred, no further payments shall be made to the
Executive or a designated beneficiary. If the amount of compensation
actually deferred exceeds the benefits paid to the Executive hereunder, the
difference between such amounts shall be paid to the Executive, without
interest, in five equal annual payments commencing in the month of March
following the entry of the Executive into competition with the Company.
Amounts payable under this subparagraph may be prepaid at the option of the
Company.
(d) Suicide. If the Executive dies by suicide within one year of the
-------
onset of any deferral period, the amount of compensation actually deferred,
if any, pursuant to that deferral election shall be paid to the beneficiary
designated by the Executive, without interest, within 60 days of the date
of death.
(e) Minimum Payments. The Executive, together with his designated
----------------
beneficiary shall in no event receive an aggregate amount which is less
than the total which has been deferred by the Executive.
(f) Payment by Company or Trust. If a trust is established as described
---------------------------
in Section 7 below and funds have been set aside in the trust, amounts
payable under this agreement may be paid by the Company or from the trust.
The Company shall determine the source of the payments. Establishment of
the trust shall not relieve the Company of its obligations under this
agreement except to the extent that payments are actually made from the
trust.
5. Beneficiary Designation. The Executive may designate a beneficiary to
-----------------------
receive the benefits as set forth above, including the benefits provided under
Paragraphs 4(d) and 4(e), following his death. Such designation shall be
substantially in the form attached hereto. In the absence of a designation by
the Executive, the Executive shall be deemed to have designated that any unpaid
installments shall be payable to his surviving spouse, and that installments
remaining unpaid upon the spouse's death shall be paid to the spouse's estate.
If the Executive dies without a surviving spouse and has failed to make a
designation, remaining unpaid installments shall be paid in equal shares to the
Executive's living children.
2
<PAGE>
6. Limitations.
-----------
(a) No Withdrawal. Amounts which have been deferred under this
-------------
agreement are not subject to withdrawal by the Executive and shall be paid
only in accordance with the terms hereof.
(b) No Assignment. No amount payable under this agreement shall be
-------------
subject to assignment, transfer, sale, pledge, encumbrance, alienation or
charge by the Executive or any beneficiary. Any attempt to assign,
transfer, sell, pledge, encumber, alienate or charge any amount hereunder
shall be without effect.
(c) Unsecured. Neither the Executive nor any beneficiary, nor any other
---------
person shall be deemed to have, pursuant to this agreement, any property
interest, legal or equitable, in any specific asset of the Company. The
Executive is a general, unsecured creditor with respect to the promises of
the Company made herein.
7. Investment. The Company may use the funds deferred hereunder in any
----------
manner desired by the Company. The Company may but is under no obligation to,
invest the funds, at the Company's convenience, to assist in providing the
benefits promised herein. Any investment, reserve or other funding arrangement
shall belong solely to the Company, shall be subject to the Company's sole
control, and shall be subject to the claims of creditors of the Company.
Neither the Executive nor any beneficiary shall have any legal or equitable
interest in any such investment, reserve or other funding arrangement. If the
Company purchases life insurance in connection with this agreement, the Company
shall be the owner and beneficiary of all such policies.
The Company, in its sole discretion, may determine to establish a
trust to assist in meeting its obligations under this agreement and other
similar agreements. If established, the trust shall conform to the requirements
of Revenue Procedure 92-64, as amended or superseded.
8. Interpretation. The Board of Directors of the Company shall have full
--------------
power and authority to interpret, construe and administer this agreement, the
Board's interpretations, constructions, and actions hereunder shall be binding
and conclusive on all persons fore all purposes. No member of the Board shall
be liable to any person for any action taken or omitted in connection with this
agreement, unless attributable to his own willful misconduct or lack of good
faith.
In the event of the Executive disagrees with any determination of the Board
of Directors hereunder the Executive shall have the right and obligation to make
written request to the Board of Directors within 60 days of notice of their
decision to review that decision. The Directors must issue their decision or
review within 120 days after delivery of the request or the request is deemed
denied.
3
<PAGE>
9. Amendment. The Board of Directors of the Company shall have the power
---------
to amend this agreement; provided, however, that no amendment shall have any
material, adverse effect on the Executive unless he consents to such amendment
in writing. No amendment may be made which would alter the irrevocable nature
of the election to defer compensation.
IN WITNESS WHEREOF, the parties have executed this agreement the 12th
day of January, 1998.
STEELCASE INC.
/s/ A. Rougier-Chapman
By_______________________________________________
Its__________________________________________
/s/ Robert Ballard 1/12/98
________________________________________________
Executive
4
<PAGE>
ATTACHMENT A
Executive: Robert Ballard
Dates of Deferral
Agreements: 1. February 26, 1988
2. February 27, 1989
3. February 16, 1996
Deferral Periods: 1. 5 Years (3/1/88 + 2/28/93)
2. 5 Years (3/1/89 + 2/28/94)
3. 3 Years (3/1/96 + 2/28/99)
Deferred Amounts: 1. $25,000/year
2. $25,000/year
3. $41,667/year
Annual Benefit
Payments: 1. $82,000, paid each March for 15 years beginning
the March after Executive attains age 70,
provided that he does attain age 70.
2. $75,000, paid each March for 15 years beginning
the March after Executive attains age 70,
provided that he does attain age 70.
3. $29,000 paid each March for 15 years beginning
the March after Executive attains age 70,
provided that he does attain age 70.
Vesting Schedule: 1. 100%
2. 100%
3. The vested percentage is determined by the
number of whole years of employment following
completion of the full deferral:
Years of Vested Percentage
Vesting Service -----------------------------
---------------
Less than 1 65%
1 72%
2 79%
3 86%
4 93%
5 100%
100% vesting also occurs at the earlier of age 65
or when the rule of 80 is satisfied according to
the Steelcase Benefits Booklet, or upon total and
permanent disability.
Death Prior to Attaining
Age 70: 1. $80,000 per year for 15 years, starting March
after death.
2. $70,000 per year for 15 years, starting March
after death
3. $29,000 per year for 15 years, starting March
after death
<PAGE>
Less than Complete Deferral:
1.
Number of Years of Payments
Complete Deferral --------
------------------
0 $0
1 $25,000 (lump sum)
2 $8,000/year for 10 years
3 $14,000/year for 10 years
4 $20,000/year for 10 years
(Plus refund of any partial year deferral)
Payments will be made (or begin) in the March following cessation of
deferrals.
2.
Number of Years of Payments
Complete Deferral --------
------------------
0 $0
1 $25,000 (lump sum)
2 $8,500/year for 10 years
3 $14,000/year for 10 years
4 $21,000/year for 10 years
(Plus refund of any partial year deferral)
Payments will be made (or begin) in the March following cessation of
deferrals.
3.
Number of Years of Payments
Complete Deferral --------
------------------
0 $0
1 $41,667 (lump sum)
2 $12,500/year for 10 years
(Plus refund of any partial year deferral)
Payments will be made (or begin) in the March following cessation of
deferrals.
Acknowledged:
Steelcase, Inc.
/s/ A. Rougier-Chapman
By:__________________________________
/s/ Robert Ballard 1/12/98
_______________________________________
Robert Ballard
<PAGE>
EXHIBIT 10.4
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into this 13th day of January,
1998, by and between STEELCASE INC., a Michigan corporation ("Company") and
JAMES MITCHELL ("Executive").
WHEREAS, the Executive is presently an employee of the Company;
WHEREAS, the Executive has elected to defer a portion of his future
compensation until after his retirement or death and may do so again in the
future; and
WHEREAS, the Company has agreed to pay deferred compensation to the
Executive in consideration of such deferral and may do so in the future; and
WHEREAS, the parties wish to substitute the following agreement for
any and all prior agreements relating to such deferrals and to provide hereby
for future deferrals;
NOW THEREFORE, the parties agree as follows:
1. Deferral Election and Amount. Attachment A sets forth amounts deferred
----------------------------
by Executive under one or more prior agreements. Any future deferrals agreed to
between Executive and Company will be evidenced by separate Attachments,
executed by or on behalf of both parties. Any election to defer is irrevocable
and the compensation which is deferred must be compensation payable for services
to be performed on or after the date of execution of the election to defer. In
consideration of such deferral, the Company agrees to pay benefits as set forth
in the Attachment.
2. Source of Amounts Deferred. The Company shall deduct compensation
--------------------------
deferred hereunder equally from the Executive's bi-weekly payroll, unless
otherwise specified in the Attachment.
3. Account. The Company shall maintain a bookkeeping account indicating
-------
the cumulative amount of compensation deferred by the Executive.
4. Payments.
--------
(a) General. Each Attachment will describe the amount of payments to be
-------
made by the Company in respect of the deferral, and any vesting
requirements.
In the event deferrals cease before completion for any reason
other than Executive's death, the Company will only make those payments
identified in the Appendix in the event of less than complete deferral.
<PAGE>
(b) Discharge for Cause. If the Executive is discharged for cause, an
-------------------
amount equal to the compensation actually deferred, if any, shall be paid
to the Executive, without interest, in five equal annual payments
commencing in the month of March following the discharge. Amounts payable
under this subparagraph may be prepaid at the option of the Company. For
purposes of this Agreement, discharge "for cause" shall mean discharge by
reason of gross insubordination, proven dishonesty injurious to the
Company, the commission of a felony or misdemeanor injurious to the
Company, or the engagement in business or practice in competition with the
Company without the Company's prior written consent.
(c) Competition. If the Executive enters into competition with the
-----------
Company, without prior approval of the Board of Directors of the Company,
and the benefits paid to the Executive hereunder exceed the amount of
compensation actually deferred, no further payments shall be made to the
Executive or a designated beneficiary. If the amount of compensation
actually deferred exceeds the benefits paid to the Executive hereunder, the
difference between such amounts shall be paid to the Executive, without
interest, in five equal annual payments commencing in the month of March
following the entry of the Executive into competition with the Company.
Amounts payable under this subparagraph may be prepaid at the option of the
Company.
(d) Suicide. If the Executive dies by suicide within one year of the
-------
onset of any deferral period, the amount of compensation actually deferred,
if any, pursuant to that deferral election shall be paid to the beneficiary
designated by the Executive, without interest, within 60 days of the date
of death.
(e) Minimum Payments. The Executive, together with his designated
----------------
beneficiary shall in no event receive an aggregate amount which is less
than the total which has been deferred by the Executive.
(f) Payment by Company or Trust. If a trust is established as described
---------------------------
in Section 7 below and funds have been set aside in the trust, amounts
payable under this agreement may be paid by the Company or from the trust.
The Company shall determine the source of the payments. Establishment of
the trust shall not relieve the Company of its obligations under this
agreement except to the extent that payments are actually made from the
trust.
5. Beneficiary Designation. The Executive may designate a beneficiary to
-----------------------
receive the benefits as set forth above, including the benefits provided under
Paragraphs 4(d) and 4(e), following his death. Such designation shall be
substantially in the form attached hereto. In the absence of a designation by
the Executive, the Executive shall be deemed to have designated that any unpaid
installments shall be payable to his surviving spouse, and that installments
remaining unpaid upon the spouse's death shall be paid to the spouse's estate.
If the Executive dies without a surviving spouse and has failed to make a
designation, remaining unpaid installments shall be paid in equal shares to the
Executive's living children.
2
<PAGE>
6. Limitations.
-----------
(a) No Withdrawal. Amounts which have been deferred under this agreement
-------------
are not subject to withdrawal by the Executive and shall be paid only in
accordance with the terms hereof.
(b) No Assignment. No amount payable under this agreement shall be
-------------
subject to assignment, transfer, sale, pledge, encumbrance, alienation or
charge by the Executive or any beneficiary. Any attempt to assign,
transfer, sell, pledge, encumber, alienate or charge any amount hereunder
shall be without effect.
(c) Unsecured. Neither the Executive nor any beneficiary, nor any other
---------
person shall be deemed to have, pursuant to this agreement, any property
interest, legal or equitable, in any specific asset of the Company. The
Executive is a general, unsecured creditor with respect to the promises of
the Company made herein.
7. Investment. The Company may use the funds deferred hereunder in any
----------
manner desired by the Company. The Company may but is under no obligation to,
invest the funds, at the Company's convenience, to assist in providing the
benefits promised herein. Any investment, reserve or other funding arrangement
shall belong solely to the Company, shall be subject to the Company's sole
control, and shall be subject to the claims of creditors of the Company.
Neither the Executive nor any beneficiary shall have any legal or equitable
interest in any such investment, reserve or other funding arrangement. If the
Company purchases life insurance in connection with this agreement, the Company
shall be the owner and beneficiary of all such policies.
The Company, in its sole discretion, may determine to establish a
trust to assist in meeting its obligations under this agreement and other
similar agreements. If established, the trust shall conform to the requirements
of Revenue Procedure 92-64, as amended or superseded.
8. Interpretation. The Board of Directors of the Company shall have full
--------------
power and authority to interpret, construe and administer this agreement, the
Board's interpretations, constructions, and actions hereunder shall be binding
and conclusive on all persons fore all purposes. No member of the Board shall
be liable to any person for any action taken or omitted in connection with this
agreement, unless attributable to his own willful misconduct or lack of good
faith.
In the event of the Executive disagrees with any determination of the
Board of Directors hereunder the Executive shall have the right and obligation
to make written request to the Board of Directors within 60 days of notice of
their decision to review that decision. The Directors must issue their decision
or review within 120 days after delivery of the request or the request is deemed
denied.
3
<PAGE>
9. Amendment. The Board of Directors of the Company shall have the power
---------
to amend this agreement; provided, however, that no amendment shall have any
material, adverse effect on the Executive unless he consents to such amendment
in writing. No amendment may be made which would alter the irrevocable nature
of the election to defer compensation.
IN WITNESS WHEREOF, the parties have executed this agreement the 13th
day of January, 1998.
STEELCASE INC.
/s/ A. Rougier-Chapman
By _________________________________
Its ____________________________
/s/ James Mitchell
____________________________________
Executive
4
<PAGE>
ATTACHMENT A
<TABLE>
<CAPTION>
<S> <C>
Executive: James Mitchell
Date of Deferral
Agreement: February 19, 1996
Deferral Period: 5 Years (3/1/96 -- 2/28/2001)
Deferred Amounts: $20,000/year
Annual Benefit: $81,600, paid each March for 15 years commencing with the
March Following the Executive's 70th birthdate, and provided
Executive attains age of 70.
Vesting Schedule: The vested percentage is determined by the number of whole
years of employment following completion of the full
deferral:
</TABLE>
<TABLE>
<CAPTION>
Years of
Vesting Service Vested Percentage
--------------- -----------------
<S> <C>
Less than 1 65%
1 72%
2 79%
3 86%
4 93%
5 100%
</TABLE>
100% vesting also occurs at the earlier of age 65 or when the
rule of 80 is satisfied according to the Steelcase Benefits
Booklet, or in the event of total and permanent disability.
Death Prior
to Attaining
Age 70: $60,800 per year for 15 years, starting March after death,
if death occurs prior to age 60 or prior to complete deferral
$64,000 per year for 15 years, starting March after death, if
death occurs during ages 60 through 64, but after complete
deferral
$68,000 per year for 15 years, starting March after death, if
death occurs during ages 65 through 69, but after complete
deferral
5
<PAGE>
Less than Complete Deferral:
<TABLE>
<CAPTION>
Number of Years of
Complete Deferral Payments
------------------ --------
<C> <S>
0 $0
1 $20,000 (lump sum)
2 $6,000/year for 10 years
3 $8,800/year for 10 years
4 $12,000/year for 10 years
</TABLE>
(Plus refund of any partial year deferral)
Payments will be made (or begin) in the March following cessation of
deferrals.
Acknowledged:
Steelcase, Inc.
/s/ A. Rougier-Chapman
By: _____________________________
/s/ James Mitchell
_________________________________
James Mitchell
6
<PAGE>
EXHIBIT 11.1
STEELCASE INC.
STATEMENT REGARDING COMPUTATION OF UNAUDITED PRO FORMA NET INCOME (LOSS)
PER SHARE OF COMMON STOCK
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
FEBRUARY 28, NOVEMBER 28,
1997 1997
------------ ------------
<S> <C> <C>
Net Income........................................... $ 27.7 $ 163.3
Pro forma adjustments:
Retained earnings reduction for conversion of Exist-
ing Preferred Stock................................ (383.2)
Net income reduction for Employee Stock Grant....... (2.1)
----------- -----------
Net income (loss) attributable to holders of Common
Stock............................................... $ (355.5) $ 161.2
=========== ===========
Net income (loss) per share of Common Stock.......... $ (2.25) $ 1.02
=========== ===========
Weighted average shares of Common Stock outstanding.. 158.1 158.3
=========== ===========
Weighted average shares of Common Stock outstanding:
Weighted average shares of Existing Common Stock
outstanding........................................ 200,906 201,150
Additional shares resulting from Stock Split........ 140,433,294 140,603,850
Additional shares resulting from conversion of Ex-
isting Preferred Stock............................. 17,120,400 17,120,400
Cheap Stock:
Employee Stock Grant............................... 150,000 150,000
Employee Stock Option Grant........................ 225,000 225,000
----------- -----------
Weighted average shares of Common Stock outstanding.. 158,129,600 158,300,400
=========== ===========
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Steelcase Inc.
Grand Rapids, Michigan
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-1 (Amendment 2) of Steelcase Inc. of our
report dated March 21, 1997 relating to the consolidated financial statements
of Steelcase Inc. which is contained in that Prospectus, and of our report
dated March 21, 1997 relating to the financial statement schedule which is
contained in Part II of the Registration Statement. We also consent to the
references to us under the captions "Selected Financial Data" and "Experts" in
the Prospectus.
By _____________________________
BDO SEIDMAN, LLP
Grand Rapids, Michigan
January 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STEELCASE
INC.'S FINANCIAL STATEMENTS FOR THE YEAR ENDED FEBRUARY 23, 1996, FEBRUARY 28,
1997 AND THE NINE MONTHS ENDED NOVEMBER 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 9-MOS
<FISCAL-YEAR-END> FEB-28-1995 FEB-23-1996 FEB-28-1997 FEB-27-1998
<PERIOD-START> MAR-01-1994 MAR-01-1995 FEB-24-1996 MAR-01-1997
<PERIOD-END> FEB-28-1995 FEB-23-1996 FEB-28-1997 NOV-28-1997
<CASH> 164 209 174 323
<SECURITIES> 39 15 14 29
<RECEIVABLES> 394 389 476 556
<ALLOWANCES> 15 20 23 33
<INVENTORY> 154 139 108 104
<CURRENT-ASSETS> 789 791 825 1038
<PP&E> 1,595 1,685 1,747 1,791
<DEPRECIATION> 989 1,061 1,102 1,131
<TOTAL-ASSETS> 1,762 1,885 1,922 2,171
<CURRENT-LIABILITIES> 313 316 350 487
<BONDS> 0 0 0 0
0 0 0 0
11 11 11 11
<COMMON> 10 10 10 10
<OTHER-SE> 1,282 1,373 1,359 1,462
<TOTAL-LIABILITY-AND-EQUITY> 1,762 1,885 1,922 2,171
<SALES> 2,049 2,156 2,408 2,061
<TOTAL-REVENUES> 2,049 2,156 2,408 2,061
<CGS> 1,452 1,468 1,552 1,317
<TOTAL-COSTS> 1,452 1,468 1,552 1,317
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 5 11 13 7
<INTEREST-EXPENSE> 2 2 114 1
<INCOME-PRETAX> 105 188 51 260
<INCOME-TAX> 41 68 24 100
<INCOME-CONTINUING> 64 124 28 160
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 64 124 28 163
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
