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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 1999
Commission file number 0-27824
SPAR GROUP, INC.
<TABLE>
<CAPTION>
<S> <C>
Delaware 33-0684451
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
580 WHITE PLAINS ROAD, SIXTH FLOOR, TARRYTOWN, NY 10591
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (914) 332-4100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common
Stock, par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES[X]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the Common Stock of the Registrant held
by non-affiliates of the Registrant on March 30, 2000, based on the closing
price of the Common Stock as reported by the Nasdaq SmallCap Market on such
date, was approximately $56,797,963. [ ]
The number of shares of the Registrant's Common Stock outstanding as of
March 30, 2000 was 18,175,348 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
INTRODUCTION
On April 14, 2000, SPAR Group, Inc. ("SPAR" or the "Company"), filed
with the Securities and Exchange Commission (the "Commission") its Annual Report
on Form 10-K for its fiscal year December 31, 1999 (the "1999 Form 10-K")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The information called for by items 10, 11, 12 and 13 of Part III of Form
10-K was not included in the body of the 1999 Form 10K as filed, but was
incorporated by reference to the Company's Proxy Statement, which was expected
to be filed with the Commission within the requisite 120-day period. Because the
Company is not in fact filing its Proxy Statement within such 120 day period,
this Form 10-K/A amends the 1999 Form 10-K by deleting the caption and first
paragraph from such form and substituting for such items the following
replacements for Items 10, 11, 12 and 13. In addition, Item 14 is hereby deleted
and replaced with Item 14 as filed herewith.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information in connection with
each person who is or was at December 31, 1999, an executive and/or director for
SPAR.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SPAR GROUP, INC.
- ---- --- ------------------------------
<S> <C> <C>
Robert G. Brown 57 Chairman, Chief Executive Officer, President and Director
William H. Bartels 56 Vice Chairman and Director
Patrick W. Collins(1) 70 Director, (Resigned March 6, 2000)
Robert O. Aders(2) 71 Director
J. Christopher Lewis(1) (2) 43 Director
Charles Cimitile 45 Chief Financial Officer and Secretary
James H. Ross 66 Treasurer
</TABLE>
- --------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Robert G. Brown serves as the Chairman, the Chief Executive Officer,
the President and a Director of the Company and has held such positions since
July 8, 1999 (the effective date of the Merger). Mr. Brown served as the
Chairman, President and Chief Executive Officer of the SPAR Marketing Companies
(SBRS since 1994, SINC since 1979, SMNEV since November 1993, and SMF since SMF
acquired its assets and business in 1996).
William H. Bartels serves as the Vice Chairman and a Director of the
Company and has held such positions since July 8, 1999 (the effective date of
the Merger). Mr. Bartels served as the Vice-Chairman, Secretary, Treasurer and
Senior Vice President of the SPAR Marketing Companies (SBRS since 1994, SINC
since 1979, SMNEV since November 1993 and SMF since SMF acquired its assets and
business in 1996), and has been responsible for the Company's sales and
marketing efforts, as well as for overseeing joint ventures and acquisitions.
<PAGE>
Patrick W. Collins served as a Director of SPAR since July 8, 1999 (the
effective date of the Merger) and had been a member of the PIA Merchandising
Services, Inc. Board since May 1998. Mr. Collins served as Chief Operating
Officer of Ralphs Grocery Company for 18 years, 17 of which he served as
President and one year as Vice Chairman. Mr. Collins also serves as a director
of Catalina Marketing Corporation, a provider of in-store electronic marketing
services, and New Bristol Farms, Inc., a gourmet food grocery chain. Mr. Collins
resigned from his position of Director of SPAR Group, Inc., effective March 6,
2000.
Robert O. Aders serves as a Director of the Company and has done so
since July 8, 1999. Mr. Aders has served as Chairman of The Advisory Board,
Inc., an international consulting organization since 1993, as President Emeritus
of the Food Marketing Institute ("FMI") since 1993, and as counsel to Collier,
Shannon, Rill & Scott, a Washington, D.C. law firm since 1993. Immediately prior
to his election to the presidency of FMI in 1976, Mr. Aders was Acting Secretary
of Labor in the Ford Administration. Mr. Aders was the Chief Executive Officer
of FMI from 1976 to 1993. He also served in the Kroger Co., in various executive
positions and was Chairman of the Board from 1970 to 1974. Mr. Aders also serves
as a director of FMI, the Stedman Nutrition Foundation at Duke Medical Center,
Checkpoint Systems, Inc., Coinstar, Inc., Source Information Systems and
Telepanel Systems, Inc., and as a trustee of The National Urban League, Food
Industry Crusade Against Hunger and St. Joseph Academy of Food Marketing.
J. Christopher Lewis serves as a Director of the Company, holding such
position since July 8, 1999 (the effective date of the Merger), and had been a
member of the PIA Merchandising Services, Inc. Board since April 1997. Since
1981, Mr. Lewis has been general partner of Riordan, Lewis & Haden. Mr. Lewis
also serves as a director of Tetra Tech, Inc., SM&A Corporation, California
Beach Restaurants, Inc., an owner and operator of restaurants, and several
privately-held companies.
Charles Cimitile serves as the Chief Financial Officer and Secretary of
the Company and has done so since November 24, 1999. Mr. Cimitile served as
Chief Financial Officer for GT Bicycles from 1996 to 1999 and Cruise Phone, Inc.
from 1995 through 1996. Prior to 1995, he served as the Vice President Finance,
Treasurer and Secretary of American Recreation Company Holdings, Inc. and its
predecessor company.
James H. Ross serves as the Treasurer of the Company and has held such
positions since July 8, 1999 (the effective date of the Merger). Mr. Ross has
been the Chief Financial Officer of the SPAR Marketing Companies since 1991, and
was the General Manager of SBRS from 1994-1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's directors and certain of its officers and persons who own more than
10% of SPAR Common Stock (collectively, "Insiders"), to file reports of
ownership and changes in their ownership of SPAR Common Stock with the
Commission. Insiders are required by Commission regulations to furnish SPAR with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5s were
required for those persons, SPAR believes that
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its Insiders complied with all applicable Section 16(a) filing requirements for
fiscal 1999, with the exception of Mr. Charles Cimitile, who has not filed a
Form 3, but does not own any stock.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION OF SPAR GROUP, INC.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to SPAR in all capacities for the years ended December 31, 1999,
December 31, 1998 and December 31, 1997.
SUMMARY COMPENSATION TABLE(1)
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LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- -------------------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) OPTIONS (#) (2)($)
- -------------------------------------------- ---- ---------- --------- ----------- ------------
<S> <C> <C>
Robert G. Brown 1999 7,500 -- -- --
Chief Executive Officer, Chairman of 1998 125,000 -- -- 791
the Board, President, and Director 1997 46,756 -- -- 553
William H. Bartels 1999 16,307 -- -- --
Vice Chairman and Director 1998 75,000 -- -- 1,439
1997 85,089 -- -- 1,724
James H. Ross 1999 111,235 0 -- 2,187
Treasurer and Vice President 1998 80,535 1,710 -- 1,897
1997 106,660 1,295 -- 3,001
</TABLE>
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(1) For accounting purposes, the Merger is treated as an acquisition of PIA
Merchandising Services, Inc. ("Old PIA"), by the SPAR Companies.
Accordingly, these figures represent the compensation paid by the
Company since July 8, 1999, the effective date of the Merger, and the
SPAR Companies prior to that date, but not compensation paid by Old
PIA. See Item I, "Merger and Restructuring". Prior to the Merger, Terry
R. Peets served as the Chief Executive Officer, the President and a
Director of Old PIA, which is the same legal entity as the Company but
not the same accounting entity. Subsequent to the Merger, Mr. Peets
served as Vice-Chairman of SPAR until his resignation in September,
1999. Mr. Peets received $133,354 in compensation from the Old PIA
prior to the Merger (which for accounting purposes was not compensation
paid by the Company) and $124,558 in compensation (including severance
payments) from SPAR after the Merger.
(2) Other compensation represents the Company's 401k contribution.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each grant of
stock options made during the year ended December 31, 1999, to each of the Named
Executive Officers. No stock appreciation rights ("SAR's") were granted during
such period to such persons.
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<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS EXERCISE EXPIRATION ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE DATE PRICE APPRECIATION FOR OPTION(4)
OPTIONS EMPLOYEES IN ($/SH) --------------------------------
NAME GRANTED (#) PERIOD (%) 5% ($) 10% ($)
- -------------------- ------------- ------------- ------------ ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Brown 382,986(1) 16.7 5.500 07/08/09 3,267,753 4,966,835
382,986(2) 16.7 5.500 07/08/09 3,267,753 4,966,835
William H. Bartels 235,996(1) 10.3 5.500 07/08/09 2,013,590 3,060,564
235,996(2) 10.3 5.500 07/08/09 2,013,590 3,060,564
Charles Cimitile 75,000(1) 3.3 3.500 11/24/09 407,224 618,961
James H. Ross 40,000(1) 1.7 5.000 07/08/09 310,266 471,590
52,665(3) 2.3 0.010 07/08/09 408,504 620,907
- ------------
</TABLE>
(1) All such options vest over four-year periods at a rate of 25% per year,
beginning on the first anniversary of the date of grant.
(2) Options will vest in full at such time as the Company's stock price for
the Company's common stock, as reported on the Nasdaq SmallCap market,
equals a price of $10.00 per share.
(3) These options are fully vested at December 31, 1999.
(4) The potential realizable value is calculated based upon the term of the
option (ten years) at its time of grant. It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate, compounded annually for the entire term of the option.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number and value of the exercisable
and unexercisable options held by each of the Named Executive Officers at
December 31, 1999. None of the Named Executive Officers exercised any options
during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END (#) FISCAL YEAR-END ($)(1)
---------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ---------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Robert G. Brown 0 765,972 0 0
William H. Bartels 0 471,992 0 0
Charles Cimitile 0 75,000 0 0
James H. Ross 52,665 40,000 177,481 0
</TABLE>
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(1) The only in-the-money options at December 31, 1999, were owned by James
H. Ross. The market value of SPAR common stock was $3.38 as of December
31, 1999, which was greater than the exercise price of $.01 per share.
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COMPENSATION PLANS
As a result of the reverse merger with PIA, SPAR Group, Inc., has three
stock option plans: The 1990 Stock Option Plan ("1990 Plan"), the Amended and
Restated 1995 Stock Option Plan ("1995 Plan") and the 1995 Director's Plan
("Director's Plan").
The 1990 plan is a nonqualified option plan providing for the issuance
of up to 683,109 shares of common stock to officers, directors and key
employees. The options have a term of ten years and one week and are either
fully vested or will vest ratably no later than five years from the grant date.
Since 1995, no options have been granted under this plan.
The 1995 Plan provides for the granting of either incentive or
nonqualified stock options to specified employees, consultants and directors of
SPAR Group, Inc. for the purchase of up to 3,500,000 shares of SPAR's common
stock. The options have a term of ten years, except in the case of incentive
stock options granted to greater than 1% stockholders of the SPAR, for which the
term is five years. The exercise price of nonqualified stock options must be
equal to at least 85% of the fair market value of SPAR's common stock at the
date of grant, the exercise price of incentive stock options must be equal to at
least the fair market value of SPAR's common stock at the date of grant. At
December 31, 1999, options to purchase 500,256 shares were available for grant
under this plan.
The Director's Plan is a stock option plan for nonemployee directors
and provides for the purchase of up to 100,000 shares of SPAR's common stock. An
option to purchase 1,500 shares of SPAR's common stock shall be granted
automatically each year to each director, following SPAR's annual stockholder's
meeting. The exercise price of options issued under this plan shall be not less
than the fair market value of SPAR's common stock on the date of grant. Each
option under this plan shall vest and become exercisable in full on the first
anniversary of its grant date, provided the optionee is reelected as a director
of SPAR. The maximum term of options granted under the plan is ten years and one
day, subject to earlier termination following an optionee's cessation of service
with SPAR. At December 31, 1999, options to purchase 86,500 shares were
available for grant under this plan.
Under the Nonemployee Directors Plan, an option to purchase 1,500
shares of SPAR common stock is granted to each Eligible Director immediately
following each annual meeting of stockholders of SPAR. Each option vests and
becomes exercisable in full at the next annual meeting of stockholders, provided
that the optionee is reelected as a director of SPAR. The maximum term of
options granted under the Nonemployee Directors Plan is ten years and one day,
subject to earlier termination following an optionee's cessation of service with
SPAR. The exercise price of stock options granted under the Nonemployee
Directors Plan will be the fair market value of the SPAR common stock on the
date of grant.
COMPENSATION OF DIRECTORS
During the year ended December 31, 1999, SPAR paid to Mr. Aders and to
Mr. Collins, a former director, an aggregate of $3,000 and $6,000, respectively,
for services as members of the SPAR Board. Mr. Lewis received no compensation
for his services as a director (other than the grant of options as described in
the following paragraphs). Messrs. Aders, Collins and Lewis were also reimbursed
for certain expenses in connection with their attendance at SPAR Board and
committee
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meetings. During 1999, Mr. Aders was granted an option to purchase 10,000 shares
of SPAR's common stock at an exercise price of $.01 per share. The options vest
ratably over a four-year period. Mr. Lewis was granted an option to purchase
1,500 shares of SPAR common stock at an exercise price of $5.00 per share. These
options have a one-year vesting period.
SPAR 's Compensation Committee administers the Nonemployee Directors
Plan. Each member of the SPAR Board who is not otherwise an employee or officer
of SPAR or any subsidiary of SPAR (each, an "Eligible Director") is eligible to
participate in the Nonemployee Directors Plan. Directors who are consultants of,
but not otherwise employees or officers of, SPAR are Eligible Directors.
Under the Nonemployee Directors Plan, an option to purchase 1,500
shares of SPAR common stock is granted to each Eligible Director immediately
following each annual meeting of stockholders of SPAR. Each option vests and
becomes exercisable in full at the next annual meeting of stockholders, provided
that the optionee is reelected as a director of SPAR. The maximum term of
options granted under the Nonemployee Directors Plan is ten years and one day,
subject to earlier termination following an optionee's cessation of service with
SPAR. The exercise price of stock options granted under the Nonemployee
Directors Plan will be the fair market value of the SPAR common stock on the
date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was at any time during the year
ended December 31, 1999, or at any other time an officer or employee of SPAR. No
executive officer of SPAR serves as a member of the SPAR Board or compensation
committee of any other entity, which has one or more executive officers serving
as a member of the SPAR Board or Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- -------------- ------------------------------------ ------------------ ----------
<S> <C> <C> <C>
Common Robert G. Brown(1) 7,591,965(2) 39.3%
Shares
Common William H. Bartels(1) 4,805,022 24.8%
Shares
Common J. Christopher Lewis 157,477(3) *
Shares 300 S. Grand Avenue, Suite 2900
Los Angeles, California 90071
Common James H. Ross(1) 68,865(4) *
Shares
Common Patrick W. Collins(1) 7,500(5) *
Shares
Common Richard J. Riordan 1,209,922(6) 6.26%
Shares 300 S. Grand Avenue, Suite 2900
Los Angeles, CA 90071
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- -------------- ------------------------------------ ------------------ ----------
<S> <C> <C> <C>
Common Heartland Advisors, Inc. 1,522,500(7) 7.9%
Shares 790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Common Executive Officers and Directors 12,630,829 65.4%
Shares
</TABLE>
* Less than 1%
(1) The address of such owners is c/o SPAR Group, Inc. 580 White Plains
Road, 6th Floor, Tarrytown, New York.
(2) Includes 1,800,000 shares held by a grantor trust for the benefit of
certain family members of Robert G. Brown over which Robert G. Brown,
James R. Brown, Sr. and William H. Bartels is a trustee, and 180,000
shares held by a grantor trust for the benefit of certain other family
members of Robert G. Brown over which each of Robert G. Brown, James R.
Brown, Sr. and William H. Bartels is a trustee.
(3) All information regarding share ownership is taken from and furnished
in reliance upon the Schedule 13G (Amendment No. 1), dated February
10, 2000, filed by J. Christopher Lewis, Patrick C. Haden, Riordan
Lewis & Haden, and RVM/PIA with the Securities and Exchange Commission
on March 2, 2000. Includes 95,577 shares owned by Riordan Lewis & Haden
("RLH"). Mr. Lewis, a director of SPAR, may be deemed to share voting
and investment power with respect to all such shares as a general
partner of RLH. One other partner of RLH has voting power or investment
power with respect to such shares. Also includes 7,000 shares issuable
upon the exercise of options held by Mr. Lewis.
(4) Includes 52,665 shares issuable by in the money options as of December
31, 1999.
(5) Includes 7,500 shares issuable upon the exercise of options.
(6) All information regarding share ownership is taken from and furnished
in reliance upon the Schedule 13G, dated February 10, 2000 and filed by
Richard J. Riordan with the Securities and Exchange Commission on
February 14,2000.
(7) All information regarding share ownership is taken from and furnished
in reliance upon the Schedule 13G (Amendment No. 6), dated January 27,
2000, filed by Heartland Advisors, Inc. with the Securities and
Exchange Commission on February 3, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Robert G. Brown, a director, the Chairman and the Chief Executive
Officer of the Company, and Mr. William H. Bartels, a director and the Vice
Chairman of the Company, are the sole stockholders and executive officers and
directors of SPAR Marketing Services, Inc. ("SMS"), SPAR Management Services,
Inc. ("SMSI"), SPAR Infotech, Inc. ("SIT"), and certain other companies.
SMS and SMSI (through SMS) provided field representative (through its
independent contractor field force) and field management services to the SPAR
Marketing Companies at a total cost of $3.2 million in the fiscal year ended
March 31, 1998, and at a total cost of $2.8 million to the SPAR Marketing
Companies for the nine months ended December 31, 1998, and $4.1 million for the
12 months ended December 31, 1999. Under the terms of the Field Service
Agreement, SMS will continue to provide the services of approximately 2,300
field representative and through SMSI will provide 37 regional and district
managers to the SPAR Marketing Companies as they may request from time to time,
for which SPAR has agreed to pay SMS for all of its costs of providing those
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services plus 4%. However, SMS may not charge any SPAR Company for any past
taxes or associated costs for which the SAI Principals have agreed to indemnify
the SPAR Companies.
SMS is currently engaged in a dispute with the Internal Revenue Service
over the independent contractor status of its field personnel. See Note 8 the
Financial Statements.
SIT provided computer programming services to SMF at a total cost of $0
to SMF in the fiscal year ended March 31, 1998, and at a total cost of $0 to SMF
for the nine months ended December 31, 1998 and $608,000 for the year ended
December 31, 1999. Under the terms of the programming agreement between SMF and
SIT effective as of October 1, 1998 (the "Programming Agreement"), SIT continues
to provide programming services to SMF as SMF may request from time to time, for
which SMF has agreed to pay SIT competitive hourly wage rates and to reimburse
SIT's out-of-pocket expenses. See Note 10 to the Financial Statements.
In July 1999, SMF, SMS and SIT entered into a Software Ownership
Agreement with respect to Internet job scheduling software jointly developed by
such parties. In addition, STM, SMS and SIT entered into trademark licensing
agreements whereby STM has granted non-exclusive royalty-free licenses to SIT
and SMS for their continued use of the name "SPAR" and certain other trademarks
and related rights transferred to STM in connection with the Merger.
In the event of any material dispute in the business relationships
between SPAR, SMS, SMSI, or SIT, or in the course of pursuing SMS' independent
contractor/employee dispute with the IRS, it is possible that Messrs. Brown and
Bartels may have one or more conflicts of interest with respect to these
relationships and dispute that could have a material adverse effect on SPAR
Group, Inc. See Note 8 to the Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
1. INDEX TO FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report F-1
Consolidated and Combined Balance Sheets as of December 31, 1999 and
December 31, 1998 F-2
Consolidated and Combined Statements of Operations for the year ended
December 31, 1999, for the nine month period ended December 31,
1998, and the year ended March 31, 1998 F-3
Consolidated and Combined Statements of Stockholders' Equity for the
year ended December 31, 1999, for the nine month period ended
December 31, 1998, and the year ended March 31, 1998 F-4
Consolidated and Combined Statements of Cash Flows for the year ended
December 31, 1999, for the nine month period ended December 31,
1998, and the year ended March 31, 1998 F-5
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Notes to Financial Statements F-6
2. FINANCIAL STATEMENT SCHEDULES.
Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1999 the nine month period ended December 31, 1998,
and the year ended March 31, 1998 F-39
</TABLE>
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3. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
3.1 Certificate of Incorporation of SPAR Group, Inc., as
amended. (incorporated by reference to the Company's
Registration Statement on Form S-1 (Registration No.
33-80429) as filed with the Securities and Exchange
Commission on December 14, 1995 (the "Form S-1") and to
Exhibit 3.1 to the Company's Form 10-Q for the 3rd
Quarter ended September 30, 1999).
3.2 By-laws of PIA (incorporated by reference to the Form
S-1).
4.1 Registration Rights Agreement entered into as of January
21, 1992 by and between RVM Holding Corporation.
RVM/PIA, a California Limited Partnership, The Riordan
Foundation and Creditanstalt-Bankverine (incorporated by
reference to the Form S-1).
10.1 1990 Stock Option Plan (incorporated by reference to the
Form S-1).
10.2 Amended and Restated 1995 Stock Option Plan
(incorporated by reference of Exhibit 10.2 to the
Company's Form 10-Q for the 2nd Quarter ended July 3,
1998).
10.3 1995 Stock Option Plan for Non-employee Directors
(incorporated by reference to the Form S-1).
10.4+* Employment Agreement dated as of June 25, 1997 between
PIA and Terry R. Peets (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-Q for the 2nd
Quarter ended June 30, 1997)
10.5+* Severance Agreement dated as of February 20, 1998
between PIA and Cathy L. Wood (incorporated by reference
to Exhibit 10.5 to the Company's Form 10-Q for the 1st
Quarter ended April 30, 1998)
10.6* Severance Agreement dated as of August 10, 1998 between
PIA and Clinton E. Owens (incorporated by reference to
Exhibit 10.6 to the Company's Form 10-Q for the 3rd
Quarter ended October 2, 1998)
10.7+* Amendment No. 1 to Employment Agreement dated as of
October 1, 1998 between PIA and Terry R. Peets.
10.8+* Amended and Restated Severance Compensation Agreement
dated as of October 1, 1998 between PIA and Cathy L.
Wood.
10.9+ Loan and Security Agreement dated December 7, 1998 among
Mellon Bank, N.A., PIA Merchandising Co., Inc., Pacific
Indoor Display Co. and PIA.
10.10+ Agreement and Plan of Merger dated as of February 28,
1999 among PIA, SG Acquisition, Inc., PIA Merchandising
Co., Inc., SPAR Acquisition, Inc., SPAR Marketing, Inc.,
SPAR Marketing Force, Inc., SPAR, Inc., SPAR/Burgoyne
Retail Services, Inc., SPAR Incentive Marketing, Inc.,
SPAR MCI Performance Group, Inc. and SPAR Trademarks,
Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.11+ Voting Agreement dated as of February 28, 1999 among
PIA, Clinton E. Owens, RVM/PIA, California limited
partnership, Robert G. Brown and William H. Bartels.
10.12* Amendment No. 2 to Employment Agreement dated as of
February 11, 1999 between PIA and Terry R. Peets
(incorporated by reference to Exhibit 10.12 to the
Company's Form 10-Q for the 2nd Quarter ended April 2,
1999).
10.13 Special Purpose Stock Option Plan (incorporated by
reference to Exhibit 10.13 of the Company's Form 10-Q
for the 2nd Quarter ended July 2, 1999.
10.14 Amendment No. 1 to Severance Agreement dated as of May
18, 1999 between the Company and Cathy L. Wood
(incorporated by reference to Exhibit 10.14 of the
Company's Form 10-Q for the 3rd Quarter ended September
30, 1999).
10.15++ Second Amended and Restated Revolving Credit, Term Loan
and Security Agreement by and among IBJ Whitehall
Business Credit Corporation with SPAR Marketing Force,
Inc., SPAR Group, Inc., SPAR, Inc., SPAR/Burgoyne Retail
Services, Inc., SPAR Incentive Marketing, Inc., SPAR
Trademarks, Inc., 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
dated as of September 22, 1999.
10.16++ Waiver and Amendment No. 1 ("Amendment") is entered into
as of December 8, 1999, by and between SPAR Marketing
Force, Inc., SPAR, Inc., SPAR/Burgoyne 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").
10.17** Service Agreement dated as of January 4, 1999 by and
between SPAR Marketing Force, Inc. and SPAR Marketing
Services, Inc.
10.18** Business Manager Agreement dated as of July 8, 1999 by
and between SPAR Marketing Force, Inc. and SPAR
Marketing Services, Inc.
21.1++ Subsidiaries of the Company
23.1++ Consent of Ernst & Young LLP
27.1++ Financial Data Schedule
</TABLE>
Page 12
<PAGE>
+ Previously filed with initial Form 10-K for the fiscal
year ended January 1, 1999.
++ Previously filed with Form 10-K for the fiscal year
ended December 31, 1999.
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to
applicable rules of the Securities and Exchange
Commission.
** Filed herewith.
(B) REPORTS ON FORM 8-K.
Form 8-K dated July 8, 1999 and filed with the Commission on July 23,
1999. Form 8-K/A dated July 8, 1999 and filed with the Commission on
September 20, 1999.
Page 13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPAR GROUP, INC.
May 1, 2000 By: /s/ Charles Cimitile
-----------------------
Charles Cimitile
Chief Financial Officer
Page 14
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of SPAR Group, Inc., as
amended. (incorporated by reference to the Company's
Registration Statement on Form S-1 (Registration No.
33-80429) as filed with the Securities and Exchange
Commission on December 14, 1995 (the "Form S-1") and to
Exhibit 3.1 to the Company's Form 10-Q for the 3rd
Quarter ended September 30, 1999).
3.2 By-laws of PIA (incorporated by reference to the Form
S-1).
4.1 Registration Rights Agreement entered into as of January
21, 1992 by and between RVM Holding Corporation.
RVM/PIA, a California Limited Partnership, The Riordan
Foundation and Creditanstalt-Bankverine (incorporated by
reference to the Form S-1).
10.1 1990 Stock Option Plan (incorporated by reference to the
Form S-1).
10.2 Amended and Restated 1995 Stock Option Plan
(incorporated by reference of Exhibit 10.2 to the
Company's Form 10-Q for the 2nd Quarter ended July 3,
1998).
10.3 1995 Stock Option Plan for Non-employee Directors
(incorporated by reference to the Form S-1).
10.4+* Employment Agreement dated as of June 25, 1997 between
PIA and Terry R. Peets (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-Q for the 2nd
Quarter ended June 30, 1997)
10.5+* Severance Agreement dated as of February 20, 1998
between PIA and Cathy L. Wood (incorporated by reference
to Exhibit 10.5 to the Company's Form 10-Q for the 1st
Quarter ended April 30, 1998)
10.6* Severance Agreement dated as of August 10, 1998 between
PIA and Clinton E. Owens (incorporated by reference to
Exhibit 10.6 to the Company's Form 10-Q for the 3rd
Quarter ended October 2, 1998)
10.7+* Amendment No. 1 to Employment Agreement dated as of
October 1, 1998 between PIA and Terry R. Peets.
10.8+* Amended and Restated Severance Compensation Agreement
dated as of October 1, 1998 between PIA and Cathy L.
Wood.
10.9+ Loan and Security Agreement dated December 7, 1998 among
Mellon Bank, N.A., PIA Merchandising Co., Inc., Pacific
Indoor Display Co. and PIA.
10.10+ Agreement and Plan of Merger dated as of February 28,
1999 among PIA, SG Acquisition, Inc., PIA Merchandising
Co., Inc., SPAR Acquisition, Inc., SPAR Marketing, Inc.,
SPAR Marketing Force, Inc., SPAR, Inc., SPAR/Burgoyne
Retail Services, Inc., SPAR Incentive Marketing, Inc.,
SPAR MCI Performance Group, Inc. and SPAR Trademarks,
Inc.
<PAGE>
10.11+ Voting Agreement dated as of February 28, 1999 among
PIA, Clinton E. Owens, RVM/PIA, California limited
partnership, Robert G. Brown and William H. Bartels.
10.12* Amendment No. 2 to Employment Agreement dated as of
February 11, 1999 between PIA and Terry R. Peets
(incorporated by reference to Exhibit 10.12 to the
Company's Form 10-Q for the 2nd Quarter ended April 2,
1999).
10.13 Special Purpose Stock Option Plan (incorporated by
reference to Exhibit 10.13 of the Company's Form 10-Q
for the 2nd Quarter ended July 2, 1999.
10.14 Amendment No. 1 to Severance Agreement dated as of May
18, 1999 between the Company and Cathy L. Wood
(incorporated by reference to Exhibit 10.14 of the
Company's Form 10-Q for the 3rd Quarter ended September
30, 1999).
10.15++ Second Amended and Restated Revolving Credit, Term Loan
and Security Agreement by and among IBJ Whitehall
Business Credit Corporation with SPAR Marketing Force,
Inc., SPAR Group, Inc., SPAR, Inc., SPAR/Burgoyne Retail
Services, Inc., SPAR Incentive Marketing, Inc., SPAR
Trademarks, Inc., 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
dated as of September 22, 1999.
10.16++ Waiver and Amendment No. 1 ("Amendment") is entered into
as of December 8, 1999, by and between SPAR Marketing
Force, Inc., SPAR, Inc., SPAR/Burgoyne 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").
10.17** Service Agreement dated as of January 4, 1999 by and
between SPAR Marketing Force, Inc. and SPAR Marketing
Services, Inc.
10.18** Business Manager Agreement dated as of July 8, 1999 by
and between SPAR Marketing Force, Inc. and SPAR
Marketing Services, Inc.
21.1++ Subsidiaries of the Company
23.1++ Consent of Ernst & Young LLP
27.1++ Financial Data Schedule
<PAGE>
+ Previously filed with initial Form 10-K for the fiscal
year ended January 1, 1999.
++ Previously filed with Form 10-K for the fiscal year
ended December 31, 1999.
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to
applicable rules of the Securities and Exchange
Commission.
** Filed herewith.
Exhibit 10.17
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of January 4, 1999 (as the
same may be supplemented, modified, amended, restated or replaced from time to
time in the manner provided herein, this "Agreement"), is by and between SPAR
MARKETING FORCE, INC. ("Marketing Force"), and SPAR MARKETING SERVICES, INC.
("SMS").
RECITALS
--------
SMS has previously provided and currently provides certain
field representative and management services to Marketing Force and others.
Marketing Force and SMS desire to memorialize the terms and conditions on which
SMS will continue to provide, on a nonexclusive basis, the services described
below on behalf of Marketing Force with respect to in-store merchandising and
related services at the stores and other locations of the customers of Marketing
Force and such of Marketing Force's affiliates as Marketing Force may from time
to time request (collectively, "Stores") within the continental United States
and Canada (the "Territory").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties hereto hereby agree as follows:
1. Term This Agreement shall commence upon the date hereof,
and shall continue through December 31, 2000, and shall be automatically renewed
and continue for additional one year periods thereafter (the "Term"), unless (a)
either party gives the other written notice at least sixty days prior to
December 31 of any year (commencing in 2000) of its desire to not renew this
Agreement, or (b) this Agreement is sooner terminated pursuant to Section 5
hereof.
2. Merchandising, Scheduling and Supervisory Services. During
the Term, SMS shall (a) stock, restock and replenish merchandise and perform
other merchandising and related activities and services requested from time to
time by Marketing Force (the "Merchandising Services") in Stores within the
Territory on behalf of Marketing Force and such of Marketing Force's affiliates
as Marketing Force may from time to time request for the customers of Marketing
Force and such affiliates, (b) operate and maintain the Internet job scheduling
and other software utilized by the field managers and personnel of SMS and the
field personnel of Marketing Force and such affiliates of Marketing Force as may
be requested from time to time by Marketing Force (the "Scheduling Services"),
and (c) manage and direct the field personnel of SMS performing the
Merchandising Services and such field personnel of Marketing Force and its
affiliates as may be requested from time to time by Marketing Force (the
"Personnel Services", and together with the Merchandising Services and
Scheduling Services, the "Services"). Any merchandise needed for the
Merchandising Services shall be delivered to the Stores (or at such other
location as may be mutually agreed upon by the parties with respect to any
particular task) from time to time by or on behalf Marketing Force or the
applicable customers, all at no cost and expense to SMS. Marketing Force and SMS
shall in good faith establish and implement mutually acceptable procedures for
the scheduling and coordination of the performance of the Services.
3. Cost Plus Compensation. Except as otherwise provided in the
second and third sentences of this Section 3, Marketing Force shall compensate
SMS for the performance of the Services in an amount equal to (a) all costs and
expenses reasonably incurred by SMS in performing the Services pursuant hereto,
including (without limitation) any and all independent contractor payments,
wages and other employment costs of all personnel, travel and other reimbursable
field and administrative out of pocket costs and expenses, purchases of
equipment and supplies, depreciation and amortization, courier, postage and
special mailing charges, rent, utilities, and other overhead (the "Services
Costs"), plus (b) four percent of the sum of the items in clause (a), above
(collectively with the Services Costs, the "Services Compensation"); provided,
however, that the Services Costs shall include any payroll and employment taxes
payable to field employees with respect to Services performed after the date
hereof. Marketing Force and SMS acknowledge and agree that it is presently
anticipated that the stockholders of SMS will enter into a Limited
Indemnification Agreement substantially in the form attached hereto as Exhibit A
(the "Indemnity Agreement") in connection with the consummation of the
transactions contemplated by the Merger Agreement (as such term is defined in
the Indemnity Agreement). Notwithstanding the provisions of this
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<PAGE>
Section 3 or any other provision of this Agreement, Marketing Force shall not be
required to compensate SMS for or otherwise pay or reimburse (and Services Costs
shall not include) any amount with respect to which the stockholders of SMS (i)
would have been required to indemnify, defend and hold harmless any Merger Party
(as such term is defined in the Indemnity Agreement) pursuant to the Indemnity
Agreement were it executed and effective as of the date of this Agreement, or
(ii) are required to indemnify, defend and hold harmless any Merger Party
pursuant to the Indemnity Agreement after it is executed and becomes effective
(collectively, "Indemnified Amounts").
4. Payments. Marketing Force shall pay to SMS by wire transfer
a monthly retainer of $250,000 (as adjusted from time to time by the mutual
agreement of the parties) on or before the first of each month on account of the
Services Compensation respecting the estimated administrative and overhead costs
of performing the Services (i.e., the Services Compensation other than the field
personnel costs). SMS shall invoice Marketing Force weekly for all field
management and personnel costs, and such invoices shall be paid by Marketing
Force by wire transfer to SMS within two business days after receipt thereof.
SMS may from time to time, and at least once per quarter shall, reconcile the
retainer and field personnel payments and invoice Marketing Force for any
shortfall, or credit Marketing Force's future invoices for any excess, in the
Services Compensation received by SMS during the calculation period. Marketing
Force shall have the right at its own cost and expense to audit such costs and
expenses from time to time upon reasonable notice to SMS, provided that the
audit shall be conducted in a manner that is not unreasonably disruptive of
SMS's business.
5. Early Termination. Notwithstanding any provision to the
contrary contained herein, either party shall have the right to terminate this
Agreement (i) for any reason or no reason upon six (6) months prior written
notice at any time, (ii) upon ten (10) business days prior written notice to the
other party in the event such other party material breaches this Agreement and
fails to cure such breach within thirty (30) days after notice of such breach
from the terminating party, or (iii) upon ten (10) business days prior written
notice to the other party in the event of any voluntary or involuntary (A)
petition or similar pleading under any bankruptcy or similar act is commenced by
or against such other party, or (B) proceeding is instituted in any court or
tribunal to declare either such other party insolvent or unable to pay its
debts.
6. Force Majeure. SMS shall not be liable for any failure to
perform or for delay in performance of its obligations caused by circumstances
beyond its reasonable control, including (without limitation) communications,
computer and power outages, fire, flood, ice and show storms, earthquake, other
natural disasters, war, insurrection, riot, sabotage, epidemic, labor disputes,
acts of God, acts of any government or agency thereof, or judicial action.
7. Independent Contractor, Non-exclusive Status, Etc.
Marketing Force acknowledges and agrees that its sole relationship with SMS is
that of independent contractor, and that no term or provision of this Agreement
or any related document is intended to create, nor shall any such term or
provision be deemed or construed to have created, any joint venture,
partnership, trust, agency or other fiduciary relationship with SMS or any of
its affiliates. No term or provision of this Agreement or any related document
is intended, or shall be deemed or construed, to in any way (a) limit the power,
authority or discretion of SMS to conduct its business in such manner as it may
choose, or (b) confer upon Marketing Force any right, power or privilege to
control, direct, approve or otherwise affect any manner chosen by SMS or any of
its affiliates to conduct its business, irrespective of whether any of the
Services may be involved in or affected by any such conduct. Without limiting
the generality of the foregoing, SMS shall have full and exclusive power,
authority and discretion at any time and from time to time (i) to hire, direct
and discharge from time to time any and all officers, employees, agents, brokers
and other representatives of SMS (including, without limitation, the its
stockholders), (ii) to engage such independent contractors, affiliates and other
subcontractors as it may deem necessary or appropriate in the performance of the
Services, (iii) to exercise or otherwise enforce any of its rights, powers,
privileges, remedies or interests in whole or in part, (iv) to delay, refrain
from or discontinue any such exercise or other enforcement, (v) to perform the
same or similar services for others and pursue any and all other continuing, new
or other business opportunities of any nature or description, which may include
(without limitation,) one or more of the business activities engaged in by
Marketing Force or its affiliates or aspects thereof, whether independently or
for or with other persons, and irrespective of location, and (vi) to allocate
the time and attention and the other resources of SMS among the Services and its
various other activities, provided that such allocation does not adversely
affect the performance of SMS hereunder in any material respect, in each case
without notice to Marketing Force (except as otherwise expressly required
hereunder), for any reason or no reason whatsoever and whether intentionally or
otherwise. Marketing Force shall not be required to use SMS exclusively for the
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Doc. No. 342441
<PAGE>
provision of Services in any Stores or otherwise at any time and may purchase
Services from any affiliate or other person without limitation or restriction of
any kind.
8. Indemnification. (a) Marketing Force, its affiliates and
their respective officers, employees, independent contractors, agents, brokers
and other representatives (a "MF Indemnified Person") each shall be indemnified,
reimbursed and held harmless by SMS upon demand, and defended at the expense of
SMS with counsel selected by SMS (and reasonably acceptable to Marketing Force),
from and against any and all claims, liabilities, expenses (including, without
limitation, the disbursements, expenses and reasonable fees of their respective
attorneys) and other losses that may be imposed upon, incurred by or asserted
against any MF Indemnified Person resulting from, arising out of or directly or
indirectly related to any Service or other activity performed by SMS or any of
its representatives or any misrepresentation, omission, breach, default or
wrongdoing by SMS or any of its representatives; in each case other than to the
extent occasioned by the gross negligence or willful misconduct of any MF
Indemnified Person as finally determined pursuant to applicable law by a
governmental authority having jurisdiction.
(b) SMS, its affiliates and their respective officers,
employees, independent contractors, agents, brokers and other representatives (a
"SMS Indemnified Person") each shall be indemnified, reimbursed and held
harmless by Marketing Force upon demand, and defended at the expense of
Marketing Force with counsel selected by Marketing Force (and reasonably
acceptable to SMS), from and against any and all claims, liabilities, expenses
(including, without limitation, the disbursements, expenses and reasonable fees
of their respective attorneys) and other losses that may be imposed upon,
incurred by or asserted against any SMS Indemnified Person resulting from,
arising out of or directly or indirectly related to any Service or other
activity performed substantially in accordance with the directions of Marketing
Force or any of its representatives or any product defect in or other condition
of any merchandise provided or any misrepresentation, omission, breach, default
or wrongdoing by Marketing Force or any of its representatives, but excluding
any Indemnified Amounts; in each case other than to the extent occasioned by the
gross negligence or willful misconduct of any SMS Indemnified Person as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction.
9. Successors and Assigns; Assignment. This Agreement and each
related document shall be binding upon and inure to the benefit of the
successors, permitted assigns and legal representatives of each party
(including, without limitation, any assignee of substantially all of the
business or assets of any party or any successor by merger). Neither party may
assign any of its rights or obligations under this Agreement or any related
document to any other person without the consent of the other party; provided,
however, that (i) either party may assign its rights and obligations hereunder
in whole or in part to any of its affiliates (without, however, relieving the
assignor of any of its obligations hereunder) by giving the other party a copy
of such assignment, (ii) SMS acknowledges and agrees that Marketing Force may
request (for its account hereunder) that SMS provide services for affiliates of
Marketing Force without the need to formally assign any rights or obligations of
Marketing Force to such affiliates, and (iii) nothing in this Section is
intended, or shall be deemed or construed, to in any way limit the use of
independent contractors as field representatives or managers by SMS.
[END OF PAGE]
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Doc. No. 342441
<PAGE>
10. Counterparts, Notices, Governing Law, Amendments, Etc.
This Agreement shall be effective on the date as of which this Agreement shall
be executed and delivered by the parties hereto. This Agreement may be executed
in two or more counterpart copies of the entire document or of signature pages
to the document, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding upon all of the parties hereto. All notices that are required
or otherwise given in connection with this Agreement shall be in writing, shall
be given to a party at the address set forth below (or as most recently
specified by it to the other party in writing) by personal delivery, United
States express or certified mail, return receipt requested, or national
overnight courier, in each case with postage or delivery prepaid, and shall be
deemed to have been given on the day it was delivered or refused. This Agreement
and all related documents shall be governed by and construed in accordance with
the applicable laws pertaining, in the State of New York (other than those that
would defer to the substantive laws of another jurisdiction). The headings
contained in this Agreement or any related document are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement or any
related document. Each and every supplement or modification to or amendment or
restatement of this Agreement or any related document shall be in writing and
signed by all of the parties hereto, and each and every waiver of, or consent to
any departure from, any term or provision of this Agreement or any related
document shall be in writing and signed by each affected party hereto. This
Agreement and the other Merger Documents contain the entire agreement of the
parties and supersede all other representations, warranties, agreements and
understandings, oral or otherwise, among the parties with respect to the matters
contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
SPAR MARKETING SERVICES, INC., SPAR MARKETING FORCE, INC.
a Nevada corporation an Nevada corporation
By: /s/ Robert G. Brown By:/s/ Robert G. Brown
---------------------------------- ----------------------------------
Robert G. Brown Robert G. Brown
Chairman, Chief Executive Officer, Chairman, Chief Executive Officer,
and President and President
Doc. No. 342441
Exhibit 10.18
BUSINESS MANAGER AGREEMENT
--------------------------
INTRODUCTION
------------
THIS BUSINESS MANAGER AGREEMENT, dated as of July 8, 1999 (as
the same may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided herein, this "Agreement"), is by and between SPAR
INFOTECH, INC., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591 ("Infotech"), SPAR MARKETING
FORCE, INC., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591 ("Marketing Force"), and SPAR
MARKETING SERVICES, INC., a Nevada corporation currently having an address at
303 South Broadway, Suite 140, Tarrytown, New York 10591 ("SMS"). The above
entities are sometimes referred to herein individually as a "Party" and
collectively as the "Parties".
RECITALS
--------
The efforts of the Parties prior to the date of this Agreement
resulted in the creation of certain Confidential Information, Software and
Program Documentation (collectively referred to herein as the "Joint Works").
The Parties have determined that it is in their best interests to resolve any
existing or potential disputes concerning their respective rights in the Joint
Works, all upon the terms and provisions and subject to the conditions set forth
in this Agreement.
AGREEMENT
---------
In consideration of the foregoing, the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration (the
receipt and adequacy of which is hereby acknowledged by the Parties), the
Parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Each use in this Agreement of a neuter
pronoun shall be deemed to include references to the masculine and feminine
variations thereof, and vice versa, and a singular pronoun shall be deemed to
include a reference to the plural variation thereof, and vice versa, in each
case as the context may permit or require. As used in this Agreement, the
following capitalized terms and non-capitalized words and phrases shall have the
meanings respectively assigned to them below, which meanings shall be applicable
equally to the singular and plural forms of the terms so defined:
(a) "Business Competitive With Infotech" shall mean any
substantial business activity in collecting, analyzing and/or disseminating
scanner data, ex-factory shipment data and/or other similar information.
(b) "Business Competitive With Marketing Force" shall mean any
substantial business activity conducted by any person that is competitive with
any substantial business activity conducted by any SPAR Company or PIA Company
at the Merger Effective Time (whether or not such person's activity is actually
conducted in competition with any SPAR Company or PIA Company), excluding,
however, any Business Competitive With Infotech (whether or not so conducted by
any SPAR Company or PIA Company).
(c) "Confidential Information" includes all field and file
definitions and source code relating to the Software and the Program
Documentation (as each are hereinafter defined), including (without limitation)
the designs, methods, layouts, processing procedures, programming techniques
used or employed by the Parties, including combinations thereof, in conjunction
therewith, and encompass interactive data entry, file handling, report
generation and all other aspects of operation.
(d) "Merger Effective Time" shall mean the "Effective Time"
under (and as defined in) the Agreement and Plan of Merger dated as of February
28, 1999, among the SPAR Companies and the PIA Companies (which is the time the
merger thereunder takes effect and the
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<PAGE>
SPAR Companies and PIA Companies come under common control), as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein.
(e) "PIA Company" and "PIA Companies" shall respectively mean
any one or more of PIA MERCHANDISING SERVICES, INC., a Delaware corporation, SG
ACQUISITION, INC., a Nevada corporation (which is merging into SPAR Acquisition,
Inc.), PIA MERCHANDISING CO., INC., a California corporation, and their
respective subsidiaries as of the Merger Effective Time.
(f) "Program Documentation" means the user manuals, handbooks
and other written materials relating to the Software, and any subsequent updates
or revisions to such scheduling software.
(g) "Representative" of any Party shall mean any of its
directors, officers, employees, attorneys, heirs, executors, administrators, or
agents, any of such Party's sublicensees, affiliates, successors and assigns, or
any of their respective directors, officers, employees, attorneys, heirs,
executors, administrators, or agents.
(h) "Software" means the application software program(s)
respecting the "Business Manager" Internet scheduling software consisting of
executable object code programs for such scheduling software and related screen
formats programmed to operate on the systems of the Parties, and any subsequent
updates or revisions to such scheduling software.
(i) "SPAR Company" and "SPAR Companies" shall respectively
mean any one or more of SPAR ACQUISITION, INC., a Nevada corporation, SPAR
MARKETING, INC., a Delaware corporation, SPAR MARKETING, INC., a Nevada
corporation, SPAR MARKETING FORCE, INC., a Nevada corporation, SPAR, INC., a
Nevada corporation, SPAR/BURGOYNE RETAIL SERVICES, INC., an Ohio corporation,
SPAR INCENTIVE MARKETING, INC., a Delaware corporation, SPAR MCI PERFORMANCE
GROUP, INC., a Delaware corporation, and SPAR TRADEMARKS, INC., a Nevada
corporation.
Section 2. THE JOINT WORKS; FUTURE DEVELOPMENT; SUBLICENSES;
LIMITS ON USE.
(a) The Parties as Co-Owners of the Joint Works. In
consideration for the promises made to it under this Agreement, each Party
hereby grants and conveys to the other any and all right, title and interest in
and to the Joint Works that it may have as may be required to render any other
Party a co-owner of the Joint Works. Each party hereby acknowledges and agrees
that each party is now and at all times has been a co-owner of all right, title
and interest in and to the Joint Works, including (without limitation), the
United States and international copyright interests therein, and any and all
moral rights in the Joint Works recognized by applicable law, such that the
Parties each has and shall each continue to have, for any and all purposes, the
right to transfer, develop, license, control and otherwise exploit the Joint
Works, in whole or in any part, as each of them may see fit, in any and all
media subject to the terms and conditions set forth in this Agreement. Each
party covenants and agrees that it shall in all future publications of the Joint
Works, refer to its author as "SPAR Infotech, Inc., SPAR Marketing Force, Inc.
and SPAR Marketing Services, Inc." and state its copyright as "(C) [Date of
Publication] SPAR Infotech, Inc., SPAR Marketing Force, Inc. and SPAR Marketing
Services, Inc." "All rights reserved."
(b) Waiver of Claims and Rights of Participation and
Accounting. Each of the Parties hereby knowingly and intentionally waives
whatever claims it may now have or may ever have against the other Parties and
their respective Representatives for any claim related to rights of exploitation
of the Joint Works, including (without limitation) claims for authorship or
copyright infringement. Each of the Parties knowingly and intentionally waives
any and all claims or rights that it may have or may ever have against the other
Parties and their respective Representatives for
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<PAGE>
any right of participation in, or accounting for, the revenues that the other
party may derive from its use or exploitation of the Joint Works, in whole or in
part, without limitation.
(c) Future Development. The Parties acknowledge and agree that
any Party may engage any other Party from time to time to provide programming
services, system work and other assistance in developing, revising and improving
the Software and/or the Program Documentation, which shall be deemed and
construed to be for the benefit of all of the Parties. The Parties agree that
their respective contributions to all such improvements, revisions and
developments shall be included within the scope of the term "Software" and the
term "Program Documentation," respectively, as such terms are used in this
Agreement and shall not be the sole property of any Party hereto.
(d) Sublicenses. Each Party from time to time may add one or
more subsidiaries or affiliates (but only those under common ownership and
control with the Parties) as a sublicensee under this Agreement (each a
"Sublicensee" and collectively "Sublicensees"). Each Sublicensee hereby assumes
and agrees to be bound by the terms, provisions and conditions as set forth in
this Agreement as if it were a "Party" hereunder. In the event the control or
ownership of any Sublicensee, its business or substantially all of its assets
are sold or transferred so that such Sublicensee, business or assets cease to be
under common ownership and control with the sublicensing Party, such subsidiary
or affiliate shall automatically cease to be a Sublicensee hereunder from and
after such sale or transfer, without, however, relieving or otherwise affecting
any of the obligations of such former Sublicensees with respect to its
obligations with respect to actions or events arising prior to such sale or
transfer.
(e) Certain Limits on Use by Parties. Neither Infotech nor any
of its Sublicensees shall use the Software or the Program Documentation in any
material respect in any Business Competitive With Marketing Force; and neither
Marketing Force nor SMS nor any of their respective Sublicensees shall use the
Software or the Program Documentation in any material respect in any Business
Competitive With Infotech. The Parties acknowledge and agree that such
limitation shall not preclude any Party or its Sublicensees from using the
Software and the Program Documentation for any other purpose whatsoever (subject
to the licensing limitations of Section 5 hereof).
(f) No Unpermitted Users. No Party shall cause, suffer or
permit any of its affiliates or cause or enable any other person to use the
Software or the Program Documentation in any material respect unless such person
is a permitted Licensee or Sublicensee hereunder.
Section 3. TERM. The term of this Agreement shall be
perpetual.
Section 4. MUTUAL EXCULPATION AND RELEASE. No Party nor any of
its Representatives shall incur any liability to any other Party or any of its
Representatives for any acts or omissions arising out of or related directly or
indirectly to any of the Software, Program Documentation or Confidential
Information, any license, use or application thereof, or any claims or actions
(including, without limitation, claims for malfunction or infringement) and any
resulting losses or expenses with respect thereto of any Party or any of their
respective Representatives of any kind or nature whatsoever, whether known or
unknown, in law or equity or otherwise; and each Party (on behalf of itself and
each of its Representatives) hereby expressly waives any and all such claims,
actions, losses and expenses against each of the releasing Party and its
Representatives ever had, now have or hereafter can, shall or may have, against
the each other Party and its Representatives by reason of any matter, cause or
thing whatsoever from the beginning to the end of the world; provided, however,
that the foregoing release shall not apply to the Parties' respective
obligations set forth in this Agreement.
Section 5. THIRD PARTY LICENSING.. Subject to the terms and
conditions herein contained, each Party (but not its Sublicensees) may grant
licenses to make, use or sell the
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Software and Program Documentation (a "License") to one or more third parties
(each a "Licensee" and collectively "Licensees") on such terms and conditions as
such Party may elect, provided, however, that (a) Infotech shall not grant any
License to make, use or sell the Software or the Program Documentation to any
Licensee whose business is a Business Competitive With Marketing Force; and (b)
neither Marketing Force nor SMS shall grant any License to make, use or sell the
Software or the Program Documentation to any Licensee whose business is a
Business Competitive With Infotech.
Section 6. REPRESENTATIONS AND WARRANTIES RESPECTING THE
PARTIES. Each Party represents and warrants to the each of the other Parties
that, as of the date hereof that: (a) such Party is a corporation duly
incorporated, validly existing and in good standing under the laws its state of
incorporation; (b) such Party has the legal capacity, power, authority and
unrestricted right to execute and deliver this Agreement and to perform all of
its obligations hereunder; (c) the execution and delivery by such Party of this
Agreement and the performance by such Party of all of its obligations hereunder
will not violate or be in conflict with any term or provision of (i) any
applicable law, (ii) any judgment, order, writ, injunction, decree or consent of
any court or other judicial authority applicable to such Party or any material
part of such Party's assets and properties, (iii) any of its organizational
documents, or (iv) any material agreement or document to which such Party is a
party or subject or that applies to any material part of such Party's assets and
properties; (d) no consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition precedent, concurrent or subsequent to or in connection
with the due and valid execution, delivery and performance by such Party of this
Agreement or the legality, validity, binding effect or enforceability of any of
the terms and provisions of this Agreement; and (e) this Agreement is a legal,
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms and provisions.
Section 7. RELATIONSHIP AMONG THE PARTIES. No term or
provision of this Agreement is intended to create, nor shall any such term or
provision be deemed or construed to have created, any employment, joint venture,
partnership, trust, agency or other fiduciary relationship between the Parties
and no Party shall be considered as an employee, joint venturer, partner,
trustee, agent or other representative for or of any other Party. No Party shall
not be entitled or have any power or authority to bind or obligate any other
Party in any manner whatsoever or to hold itself out as an employee, joint
venturer, partner, trustee, agent or other representative of any other Party.
Section 8. WAIVER OF JURY TRIAL. In any action, suit or
proceeding in any jurisdiction brought against any Party by any other Party,
each Party hereby irrevocably waives trial by jury.
Section 9. CONSENT TO NEW YORK JURISDICTION AND VENUE, ETC.
Each Party hereby consents and agrees that the Supreme Court of the State of New
York for the County of Westchester and the United States District Court for the
Southern District of New York each shall have personal jurisdiction and proper
venue with respect to any dispute between the Parties; provided that the
foregoing consent shall not deprive any Party of the right in its discretion to
voluntarily commence or participate in any other forum having jurisdiction and
venue. In any dispute, no Party will raise, and each Party hereby expressly and
irrevocably waives, any objection or defense to any such jurisdiction as an
inconvenient forum.
Section 10. NOTICES. Except as otherwise expressly provided,
any notice, request, demand or other communication permitted or required to be
given under this Agreement shall be in writing, shall be sent by one of the
following means to the addressee at the address set forth above (or at such
other address as shall be designated hereunder by notice to the other parties
and persons receiving copies, effective upon actual receipt) and shall be deemed
conclusively to have been given: (i) on the first business day following the day
timely deposited with Federal
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Express (or other equivalent national overnight courier) or United States
Express Mail, with the cost of delivery prepaid or for the account of the
sender; (ii) on the fifth business day following the day duly sent by certified
or registered United States mail, postage prepaid and return receipt requested;
or (iii) when otherwise actually received by the addressee on a business day (or
on the next business day if received after the close of normal business hours or
on any non-business day).
Section 11. FURTHER ASSURANCES. Each Party agrees to do such
further acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the other Party from time to time
reasonably may request in order to effectuate the purpose and the terms and
provisions of this Agreement, each in such form and substance as may be
acceptable to the Parties. Without limiting the generality of the foregoing,
each Party hereto will provide each other Party hereto, at such other Party's
request and expense, with copies of the source or object code version of the
Software and any and all related documentation to enable such requesting Party
to develop and enhance the Software and the Program Documentation.
Section 12. INTERPRETATION, HEADINGS, SEVERABILITY, ETC. The
Parties acknowledge and agree that the terms and provisions of this Agreement
have been negotiated, shall be construed fairly as to all parties hereto, and
shall not be construed in favor of or against any party. The section headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement. In the event that any term or
provision of this Agreement (other than Section 1 hereof) shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by a governmental authority having jurisdiction and
venue, that determination shall not impair or otherwise affect the validity,
legality or enforceability (a) by or before that authority of the remaining
terms and provisions of this Agreement, which shall be enforced as if the
unenforceable term or provision were deleted or reduced pursuant to the next
sentence, as applicable, or (b) by or before any other authority of any of the
terms and provisions of this Agreement. If any term or provision of this
Agreement is held to be unenforceable because of the scope or duration of any
such provision, the Parties agree that any court making such determination shall
have the power, and is hereby requested, to reduce the scope or duration of such
term or provision to the maximum permissible under applicable law so that said
term or provision shall be enforceable in such reduced form.
Section 13. SUCCESSORS AND ASSIGNS; ASSIGNMENT; INTENDED
BENEFICIARIES. Whenever in this Agreement reference is made to any person, such
reference shall be deemed to include the successors, assigns, heirs and legal
representatives of such person, and, without limiting the generality of the
foregoing, all representations, warranties, covenants and other agreements made
by or on behalf of any Party in this Agreement shall inure to the benefit of the
successors, assigns, heirs and legal representatives of each other Party;
provided, however, that nothing herein shall be deemed to authorize or permit
any Party to assign any of its rights or obligations under this Agreement to any
other person, and each Party covenants and agrees that it shall not make any
such assignment, except as otherwise provided in Section 5 hereof or with the
prior written consent of the other Parties. The representations, warranties and
other terms and provisions of this Agreement are for the exclusive benefit of
the Parties hereto, and, except as otherwise expressly provided herein, no other
person (including creditors of any party hereto) shall have any right or claim
against any Party by reason of any of those terms and provisions or be entitled
to enforce any of those terms and provisions against any Party.
Section 14. NO WAIVER BY ACTION, ETC. Any waiver or consent
respecting any representation, warranty, covenant or other term or provision of
this Agreement shall be effective only in the specific instance and for the
specific purpose for which given and shall not be deemed, regardless of
frequency given, to be a further or continuing waiver or consent. The failure or
delay of a Party at any time or times to require performance of, or to exercise
its rights with respect to, any representation, warranty, covenant or other term
or provision of this Agreement in
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no manner (except as otherwise expressly provided herein) shall affect its right
at a later time to enforce any such provision. No notice to or demand on any
Party in any case shall entitle such Party to any other or further notice or
demand in the same, similar or other circumstances. All rights, powers,
privileges, remedies and other interests of each Party hereunder are cumulative
and not alternatives, and they are in addition to and shall not limit (except as
otherwise expressly provided herein) any other right, power, privilege, remedy
or other interest of such Party under this Agreement or applicable law.
Section 15. COUNTERPARTS; NEW YORK GOVERNING LAW; AMENDMENTS;
ENTIRE AGREEMENT. This Agreement shall be effective as of the date first written
above when executed by all of the Parties. This Agreement may have been executed
in two or more counterpart copies of the entire document or of signature pages
to the document, each of which may be executed by one or more of the Parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding upon all of the Parties hereto. This Agreement shall be
governed by and construed in accordance with the applicable laws pertaining in
the State of New York (other than those that would defer to the substantive laws
of another jurisdiction). Each and every modification and amendment of this
Agreement shall be in writing and signed by all of the Parties, and each and
every waiver of, or consent to any departure from, any representation, warranty,
covenant or other term or provision of this Agreement shall be in writing and
signed by each affected Party. This Agreement contains the entire agreement of
the parties and supersedes all prior and other representations, agreements and
understandings (oral or otherwise) between the parties with respect to the
matters contained herein.
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[Signature Page to Business Manager Agreement]
IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement as of the date first above written.
SPAR INFOTECH, INC.
By:/s/ Robert G. Brown
-----------------------------
Robert G. Brown
Chief Executive Officer
SPAR MARKETING FORCE, INC.
By:/s/ Robert G. Brown
-----------------------------
Robert G. Brown
Chief Executive Officer
SPAR MARKETING SERVICES, INC.
By: /s/ Robert G. Brown
-----------------------------
Robert G. Brown
Chief Executive Officer
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