EXHIBIT 10.1
WAIVER AND AMENDMENT NO. 5
TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 5 (this "Agreement") is entered into as
of August 20, 2004, by and among SPAR MARKETING FORCE, INC. ("SMF"), SPAR, INC.
("SPAR"), SPAR/▇▇▇▇▇▇▇▇ RETAIL SERVICES, INC ("SBRS"), SPAR GROUP, INC. ("SGI"),
SPAR INCENTIVE MARKETING, INC. ("SIM"), SPAR TRADEMARKS, INC. ("STM"), SPAR
MARKETING, INC. (DE) ("SMIDE"), SPAR MARKETING, INC. (NV) ("SMINV"), SPAR
ACQUISITION, INC. ("SAI"), SPAR TECHNOLOGY GROUP, INC. ("STG"), SPAR/PIA RETAIL
SERVICES, INC. ("Pia Retail"), RETAIL RESOURCES, INC. ("Retail"), PIVOTAL FIELD
SERVICES, INC. ("Pivotal Field"), PIA MERCHANDISING CO., INC. ("PIA"), PACIFIC
INDOOR DISPLAY CO. ("Pacific"), PIVOTAL SALES COMPANY ("Pivotal"), SPAR ALL
STORE MARKETING SERVICES, INC., ("SAS") and SPAR ▇▇▇▇ ▇▇▇▇, INC. ("SBFI") (each
a "Borrower" and collectively "Borrowers") and ▇▇▇▇▇▇▇ BUSINESS CREDIT
CORPORATION (formerly known as Whitehall Business Credit Corporation)
("Lender").
BACKGROUND
The Borrowers and Lender are parties to that certain Third Amended and
Restated Revolving Credit and Security Agreement dated January 24, 2003 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Loan Agreement") pursuant to which Lender provides the Borrowers with certain
financial accommodations.
The Borrowers have violated certain covenants and have requested Lender
waive the resulting Events of Default and Lender is willing to do so in
connection with making certain amendments to the Loan Agreement.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined or amended herein
shall have the meanings given to them in the Loan Agreement.
2. Waivers. Subject to the satisfaction of Section 4 below, Lender hereby waives
the Event of Default which has occurred as a result Borrowers' non-compliance
with (i) Section 12(o) with respect to the fiscal quarter ended June 30, 2004
due to Borrowers' failure to maintain its required Net Worth at the end of such
fiscal quarter, (ii) Section 12(p) and Section 12(r) with respect to the fiscal
quarter ending June 30, 2004 due to Borrowers' failure to maintain the requisite
Fixed Charge Coverage Ratio and EBITDA
level for the four fiscal quarters then ended and (iii) Section 12(x) due to
Borrowers' failure to retain a consultant by June 15, 2004 and Borrowers'
failure to deliver a copy of a consultant's report to Lender by June 30, 2004.
Notwithstanding the foregoing, the waivers of the Events of Default set forth
above do not establish a course of conduct between Borrowers and Lender and
Borrowers hereby agree that Lender is not obligated to waive any future Events
of Default under the Loan Agreement.
3. Amendment. Subject to the satisfaction of Section 5 below, the Loan Agreement
is hereby amended as follows:
(a) Section 1(A) is hereby amended as follows:
(i) The definition of "Maximum Revolving Amount" is
hereby amended by deleting "$10,000,000" and
inserting "$7,000,000" in its place and stead.
(ii) The definition of "Unbilled Receivables Availability"
is hereby amended by deleting "70%" and inserting
"60%" in its place and stead.
(iii) The following new definitions are hereby added in the
appropriate alphabetical order.
"Amendment No. 5" means Waiver and Amendment
No. 5 dated as of August 20, 2004 by and
among Borrowers and Lender.
"Amendment No. 5 Effective Date" shall mean
the date on which all of the conditions
precedent set forth in Section 4 of
Amendment No. 5 have been satisfied.
(b) Section 12(n)(v)(F) is hereby amended in its entirety to provide as
follows:
"(F) any investment (net of all related
repayments and returns of capital) made by
any Borrower in any Unrestricted Subsidiary,
in the form of a capitalized expense,
capital contribution or loan, for purposes
of investing in, or investing in an entity
which is investing in, entities or
participating in joint ventures formed under
the laws of a foreign country, provided that
such investment, together with the Aggregate
Consideration, shall not exceed (x) $150,000
in the aggregate during the period
commencing on the date Amendment No. 5 is
executed through December 31, 2004, and (y)
$250,000 during each calendar year
thereafter."
(c) Section 12(r) is hereby amended in its entirety to provide as
follows:
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"(r) The Borrowers shall maintain EBITDA for
the months set forth below ending on the
last day of such month in an amount not less
than the amount set forth below:
Month ended Minimum EBITDA Cumulative Minimum EBITDA
for the month from August 1, 2004 through
then ended the month then ended
August 31, 2004 $(100,000) $(100,000)
September 30, 2004 $ 260,000 $ 160,000
October 31, 2004 $ 185,000 $ 345,000
November 30, 2004 $ 225,000 $ 570,000
December 31, 2004 $ 360,000 $ 930,000
Thereafter, commencing with the fiscal
quarter ending March 31, 2005, the Borrowers
shall maintain EBITDA of not less than
$7,750,000 at the end of each fiscal quarter
with respect to the four (4) fiscal quarters
then ended;"
(d) Section 12(x) is hereby amended in its entirety to provide as
follows:
"(x) On or before August 31, 2004, Borrowers
shall retain a consultant to be selected by
Borrowing Agent but who is satisfactory to
Lender. The terms of the engagement shall be
subject to a satisfactory review by Lender.
The consultant shall prepare a report
analyzing the contingency scenarios and
Lender shall have received a copy of such
report on or before September 30, 2004. In
addition, on or before September 30, 2004,
Borrowers shall deliver to Lender revised
month by month projected operating budget
and cash flow for the twelve months ending
December 31, 2004"
4. Conditions of Effectiveness. This Agreement shall become effective as of the
date hereof, provided that the following conditions shall have been satisfied:
Lender shall have received (i) four (4) copies of this Agreement executed by the
Borrowers and the limited guarantors (each a "Limited Guarantor") and the
guarantor ("Guarantor") listed on the signature page hereto, and, (ii) payment
of a waiver and amendment fee in the sum of $25,000 which fee shall be charged
by Lender to Borrowers' loan account as a Revolving Advance, (iii) a draft of
Borrowers' financial statements for the two fiscal quarters ended June 30, 2004
showing all write-off's during such period, (iv) a draft of Borrowers' financial
statements for the month ended July 31, 2004 showing that EBITDA was not less
than $(350,000) for such period and (v) a compliance certificate
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executed by the chief financial officer of Borrowers in substantially the form
of Exhibit A to this Agreement and a report setting forth the covenant
calculations, each as of June 30, 2004, (including advances to Unrestricted
Subsidiaries).
5. Representations, Warranties and Covenants. Each of the Borrowers hereby
represents, warrants and covenants as follows:
(a) This Agreement and the Loan Agreement constitute legal, valid and
binding obligations of each of the Borrowers and are enforceable against each of
the Borrowers in accordance with their respective terms.
(b) Upon the effectiveness of this Agreement, each of the Borrowers
hereby reaffirms all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agrees that all such
covenants, representations and warranties shall be deemed to have been remade as
of the effective date of this Agreement.
(c) No Borrower has any defense, counterclaim or offset with respect to
the Loan Agreement or the Obligations.
6. Effect on the Loan Agreement.
(a) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(b) Except as set forth in Section 2 hereof, the execution, delivery
and effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other documents, instruments or agreements executed and/or
delivered under or in connection therewith.
7. Governing Law. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York (other than those conflict of law rules that would defer to the
substantive law of another jurisdiction).
8. Release. Borrowers and Guarantors hereby release, remise, acquit and
forever discharge Lender, Lender's employees, agents, representatives,
consultants, attorneys, fiduciaries, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, for or because of
any matter or things done, omitted or suffered to be done by any of the Released
Parties prior to and including the date of execution hereof, and in any way
directly or indirectly arising out of or in any way connected to this Amendment
or the Ancillary Agreements (all of the foregoing
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hereinafter called the "Released Matters"). Borrowers acknowledge that the
agreements in this Section are intended to be in full satisfaction of all or any
alleged injuries or damages arising in connection with the Released Matters.
9. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
10. Counterparts; Facsimile Signatures. This Agreement may be executed by
the parties hereto in one or more counterparts of the entire document or of the
signature pages hereto, each of which shall be deemed an original and all of
which taken together shall constitute one and the same agreement. Any signature
received by facsimile transmission shall be deemed an original signature hereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first written above.
SPAR MARKETING FORCE, INC.
SPAR, INC.
SPAR/▇▇▇▇▇▇▇▇ RETAIL SERVICES, INC.
SPAR GROUP, INC.
SPAR INCENTIVE MARKETING, INC.
SPAR TRADEMARKS, INC.
SPAR MARKETING, INC. (DE)
SPAR MARKETING, INC. (NV)
SPAR ACQUISITION, INC.
SPAR TECHNOLOGY GROUP, INC.
SPAR/PIA RETAIL SERVICES, INC.
RETAIL RESOURCES, INC.
PIVOTAL FIELD SERVICES, INC.
PIA MERCHANDISING CO., INC.
PACIFIC INDOOR DISPLAY CO.
PIVOTAL SALES COMPANY
SPAR GROUP, INC.
SPAR ALL STORE MARKETING SERVICES, INC.
SPAR ▇▇▇▇ ▇▇▇▇, INC.
By:
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer of
each of the foregoing entities
▇▇▇▇▇▇▇ BUSINESS CREDIT CORPORATION
By:
--------------------------------------
Name:
Its:
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
CONSENTED AND AGREED TO BY:
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Limited Guarantor
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Limited Guarantor
PIA Merchandising Limited, Guarantor
By:
---------------------------
Name:
Its:
EXHIBIT A
FORM OF
COMPLIANCE CERTIFICATE
I, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in my capacity as the Chief Financial Officer of
SPAR Group, Inc., hereby certify that, with respect to the Third Amended and
Restated Revolving Credit and Security Agreement dated January 24, 2004 (as it
may be amended, modified, extended or restated from time to time, the "Credit
Agreement"; capitalized terms not otherwise defined in this Certificate shall
have the meaning given to them in the Credit Agreement) among SPAR MARKETING
FORCE, INC., SPAR, INC., SPAR/▇▇▇▇▇▇▇▇ RETAIL SERVICES, INC., SPAR GROUP, INC.,
SPAR INCENTIVE MARKETING, INC., SPAR TRADEMARKS, INC., SPAR MARKETING, INC.
(DE), SPAR MARKETING, INC. (NV), SPAR ACQUISITION, INC., SPAR TECHNOLOGY GROUP,
INC., SPAR/PIA RETAIL SERVICES, INC., RETAIL RESOURCES, INC., PIVOTAL FIELD
SERVICES, INC., PIA MERCHANDISING CO., INC., PACIFIC INDOOR DISPLAY CO., PIVOTAL
SALES COMPANY, SPAR ALL STORE MARKETING SERVICES, INC., and SPAR ▇▇▇▇ ▇▇▇▇, INC.
(each of the foregoing a "Borrower" and collectively the "Borrowers"), and
▇▇▇▇▇▇▇ BUSINESS CREDIT CORPORATION (formerly known as Whitehall Business Credit
Corporation)("Lender"):
1. Attached hereto are the financial statements required pursuant to
Section 11 of the Credit Agreement for the [month] [quarter] [year] ending
_________________.
2. With respect to any quarterly or annual financial statements,
attached hereto as Schedule 1 are detailed calculations demonstrating compliance
with the financial covenants contained in Sections 12(o), (p), (q) and (r) of
the Credit Agreement. Borrowers are in compliance with such covenants as of the
date hereof.
3. [Based on an examination by the company sufficient to enable it to
make an informed statement, the company does not believe that any Event of
Default exists which has not been previously disclosed in writing to Lender] or
[Since the last Compliance Certificate, one or more Events of Default have
occurred as more fully described on Schedule 2, which sets forth the nature and
extent of such Events of Default, a description of the corrective action taken
or proposed to be taken with respect thereto]. [If Applicable add - Schedule 2
sets forth the actions, if any, taken with respect to Events of Default since
the prior Compliance Certificate.
Dated this ____ day of ___________, 200_.
SPAR Group, Inc.
By:
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
SCHEDULE 1
Financial Covenants
A. Minimum Consolidated Net Worth
Consolidated Net Worth as of [current fiscal quarter $_____________
end]
Consolidated Net Worth as of [prior fiscal quarter end] $_____________
Covenant Requirement - at least $100,000 greater than $_____________
the consolidated net worth as of the end of the prior
fiscal quarter
B. Minimum Fixed Charge Coverage Ratio: (a) EDITDA of Borrowers on a
consolidated basis minus Non-Financed Capital Expenditures to (b) Fixed Charges
1. EBITDA calculations for any period:
(i) net income (or loss) of $_____________
Borrowers on consolidated basis
for such period (excluding
extraordinary gains and
extraordinary losses per GAAP),
plus
----
(ii) all interest expense of $_____________
Borrowers on an unsolicited
basis for such period, plus
(iii) all charges against income of $_____________
Borrowers on a consolidated
basis for such period for
federal, estate and local
taxes, plus
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(iv) depreciation expenses of $_____________
Borrowers on a consolidated
basis for such period, minus
(v) amortization expenses of $_____________
Borrowers on a consolidated
basis for such period minus
(vi) Capitalized cash expenses of $_____________
any Borrower which for expenses
were previously deducted from
net income in calculating (i)
through (iii) above, minus
(vii) Non-Financed Capital $_____________
Expenditures for such
$_____________ period.
Total (EBITDA minus Non-Financed Capital
Expenditures) $
=============
2. Fixed Charges calculation for any period:
(i) all interest payments made on $_____________
the Loans, plus
(ii) All dividends or other $_____________
distributions to stockholders
and other payments made or paid
with respect to any
indebtedness for money borrowed
(excluding the principal amount
of Revolving Advances but
including all payments made on
capitalized leases) during such
period (including, without
limitation, payments permitted
under Section 12(n)(iii)),
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plus
(iii) Income or franchise taxes paid $_____________
in cash during such period,
plus
(iv) Payments on the Shareholders $_____________
Notes during such period under
Section 12(n)(iv) of the Credit
Agreement, plus
(v) PIA and SPAR Merger Payments
made during _ such period.
Total Fixed Charges
Fixed Charge Coverage Ratio: _____:1.00
EBITDA to Fixed Charges
Covenant Requirement
Greater than or
equal to 1.10 to
1.00
C. Minimum EBITDA
EBITDA (calculated in accordance with $_____________
(B)(1)(i)-(vi)) above
Covenant Requirement $_____________
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D. Maximum Capital Expenditures [Annual test]
Capital Expenditures for fiscal year $_____________
Covenant Requirement $2,000,000
