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Note 4 - Credit Facilities

9 Months Ended

Sep. 30, 2013

4. Credit Facilities

Sterling Credit Facility:

SGRP and certain of its domestic subsidiaries, namely SPAR Marketing Force, Inc., National Assembly Services, Inc., SPAR Group International, Inc., SPAR Trademarks, Inc., and SPAR Acquisition, Inc. (each a "Subsidiary Borrower", and together with SGRP, collectively, the "Borrowers"), are parties to a Revolving Loan and Security Agreement dated as of July 6, 2010, as amended in June 2011, July 2012 and January 2013 (as amended, the "Loan Agreement"), with Sterling National Bank as "Lenders" and "Agent"(the "Sterling Credit Facility"). Effective January 1, 2013, the Sterling Credit Facility charged interest on the loans outstanding thereunder at the Prime Rate (as that term is defined in the Loan Agreement) plus one quarter of one percent (0.25%) per annum (instead of the higher rates previously charged), which interest rate automatically changes with each change in such Prime Rate.

Revolving Loans of up to $6.5 million are available to the Borrowers under the Sterling Credit Facility based upon the borrowing base formula defined in the Loan Agreement (principally 85% of "eligible" domestic accounts receivable less certain reserves). The Sterling Credit Facility is secured by substantially all of the assets of the Borrowers (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets).

The Sterling Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the Borrowers, including, but not limited to, capital expenditures and other investments.

The parties have amended the Sterling Loan Agreement effective as of July 1, 2013, to (among other things) extended the scheduled term of the Loan Agreement to July 6, 2016 (with no early termination fee), eliminated the requirement for a "closed lock box" so that collections no longer automatically pay down the loans under the Loan Agreement, and reduced the interest rate on those loans to the Agent's floating Prime Rate (as defined in the Loan Agreement) minus one half of one percent (0.50%) per annum (which is a reduction of 0.75 % per annum over the previous rate), and reduced the unused line fee to one-eighth of one percent (0.125%) per annum (which is half of the previous rate of one quarter of one percent (0.25%)).

See Note 17 to the Consolidated Financial Statements - Subsequent Events, respecting the Fifth Amendment to the Sterling Credit Facility dated October 30, 2013, which added the Company's Canadian subsidiaries as borrowers under that facility.

International Credit Facilities:

In October 2011, SPARFACTS Australia Pty. Ltd. replaced the Commonwealth Bank line of credit with a new receivables based secured line of credit facility with Oxford Funding Pty Ltd. for approximately $1.1 million. The facility provides for borrowing based upon a formula as defined in the agreement (principally 80% of eligible accounts receivable less certain deductions). The agreement technically expired on October 31, 2012, but is being extended from month to month at the Company's request. SPARFACTS is in the process of negotiating new financing.

SPAR Canada Company, a wholly owned Canadian subsidiary ("SCC"), had a secured credit agreement with Royal Bank of Canada ("RBC") providing for a Demand Operating Loan for a maximum borrowing of approximately $728,000. The Demand Operating Loan provided for borrowing based upon a formula as defined in the agreement (principally 75% of eligible accounts receivable less certain deductions) and had a minimum total debt to tangible net worth covenant. The RBC facility was replaced on October 30, 2013, when SCC became a borrower under the Sterling Credit Facility pursuant to the Fifth Amendment, as described in Note 17 to the Consolidated Financial Statements - Subsequent Events.

The Japanese subsidiary, SPAR FM Japan, Inc., a wholly owned subsidiary, has secured a loan with Mizuho Bank for approximately $204,000. The loan is payable in monthly of $2,400 at an interest rate of 0.1% per annum with a maturity date of February 28, 2018. The outstanding balance at September 30, 2013, was approximately $129,000.

Summary of Company Credit and Other Debt Facilities: (in thousands)

	September 30, 2013		Average Interest Rate⁽¹⁾			December 31, 2012		Average Interest Rate⁽²⁾
Credit Facilities Loan Balance:
United States	$	2,214		2.8	%	$	1,762		4.3	%
Australia		-		-			210		9.4	%
Canada		-		-			421		4.0	%
	$	2,214				$	2,393

Other Debt Facility:
Japan Term Loan	$	129		0.1	%	$	171		0.1	%

	September 30, 2013		December 31, 2012
Unused Availability:
United States	$	2,835	$	4,248
Australia		1,119		1,035
Canada		728		331
	$	4,682	$	5,614

(1) Based on average interest rate for the three months ended September 30, 2013.

(2) Based on average interest rate for the twelve months ended December 31, 2012.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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