Credit Facilities

Domestic

Credit Facilities

North Mill Capital Credit Facility

April 10, 2019,

the Company repaid and replaced its

2018

credit facility from PNC Bank, National Association ("PNC") with a new secured revolving credit facility in the United States and Canada (the "NM Credit Facility") with North Mill Capital, LLC ("NM").

In order to obtain, document and govern the new NM Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF") and SPAR Canada Company ("SCC") (each, a "NM Borrower" and collectively, the "NM Borrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors"), entered into

eighteen

(

) month individual Loan and Security Agreements with NM dated as of

April 10, 2019 (

the "NM Loan Agreements") which secures the obligations of the NM Loan Parties to NM with pledges of substantially all of the assets of the NM Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets); the SMF NM Borrower issued its

$10.5

million Revolving Credit Master Promissory Note to NM dated

April 10, 2019

and the SCC NM Borrower issued its

$1.5

million Revolving Credit Master Promissory Note to NM dated

April 10, 2019 (

the "Original NM Notes"), which evidences the NM Borrowers' loans and other obligations to NM; the NM Guarantors entered into a Guaranty Agreement with NM dated as of

April 10, 2019 (

the "NM Guaranty"), which guaranties the NM Borrowers' loans and other obligations to NM. The NM Credit Facility has an approved borrowing capacity of

$12.5

million for the SMF NM Borrower and

$2.5

million for the SCC NM Borrower. Subsequent to

December 31, 2019,

the NM Credit Facility was extended for

twelve

(

) months to

October 2021.

April 10, 2019,

the Company drew down an initial advance under the NM Credit Facility of approximately

$9.6

million, which was used to repay the Company's existing PNC credit facility.

The NM Credit Facility currently requires the NM Borrowers to pay interest on the loans equal to (A) Prime Rate designated by Wells Fargo Bank, plus (B)

one hundred twenty

five

basis points (

1.25%

), or a minimum of

6.75%.

December 31, 2019,

the aggregate interest rate was the minimum of

6.75%

per annum, and the outstanding loan balance was

$8.2

million. Outstanding amounts are classified as short-term debt.

In addition, the Company is paying a fee to NM in the amount of

1.5%

of the Promissory Notes or

$180,000

payable at

$10,000

per month over the term of the agreement. The Company utilized a broker to assist in this financing and has paid a fee of

$120,000

for their services.

Revolving loans are available to the Borrowers under the NM Credit Facility based upon the borrowing base formula defined in the NM Loan Agreement (principally

85%

of "eligible" accounts receivable less certain reserves and

60%

of eligible unbilled accounts receivable at a maximum limit of

$4.5

million).

The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Borrowers, including, maintaining a positive trailing EBITDA for each Borrower and limits on capital expenditures and other investments. The Company was in compliance as of

December 31, 2019.

PNC Credit Facility

January 2018,

the Company repaid and replaced its credit facility from Sterling Bank with a secured revolving credit facility in the United States and Canada (as amended the "PNC Credit Facility") with PNC Bank, National Association.

April 10, 2019,

the Company repaid and replaced its

2018

PNC Credit Facility with the NM Credit Facility.

Fifth Third Credit

Facility

January 9, 2018,

the Company completed its acquisition of a

51%

interest in its new subsidiaries, Resource Plus of North Florida, Inc., and related companies (collectively, "Resource Plus"). See Note

to the Company's Consolidated Financial Statements –

Purchase of Interests in Subsidiaries

–

Resource Plus Acquisition

, below. When acquired, Resource Plus was a party to a revolving line of credit facility it secured on

May 23, 2016, (

the "Fifth Third Credit Facility") from Fifth Third Bank for

$3.5

million, which was scheduled to expire on

May 23, 2018.

Effective

April 11, 2018,

the term of the Fifth Third Credit Facility was extended and is currently scheduled to become due on

April 23, 2020.

A Fifth Third Credit facility extension is currently being negotiated.

Revolving loans of up to

$3.5

million are available to Resource Plus under the Fifth Third Credit Facility based upon the borrowing base formula defined in the agreement (principally

80%

of "eligible" accounts receivable less certain reserves). As of

December 31, 2019

, there was

outstanding balance. The Fifth Third Credit Facility is secured by substantially all assets of Resource Plus.

The Fifth Third Credit Facility currently requires Resource Plus to pay interest on the loans there under equal to (A) the Daily LIBOR Rate (as defined in the agreement) per annum, plus (B)

two hundred fifty

basis points (

2.50%

). On

December 31, 2019

, the aggregate interest rate under that formula was

5.2%

per annum.

Other Debt

Effective with the closing of the Resource Plus acquisition in

January 2018,

the Company entered into promissory notes with the sellers totaling

$2.3

million. The notes are payable in annual installments at various amounts due on

December

31st

of each year starting with

December 31, 2018

and continuing through

December 31, 2023.

As such these notes are classified as both short term and long term based on scheduled maturities. The total balance owed at

December 31, 2019

was

$1.6

million.

International Credit Facilities:

SPARFACTS Australia Pty. Ltd. has a secured line of credit facility with National Australia Bank, effective

October 31, 2017,

for

$800,000

(Australian) or approximately

$561,000

USD (based upon the exchange rate at

December 31, 2019

). The facility provides for borrowing based upon a formula, as defined in the agreement (principally

80%

of eligible accounts receivable less certain deductions). The outstanding balance with National Australia Bank as of

December 31, 2019

was

$196,000

(Australian) or

$138,000

USD and is due on demand.

SPAR Todopromo has secured a line of credit facility with BBVA Bancomer Bank for

5.0

million Mexican Pesos or approximately

$264,000

USD (based upon the exchange rate at

December 31, 2019

). The revolving line of credit was secured on

March 15, 2016,

and originally expired

March 2018.

The facility has been amended to extend the terms to

March 2020.

The variable interest rate is TIIE (Interbank Interest Rate) +

4%,

which resulted in an annual interest rate of

11.90%

as of

December 31, 2019

. The outstanding balance at

December 31, 2019

was

zero

. The facility had been effectively closed and replaced on

December 13, 2019

with a credit facility from Steel Factoring for

5.0

million Mexican Pesos or approximately

$264,000

USD (based upon exchange rate at

December 31, 2019).

The revolving line of credit expires

December 2020.

The annual interest rate was

18.00%

as of

December 31, 2019.

The outstanding balance at

December 31, 2019

was

5.0

million Mexican Pesos or approximately

$264,000

USD (based upon the exchange rate at

December 31, 2019

November 29, 2016,

SPAR Brazil established a line of credit facility with Itau Bank for

4.0

million Brazilian Real or approximately

$996,000

USD (based upon the exchange rate at

December 31, 2019

). The facility provides for borrowing with

formal guarantees. This account was closed as of

July 1, 2018.

December 26, 2016,

SPAR Brazil secured a line of credit facility with Daycoval Bank for

5.0

million Brazilian Real or approximately

$1.2

million USD (based upon the exchange rate at

December 31, 2019

). The facility provides for borrowing based upon a formula, as defined in the agreement (principally

80%

of eligible accounts receivable less certain deductions). This account was closed as of

October 5, 2018.

May 25, 2018,

SPAR Brazil established a temporary line of credit facility with Banco Safra for

3.0

million Brazilian Real or approximately

$747,000

USD (based upon the exchange rate at

December 31, 2019

). The agreement was from month to month at the Company's request. This account was closed as of

August 13, 2018.

May 29, 2018,

SPAR Brazil established a line of credit facility with Banco Bradesco for

1.2

million Brazilian Real or approximately

$299,000

USD (based upon the exchange rate at

December 31, 2019

). The account was closed in

November 2019.

October 5, 2018

SPAR Brazil secured a line of credit facility with Branco Bradesco for approximately

3.5

million Brazilian Real or approximately

$878,000

USD (based upon the exchange rate at

December 31, 2019

). The account was closed in

December 2019.

October 5, 2018

SPAR Brazil secured a line of credit facility with Branco Santander for approximately

381,000

Brazilian Real or approximately

$95,000

USD (based upon the exchange rate at

December 31, 2019

). The annual interest rate as of

December 31, 2019

was

16.52%.

The outstanding balance as of

December 31, 2019

was approximately

184,000

Brazilian Real or approximately

$46,000

USD.

	Interest Rate as of
	December 31, 2019			2020		2021		2022		2023		2024
USA - North Mill Capital		6.75	%		8,151		–		–		–		–
USA - Fifth Third Bank		5.20	%		–		–		–		–		–
USA - Resource Plus Sellers		1.85	%		333		300		300		700		–
Australia - National Australia Bank		6.60	%		138		–		–		–		–
Mexico - Steel Factoring		18.00	%		264		–		–		–		–
Brazil – Santander		16.52	%		46		–		–		–		–
Total				$	8,932	$	300	$	300	$	700	$	-

Summary of

Unused

Company Credit and Other Debt Facilities (in thousands)

	December 31, 2019		December 31, 2018
Unused Availability:
United States	$	3,694	$	4,253
Australia		423		238
Brazil		49		304
Mexico		–		102
Total Unused Availability	$	4,166	$	4,897

Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and sufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company's major clients, or a significant reduction in business from such clients could have a material adverse effect on the Company's cash resources and its ongoing ability to fund operations.