AMENDMENT NO. 3 TO
SECOND AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 ("Amendment") is entered into as of March 1, 2002, by and
between SPAR Marketing Force, Inc., SPAR, Inc., SPAR/Xxxxxxxx Retail Services,
Inc., SPAR Group, Inc., SPAR Incentive Marketing, Inc., SPAR Trademarks, Inc.,
SPAR Performance Group, Inc. (f/k/a SPAR MCI Performance Group, Inc.), SPAR
Marketing, Inc. (DE), SPAR Marketing, Inc. (NV), SPAR Acquisition, Inc., PIA
Merchandising Co., Inc., Pacific Indoor Display Co., Inc. and Pivotal Sales
Company (each a "Borrower" and collectively, the "Borrowers") and IBJ Whitehall
Business Credit Corporation ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Second Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated as of September 22, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), pursuant to which Lender provides Borrowers with certain financial
accommodations.
Borrowers have requested that Lender amend certain provisions of the Loan
Agreement and Lender is willing to do so on the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of the 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 herein shall
have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the conditions
precedent set forth in Section 3 below, the Loan Agreement is hereby amended as
follows:
(a) Section 1(A) of the Loan Agreement is amended as follows:
(i) the following defined terms are added in their appropriate
alphabetical order:
"Third Amendment" shall mean this Amendment No. 3 to Second
Amended and Restated Revolving Credit, Term Loan and Security Agreement
dated as of March 1, 2002.
"Third Amendment Effective Date" shall mean the date on which all
conditions precedent set forth in the Third Amendment shall be satisfied.
"Special Advance Amount" shall mean $500,000.
(ii) the following defined terms are amended in their entirety to
provide as follows:
"EBITDA" shall mean for any period the sum of (i) earnings before
interest and income taxes of Borrowers on a consolidated basis for such
period (excluding extraordinary gains and losses) plus (ii) depreciation
expenses of Borrowers on a consolidated basis for such period, plus (iii)
amortization expenses of Borrowers on a consolidated basis for such period
plus (iv) any non-recurring expenses incurred by Borrowers in connection
with the Merger Transaction.
"General Intangibles" shall mean and include, as to each
Borrower, all of such Borrower's "general intangibles" as defined in the
UCC, whether now owned or hereafter acquired, including, without
limitation, all payment intangibles, all choses in action, causes of
action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures,
quality control procedures, trademarks, trademark applications, service
marks, trade secrets, goodwill, copyrights, design rights, software,
computer information, source codes, codes, records and dates,
registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to such Borrower to secure
payment of any of the Receivables by a Customer, all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Individual Maximum Revolving Advance Amount" shall mean (i) with
respect to the SPAR Borrowers, $15,000,000 and (ii) with respect to the PIA
Borrowers, $15,000,000.
"Inventory" shall mean and include as to each Borrower, all of
such Borrower's "inventory" as defined in the UCC, whether now owned or
hereafter acquired, including, without limitation, goods, merchandise and
other personal property, wherever located, to be furnished under any
consignment arrangement, contract of service or held for sale or lease, all
raw materials, work in process, finished goods and materials and supplies
of any kind, nature or description which are or might be used or consumed
in such Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or
other documents representing them.
"Receivables" shall mean and include as to each Borrower, all of
such Borrower's "accounts" as defined in the UCC, contract rights,
instruments (including those evidencing indebtedness among the Borrowers
and their Affiliates), documents, chattel paper (including electronic
chattel paper), general intangibles relating to accounts, drafts and
acceptances, credit card receivables and all other forms of obligations
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owing to such Borrower arising out of or in connection with the sale or
lease of Inventory or the rendition of services or the licensing of any
general intangible rights, and all supporting obligations, all guarantees
and other security therefor, in each case whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or
assigned to Agent hereunder.
"Revised Article 9" shall mean revised Article 9 of the UCC.
"Term" shall mean the Closing Date through February 28, 2003
subject to acceleration upon the occurrence of an Event of Default
hereunder or other termination hereunder.
"Unbilled Receivables Availability" means the amount of Revolving
Advances against Eligible Unbilled Receivables Lender may from time to time
during the term of this Agreement make available to (a) Borrowers (other
than SMCI up to 70%) ("Unbilled Receivables Advance Rate") of the net face
amount of Borrowers' (other than SMCI) Eligible Unbilled Receivables and
(b) SMCI up to 60% of the net face amount of SMCI's Eligible Unbilled
Receivables.
(b) Section 2(a)(A) of the Loan Agreement is amended as follows:
(i) Subsection (y) is amended in its entirety to provide as
follows:
"(y) an amount equal to the sum of:
(i) Receivables Availability of the SPAR Borrowers, plus
(ii) Unbilled Receivables Availability of the SPAR
Borrowers, plus
(iii) the Special Advance Amount, minus
(iv) the aggregate amount of outstanding Letters of Credit
made to or for the benefit of SPAR Borrowers, minus
(v) the Leased Premises Reserve and such other reserves as
Lender may reasonably deem proper and necessary from
time to time."
(ii) The last sentence thereof is amended in its entirety to
provide as follows:
"The sum of 2(a)(A)(i) plus (ii) plus (iii) minus (v) shall
be referred to as the "SPAR Borrowers Formula Amount"."
(c) Section 2(a)(B) of the Loan Agreement is amended as follows:
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(i) Subsection (y)(iii) is amended by deleting the "." at the end
thereof and replacing it with "; minus",
(ii) a new Subsection (y)(iv) is added to provide as follows:
"(iv) such other reserves as Lender may reasonably deem
proper and necessary from time to time."
(iii) the last sentence thereof is amended in its entirety to
provide as follows:
"The sum of 2(a)(B)(i) plus (ii) minus (iv) shall be
referred to as the "PIA Borrowers Formula Amount"."
(d) Section 3(a)(i) of the Loan Agreement is amended in its entirety
to provide as follows:
"(i) make a mandatory prepayment hereunder at any time that the
aggregate outstanding principal balance of the Revolving Advances
made by Lender to (x) Borrowers hereunder is in excess of the
lesser of the Maximum Revolving Amount or the Formula Amount, in
each case less the aggregate amount of outstanding Letters of
Credit, (y) to the SPAR Borrowers is in excess of the lesser of
the Individual Maximum Revolving Advance Amount of the SPAR
Borrowers or the SPAR Borrowers Formula Amount, in each case less
the aggregate amount of outstanding Letters of Credit made to or
for the benefit of the SPAR Borrowers, or (z) to the PIA
Borrowers is in excess of the lesser of the Individual Maximum
Revolving Advance Amount of the PIA Borrowers or the PIA
Borrowers Formula Amount, in each case less the aggregate amount
of outstanding Letters of Credit made to or for the benefit of
the PIA Borrowers, in each case in an amount equal to such
excess, and"
(e) A new Section 5(b)(vii) is added at the end of Section 5(b) of the
Loan Agreement to provide as follows:
"(vii) Special Advance Fees.
SPAR Borrowers shall pay to Lender (x) a fee equal to $833
per month commencing on the first day of the month following the
Amendment No. 3 Effective Date and on the first day of each month
thereafter during the Term, and (y) a Special Advance use fee to
the extent the outstanding Revolving Advances to the SPAR
Borrowers and the undrawn amount of outstanding Letters of Credit
issued for the account of the SPAR Borrowers exceeds the SPAR
Borrowers Formula Amount (calculated as if the Special Advance
Amount was $0), equal to two percent (2%) per annum of such
excess, calculated daily on the basis of a 360-day year for the
actual number of days elapsed but payable monthly, in arrears on
the first day of each month following the Amendment No. 3
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Effective Date and the last day of the Term. All overadvance fees
payable hereunder shall be deemed earned in full on the date when
the same is due and payable hereunder and shall not be subject to
rebate or proration upon termination of this Agreement for any
reason."
(f) Section 6 of the Loan Agreement is amended by: (i) amending
Section 6(b) in its entirety to provide as follows:
"(b) Each Borrower authorizes Lender to file one or more
financing statements and any subsequent continuations or
amendments thereto deemed necessary by Lender (the "Financing
Statements"), describing the Collateral and containing any other
information required under Part 5 of Revised Article 9. Each
Borrower agrees to furnish any such information to Lender
promptly upon request. Each Borrower agrees to execute (i) any
such Financing Statements if so requested by Lender, but
understands and agrees that such Financing Statements may be
filed without such Borrower's signature where permitted; and (ii)
other documents necessary, in the reasonable determination of
Lender, to obtain and perfect the security interests evidenced
hereby, all in form reasonably satisfactory to Lender. The Lender
shall endeavor to send a copy of the filing of any such Financing
Statement to the Borrowers; provided, however, the failure to
send that copy shall not affect the validity or enforceability of
any such filing. The Lender shall not be liable for any mistake
in or failure to file any financing statement, modification,
continuation or other perfection document. The Borrowers will pay
the costs of filing the aforesaid documents or filing or
recording this Agreement in all public offices wherever filing or
recording is deemed by Lender to be necessary or desirable. Any
Financing Statements may, to the extent a signature is necessary,
be signed by Lender on behalf of any Borrower, and may be filed
at any time in any jurisdiction whether or not Revised Article 9
is then in effect in that jurisdiction. If any Receivable becomes
evidenced by a promissory note or any other instrument for the
payment of money, Borrowers will immediately deliver such
instrument to Lender appropriately endorsed or assigned.",
(ii) adding a new Section 6(c) at the end of Section 6(b) hereof
to provide as follows:
"(c) Each Borrower shall at any time and from time to time, take
such steps as Lender may request for Lender to obtain "control"
of any Investment Property, Deposit Accounts, Letter-of-Credit
Rights or electronic Chattel Paper (as such terms are defined in
Revised Article 9), to the extent that any of the foregoing may
be proceeds of any Collateral, with any agreements establishing
control to be in form and substance reasonably satisfactory to
Lender." and
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(iii) adding a new Section 6(d) at the end of Section 6(c) hereof
to provide as follows:
"(d) Borrowers shall promptly provide Lender with written notice
of all commercial tort claims over $250,000, such notice to
contain the case title together with the applicable court and
brief description of the claim(s). Upon delivery of each such
notice, Borrowers shall be deemed to hereby grant to Lender a
security interest and lien in and to such commercial tort claims
and all proceeds thereof. The Borrowers may, so long as no Event
of Default exists, without notice to or the consent of the
Lender, pursue any course of action relating to any commercial
tort claims."
(g) Section 12 of the Loan Agreement is amended by: (i) amending the
first sentence of section 12(l) to provide as follows;
"such Borrower's (i) federal tax identification number and
(ii) organizational identification number issued by each
Borrower's state of incorporation or organization or a statement
that no such number has been listed is set forth on Schedule
12(l)."
(ii) deleting sections 12(r)(i) and 12(r)(ii) and amending
section 12(r) to provide as follows:
"(r) commencing with the fiscal quarter ending December 31, 2001
and at the end of each fiscal quarter thereafter, it shall cause
to be maintained at all times EBITDA for Borrowers on a
consolidated basis of not less than $7,750,000 with respect to
the twelve months then ended;",
(iii) deleting the word "and" at the end of "(y)", (iv) deleting
the "." at the end of "(z)" and replacing it with ";", (v) deleting the "."
at the end of "(aa)" and replacing it with "; and" and (vi) adding a new
subsection (bb) at the end thereof to provide as follows:
"(bb) the SPAR Borrowers shall not permit the sum of outstanding
Revolving Advances to the SPAR Borrowers and the undrawn amount
of outstanding Letters of Credit issued for the account of the
SPAR Borrowers to exceed the SPAR Borrowers Formula Amount
(calculated as if the Special Advance Amount was $0) for at least
twenty (20) consecutive Business Days during each fiscal
quarter."
(h) Schedule 12(l) to the Loan Agreement is amended in its entirety
and replaced with Schedule 12(l) attached hereto.
3. Conditions of Effectiveness. This Amendment shall become effective as of
November __, 2001 upon Lender's receipt of: (i) four (4) copies of this
Amendment executed by Borrower and consented and agreed to by the Guarantors,
(ii) the Third Amended and Restated Revolving Credit Note executed by Borrowers,
(iii) an amendment fee in the amount of $10,000, which fee shall be charged to
the Borrowers' loan account as a Revolving Advance, and (iv)
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such other certificates, instruments, documents and agreements as may be
required by Lender or its counsel, each of which shall be in form and substance
satisfactory to Lender and its counsel.
4. Representations and Warranties. Each Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, such Borrower hereby
reaffirms that all continuing covenants, representations and warranties made in
the Loan Agreement, to the extent the same are not amended hereby, are true and
correct in all material respects and agrees that all such continuing covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment, excluding, however, those events subject to an
express written waiver or consent from us or those expressly permitted or not
prohibited by the covenants, provided, however, that any representation or
warranty incorporating schedules speak only as of the Closing Date, subject to
Borrower's obligation under Section 12(m) of the Loan Agreement to notify Lender
of certain occurrences or events.
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment, excluding, however, those
events subject to an express written waiver or consent from us.
(d) As of the date hereof, Borrower has no defense, counterclaim or
offset with respect to the Loan Agreement.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment hereof, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) 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.
(c) Except as expressly provided in this Amendment, the execution,
delivery and effectiveness of this Amendment 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.
6. Governing Law. This Amendment 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.
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7. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. Counterparts. This Amendment may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and all of
which when taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first written above.
SPAR MARKETING FORCE, INC.
SPAR, INC.
SPAR/XXXXXXXX RETAIL SERVICES, INC.
SPAR INCENTIVE MARKETING, INC.
SPAR TRADENAMES, INC.
SPAR PERFORMANCE GROUP, INC.
SPAR MARKETING, INC. (DE)
SPAR MARKETING, INC. (NV)
SPAR ACQUISITION, INC., as Borrowers
By:
------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer of
each of the foregoing entities
PIA MERCHANDISING CO., INC.
PACIFIC INDOOR DISPLAY CO., INC.
PIVOTAL SALES COMPANY
SPAR GROUP, INC., as Borrowers
By:
------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer of
each of the foregoing corporations
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION
By:
------------------------------------------
Name:
Title:
CONSENTED AND AGREED TO:
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Xxxxxx X. Xxxxx, a Guarantor
------------------------------
Xxxxxxx X. Xxxxxxx, a Guarantor
PIA MERCHANDISING LIMITED,
a Guarantor
By:
---------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer
SCHEDULE 12(l)
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FEDERAL TAX IDENTIFICATION NUMBER AND ORGANIZATIONAL IDENTIFICATION NUMBER
