Item 8.01 Other Events.
On April 10, 2019, the Company repaid and replaced its credit facility with PNC Bank, National Association with a new secured revolving credit facility in the United States and Canada (the "NM Credit Facility") with North Mill Capital, LLC ("NM"), now d/b/a SLR Business Credit. See Note 4 to the Company's Consolidated Financial Statements in its Quarterly Report on form 10-Q for the quarter and period ended September 30, 2020, as filed with the SEC on November 16, 2020.
In order to obtain, document and govern the 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") 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", and together with SMF and SCC, each a "NM Loan Party" and collectively, the "NM Loan Parties"), entered into eighteen (18) month individual Loan and Security Agreements with NM dated as of April 10, 2019 (as amended by the Modification Agreement defined below, the "NM Loan Agreements"), which governs the obligations of the NM Loan Parties to NM and secures them 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).
On March 22, 2021, The NM Loan Parties and NM executed and delivered a Waiver and Second Modification Agreement entered in as of March 22, 2021, and effective as of April 1, 2021 (the "Second Modification Agreement"), pursuant to which NM and the NM Loan Parties agreed to extend the NM Modification Loan Agreements from April 10, 2022, to October 10, 2023, and increased the amounts of the credit facilities for SMF to US$16.5 million in the USA while maintaining the SCC facility at CDN$1.5 million in Canada; in addition the Second Modification Agreement increased SMF's borrowing base availability for unbilled receivables to up to 70% for the duration of the agreement, and increased the unbilled cap for SMF to US$5.5 million from US$4.5 million. SCC's facility received similar increases. The Second Modification Agreement also reduced the early termination fee from 1.00% to 0.85% of the aggregate US and Canadian advance limits then applicable.
To evidence the increase in the US Revolving Credit Facility, SMF executed and delivered to NM a US$16.5 million Second Amended and Restated Revolving Credit Master Promissory Note (the "Restated US Note"), which amends, restates, supersedes and replaces the prior US$ note. To evidence no change in the Canadian Revolving Credit Facility, SCC executed and delivered to NM a CDN$1.5 million Second Amended and Restated Revolving Credit Master Promissory Note (the "Restated Canadian Note"), which amends, restates, supersedes and replaces the prior CDN$ note.
The Restated US Note and Restated Canadian Note (together, the "NM Notes") continue to require the NM Borrowers to pay interest on the loans thereunder equal to: (A) Prime Rate designated by Wells Fargo Bank; plus (B) ninety-five hundredths of a percentage point (0.95%) or a minimum of 5.25%. In addition, the Company is paying a facility fee to NM of $84,000 per year at the basis of $US 10.5 million of loan balance plus additional fee of $15,000 for every incremental US$1 million of loan balance up to US$16.5 million over the term of the agreement, including such extension, and for the Second Modification Agreement paid NM a fee of $7,000 and agreed to reimburse NM's legal and documentation fees. On September 30, 2020, the aggregate interest rate under that formula was 6.75% per annum, and the outstanding loan balance was $11.7 million. Outstanding amounts are classified as short-term debt.
The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including maintaining a positive trailing EBITDA for each Borrower and limits on capital expenditures and other investments. Taking into effect the waivers in the Modification Agreement, the Company was in compliance of such covenants as of December 31, 2020, and March 22, 2021.
Copies of the Second Modification Agreement and new restated NM Notes are attached to this Current Report on Form 8-K (this "Report") as Exhibits 99.1, 99.2 and 99.3, respectively, and are hereby incorporated herein by reference. The descriptions in this Report of the Second Modification Agreement and new restated NM Notes are qualified in their entirety by such Exhibits.
Information Not "Filed"
The information in Item 8.01 of this Report and the Release attached as Exhibit 99.1, to the greatest extent permitted by applicable law, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. Such information, to the extent deemed or determined to have been not "filed" under applicable law, shall not be deemed incorporated by reference in any filing by us under the Securities Act of 1933, as amended (the "Securities Act", and together with the Exchange Act, and all rules thereunder, the "Securities Laws"), except as shall be expressly set forth by specific reference in such a filing.
Forward Looking Statements
This Current Report on Form 8-K (this "Current Report") contains "forward-looking statements" within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, the Company, and this Report has been filed by the Corporation with the SEC. "Forward-looking statements" are defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other applicable federal and state securities laws, rules and regulations, as amended (together with the Securities Act and the Exchange Act, "Securities Laws").
All statements (other than those that are purely historical) are forward-looking statements. Words such as "may," "will," "expect," "intend," "believe," "estimate," "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also identify forward-looking statements. Forward-looking statements made by the Company in this Current Report may include (without limitation) statements regarding: risks, uncertainties, cautions, circumstances and other factors ("Risks"); and the potential negative effects of the novel coronavirus and COVID-19 pandemic on the Company's business, the Company's potential non-compliance with the covenants in the NM Loan Agreements, the Company's potential non-compliance with applicable Nasdaq director independence, bid price or other rules, the integration and suitability of the Company's new CEO, the Company's cash flow or financial condition, the Company's cash flow later this year, or the pursuit or achievement of the Company's corporate objectives..
You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties) and other information made, contained or noted in or incorporated by reference into this Current Report, but you should not place undue reliance on any of them. The results, actions, levels of activity, performance, achievements or condition of the Company (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, Risks, trends or condition) and other events and circumstances planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, "Expectations"), and our forward-looking statements (including all Risks) and other information reflect the Company's current views about future events and circumstances. Although the Company believes those Expectations and views are reasonable, the results, actions, levels of activity, performance, achievements or condition of the Company or other events and circumstances may differ materially from our Expectations and views, and they cannot be assured or guaranteed by the Company, since they are subject to Risks and other assumptions, changes in circumstances and unpredictable events (many of which are beyond the Company's control). In addition, new Risks arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company. Accordingly, the Company cannot assure you that its Expectations will be achieved in whole or in part, that it has identified all potential Risks, or that it can successfully avoid or mitigate such Risks in whole or in part, any of which could be significant and materially adverse to the Company and the value of your investment in the Company's common stock.
These forward-looking statements reflect the Company's Expectations, views, Risks and assumptions only as of the date of this Current Report, and the Company does not intend, assume any obligation, or promise to publicly update or revise any forward-looking statements (including any Risks or Expectations) or other information (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed circumstances, future events, recognition, or otherwise.