EXHIBIT 10.16
CONSENT, RELEASE AND AMENDMENT NO. 6 TO
SECOND AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS CONSENT, RELEASE AND AMENDMENT NO. 6 ("Amendment") is entered into as
of June 30, 2002, by and between SPAR Marketing Force, Inc., a Nevada
corporation ("SMF"), SPAR, Inc., a Nevada corporation ("SPAR"), SPAR/Xxxxxxxx
Retail Services, Inc., an Ohio corporation ("SBRS"), SPAR Group, Inc., a
Delaware corporation ("SGI"), SPAR Incentive Marketing, Inc., a Delaware
corporation ("SIM"), SPAR Trademarks, Inc., a Nevada corporation ("STM"), SPAR
Marketing, Inc. (DE), a Delaware corporation ("SMIDE"), SPAR Marketing, Inc.
(NV), a Nevada corporation ("SMINV"), SPAR Acquisition, Inc., a Nevada
corporation ("SAI"), PIA Merchandising Co., Inc., a California corporation
("PIA"), Pacific Indoor Display Co., Inc., a California corporation ("Pacific"),
Pivotal Sales Company, a California corporation ("Pivotal") and SPAR Performance
Group, Inc. (f/k/a SPAR MCI Performance Group, Inc.), a Delaware corporation
("SPG") (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 (i) consent to (a) the release of SPG
as a Borrower, (b) the sale of the stock of SPG to SPG Holdings and (c) SGI's
making of inter-company loans to SPG, and (ii) 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 5 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:
"Intercompany Loan Agreement" shall mean that certain Revolving
Credit, Guaranty and Security Agreement dated as of June 30, 2002 among
SIM, SPG Holdings and SPG.
"Intercompany Loans" shall mean loans made by SGI pursuant to the
Intercompany Loan Agreement.
"Sixth Amendment" shall mean this Consent, Release and Amendment
No. 6 to Second Amended and Restated Revolving Credit, Term Loan and
Security Agreement dated as of June 30, 2002.
"Sixth Amendment Effective Date" shall mean the date upon which
all the conditions precedent set forth in Section 5 of the Sixth
Amendment have been satisfied.
"SPG" shall mean SPAR Performance Group, Inc. (f/k/a SPAR MCI
Performance Group, Inc.), a Delaware corporation.
"SPG Holdings" shall mean Performance Holdings, Inc., a Delaware
corporation.
"SPG Holdings Term Loan Agreement" shall mean that certain Term
Loan, Guaranty and Security Agreement entered into as of June 30, 2002
by and between SIM and SPG Holdings.
"SPG Holdings Term Notes" shall mean collectively, (i) that
certain Term Note in the amount of $2,500,000 and (ii) that certain
Term Note in the amount of $3,500,000, in each case issued by SPG
Holdings in favor of SIM.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
and Sale Agreement dated as of June 30, 2002 by and between SPG
Holdings and SIM.
"Supplemental Amount" shall mean, for each period of time, the
amount set forth below opposite such time period:
Time Period Supplemental Amount
08/14/2002 through 12/31/2002 $750,000
01/01/2003 through 01/31/2003 $500,000
02/01/2003 through 02/28/2003 $450,000
03/01/2003 through 03/31/2003 $400,000
04/01/2003 through 04/30/2003 $350,000
05/01/2003 through 05/31/2003 $300,000
06/01/2003 through 06/30/2003 $250,000
07/01/2003 through 07/31/2003 $200,000
08/01/2003 through 08/31/2003 $150,000
2
09/01/2003 through 09/30/2003 $100,000
10/01/2003 through 10/31/2003 $ 50,000
11/01/2003 and thereafter $0.
(ii) the following defined terms are amended and restated in
their entirety to provide as follows:
"Fixed Charge Coverage Ratio" shall mean and include with respect
to any fiscal period the ratio of (a) (i) EBITDA of Borrowers on a
consolidated basis, minus (ii) capital expenditures made during such
period (including, without limitation, expenditures for software) to
(b) (i) all principal and interest payments made on the Loans
hereunder, plus (ii) all dividends and other payments or distributions
made or paid with respect to any indebtedness for money borrowed during
such period, 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)(iii) of this Agreement, plus, (v) payments
made to vendors during such period on payables associated with the
acquisition of PIA under the SPAR Merger Agreement, such payments not
to exceed $4,600,000 in the aggregate.
"Receivables Availability" means the amount of Revolving Advances
against Eligible Receivables Lender may from time to time during the
term of this Agreement make available to Borrowers (i) up to 85%
("Receivables Advance Rate") of the net face amount of Borrowers'
Eligible Receivables.
"SPAR Borrowers" shall mean, individually and collectively, SGI,
SMF, SPAR, SBRS, STM, SMIDE, SMINV and SAI.
"Subsidiary Stock" means all of the issued and outstanding shares
of stock owned by (1) PIA of Pacific and Pivotal, (2) SAI of SIM, STM
and SMIDE, (3) SMIDE of SMF, SMINV, SPAR and SBRS and (4) SGI of PIA
and SAI.
"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 Borrowers up
to 70% ("Unbilled Receivables Advance Rate") of the net face amount of
Borrowers' Eligible Unbilled Receivables.
(iii) the defined term "Special Advance Amount" is hereby deleted
in its entirety.
(b) All references in the Loan Agreement and the Ancillary Agreements to
SMCI shall be deemed to be references to SPAR Performance Group, Inc. (f/k/a
SPAR MCI Performance Group, Inc.).
3
(c) Section 2(a)(A)(b)(y)(iii) of the Loan Agreement is amended in its
entirety to provide as follows:
"(iii) the Supplemental Amount, minus
(d) Section 5(b)(vii) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"(vii) Supplemental Amount 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
Sixth Amendment Effective Date and on the first day of each month
thereafter during which the Supplemental Amount is greater than
$0, and (y) a Supplemental Amount 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 Supplemental Amount was $500,000),
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 Sixth Amendment Effective Date and the
last day of the Term. All 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."
(e) Section 10 of the Loan Agreement is amended by adding a new sentence
to the end thereof to provide as follows:
"At the request of Lender, SIM shall arrange with SPG to have
Lender or its employees or agents designated as SIM's
representative for purposes of Section 5.03 of the Intercompany
Loan Agreement."
(f) Section 11 of the Loan Agreement is amended by adding a new
subsection (d) to the end of the first sentence thereof to provide as follows:
"(d) as soon as available, but in any event within five (5)
Business Days after any Borrower's receipt thereof, all financial
statements of SPG that are delivered to Borrowers pursuant to the
terms of the Intercompany Loan Agreement."
(g) Section 12(m) of the Loan Agreement is amended by (1) deleting the
"and" before the "(xi)" and (2) adding new subsections (xii) and (xiii) at the
end thereof to provide as follows:
"(xii) any amendment to either the Intercompany Loan Agreement or
the SPG Holdings Term Loan Agreement; and
4
(xiii) any material default by (A) SPG or SPG Holdings under the
Intercompany Loan Agreement or (B) SPG Holdings under the SPG
Holdings Term Loan Agreement."
(h) Section 12(n) of the Loan Agreement is amended by (1) replacing the
"or" before the "(xii)" with a semicolon, (2) adding the word "or" at the end of
the "(xiii)" thereof and (3) adding a new subsection (xiv) at the end thereof to
provide as follows:
"(xiv) amend either the Intercompany Loan Agreement or the SPG
Holdings Term Loan Agreement in a manner which adversely affects
the rights of Lender;"
(i) Section 12(n)(ii) of the Loan Agreement is amended in its entirety
to provide as follows:
"(ii) declare, pay or make any dividend or distribution on any
shares of its common stock or preferred stock, or apply any of
its funds, property or assets to the purchase, redemption or
other retirement of any common or preferred stock;"
(j) Section 12(n)(iii) of the Loan Agreement is amended in its entirety
to provide as follows:
"(iii) directly or indirectly, prepay any indebtedness (other
than to Lender or any other Borrowers permitted in this section);
make any principal payment on the Shareholder Notes in excess of
$250,000 for any fiscal quarter commencing with the Fiscal
Quarter beginning October 1, 2002 (or such greater amount to
which Lender may consent in its sole discretion), together with
interest at 8% per annum payable quarterly, provided, however,
that no such payment may be made on the Shareholder Notes if,
after giving effect to any such payment, (A) the Borrowers shall
have an average Undrawn Availability of less than $2,500,000 for
the previous Fiscal Quarter (assuming the Supplemental Amount was
$0), (B) the Borrowers shall have, on a consolidated basis, a
Fixed Charge Coverage Ratio as of the date of such payment with
respect to the previous twelve (12) fiscal months then ended (for
purposes of this proviso, clause (b)(iv) of the defined term
Fixed Charge Coverage Ratio shall be deemed to include the
proposed payment as well as any actual payments made during the
applicable fiscal period) of not less than 1.3 to 1.0 and (C) a
Default or an Event of Default shall have occurred; or
repurchase, redeem, retire or otherwise acquire any indebtedness
of Borrowers in advance of the maturity thereof,"
(k) Section 12(n)(iv) of the Loan Agreement is amended by replacing the
"and" before the "(c)" with a comma and by adding new provisions (D) and (E) at
the end thereof to provide as follows:
5
"(D) loans made by SIM to SPG Holdings pursuant to the SPG
Holdings Term Loan Agreement, and (E) loans made by SGI to SPG
pursuant to the Intercompany Loan Agreement, provided, however,
that the initial amount of Intercompany Loans under the
Intercompany Loan Agreement shall not exceed $2,300,000,
provided, further, that during the period commencing as of the
Amendment No. 6 Effective Date through the end of the Term, the
outstanding amount of Intercompany Loans shall not exceed
$3,500,000;"
(l) Section 12(x) of the Loan Agreement is amended in its entirety to
provide as follows:
"(x) Intentionally Omitted;"
(m) Section 12(q) of the Loan Agreement is amended in its entirety to
provide as follows:
"(q) it will not make capital expenditures (including, without
limitation, expenditures for software) in any fiscal year in an
aggregate amount in excess of $2,000,000 for all Borrowers;"
(n) Section 19 of the Loan Agreement is amended by (1) deleting the "or"
at the end of "(xviii)", (2) replacing the period at the end of "(xix)" with ";
or" and (3) adding a new subsection (xx) at the end thereof to provide as
follows:
"(xx) a default by SIM of any of its obligations under the
Intercompany Loan Agreement."
(o) Schedule 12(b) of the Loan Agreement is hereby amended and restated
in its entirety as set forth on Schedule 12(b) attached hereto.
3. Releases.
--------
(a) Subject to the satisfaction of the conditions precedent set forth in
Section 5 below, (i) SPG is hereby released as a Borrower under the Loan
Agreement and Ancillary Agreements and 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 SPG
prior to and including the time of execution hereof (provided that the
Intercompany Loan Agreement, the SPG Holdings Term Loan Agreement, the SPG
Holdings Term Notes, the Stock Purchase Agreement and each Collateral Assignment
with respect to the foregoing agreements shall be deemed, for purposes hereof,
to have been executed immediately following the execution hereof), and in any
way directly or indirectly arising out of or in any way connected to the Loan
Agreement and Ancillary Agreements and (ii) any reference to Borrowers under the
Loan Agreement and the Ancillary Agreements shall not include SPG. Lender shall
file UCC-3 Termination Statements with respect to UCC-1 financing statements
which were originally filed by Lender.
6
(b) SPG hereby releases, remises, acquits and forever discharges Lender
and its employees, agents, representatives, consultants, attorneys, fiduciaries,
officers, directors, partners, predecessors, successors and assigns, subsidiary
corporations, affiliates, 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 the Loan Agreement or the Ancillary Agreements (all
of the foregoing hereinafter called the "Released Matters"). SPG acknowledges
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.
4. Consent.
-------
Subject to the satisfaction of the conditions precedent set forth in
Section 5 below, Lender hereby consents to (i) SIM entering into the Stock
Purchase Agreement and (ii) the sale of SPG to SPG Holdings pursuant to the
Stock Purchase Agreement.
5. Conditions of Effectiveness. This Amendment shall become effective upon
satisfaction of the following conditions precedent: (a) Lender's receipt of:
(i) four (4) copies of this Amendment executed by Borrower and consented
and agreed to by the Guarantors,
(ii) a $30,000 amendment fee, which fee shall be charged to Borrowers'
loan account as a Revolving Advance,
(iii) a copy of the Articles of Incorporation and the By-Laws of SPG
Holdings,
(iv) a copy of the executed Stock Purchase Agreement,
(v) a copy of the executed (A) SPG Holdings Term Loan Agreement and (B)
SPG Holdings Term Notes,
(vi) a copy of the executed Intercompany Loan Agreement and related
documents,
(vii) a copy of all documentation executed in connection with the SPG
ESOP transaction,
(viii) a UCC-3 Assignment to Lender of SIM's first priority perfected
security interest in all assets of SPG (which security interest is security
for SPG's obligations under the Intercompany Loan Agreement),
7
(ix) a UCC-3 Assignment of SIM's second priority perfected security
interest in all assets of SPG (which security interest is security for
SPG's obligations as guarantor of the obligations of SPG Holdings under the
SPG Holdings Term Loan Agreement),
(x) a UCC-3 Assignment of SIM's first priority perfected security
interest in all assets of SPG Holdings,
(xi) a Collateral Assignment of SIM's rights under the Intercompany Loan
Agreement, executed by SIM, SPG and SPG Holdings,
(xii) a Collateral Assignment of SIM's rights under the Stock Purchase
Agreement and the SPG Holdings Term Notes, executed by SIM, SPG and SPG
Holdings,
(xiii) proforma financial statements of (a) Borrowers on a consolidated
and consolidating basis and (b) SPG Holdings and SPG on a consolidating
basis, dated June 30, 2002 reflecting a valuation of all assets and
liabilities both before and after giving effect to all transactions
contemplated by this Amendment, the Intercompany Loan Agreement, the SPG
Holdings Term Loan Agreement and the Stock Purchase Agreement;
(xiv) a certificate from an officer of SIM setting forth the amount of
the initial advance under the Intercompany Loan Agreement; and
(xv) 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; and
(b) the consummation of the transactions described in (i) the Stock
Purchase Agreement (ii) the ESOP documentation, (iii) the Intercompany Loan
Agreement and (iv) the SPG Holdings Term Loan Agreement.
6. 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.
8
(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.
(e) In conjunction with the consummation of the transactions set forth
in the Stock Purchase Agreement, SIM has taken all actions necessary to perfect
its liens and security interests in the assets of SPG and SPG Holdings which
were granted pursuant to the Intercompany Loan Agreement and the SPG Holdings
Term Loan Agreement.
7. 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.
8. 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.
9. 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.
10. 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.
[SIGNATURE PAGES TO FOLLOW]
9
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 MARKETING, INC. (DE)
SPAR MARKETING, INC. (NV)
SPAR ACQUISITION, INC.
SPAR PERFORMANCE GROUP, INC., as Borrowers
By:/s/ Xxxxxxx Xxxxxxxx
------------------------------
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:/s/ Xxxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer of
each of the foregoing entities
IBJ WHITEHALL BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: SVP
10
CONSENTED AND AGREED TO:
/s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, a Guarantor
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx, a Guarantor
PIA MERCHANDISING LIMITED,
a Guarantor
By:/s/ Xxxxxxx Xxxxxxxx
----------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer
11
Schedule 12 (b)
Subsidiaries
