SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended May 31, 1998 Commission File No. 0-27682
Globe Business Resources, Inc.
Incorporated under the IRS Employer
laws of Ohio Identification No. 31-1256641
11260 Chester Road
Suite 400
Cincinnati, OH 45246
Phone: (513) 771-8287
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of July 3, 1998, 4,555,707 shares of the Registrant's common stock, no
par value, were outstanding.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
Page No.
--------
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - 3
May 31, 1998 and February 28, 1998
Consolidated Statement of Income - 4
Three months ended May 31, 1998 and 1997
Consolidated Statement of Cash Flows - 5
Three months ended May 31, 1998 and 1997
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 14
<PAGE>
PART I - FINANCIAL INFORMATION
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
May 31, February 28,
1998 1998
--------- ------------
(Unaudited)
ASSETS:
Cash $ 363 $ 526
Trade accounts receivable, less allowance
for doubtful accounts of $623
and $609, respectively 9,710 8,252
Other receivables 569 131
Prepaid expenses 2,876 2,038
Rental furniture, net 53,614 53,220
Property and equipment, net 8,040 7,743
Goodwill and other intangibles, net 30,613 26,695
Note receivable from officer 100 100
Other, net 971 732
--------- ---------
Total assets $ 106,856 $ 99,437
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 5,054 $ 3,561
Customer deposits 2,202 2,027
Accrued compensation 2,140 2,061
Accrued taxes 938 325
Deferred income taxes 4,123 4,183
Accrued interest payable 878 1,121
Other accrued expenses 1,533 1,025
Debt 53,533 49,713
--------- ---------
Total liabilities 70,401 64,016
--------- ---------
Common stock and other shareholders' equity:
Common stock, no par, 15,000,000 shares
authorized, 4,555,142, and 4,548,399
shares issued and outstanding 21,496 21,492
Retained earnings 19,043 18,013
Fair market value in excess of historical cost of
acquired net assets attributable to related
party transactions (4,084) (4,084)
--------- ---------
Total common stock and other shareholders' equity 36,455 35,421
--------- ---------
Total liabilities and shareholders' equity $ 106,856 $ 99,437
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share data)
For the three months ended,
---------------------------
May 31, May 31,
1998 1997
---------------------------
(Unaudited)
Revenues:
Corporate housing sales $ 16,858 $ 7,074
Rental sales 11,355 11,318
Retail sales 4,669 3,800
-------- --------
32,882 22,192
-------- --------
Cost of revenues:
Cost of corporate housing sales 11,982 4,832
Cost of rental sales 798 1,000
Cost of retail sales 2,834 2,415
Furniture depreciation and disposals 2,349 2,170
-------- --------
17,963 10,417
-------- --------
Gross profit 14,919 11,775
Operating expenses:
Warehouse and delivery 2,576 2,290
Occupancy 1,854 1,667
Selling and advertising 2,634 2,311
General and administration 4,670 2,793
Amortization of intangible assets 427 161
-------- --------
12,161 9,222
-------- --------
Operating income 2,758 2,553
Other expenses:
Interest expense 964 601
Other, net 31 46
-------- --------
995 647
Income before income taxes 1,763 1,906
Provision for income taxes 688 744
-------- --------
Net income $ 1,075 $ 1,162
======== ========
Earnings per common share:
Basic $ 0.24 $ 0.26
======== ========
Diluted $ 0.23 $ 0.26
======== ========
Weighted average number of
common shares outstanding:
Basic 4,550 4,441
Diluted 4,679 4,496
The accompanying notes are an integral part of these financial statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
For the three
months ended,
----------------------
May 31, May 31,
1998 1997
---------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,075 $ 1,162
Adjustments to reconcile net income to
net cash provided by operating activities:
Rental furniture depreciation 1,902 1,729
Other depreciation and amortization 934 434
Provision for losses on accounts receivable 154 100
Provision for deferred income taxes (60) 52
(Gain)/loss on sale of property and equipment (5) --
Book value of furniture sales and rental buyouts 3,748 3,192
Changes in assets and liabilities:
Accounts receivable (2,064) (579)
Note receivable -- --
Other assets, net (239) 3
Prepaid expenses (838) (13)
Accounts payable 1,493 218
Customer deposits 117 223
Accrued compensation (17) (274)
Accrued taxes 613 694
Accrued interest payable (243) 6
Other accrued expenses 326 118
-------- --------
Net cash provided by operating activities 6,896 7,065
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental furniture (5,234) (6,349)
Purchases of property and equipment (805) (1,577)
Proceeds from disposition of property and equipment 6 --
Purchases of businesses, net of cash acquired (4,852) (3,452)
-------- --------
Net cash used in investing activities (10,885) (11,378)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on the revolving credit agreement 37,276 28,587
Repayments on the revolving credit agreement (33,259) (25,425)
Borrowings on the senior note -- --
Borrowings/(repayments) of other debt (75) 1,250
Principal payments under capital lease obligations (121) (115)
Exercise of common stock options 5 --
-------- --------
Net cash provided by financing activities 3,826 4,297
-------- --------
Net decrease in cash (163) (16)
Cash at beginning of period 526 717
-------- --------
Cash at end of period $ 363 $ 701
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
GLOBE BUSINESS RESOURCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
NOTE 1 -- PRESENTATION OF INTERIM INFORMATION
In the opinion of the management of Globe Business Resources, Inc., the
accompanying unaudited consolidated financial statements include all adjustments
considered necessary to present fairly its financial position as of May 31,
1998, and the results of its operations for the three months ended May 31, 1998
and 1997 and its cash flows for the three months ended May 31, 1998 and 1997.
Interim results are not necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented in accordance
with the requirements of Form 10-Q, and do not contain certain information
included in the Company's audited consolidated financial statements and notes in
its Form 10-K for the fiscal year ended February 28, 1998.
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2 -- ACQUISITIONS
During the first quarter of fiscal 1999, the Company completed two asset
acquisitions and settled certain contingent consideration on two fiscal 1998
acquisitions. These transactions were completed by payment of approximately $4.9
million in cash and the assumption of certain liabilities.
On April 30, 1998, Globe acquired certain assets of privately owned Express
Rental, Inc., dba Express Furniture Rental ("EFR"), which is based in Ventura,
California and operates in the rent-to-rent segment of the furniture rental
business. The assets acquired consist of EFR's Los Angeles operations, with
annual revenues of approximately $2.0 million.
On May 1, 1998, Globe acquired substantially all the assets of privately
owned Feld Corporate Housing ("FCH"), which operates in Denver, Colorado and
provides short-term housing to transferring or temporarily assigned corporate
personnel, new hires, trainees and consultants. FCH maintained an inventory of
approximately 250 leased housing units at the time of acquisition and had annual
revenues of approximately $5.0 million for the year ended December 31, 1997.
In accordance with APB No. 16, these acquisitions were accounted for using
the purchase method.
The purchase price allocation for the acquired businesses is as follows:
(Unaudited)
-------------
Cash, receivables and prepaids $ (14)
Rental furniture 810
Property and equipment -
Other assets -
Goodwill and other intangibles 4,345
--------
5,141
Liabilities assumed (289)
---------
$ 4,852
========
The following table sets forth certain Globe consolidated income statement
data on a pro forma basis, as if EFR and FCH were acquired at the beginning of
the periods indicated.
Three months ended May 31,
--------------------------
1998 1997
----------- ---------
Revenues $ 33,930 $ 23,743
Net income 1,173 1,310
Basic earnings per common share $ 0.26 $ 0.29
Diluted earnings per common share $ 0.25 $ 0.29
Weighted average number of common
shares outstanding:
Basic 4,550 4,441
Diluted 4,679 4,496
SUBSEQUENT EVENT
On June 1, 1998, Globe acquired substantially all the assets of privately
owned Village Suites ("VS") for approximately $7,700 in cash and the assumption
of certain liabilities. VS, based in Detroit, Michigan with operations in
Illinois, Michigan, Minnesota, Ohio and Wisconsin provides short-term housing to
transferring or temporarily assigned corporate personnel, new hires, trainees
and consultants. VS maintained an inventory of approximately 770 leased housing
units at the time of acquisition and had annual revenues of approximately $13.0
million for the year ended September 30, 1997.
NOTE 3 -- EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings per Share", in the fourth
quarter of fiscal 1998. All earnings per share amounts for prior periods have
been restated to conform to this statement, which had no material effect on the
previously reported earnings per share.
For all periods presented, basic earnings per share was calculated by
dividing net income applicable to common stock by the weighted average number of
shares outstanding during the period.
For all periods presented, diluted earnings per share was calculated by
dividing net income applicable to common stock by the weighted average number of
shares and dilutive potential common shares outstanding during the period.
Potential common shares include outstanding stock options and contingently
issuable shares.
<PAGE>
The following table presents the calculation of basic and diluted earnings
per share for the periods indicated.
Three months ended May 31,
-------------------------
1998 1997
---------- --------
(Unaudited)
Net income used to calculate basic and diluted
earnings per share $ 1,075 $ 1,162
======= =======
Weighted average common shares used to calculate
basic earnings per share 4,550 4,441
======= =======
Basic earnings per common share $ 0.24 $ 0.26
======= =======
Shares used in the calculation of
diluted earnings per share:
Weighted average common shares 4,550 4,441
Dilutive effect of assumed exercise
of options for the purchase
of common shares 57 46
Dilutive effect of assumed issuance of
contingently issuable shares 72 9
------- --------
Weighted average common shares used to calculate
diluted earnings per share 4,679 4,496
======= =======
Diluted earnings per common share $ 0.23 $ 0.26
======= =======
NOTE 4 -- RENTAL FURNITURE
Rental furniture consists of the following:
May 31, February 28,
1998 1998
----------- ------------
(unaudited)
Furniture on rental $42,999 $41,884
Furniture on hand 21,074 21,537
-------- --------
64,073 63,421
Accumulated depreciation (10,459) (10,201)
--------- ---------
$53,614 $53,220
======= =======
<PAGE>
NOTE 5 -- DEBT
Outstanding debt consists of:
May 31, February 28,
1998 1998
-------- ------------
(Unaudited)
The Fifth Third Bank, PNC Bank and
Norwest Bank unsecured revolving note,
average interest of 7.31% $ 20,493 $ -
The Fifth Third Bank and PNC Bank unsecured
revolving note, average interest of 7.39% - 16,476
7.54% Senior Notes, unsecured, interest
payable semi-annually on March 1 and
September 1, due September 1, 2007 30,000 30,000
6.0% note payable to seller of acquired
business, payable in monthly installments,
due December 31, 2000 775 850
7.5% note payable to seller of acquired
business, payable in monthly
installments, due November 2, 1998 157 181
7.2% mortgage note payable to
The Fifth Third Bank, interest
payable in monthly installments,
due December 1, 2002 1,496 1,510
Capital lease obligations 612 696
-------- --------
$ 53,533 $ 49,713
======== ========
The funds required for the EFR and FCH acquisitions were derived from
borrowings under the Company's unsecured revolving Credit Agreement.
On May 14, 1998, the Company's $30 million unsecured revolving line of
credit with the Fifth Third Bank and PNC Bank was increased, by amendment, to a
$45 million unsecured revolving line of credit with The Fifth Third Bank, PNC
Bank and Norwest Bank. Interest rates, unused facility fees and other terms are
unchanged from the original revolving Credit Agreement. At May 31, 1998, the
revolving Credit Agreement provided a total unused credit facility of
approximately $24.5 million.
<PAGE>
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements beginning on page 3.
GENERAL
Globe is a major participant in the temporary relocation industry,
operating in both the corporate housing and rent-to-rent furniture businesses.
The corporate housing business provides short-term housing through an inventory
of leased housing units to temporarily assigned corporate personnel, new hires,
trainees and consultants. The rent-to-rent furniture business rents quality
office and residential furniture to a variety of corporate and individual
customers. Additionally, the Company sells residential and office furniture that
no longer meets its "showroom condition" standards for rental through its
clearance centers and offers new furniture for sale through its showrooms and
account executives.
The Company's fiscal year ends on February 28/29.
The discussions contained under Results of Operations and Liquidity and
Capital Resources include forward-looking information which is subject to risks
and qualifications including, but not limited to, those set forth in Exhibit 99.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain gross profit data
as a percentage of respective corporate housing, rental and retail sales
revenues.
For the three months ended,
--------------------------------
May 31, 1998 May 31, 1997
------------ ------------
Revenues:
Corporate housing sales 51.3% 31.9%
Rental sales 34.5% 51.0%
Retail sales 14.2% 17.1%
--------- ---------
Total revenues 100.0% 100.0%
Gross profit:
Corporate housing sales 28.9% 31.7%
Rental sales 93.0% 91.2%
Retail sales 39.3% 36.4%
--------- ---------
Gross profit before depreciation
and disposals 52.5% 62.8%
Furniture depreciation and disposals (7.1%) (9.8%)
--------- --------
Combined gross profit 45.4% 53.1%
Operating expenses 35.7% 40.8%
Amortization of intangible assets 1.3% 0.7%
---------- --------
Operating income 8.4% 11.5%
Interest/other 3.0% 2.9%
---------- --------
Income before taxes 5.4% 8.6%
========== ========
<PAGE>
Impact of Corporate Housing Acquisitions
Globe entered the corporate housing business in fiscal 1997 by making three
acquisitions. Seven additional corporate housing businesses were acquired in
fiscal 1998. Globe continued its corporate housing acquisition program during
the first quarter of fiscal 1999 with the acquisition of Feld Corporate Housing
in May 1998. Another corporate housing acquisition was made in June 1998,
subsequent to completion of the first quarter. All acquisitions to date have
been accounted for using the purchase method of accounting.
Corporate housing companies' assets consist primarily of accounts
receivable, customer deposits and some minor furniture and fixed asset balances.
Consequently, the purchase price for these businesses is allocated largely to
goodwill and other intangibles. Cost of goodwill and other intangibles related
to the corporate housing acquisitions approximates $31.0 million and is being
amortized on a straight-line basis primarily over twenty years. Goodwill and
intangibles amortization, which is a separate component of operating expenses,
reduced operating profit by $0.4 million, or 1.3% of revenues, in the first
quarter of fiscal 1999 and $0.2 million, or 0.7% of revenues, in the first
quarter of fiscal 1998.
The corporate housing business has a lower gross profit margin, as well as
lower operating expenses as a percentage of revenues, than the furniture rental
business. As a result, the Company's gross profit margin and operating expenses
as a percentage of revenues have been declining since the Company entered the
corporate housing business. Gross profit margin decreased to 45.4% in the first
quarter of fiscal 1999 from 53.1% in the first quarter of fiscal 1998, resulting
from the larger percentage of total revenues from corporate housing (51.3% in
the first quarter of fiscal 1999 versus 31.9% in the comparable period of fiscal
1998). Gross profit margin on rental sales in the first quarter of fiscal 1999
was 93.0%, versus 28.9% for corporate housing. Comparable gross profit margins
for the first quarter of fiscal 1998 were 91.2% and 31.7%, respectively. Because
the Company is integrating its furniture rental and corporate housing
operations, these gross profit percentages exclude furniture depreciation and
disposals which can no longer be separately identified. An additional result of
this integration is that operating expenses and, therefore, operating margins
for furniture rental and corporate housing cannot be specifically identified.
Combined operating expenses, excluding goodwill, decreased to 35.7% of revenues
in the first quarter of fiscal 1999 from 40.8% in the first quarter of fiscal
1998, while the operating margin, including goodwill, decreased to 8.4% of
revenues in the first quarter of fiscal 1999 from 11.5% of revenues in the first
quarter of fiscal 1998. The reduction in operating margin is primarily the
result of the increasing mix of corporate housing revenues over the comparable
periods, additions to the Company's management team and related infrastructure
spending to support the Company's rapid growth, and greater amortization
expenses. Excluding amortization expenses, operating margins declined to 9.7% in
the first quarter of fiscal 1999 from 12.2% in the first quarter of fiscal 1998.
Globe plans to continue its consolidation of corporate housing through
additional acquisitions, thereby capitalizing on the desire of many corporations
to have a corporate housing company that can meet their needs nationally. With
the acquisitions to date, Globe has expanded its presence into twenty-two
markets and is the market leader in nine of these markets, with annualized
corporate housing revenues in excess of $90 million. Globe is vying with two
other corporate housing companies for the number two position in the industry.
As Globe increases its presence in the corporate housing business some
competing corporate housing companies that are customers of Globe may transfer
their furniture rental business to other vendors. At the end of June 1998, the
Company's annualized revenues from these corporate housing companies
approximated $9.5 million.
Due to the significant impact of the corporate housing acquisitions on the
Company's operations and financial results, certain aspects of the Company's
historical results of operations and period-to-period comparisons will not be
indicative of future results.
<PAGE>
Comparison of First Quarter Fiscal 1999 to First Quarter Fiscal 1998
Total revenues of $32.9 million increased $10.7 million, or 48.2%, in the
first quarter of fiscal 1999, from $22.2 million in the first quarter of fiscal
1998, primarily due to acquisitions which occurred subsequent to the first
quarter of fiscal 1998. Excluding the corporate housing operations and the
impact of intercompany eliminations, total revenues increased 9.6% in the first
quarter of fiscal 1999 compared to the first quarter of fiscal 1998.
Corporate housing revenues of $16.9 million in the first quarter of fiscal
1999 increased 138.3% from $7.1 million in the first quarter of fiscal 1998.
This increase was primarily caused by acquisitions which occurred after the
first quarter of fiscal 1998.
Rental revenues of $11.3 million in the first quarter of fiscal 1999 were
flat when compared to the first quarter of fiscal 1998 due to the elimination of
revenues from corporate housing customers acquired by the Company subsequent to
the first quarter of fiscal 1998. Excluding the impact of intercompany
eliminations, rental revenues increased 5.1%.
Sales revenues of $4.7 million increased $0.9 million, or 22.9%, in the
first quarter of fiscal 1999 from $3.8 million in the first quarter of fiscal
1998, driven by an increase of $0.6 million, or 37.7%, in clearance center
revenues over the period. The additional $0.3 million increase is primarily
attributable to increased sales of new office furniture in the first quarter of
fiscal 1999 versus the first quarter of fiscal 1998.
Gross profit of $14.9 million in the first quarter of fiscal 1999 increased
$3.1 million, or 26.7%, from $11.8 million in the first quarter of fiscal 1998
and declined as a percentage of revenues to 45.4% from 53.1% over the same
period due to the higher mix of corporate housing revenues and the lower margins
associated with these revenues. Gross profit on both rental and retail sales
revenues improved versus the comparable prior year period. Corporate housing
gross profit declined versus the comparable prior year period but improved
versus the gross profit levels which were experienced in the last nine months of
fiscal 1998 as the Company is actively addressing occupancy levels at certain
corporate housing locations.
Operating expenses of $12.2 million in the first quarter of fiscal 1999
increased 31.9% from $9.2 million in the first quarter of fiscal 1998 as a
result of acquisitions, as well as additions to the Company's management team
and related infrastructure spending to support the Company's rapid growth, which
occurred subsequent to the first quarter of fiscal 1998. As a percentage of
total revenues, these expenses declined to 37.0% from 41.6% over the same period
as a result of corporate housing's lower operating expenses as a percent of
revenues. The investment in management and infrastructure should enable the
Company to continue its acquisition strategy without incurring significant
additional overhead.
As a result of the changes in revenues, gross profit and operating expenses
discussed above, operating income increased 8.0% to $2.8 million, or 8.4% of
revenues in the first quarter of fiscal 1999, from $2.6 million, or 11.5% of
revenues in the first quarter of fiscal 1998.
Interest/other expense increased $0.4 million to $1.0 million in the first
quarter of fiscal 1999 from $0.6 million in the first quarter of fiscal 1998 and
as a percentage of total revenues increased slightly to 3.0% from 2.9% over the
same period. The increased expense for fiscal 1999 was due primarily to higher
debt balances than in the comparable period of fiscal 1998. The debt increase
was the result of funding required for acquisitions.
Income before income taxes of $1.8 million in the first quarter of fiscal
1999 declined $0.1 million, or 7.5%, compared to the first quarter of fiscal
1998 and as a percentage of revenues decreased to 5.4% from 8.6% over the same
period.
The Company's effective tax rate, which includes federal, state and local
taxes, remained flat at 39.0% in the first quarter of fiscal 1999 as compared to
the first quarter of fiscal 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On May 14, 1998, the Company's $30.0 million unsecured line of credit was
increased to $45.0 million. Interest rates for this revolving line of credit are
based on a leverage formula, which is currently the lesser of the prime rate
minus 25 basis points or LIBOR plus 150 basis points. At July 3, 1998, the
unused line of credit was $15.8 million, which is available for acquisitions and
general corporate purposes.
The term of the line of credit will expire on September 30, 2000, requiring
full payment of the then outstanding balance. The Company expects to have other
financing arrangements in place prior to this date.
From March 1, 1998 through July 3, 1998 Globe used approximately $12.6
million from its lines of credit and assumed approximately $0.7 million of
certain liabilities in completing three acquisitions and settling certain
contingent consideration for two fiscal 1998 acquisitions. (See note 2 to the
consolidated financial statements for further discussion of these acquisitions.)
The Company's principal use of cash is for furniture purchases. The Company
purchases furniture to replace furniture which has been sold and to maintain
adequate levels of rental furniture to meet existing and new customer needs.
Furniture purchases were $5.2 million in the first three months of fiscal 1999
and $6.3 million in the first three months of fiscal 1998. The lower level of
purchases in the first quarter of fiscal 1999 versus the prior year period
reflects the Company's efforts to better manage inventory utilization. As the
Company's growth strategies are implemented, furniture purchases are expected to
increase.
Capital expenditures were $0.8 million and $1.6 million in the first three
months of fiscal 1999 and 1998, respectively. Current year expenditures were
financed through cash provided by operations while the prior year expenditures
were financed primarily by a $1.5 million mortgage loan. Expenditures for the
first three months of fiscal 1999 were largely attributable to continued
development of computer systems. The decrease from the prior year results from
the completion of construction of a showroom/warehouse facility in Indianapolis,
Indiana during fiscal 1998. Costs to further develop the computer systems, which
are anticipated to be approximately $1.3 million, will be incurred in the next
9-12 months and are expected to be financed through cash generated by
operations.
In the first three months of fiscal 1999 and 1998, net cash provided by
operations was $6.9 million and $7.1 million, respectively, generating $0.9
million more cash than was necessary to fund investing activities (excluding
acquisitions) in the first three months of fiscal 1999 and $0.9 million less
cash than was necessary to fund investing activities (excluding acquisitions) in
the first three months of fiscal 1998. The improvement in cash flow in the first
quarter of fiscal 1999 is the result of the lower levels of furniture purchases
and capital expenditures in the current year period discussed above.
Aside from acquisitions, furniture purchases, which have historically been
seasonally weighted to the first half of the fiscal year, are the primary reason
for use of the credit facilities. Any temporary cash deficiencies resulting from
these purchases will be funded via the line of credit. The Company expects cash
flow from operations plus the credit facilities to be sufficient to fund the
Company's needs, other than significant acquisitions and any repurchases that
may be made under the Company's authorized $3.0 million stock repurchase
program, for the foreseeable future.
YEAR 2000
The Company's internal financial and operational systems are Year 2000
compliant. Management is not aware of exposures related to the operations of
customers or vendors. No material adverse consequences are anticipated in
conjunction with the Year 2000 issue and management intends to monitor the
situation on an ongoing basis.
<PAGE>
PART II
ITEM 1
Legal Proceedings
None
ITEM 2
Changes in Securities
None
ITEM 3
Defaults Upon Senior Securities
None
ITEM 4
Submission of Matters to a Vote of Security Holders
None
ITEM 5
Other Information
None
ITEM 6
Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Exhibits:
10.5.1 Amendment to Credit Agreement among the Registrant, The
Fifth Third Bank, PNC Bank and Norwest Bank dated May 14,
1998.
27 Financial Data Schedule
99 Safe Harbor Statement
(b) Reports on Form 8-K filed during the first quarter of 1999:
Form 8-K filed May 18, 1998 for the Feld Corporate Housing acquisition.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBE BUSINESS RESOURCES, INC.
By: /s/Sharon G. Kebe
---------------------------------
Sharon G. Kebe
Senior Vice President-Finance
and Treasurer
(Principal Financial Officer)
Signed: July 9, 1998
FIRST AMENDMENT TO
CREDIT AGREEMENT
This First Amendment to the Credit Agreement (the "Amendment") is entered
into as of the 14th day of May, 1998, by and among GLOBE BUSINESS RESOURCES,
INC., an Ohio corporation formerly known as and doing business as Globe
Furniture Rentals ("Borrower"), THE FIFTH THIRD BANK, an Ohio banking
corporation ("Fifth Third"), PNC BANK, OHIO, NATIONAL ASSOCIATION, a national
banking association ("PNC") and NORWEST LOAN PARTNERS, a division of Norwest
Bank Minnesota N.A., ("Norwest") as lenders (collectively, the "Banks" and each
a "Bank"), and THE FIFTH THIRD BANK, in its capacity as Agent for the Banks (the
"Agent").
WHEREAS, Banks, Borrower and Agent entered into that certain Credit
Agreement, dated as of September 29, 1997 (the "Agreement");
WHEREAS, in connection with the transactions contemplated by the Agreement,
Borrower executed and delivered to Banks the following additional loan
documents, each dated September 29, 1997: (a) a Revolving Note in the original
principal amount of $20,000,000 executed by Borrower and made payable to Fifth
Third (the "Fifth Third Revolving Note") and (b) a Revolving Note in the
original principal amount of $10,000,000, executed by Borrower and made payable
to PNC (the "PNC Revolving Note") (the Agreement and all of the foregoing
documents and all other loan documents executed in connection with the loan
evidenced by the Agreement will be collectively referred to herein as the "Loan
Documents")
WHEREAS, Borrower and Banks wish to include Norwest Loan Partners as an
additional Bank under the terms of the Agreement and from the date hereof, each
reference to Banks in the Agreement shall also include Norwest Loan Partners;
WHEREAS, Borrower and Banks desire to amend the Agreement, to increase the
principal amount of the PNC Revolving Note and to evidence the Revolving Note of
Norwest in the principal amount of $10,000,000, subject to the terms and
conditions set forth herein;
NOW THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Amendments.
(a) Section 2, Subsections 2.1(a), (b) and (e) of the Agreement are hereby
amended and restated in their entirety as follows:
2.1. Revolving Credit Loans. (a) Subject to the terms and conditions
hereof, a line of credit facility (the "Facility") is hereby
established pursuant to which each Bank hereby severally agrees to
make revolving loans (the "Loans") to Borrower at Borrower's request
from time to time during the term of this Agreement in an aggregate
amount not to exceed $45,000,000 minus the face amounts outstanding
under any Letter(s) of Credit. Agent may create and maintain reserves
from time to time based on such credit considerations as Agent may
reasonably deem appropriate. Borrower may borrow, prepay and reborrow
hereunder, provided that the principal amount of all Loans outstanding
at any one time shall not exceed $45,000,000; if the amount of the
Loans outstanding at any time exceeds $45,000,000, Borrower shall
immediately pay the amount of such excess to Agent for the account of
Banks in immediately available funds. Loans will be made ratably by
the respective Banks in proportion to their respective Revolving
Credit Commitment Percentages set forth in Section 2.1 (b), and
repayments of Loans shall be for the account of the respective Banks
in the same proportion (subject to the provisions of this Agreement
relating to Defaulting Banks).
<PAGE>
(b) The Revolving Credit Commitment and Revolving Credit Commit-
ment Percentage of each Bank and the Total Revolving Credit Commitment
are as set forth below:
The Fifth Third Bank $20,000,000 44.45%
PNC Bank, Ohio, National Association $15,000,000 33.33%
Norwest Loan Partners $10,000,000 22.22%
Total Revolving Credit Commitment $45,000,000 100%.
(e) On the execution date of the First Amendment to the Credit
Agreement (the "Amendment"), Borrower will duly issue and deliver to
each Bank an amended and restated Revolving Note in the form of
Exhibits 2.1(e) (i), (ii) and (iii) respectively (collectively the
"Revolving Notes" and each a "Revolving Note") in the principal amount
of such Bank's Revolving Credit Commitment. Each Revolving Note shall
bear interest as set forth in the respective Revolving Notes and each
shall be dated the date of the Amendment.
(b) Section 11, Subsection 11.6 of the Agreement is hereby amended and
restated in its entirety as follows:
11.6 Notices. Any notices under or pursuant to this Agreement will be
deemed duly sent when delivered in hand or when mailed by registered
or certified mail, return receipt requested, addressed as follows:
THE FIFTH THIRD BANK
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Asset Based Lending Department
PNC BANK, OHIO, NATIONAL ASSOCIATION
201 East Fifth Street
Cincinnati, Ohio 45202
Attention: Middle Market Corporate Banking - Third floor
NORWEST LOAN PARTNERS
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0075
Attention: Duncan Sinclair
GLOBE BUSINESS RESOURCES, INC.,
Spectrum Office Tower
11260 Chester Road, Suite 400
Cincinnati, Ohio 45246
Attention: Sharon G. Kebe, Senior Vice President, Finance
With a copy to: Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
Cincinnati, Ohio 45202
Attention: Edward Steiner, Esq.
Any party may change such address by sending written notice of the
change to the other parties.
<PAGE>
2. Representations, Warranties and Covenants of Borrower. To induce Banks
to enter into this Amendment, Borrower represents and warrants as follows:
(a) Other than as set forth on Schedule 5.3 and Schedule 5.9 attached
hereto, the representations and warranties of Borrower contained in
Section 5 of the Agreement are deemed to have been made again on and
as of the date of execution of this Amendment, and are true and
correct as of the date of execution hereof.
(b) No Event of Default (as such term is defined in Section 8 of the
Agreement) or event or condition which, with the lapse of time or
giving of notice or both, would constitute an Event of Default exists
on the date hereof.
(c) The person executing this Amendment and the Amended and Restated
Revolving Notes, is a duly elected and acting officer of Borrower and
is duly authorized by the Board of Directors of Borrower to execute
and deliver this Amendment and such note on behalf of Borrower.
3. Conditions. Banks' obligations under this Amendment are subject to the
following conditions:
(a) Borrower shall have executed and delivered to Banks the Amended and
Restated Revolving Notes in the form attached hereto as Exhibits
2.1(e)(i), (ii) and (iii) respectively.
(b) The Banks shall have been furnished copies, certified by the Secretary
or assistant Secretary of Borrower, of resolutions of the Board of
Directors of Borrower authorizing the execution of this Amendment, the
Exhibits hereto and all other documents executed in connection
herewith which resolutions will be in the form attached hereto as
Exhibit A.
(c) The representations and warranties of Borrower in Section 2 hereof
shall be true and correct on the date of execution of this Amendment.
(d) On the execution date of this First Amendment, Borrower will pay to
Agent a fee in the amount of $10,000 (the "Agent Fee"), which is
intended to reimburse Agent for its costs and expenses associated with
the arrangement and facilitation of the transactions contemplated
under this Amendment. Neither PNC nor Norwest shall participation in
the Agent Fee.
4. General.
(a) Except as expressly modified hereby, the Agreement remains unaltered
and in full force and effect. Borrower acknowledges that Banks have
made no oral representations to Borrower with respect to the Agreement
and this Amendment thereto and that all prior understandings between
the parties are merged into the Agreement as amended by this writing.
All Loans outstanding on the date of execution of this Amendment shall
be considered for all purposes to be Loans outstanding under the
Agreement as amended by this Amendment.
(b) Capitalized terms used and not otherwise defined herein will have the
meanings set forth in the Agreement.
(c) Nothing contained herein will be construed as waiving any default or
Event of Default under the Agreement or will affect or impair any
right, power or remedy of the Banks under or with respect to the
Loans, the Agreement, as amended, the Note, as amended and restated,
or any agreement or instrument guaranteeing, securing or otherwise
relating to the Loans.
<PAGE>
(d) This Amendment shall be considered an integral part of the Agreement,
and all references to the Agreement in the Agreement itself or any
document referring thereto shall, on and after the date of execution
of this Amendment, be deemed to be references to the Agreement as
amended by this Amendment.
(e) This Amendment will be binding upon and inure to the benefit of
Borrower and Banks and their respective successors and assigns.
(f) All representations, warranties and covenants made by Borrower herein
will survive the execution and delivery of this Amendment.
(g) This Amendment will, in all respects, be governed and construed in
accordance with the laws of the State of Ohio.
(h) This Amendment may be executed in one or more counterparts, each of
which will be deemed an original and all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, Borrower and Banks have executed this Agreement by
their duly authorized officers as of the date first above written.
GLOBE BUSINESS RESOURCES, INC.
By: /s/Sharon G. Kebe
-----------------------------------------
Its: Senior Vice President-Finance
and Treasurer
PNC BANK, OHIO, NATIONAL ASSOCIATION
By: /s/Christopher R. Ramos
-----------------------------------------
Its: Vice President
NORWEST LOAN PARTNERS, a division of Norwest
Bank Minnesota, N.A.
By: /s/R. Duncan Sinclair
-----------------------------------------
R. Duncan Sinclair
Its: Vice President
THE FIFTH THIRD BANK,
for itself and as Agent for the Banks
By: /s/David B. Haas
-----------------------------------------
Its: Vice President
<PAGE>
EXHIBIT 2.1(E)(I)
AMENDED AND RESTATED
REVOLVING NOTE
$20,000,000 Cincinnati, Ohio
September 29, 1997
First Amendment and Restatement May 14, 1998
(Effective Date)
For value received, GLOBE BUSINESS RESOURCES, INC., an Ohio corporation
formerly known as and doing business as Globe Furniture Rentals, ("Borrower"),
hereby promises to pay to the order of THE FIFTH THIRD BANK, an Ohio banking
corporation (the "Bank"), at its offices, located at 38 Fountain Square Plaza,
Cincinnati, Ohio 45263, in lawful money of the United States of America and in
immediately available funds, the principal sum of Twenty Million Dollars
($20,000,000) or such lesser unpaid principal amount as may be advanced by Bank
pursuant to the terms of the Credit Agreement, dated September 29, 1997, as
amended by the First Amendment thereto, dated of even date herewith by and
between Borrower, The Fifth Third Bank, Agent, The Fifth Third Bank, PNC Bank,
Ohio, National Association and Norwest Loan Partners, as Banks, as the same may
be further amended from time to time (the "Agreement").
The principal balance outstanding hereunder shall bear interest from the
date of the first advance until paid at a floating rate of interest equal to the
percent per annum set forth below, which rate of interest will fluctuate on a
periodic basis as provided herein to the rate specified by the following table
based upon the ratio of the amount of Borrower's Total Debt to EBITDA, on a
consolidated basis:
TOTAL DEBT TO EBITDA THEN INTEREST RATE EQUALS
Greater than or equal to 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus. 25% or
(ii) LIBOR Rate plus 1.50%
Less than 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus .50% or
(ii) LIBOR Rate plus 1.25%
In the event the Borrower meets the requirements set forth above, Borrower
may elect to have all or any portion of the Note in minimum increments of
$1,000,000 per election (provided such amounts are not then subject to another
LIBOR Election) bear interest at the per annum rate equal to the percentage in
excess of the LIBOR Rate as set forth above (a "LIBOR Election"). Such notice
shall be delivered to Agent in writing at least 2 business days prior to the
date of such advance and shall inform Agent of the amount of the Note to be
subject to the LIBOR Election, the LIBOR Interest Period and the effective date
for the LIBOR Interest Period. Borrower shall not be permitted to have more than
six (6) separate LIBOR Elections outstanding at any one time during the term
hereof.
On the Effective Date, the initial interest rates for advances hereunder
will be based upon a Total Debt to EBITDA ratio of greater than 1.86 : 1.00 for
Borrower.
Interest rate changes based upon changes in the foregoing chart will be
made effective as of the date of the first advance hereunder and on the first
day of the calendar month following the review by Agent of Borrower's quarterly
financial statements. In addition to changes occurring pursuant to fluctuations
in the foregoing chart, the interest rate charged hereunder shall change
automatically upon each change in the Prime Rate. Interest will be calculated
based on a 360-day year and charged for the actual number of days elapsed, and
will be payable on the first day of each calendar month commencing June 1, 1998
and continuing on the first (1st) day of each calendar month thereafter during
the term hereof unless an interest rate based upon the LIBOR Rate is in effect,
in which case the accrued interest shall be due and payable at the end of the
<PAGE>
LIBOR Interest Period and Agent will remit to Bank its pro-rata share within 1
business day after Agent's receipt thereof. If any amount as to which a LIBOR
Election is in effect is repaid on a day other than the last day of the
applicable LIBOR Interest Period, or becomes payable on a day other than the
last day of the applicable LIBOR Interest Period due to acceleration or
otherwise, the Borrower shall pay, on demand by the Agent, such amount (as
determined by the Agent) as is required to compensate the Banks for any losses,
costs or expenses which the Banks may incur as a result of such payment or
acceleration, including, without limitation, any loss, cost or expense
(including loss of profit) incurred by reason of liquidation or reemployment of
deposits or other funds acquired by the Banks to fund or maintain such amount
bearing interest at the LIBOR Rate plus the percentage as set forth in the chart
above.
After maturity, whether by acceleration or otherwise, this Note will bear
interest, at the election of Bank and without notice to Borrower (computed and
adjusted in the same manner, and with the same effect, as interest hereon prior
to maturity), payable on demand, at a rate per annum equal to the Default Rate,
until paid, and whether before or after the entry of judgment hereon.
The Prime Rate means the rate of interest per annum announced to be its
Prime Rate from time to time by Agent at its principal office in Cincinnati,
Ohio whether or not Agent will at times lend to borrowers at lower rates of
interest, or, if there is no such Prime Rate, then its base rate or such other
rate as may be substituted by Agent for the Prime Rate.
LIBOR Interest Period means, with respect to which amounts outstanding
hereunder will accrue interest at the LIBOR Rate for a period of 30, 60, 90, 120
or 180 days commencing on a business day selected by Borrower pursuant to this
Note. Such LIBOR Interest Period shall end on the day in the succeeding calendar
month which corresponds numerically to the beginning day of such LIBOR Interest
Period, provided, however, that if there is no such numerically corresponding
day in such succeeding month, such LIBOR Interest Period shall end on the last
business day of such succeeding month. If a LIBOR Interest Period would
otherwise end on a day which is not a business day, such LIBOR Interest Period
shall end on the next succeeding business day.
LIBOR Rate means the rate (adjusted for reserves if Bank is required to
maintain reserves with respect to relevant advances) being asked on an amount of
Eurodollar deposits equal to the amount of the Note subject to a LIBOR Election
on the first day of a LIBOR Interest Period and which has a maturity
corresponding to the maturity of the LIBOR Interest Period, as reported by the
TELERATE rate reporting system (or any successor) as determined by Bank by noon
on the Effective Date of the LIBOR Interest Period. Each determination by Bank
of the LIBOR Rate shall be conclusive in the absence of manifest error.
Borrower's right to accrue interest at the LIBOR Rate shall be terminated
automatically if Bank, by telephonic notice, shall notify Borrower that LIBOR
deposits with a maturity equal to the LIBOR Interest Period and in an amount
equal to the then current outstanding principal amount of the Note are not
readily available in the London Inter-Bank Offered Rate Market, or that, by
reason of circumstances affecting such Market, adequate and reasonable methods
do not exist for ascertaining the interest rate applicable to such deposits for
the LIBOR Interest Period.
In addition, notwithstanding anything herein contained to the contrary, if,
prior to or during any period with respect to which the LIBOR Rate is in effect,
any change in any law, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful for the Bank to find or maintain its funding in
Eurodollars of any portion of the Note subject to the LIBOR Rate or otherwise to
give effect to Bank's obligations as contemplated hereby, (i) Bank may, by
written notice to Borrower, declare Bank's obligations in respect of the LIBOR
Rate to be terminated forthwith, and (ii) the LIBOR Rate with respect to Bank
shall forthwith cease to be in effect, and interest shall from and after such
date be calculated based on the Prime Rate.
On September 30, 2000, all outstanding principal and all accrued and unpaid
interest will be due and payable.
The principal amount of each loan made by Bank under this Note and the
amount of each prepayment made by Borrower under this Note will be recorded by
Bank in the regularly maintained data processing records of Bank. The aggregate
unpaid principal amount of all loans set forth in such records will be
<PAGE>
presumptive evidence of the principal amount owing and unpaid on this Note.
However, failure by Bank to make any such entry will not limit or otherwise
affect Borrower's obligations under this Note or the Agreement.
All payments received by Agent under this Note will be applied first to
payment of amounts advanced by Bank on behalf of Borrower or which may be due
for insurance, taxes and attorneys' fees or other charges to be paid by Borrower
pursuant to the Agreement and the Loan Documents (as defined in the Agreement),
then to accrued interest on this Note, then to principal which will be repaid in
the inverse order of maturity.
This Note is one of the Revolving Notes referred to in the Agreement, and
is entitled to the benefits, and is subject to the terms, of the Agreement.
Capitalized terms used but not otherwise defined herein will have the meanings
attributed thereto in the Agreement. The maturity of this Note is subject to
acceleration upon the terms, set forth in the Agreement. Except as otherwise
expressly provided in the Agreement, if any payment on this Note becomes due and
payable on a day other than one on which Agent is open for business (a "Business
Day"), the maturity thereof will be extended to the next Business Day, and
interest will be payable at the rate specified herein during such extension
period.
After the occurrence of an Event of Default, all amounts of principal
outstanding as of the date of the occurrence of such Event of Default will bear
interest at the Default Rate, in Bank's sole discretion, without notice to
Borrower. This provision does not constitute a waiver of any Events of Default
or an agreement by Bank to permit any late payments whatsoever.
In no event will the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction will, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess will be
deemed received on account of, and will automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest, and the
provisions hereof will be deemed amended to provide for the highest permissible
rate. If there are no such amounts outstanding, Bank will refund to Borrower
such excess.
Borrower and all endorsers, sureties, guarantors and other persons liable
on this Note hereby waive presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, and consent to one or
more renewals or extensions of this Note.
This Note is being executed in substitution for the Note, originally dated
September 29, 1997, in the principal amount of $20,000,000, and is not delivered
in repayment thereof.
This Note may not be changed orally, but only by an instrument in writing.
This Note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the State and Federal courts in Hamilton County, Ohio or
any other court in which Bank initiates proceedings will have exclusive
jurisdiction over all matters arising out of this Note, and that service of
process in any such proceeding will be effective if mailed to Borrower at its
address described in the Notices section of the Agreement. BORROWER HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.
GLOBE BUSINESS RESOURCES, INC.
By: /s/Sharon G. Kebe
---------------------------
Its: Senior Vice President-Finance
and Treasurer
<PAGE>
EXHIBIT 2.1(E)(II)
AMENDED AND RESTATED
REVOLVING NOTE
$15,000,000 Cincinnati, Ohio
September 29, 1997
First Amendment and Restatement May 14, 1998
(Effective Date)
For value received, GLOBE BUSINESS RESOURCES, INC., an Ohio corporation
formerly known as and doing business as Globe Furniture Rentals ("Borrower"),
hereby promises to pay to the order of PNC BANK, OHIO, NATIONAL ASSOCIATION, a
national banking association (the "Bank"), at Agent's offices, located at 38
Fountain Square Plaza, Cincinnati, Ohio 45263, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Fifteen Million Dollars ($15,000,000) or such lesser unpaid principal amount as
may be advanced by Bank pursuant to the terms of the Credit Agreement, dated
September 29, 1997, as amended by the First Amendment thereto, dated of even
date herewith by and between Borrower, The Fifth Third Bank, Agent, The Fifth
Third Bank, PNC Bank, Ohio, National Association and Norwest Loan Partners, as
Banks, as the same may be further amended from time to time (the "Agreement").
The principal balance outstanding hereunder shall bear interest from the
date of the first advance until paid at a floating rate of interest equal to the
percent per annum set forth below, which rate of interest will fluctuate on a
periodic basis as provided herein to the rate specified by the following table
based upon the ratio of the amount of Borrower's Total Debt to EBITDA, on a
consolidated basis:
TOTAL DEBT TO EBITDA THEN INTEREST RATE EQUALS
Greater than or equal to 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus. 25% or
(ii) LIBOR Rate plus 1.50%
Less than 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus .50% or
(ii) LIBOR Rate plus 1.25%
In the event the Borrower meets the requirements set forth above, Borrower
may elect to have all or any portion of the Note in minimum increments of
$1,000,000 per election (provided such amounts are not then subject to another
LIBOR Election) bear interest at the per annum rate equal to the percentage in
excess of the LIBOR Rate as set forth above (a "LIBOR Election"). Such notice
shall be delivered to Agent in writing at least 2 business days prior to the
date of such advance and shall inform Agent of the amount of the Note to be
subject to the LIBOR Election, the LIBOR Interest Period and the effective date
for the LIBOR Interest Period. Borrower shall not be permitted to have more than
six (6) separate LIBOR Elections outstanding at any one time during the term
hereof.
On the Effective Date, the initial interest rates for advances hereunder
will be based upon a Total Debt to EBITDA ratio of greater than 1.86 : 1.00 for
Borrower.
Interest rate changes based upon changes in the foregoing chart will be
made effective as of the date of the first advance hereunder and on the first
day of the calendar month following the review by Agent of Borrower's quarterly
financial statements. In addition to changes occurring pursuant to fluctuations
in the foregoing chart, the interest rate charged hereunder shall change
automatically upon each change in the Prime Rate. Interest will be calculated
based on a 360-day year and charged for the actual number of days elapsed, and
will be payable on the first day of each calendar month commencing June 1, 1998
and continuing on the first (1st) day of each calendar month thereafter during
the term hereof unless an interest rate based upon the LIBOR Rate is in effect,
in which case the accrued interest shall be due and payable at the end of the
<PAGE>
LIBOR Interest Period and Agent will remit to Bank its pro-rata share within 1
business day after Agent's receipt thereof. If any amount as to which a LIBOR
Election is in effect is repaid on a day other than the last day of the
applicable LIBOR Interest Period, or becomes payable on a day other than the
last day of the applicable LIBOR Interest Period due to acceleration or
otherwise, the Borrower shall pay, on demand by the Agent, such amount (as
determined by the Agent) as is required to compensate the Banks for any losses,
costs or expenses which the Banks may incur as a result of such payment or
acceleration, including, without limitation, any loss, cost or expense
(including loss of profit) incurred by reason of liquidation or reemployment of
deposits or other funds acquired by the Banks to fund or maintain such amount
bearing interest at the LIBOR Rate plus the percentage as set forth in the chart
above.
After maturity, whether by acceleration or otherwise, this Note will bear
interest, at the election of Bank and without notice to Borrower (computed and
adjusted in the same manner, and with the same effect, as interest hereon prior
to maturity), payable on demand, at a rate per annum equal to the Default Rate,
until paid, and whether before or after the entry of judgment hereon.
The Prime Rate means the rate of interest per annum announced to be its
Prime Rate from time to time by Agent at its principal office in Cincinnati,
Ohio whether or not Agent will at times lend to borrowers at lower rates of
interest, or, if there is no such Prime Rate, then its base rate or such other
rate as may be substituted by Agent for the Prime Rate.
LIBOR Interest Period means, with respect to which amounts outstanding
hereunder will accrue interest at the LIBOR Rate for a period of 30, 60, 90, 120
or 180 days commencing on a business day selected by Borrower pursuant to this
Note. Such LIBOR Interest Period shall end on the day in the succeeding calendar
month which corresponds numerically to the beginning day of such LIBOR Interest
Period, provided, however, that if there is no such numerically corresponding
day in such succeeding month, such LIBOR Interest Period shall end on the last
business day of such succeeding month. If a LIBOR Interest Period would
otherwise end on a day which is not a business day, such LIBOR Interest Period
shall end on the next succeeding business day.
LIBOR Rate means the rate (adjusted for reserves if Bank is required to
maintain reserves with respect to relevant advances) being asked on an amount of
Eurodollar deposits equal to the amount of the Note subject to a LIBOR Election
on the first day of a LIBOR Interest Period and which has a maturity
corresponding to the maturity of the LIBOR Interest Period, as reported by the
TELERATE rate reporting system (or any successor) as determined by Bank by noon
on the Effective Date of the LIBOR Interest Period. Each determination by Bank
of the LIBOR Rate shall be conclusive in the absence of manifest error.
Borrower's right to accrue interest at the LIBOR Rate shall be terminated
automatically if Bank, by telephonic notice, shall notify Borrower that LIBOR
deposits with a maturity equal to the LIBOR Interest Period and in an amount
equal to the then current outstanding principal amount of the Note are not
readily available in the London Inter-Bank Offered Rate Market, or that, by
reason of circumstances affecting such Market, adequate and reasonable methods
do not exist for ascertaining the interest rate applicable to such deposits for
the LIBOR Interest Period.
In addition, notwithstanding anything herein contained to the contrary, if,
prior to or during any period with respect to which the LIBOR Rate is in effect,
any change in any law, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful for the Bank to find or maintain its funding in
Eurodollars of any portion of the Note subject to the LIBOR Rate or otherwise to
give effect to Bank's obligations as contemplated hereby, (i) Bank may, by
written notice to Borrower, declare Bank's obligations in respect of the LIBOR
Rate to be terminated forthwith, and (ii) the LIBOR Rate with respect to Bank
shall forthwith cease to be in effect, and interest shall from and after such
date be calculated based on the Prime Rate.
On September 30, 2000, all outstanding principal and all accrued and unpaid
interest will be due and payable.
The principal amount of each loan made by Bank under this Note and the
amount of each prepayment made by Borrower under this Note will be recorded by
Bank in the regularly maintained data processing records of Bank. The aggregate
unpaid principal amount of all loans set forth in such records will be
<PAGE>
presumptive evidence of the principal amount owing and unpaid on this Note.
However, failure by Bank to make any such entry will not limit or otherwise
affect Borrower's obligations under this Note or the Agreement. All payments
received by Agent under this Note will be applied first to payment of amounts
advanced by Bank on behalf of Borrower or which may be due for insurance, taxes
and attorneys' fees or other charges to be paid by Borrower pursuant to the
Agreement and the Loan Documents (as defined in the Agreement), then to accrued
interest on this Note, then to principal which will be repaid in the inverse
order of maturity.
This Note is one of the Revolving Notes referred to in the Agreement, and
is entitled to the benefits, and is subject to the terms, of the Agreement.
Capitalized terms used but not otherwise defined herein will have the meanings
attributed thereto in the Agreement. The maturity of this Note is subject to
acceleration upon the terms, set forth in the Agreement. Except as otherwise
expressly provided in the Agreement, if any payment on this Note becomes due and
payable on a day other than one on which Agent is open for business (a "Business
Day"), the maturity thereof will be extended to the next Business Day, and
interest will be payable at the rate specified herein during such extension
period.
After the occurrence of an Event of Default, all amounts of principal
outstanding as of the date of the occurrence of such Event of Default will bear
interest at the Default Rate, in Bank's sole discretion, without notice to
Borrower. This provision does not constitute a waiver of any Events of Default
or an agreement by Bank to permit any late payments whatsoever.
In no event will the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction will, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess will be
deemed received on account of, and will automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest, and the
provisions hereof will be deemed amended to provide for the highest permissible
rate. If there are no such amounts outstanding, Bank will refund to Borrower
such excess.
Borrower and all endorsers, sureties, guarantors and other persons liable
on this Note hereby waive presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, and consent to one or
more renewals or extensions of this Note.
This Note is being executed in substitution for the Note, originally dated
September 29, 1997, in the principal amount of $10,000,000, and is not delivered
in repayment thereof.
This Note may not be changed orally, but only by an instrument in writing.
This Note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the State and Federal courts in Hamilton County, Ohio or
any other court in which Bank initiates proceedings will have exclusive
jurisdiction over all matters arising out of this Note, and that service of
process in any such proceeding will be effective if mailed to Borrower at its
address described in the Notices section of the Agreement. BORROWER HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.
GLOBE BUSINESS RESOURCES, INC.
By: /s/Sharon G. Kebe
----------------------------------
Its: Senior Vice President-Finance
and Treasurer
<PAGE>
EXHIBIT 2.1(E)(III)
REVOLVING NOTE
$10,000,000 Cincinnati, Ohio
May 14, 1998
(Effective Date)
For value received, GLOBE BUSINESS RESOURCES, INC., an Ohio corporation
formerly known as and doing business as Globe Furniture Rentals ("Borrower"),
hereby promises to pay to the order of NORWEST LOAN PARTNERS, a division of
Norwest Bank Minnesota, N.A. (the "Bank"), at Agent's offices, located at 38
Fountain Square Plaza, Cincinnati, Ohio 45263, in lawful money of the United
States of America and in immediately available funds, the principal sum of Ten
Million Dollars ($10,000,000) or such lesser unpaid principal amount as may be
advanced by Bank pursuant to the terms of the Credit Agreement, dated September
29, 1997, as amended by the First Amendment thereto, dated of even date herewith
by and between Borrower, The Fifth Third Bank, Agent, The Fifth Third Bank, PNC
Bank, Ohio, National Association and Norwest Loan Partners, as Banks, as the
same may be further amended from time to time (the "Agreement").
The principal balance outstanding hereunder shall bear interest from the
date of the first advance until paid at a floating rate of interest equal to the
percent per annum set forth below, which rate of interest will fluctuate on a
periodic basis as provided herein to the rate specified by the following table
based upon the ratio of the amount of Borrower's Total Debt to EBITDA, on a
consolidated basis:
TOTAL DEBT TO EBITDA THEN INTEREST RATE EQUALS
Greater than or equal to 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus. 25% or
(ii) LIBOR Rate plus 1.50%
Less than 1.86 : 1.00 Borrower's option of:
(i) Prime Rate minus .50% or
(ii) LIBOR Rate plus 1.25%
In the event the Borrower meets the requirements set forth above, Borrower
may elect to have all or any portion of the Note in minimum increments of
$1,000,000 per election (provided such amounts are not then subject to another
LIBOR Election) bear interest at the per annum rate equal to the percentage in
excess of the LIBOR Rate as set forth above (a "LIBOR Election"). Such notice
shall be delivered to Agent in writing at least 2 business days prior to the
date of such advance and shall inform Agent of the amount of the Note to be
subject to the LIBOR Election, the LIBOR Interest Period and the effective date
for the LIBOR Interest Period. Borrower shall not be permitted to have more than
six (6) separate LIBOR Elections outstanding at any one time during the term
hereof.
On the Effective Date, the initial interest rates for advances hereunder
will be based upon a Total Debt to EBITDA ratio of greater than 1.86 : 1.00 for
Borrower.
Interest rate changes based upon changes in the foregoing chart will be
made effective as of the date of the first advance hereunder and on the first
day of the calendar month following the review by Agent of Borrower's quarterly
financial statements. In addition to changes occurring pursuant to fluctuations
in the foregoing chart, the interest rate charged hereunder shall change
automatically upon each change in the Prime Rate. Interest will be calculated
based on a 360-day year and charged for the actual number of days elapsed, and
will be payable on the first day of each calendar month commencing June 1, 1998
and continuing on the first (1st) day of each calendar month thereafter during
the term hereof unless an interest rate based upon the LIBOR Rate is in effect,
in which case the accrued interest shall be due and payable at the end of the
LIBOR Interest Period and Agent will remit to Bank its pro-rata share within 1
business day after Agent's receipt thereof. If any amount as to which a LIBOR
<PAGE>
Election is in effect is repaid on a day other than the last day of the
applicable LIBOR Interest Period, or becomes payable on a day other than the
last day of the applicable LIBOR Interest Period due to acceleration or
otherwise, the Borrower shall pay, on demand by the Agent, such amount (as
determined by the Agent) as is required to compensate the Banks for any losses,
costs or expenses which the Banks may incur as a result of such payment or
acceleration, including, without limitation, any loss, cost or expense
(including loss of profit) incurred by reason of liquidation or reemployment of
deposits or other funds acquired by the Banks to fund or maintain such amount
bearing interest at the LIBOR Rate plus the percentage as set forth in the chart
above.
After maturity, whether by acceleration or otherwise, this Note will bear
interest, at the election of Bank and without notice to Borrower (computed and
adjusted in the same manner, and with the same effect, as interest hereon prior
to maturity), payable on demand, at a rate per annum equal to the Default Rate,
until paid, and whether before or after the entry of judgment hereon.
The Prime Rate means the rate of interest per annum announced to be its
Prime Rate from time to time by Agent at its principal office in Cincinnati,
Ohio whether or not Agent will at times lend to borrowers at lower rates of
interest, or, if there is no such Prime Rate, then its base rate or such other
rate as may be substituted by Agent for the Prime Rate.
LIBOR Interest Period means, with respect to which amounts outstanding
hereunder will accrue interest at the LIBOR Rate for a period of 30, 60, 90, 120
or 180 days commencing on a business day selected by Borrower pursuant to this
Note. Such LIBOR Interest Period shall end on the day in the succeeding calendar
month which corresponds numerically to the beginning day of such LIBOR Interest
Period, provided, however, that if there is no such numerically corresponding
day in such succeeding month, such LIBOR Interest Period shall end on the last
business day of such succeeding month. If a LIBOR Interest Period would
otherwise end on a day which is not a business day, such LIBOR Interest Period
shall end on the next succeeding business day.
LIBOR Rate means the rate (adjusted for reserves if Bank is required to
maintain reserves with respect to relevant advances) being asked on an amount of
Eurodollar deposits equal to the amount of the Note subject to a LIBOR Election
on the first day of a LIBOR Interest Period and which has a maturity
corresponding to the maturity of the LIBOR Interest Period, as reported by the
TELERATE rate reporting system (or any successor) as determined by Bank by noon
on the Effective Date of the LIBOR Interest Period. Each determination by Bank
of the LIBOR Rate shall be conclusive in the absence of manifest error.
Borrower's right to accrue interest at the LIBOR Rate shall be terminated
automatically if Bank, by telephonic notice, shall notify Borrower that LIBOR
deposits with a maturity equal to the LIBOR Interest Period and in an amount
equal to the then current outstanding principal amount of the Note are not
readily available in the London Inter-Bank Offered Rate Market, or that, by
reason of circumstances affecting such Market, adequate and reasonable methods
do not exist for ascertaining the interest rate applicable to such deposits for
the LIBOR Interest Period.
In addition, notwithstanding anything herein contained to the contrary, if,
prior to or during any period with respect to which the LIBOR Rate is in effect,
any change in any law, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful for the Bank to find or maintain its funding in
Eurodollars of any portion of the Note subject to the LIBOR Rate or otherwise to
give effect to Bank's obligations as contemplated hereby, (i) Bank may, by
written notice to Borrower, declare Bank's obligations in respect of the LIBOR
Rate to be terminated forthwith, and (ii) the LIBOR Rate with respect to Bank
shall forthwith cease to be in effect, and interest shall from and after such
date be calculated based on the Prime Rate.
On September 30, 2000, all outstanding principal and all accrued and unpaid
interest will be due and payable.
The principal amount of each loan made by Bank under this Note and the
amount of each prepayment made by Borrower under this Note will be recorded by
Bank in the regularly maintained data processing records of Bank. The aggregate
unpaid principal amount of all loans set forth in such records will be
presumptive evidence of the principal amount owing and unpaid on this Note.
However, failure by Bank to make any such entry will not limit or otherwise
affect Borrower's obligations under this Note or the Agreement.
<PAGE>
All payments received by Agent under this Note will be applied first to
payment of amounts advanced by Bank on behalf of Borrower or which may be due
for insurance, taxes and attorneys' fees or other charges to be paid by Borrower
pursuant to the Agreement and the Loan Documents (as defined in the Agreement),
then to accrued interest on this Note, then to principal.
This Note is one of the Revolving Notes referred to in the Agreement, and
is entitled to the benefits, and is subject to the terms, of the Agreement.
Capitalized terms used but not otherwise defined herein will have the meanings
attributed thereto in the Agreement. The maturity of this Note is subject to
acceleration upon the terms, set forth in the Agreement. Except as otherwise
expressly provided in the Agreement, if any payment on this Note becomes due and
payable on a day other than one on which Agent is open for business (a "Business
Day"), the maturity thereof will be extended to the next Business Day, and
interest will be payable at the rate specified herein during such extension
period.
After the occurrence of an Event of Default, all amounts of principal
outstanding as of the date of the occurrence of such Event of Default will bear
interest at the Default Rate, in Bank's sole discretion, without notice to
Borrower. This provision does not constitute a waiver of any Events of Default
or an agreement by Bank to permit any late payments whatsoever.
In no event will the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction will, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess will be
deemed received on account of, and will automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest, and the
provisions hereof will be deemed amended to provide for the highest permissible
rate. If there are no such amounts outstanding, Bank will refund to Borrower
such excess.
Borrower and all endorsers, sureties, guarantors and other persons liable
on this Note hereby waive presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, and consent to one or
more renewals or extensions of this Note.
This Note may not be changed orally, but only by an instrument in writing.
This Note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the State and Federal courts in Hamilton County, Ohio or
any other court in which Bank initiates proceedings will have exclusive
jurisdiction over all matters arising out of this Note, and that service of
process in any such proceeding will be effective if mailed to Borrower at its
address described in the Notices section of the Agreement. BORROWER HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.
GLOBE BUSINESS RESOURCES, INC.
By: /s/Sharon G. Kebe
-------------------------------
Its: Senior Vice President-Finance
and Treasurer
<PAGE>
SCHEDULE 5.3
LITIGATION
<PAGE>
SCHEDULE 5.9
TITLE
<PAGE>
EXHIBIT A
GLOBE BUSINESS RESOURCES, INC.
CERTIFICATE OF BORROWER
RE: $45,000,000 FINANCING
GLOBE BUSINESS RESOURCES, INC.
EXHIBIT 99 - SAFE HARBOR
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
from civil litigation in many instances for forward-looking statements. In order
to take advantage of the Act, such statements must be accompanied by meaningful
cautionary statements that identify important factors that could cause actual
results to differ materially from those that might be projected. This exhibit to
the Registrant's Form 10-Q is being filed in order to allow the Registrant to
take advantage of the new provisions of this Act by providing the following
cautionary statements:
Risk Factors Affecting Globe
Globe's business operations and strategy are subject to a number of
uncertainties and risks which could adversely affect its performance in the
future. Among these are the following factors:
Globe's principal growth strategy depends on the acquisition of other
companies in the rent-to-rent and corporate housing businesses. Although
previous acquisitions have been successful to date, there can be no assurance
that any additional acquisitions will be consummated or that, if acquisitions
are consummated, they will be successful. Acquisitions require a significant
commitment of corporate resources, management attention and capital which, in
certain cases, could exceed that available to Globe. Additionally, Globe could
experience unexpected costs and operational difficulties in integrating acquired
businesses.
Many of Globe's competitors have greater financial and other resources than
Globe. These resources could give them an advantage in price and service areas.
Several of Globe's rental customers compete with Globe in its corporate
housing business. As Globe expands in the corporate housing area, it may
continue to lose rental business from those competitors.
Globe is dependent on its computer systems in its daily operations. In
addition, Globe is developing a common computer system for its Corporate Stay
International business. Significant cost or time overruns on the Corporate Stay
International system development or unidentified deficiencies in other Globe
systems could have a material adverse affect on Globe's operations.
While the Company is unaware of material adverse consequences related to
vendor or supplier Year 2000 non-compliance, it is possible that issues could
arise which would have a negative impact on Globe's operations.
The Company believes that the industry it serves is significantly
influenced by economic conditions generally and by levels of job creation,
relocations of employees and general business activity. A prolonged economic
downturn could have a material adverse affect on Globe's operations.
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