SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPAR GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE>
SPAR GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 3, 2000
TO THE STOCKHOLDERS OF SPAR GROUP, INC.
The 2000 Annual Meeting of Stockholders (the "2000 Annual Meeting") of
SPAR Group, Inc. (f/k/a PIA Merchandising Services, Inc.) (the "Company" or
"SPAR"), will be held at 10:00 a.m., Eastern Standard Time, on August 3, 2000,
at 580 White Plains Road, Tarrytown, NY 10591, for the following purposes:
1. To elect three Directors of the Company to serve during the ensuing
year and until their successors are elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record at the close
of business on June 16, 2000 will be entitled to notice of and to vote at the
2000 Annual Meeting or any adjournment or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1999 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
CHARLES CIMITILE
SECRETARY
July 14, 2000
Tarrytown, New York
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YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO
BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING. REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD
BE ADDRESSED TO CHARLES CIMITILE, SECRETARY AND CHIEF FINANCIAL OFFICER, AT THE
OFFICES OF THE COMPANY: SPAR GROUP, INC., 580 WHITE PLAINS ROAD, TARRYTOWN, NY
10591.
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<PAGE>
SPAR GROUP, INC.
580 WHITE PLAINS ROAD
TARRYTOWN, NY 10591
---------------------------
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 3, 2000
---------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of SPAR Group, Inc. (f/k/a
PIA Merchandising Services, Inc.), a Delaware corporation (the "Company" or
"SPAR"), for use at the 2000 Annual Meeting of Stockholders (the "2000 Annual
Meeting") to be held on Thursday, August 3, 2000, at 10:00 a.m., Eastern
Standard Time, at the principal office of the Company located at 580 White
Plains Road, Tarrytown, New York, 10591, and any adjournment or postponement
thereof. This Proxy Statement and the form of proxy to be utilized at the 2000
Annual Meeting were mailed or delivered to the stockholders of the Company on or
about July 14, 2000.
MATTERS TO BE CONSIDERED
The 2000 Annual Meeting has been called to (1) elect three Directors of
the Company to serve during the ensuing year and until their successors are
elected and qualified, (2) ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the year ending December 31, 2000, and (3)
transact such other business as may properly come before the meeting or any
adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on June 16, 2000 as the
record date (the "Record Date") for the determination of stockholders entitled
to vote at the 2000 Annual Meeting and any adjournment or postponement thereof.
As of the Record Date, there were outstanding 18,175,800 shares of the Company's
common stock, $.01 par value (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the 2000
Annual Meeting. As to all matters, each stockholder is entitled to one vote for
each share of Common Stock held. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. The Director nominees who receive the greatest number
of votes at the 2000 Annual Meeting will be elected to the Board of the Company.
Stockholders are not entitled to cumulate votes. Votes against a candidate and
votes withheld have no legal effect. In matters other than the election of
Directors, abstentions are counted as votes against in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
All proxies that are properly completed, signed and returned prior to
the 2000 Annual Meeting will be voted. Any proxy given by a stockholder may be
revoked at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it, by delivering a duly executed proxy bearing a
later date or by the stockholder attending the 2000 Annual Meeting and voting
his or her shares in person.
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
Three Directors are to be elected at the 2000 Annual Meeting to serve
until the next Annual Meeting of Stockholders and until their respective
successors have been elected and qualified. In the absence of instructions to
the contrary, proxies covering shares of Common Stock will be voted in favor of
the election of each of Mr. Robert G. Brown, Mr. William H. Bartels and Mr.
Robert O. Aders. In the event that any nominee for election as Director should
become unavailable to serve, it is intended that votes will be cast, pursuant to
the enclosed proxy, for such substitute nominee as may be nominated by the
Company. Management has no present knowledge that any of the persons named will
be unavailable to serve.
No arrangement or understanding exists between any nominee and any
other person or persons pursuant to which any nominee was or is to be selected
as a Director or nominee. None of the nominees has any family relationship to
any other nominee or to any other executive officer of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
IDENTIFIED ABOVE.
INFORMATION CONCERNING NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the incumbent Directors, of
whom Messrs. Brown, Bartels and Aders are nominees for election as Directors.
The Board of Directors has fixed at five the number of directors that will
constitute the board for the ensuing year. However, only three directors will be
elected at this time. The Board is actively seeking additional independent
directors to fill the remaining vacancies. Each nominee has consented to being
named in this Proxy Statement as a nominee for Director and has agreed to serve
as a Director if elected.
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The following table sets forth certain information in connection with
each current or nominee for director of the Company. All such information has
been furnished to the Company by such directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SPAR GROUP, INC.
----------------------------- --------- ------------------------------
<S> <C>
Robert G. Brown 57 Chairman, Chief Executive Officer, President
and Director
William H. Bartels 56 Vice Chairman and Director
Robert O. Aders(2) 73 Director
J. Christopher Lewis(1) (2) 44 Director
</TABLE>
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(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 of the SPAR Marketing Companies
(as defined below) with PIA Merchandising Services, Inc. (the "Merger"). Mr.
Brown served as the Chairman, President and Chief Executive Officer of the SPAR
Marketing Companies (SPAR/Burgoyne Retail Services, Inc. ("SBRS") since 1994,
SPAR, Inc. ("SINC") since 1979, SPAR Marketing, Inc. ("SMNEV") since November
1993, and SPAR Marketing Force, Inc. ("SMF") since SMF acquired its assets and
business in 1996) (SBRS, SINC, SMNEV and SMF may be referred to collectively as
the "SPAR Marketing Companies").
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.
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<PAGE>
Robert O. Aders serves as a Director of the Company and has done so
since July 8, 1999 (the effective date of the Merger). 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, Coinstar, Inc., Source Information
Management Co. and Telepanel Systems, Inc.
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., Emergent Information
Technologies, Inc., California Beach Restaurants, Inc., and several
privately-held companies. Mr. Lewis is not standing for re-election to the Board
of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Robert G. Brown, a Director, the Chairman, Chief Executive Officer
and President 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 are either the sole or
partial owners and executive officers and directors of each of SP/R, Inc., WR
Services, Inc., SR Services, Inc., IDS SPAR Pty, Ltd. (Australia), SPAR Ltd.,
(U.K.), Garden Island, Inc., SPAR Marketing Pty, Ltd. (Australia), and Infinity
Insurance Ltd. ("Infinity").
SMS and SMSI (through SMS) provided field representatives (through its
independent contractor field force) and field management services to the SPAR
Marketing Companies at a total cost of $6.2 million in the fiscal year ended
March 31, 1998, and at a total cost of $4.8 million to the SPAR Marketing
Companies for the nine months ended December 31, 1998, and $8.5 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 representatives 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
services plus 4%. However, SMS may not charge any SPAR Company for any past
taxes or associated costs for which each of Robert G. Brown and William H.
Bartels have agreed to indemnify SPAR.
SMS is currently engaged in a dispute with the Internal Revenue Service
over the independent contractor status of its field personnel. SMS has been
audited by the Internal Revenue Service with respect to whether certain field
representatives should be classified as independent contractors or employees for
federal employment tax purposes for the tax years ended December 31, 1991 and
1992. The dispute has worked its way through the Internal Revenue Service
appeals process and SMS intends to file a petition with the Federal District
Court. If it is found that the field representatives should be classified as
employees, SMS could be liable for employment taxes and related penalties and
interest. The outcome of this dispute and the amount of the contingent liability
are not determinable at this time. If a liability is assessed and SMS is unable
to pay, the Internal Revenue Service may seek to collect all or a portion of the
tax liability from the Company due to its common control and business
relationship with SMS. The Company is not currently a party to this lawsuit.
However, an unfavorable outcome could impact the costs of future operations. The
Company believes an adequate provision for the contingent liability has been
made in the financial statements as of December 31, 1999 and 1998. Similar
claims have been filed against SMS by certain states. However, SMS is confident
defending its position against these state claims because of prior success in
several states, and SMS will continue to vigorously defend its position against
any future state claims that may arise. For example, SMS prevailed on a similar
claim by the State of California, which had instituted administrative
proceedings against SMS. The administrative law judge agreed with SMS's
classification of field representatives as independent
-3-
<PAGE>
contractors. The State of California has declined to file a further appeal and
has refunded payments made by SMS under protest during the appeal process.
SIT provided computer programming, intellectual property and internet
consulting and other management 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.
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, SPAR Trademarks, Inc. ("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.
Through the services of Infinity Insurance, Ltd. the Company purchased
insurance coverage for its casualty and property insurance risk, for
approximately $959,000 for the year ended December 31, 1999, $375,000 for the
nine months ended December 31, 1998 and $318,000 during the year ended March 31,
1998.
In the event of any material dispute in the business relationships
between SPAR, SMS, SMSI, SIT, or Infinity 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.
THE BOARD OF DIRECTORS
COMMITTEES
The standing committees of the Board are the Audit Committee (the
"Audit Committee") and the Compensation Committee (the "Compensation
Committee"). SPAR does not have a standing nominating committee or any committee
performing the functions thereof.
The Audit Committee, which during 1999 consisted of Messrs. Aders and
Lewis, met two times after the Merger (from July 8, 1999 to December 31, 1999)
and prior to the Merger consisted of Messrs. Patrick C. Haden and Joseph H.
Coulombe who met once during the period from January 1, 1999 to July 8, 1999.
The Audit Committee makes recommendations concerning the engagement of
independent public
accountants; reviews with the independent public accountants the plans for and
scope of the audit, the audit procedures to be utilized and results of the
audit; approves the professional services provided by the independent public
accountants; reviews the independence of the independent public accountants; and
reviews the adequacy and effectiveness of the Company's internal accounting
controls.
The Compensation Committee, which during 1999 consisted of Messrs.
Patrick W. Collins and J. Christopher Lewis, met one time after the Merger (from
July 8, 1999 to December 31, 1999) and prior to the Merger consisted of Messrs.
Patrick C. Haden and Patrick W. Collins who met twice during the period from
January 1, 1999, to July 8, 1999. The Compensation Committee determines
compensation for the Company's executive officers and administers the Company's
stock incentive plans. See "Report of the Compensation Committee of the Board of
Directors."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither 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 the
Company. No executive officer of the Company serves as a member of the Board of
Directors or compensation committee of any other entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
-4-
<PAGE>
MEETINGS
After the Merger, during the year ended December 31, 1999, the Board
held five meetings and took various actions by written consent. Prior to the
Merger, during the year ended December 31, 1999, the Board held five meetings
and took various actions by written consent. Each incumbent Director attended
(in person or via conference call) at least 75% of the aggregate of (i) the
total number of meetings held by the Board after the Merger during 1999 and (ii)
the total number of meetings held by all committees of the Board during that
period within which he was a Director or member of such committee of the Board.
Each Director is elected to hold office until the next annual meeting of
stockholders and until his respective successor is elected and qualified.
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 meetings. During 1999, Mr. Aders was granted an option to purchase
10,000 shares of SPAR's common stock at an exercise price of $5.00 per share
pursuant to the 1995 Plan (as hereinafter defined). 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 pursuant to
the 1995 Stock Option Plan for Nonemployee Directors (the "Nonemployee Directors
Plan"). These options have a one-year vesting period. Compensation for each
outside director consists of $3,000 per meeting they attend, up to four meetings
per year and an additional $500 per meeting for special meetings, including
telephonic meetings. All travel related expenses for these meetings will also be
reimbursed.
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. Each option vests and becomes
exercisable in full at the next annual meeting of stockholders. 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. The exercise price is immediately payable upon exercise of the
option. Such payment may be made in cash, by check or in such other form of
lawful consideration (including promissory notes or shares of Common Stock then
held) as the Compensation Committee may approve from time to time.
Options granted under the Nonemployee Directors Plan are
non-transferable except to immediate family members, a trust for their benefit
or a partnership in which such family members are the only partners. Such
options generally expire three months after the termination of any optionee's
service to the Company. In general, if an optionee is permanently disabled or
dies during his service to the Company, such option may be exercised up to six
months after such disability or death; provided, however, that the Compensation
Committee may in its discretion extend the period for up to five years, provided
that such extension does not extend the period during which the option may be
exercised beyond the original term of the option.
Upon the dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation in which the Company does not survive,
the Nonemployee Directors Plan and each outstanding option granted thereunder
shall terminate; provided, that each optionee to whom no substitute option has
been tendered by the surviving corporation will have the right to exercise in
whole or in part any unexpired option or options issued to him, without regard
to the vesting provisions thereof.
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<PAGE>
The Board of Directors may amend or modify the Nonemployee Directors
Plan and outstanding options at any time, including but not limited to
accelerating the time at which an option may be exercised, provided that no such
amendment or modification may adversely affect the rights and obligations of the
participants with respect to their outstanding options without their consent.
The Nonemployee Directors Plan will terminate in December 2005, unless sooner
terminated by the Board.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a company will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its
officers and directors and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company's Bylaws also permit it to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the Bylaws would permit indemnification. The Company maintains director
and officer liability insurance.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company in which indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has selected Ernst & Young LLP as
independent public accountants to audit the financial statements of the Company
for 2000. Ernst & Young LLP served as the Company's independent public
accountants for 1999. Ernst & Young LLP has served as the independent public
accountants for the SPAR Marketing Companies (the acquiror of PIA Merchandising
Services, Inc., for accounting purposes) for more than the past two fiscal
years. A representative of that firm is expected to be present at the 2000
Annual Meeting, will have an opportunity to make a statement if so desired, and
will be available to respond to appropriate questions. If the stockholders do
not ratify the selection of Ernst & Young LLP, if it should decline to act or
otherwise become incapable of acting, or if its employment is discontinued, the
Audit Committee will appoint independent public accountants for 2000. Proxies
solicited by the Board will be voted in favor of ratification unless
stockholders specify otherwise.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR 2000. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS
OTHERWISE SPECIFICALLY INDICATED.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 16, 2000 by: (i) each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Company's Common Stock; (ii) each of the Company's
directors; (iii) each of the executive officers named in the Summary
Compensation Table; and (iv) the Company's directors and executive officers as a
group. Except as indicated in the footnotes to this table, the persons named in
the table, based on information provided by such persons, have sole voting and
sole investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<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) 7,577,145(2) 38.03%
Shares
Common William H. Bartels(1) 4,926,188(3) 24.72%
Shares
Common J. Christopher Lewis 162,477(4) *
Shares 300 S. Grand Avenue, Suite 2900
Los Angeles, California 90071
Common James H. Ross(1) 93,865(5) *
Shares
Common Robert O. Aders (1) 2,500(6) *
Shares
Common Richard J. Riordan 1,209,922(7) 6.07%
Shares 300 S. Grand Avenue, Suite 2900
Los Angeles, CA 90071
Common Heartland Advisors, Inc. 1,522,500(8) 7.64%
Shares 790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Common Executive Officers and Directors 12,762,175 64.05%
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.
(3) Includes 250,000 shares owned by Stella Bartels. Mr. Bartels disclaims
beneficial ownership of all such shares.
(4) 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
February 3, 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 12,000 shares issuable
upon the exercise of options held by Mr. Lewis which will vest within
60 days of the date hereof.
(5) Includes 52,665 shares issuable by in the money options as of December
31, 1999. Includes 10,000 shares issuable by options which will vest
within 60 days of the date hereof.
(6) Includes 2,500 shares issuable upon the exercise of options which will
vest within 60 days of the date hereof.
(7) All information regarding share ownership is taken from and furnished
in reliance upon the Schedule 13G, dated February 10, 2000, filed by
Richard J. Riordan with the Securities and Exchange Commission on
February 3, 2000.
(8) 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.
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<PAGE>
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages and current offices
held by all executive officers of the Company. For biographical information
regarding Robert G. Brown and William H. Bartels, see Current Members of the
Board of Directors, above.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
------------------------------- -------- ----------------------------------------------------
<S> <C> <C>
Robert G. Brown 57 Chairman, Chief Executive Officer, President and
Director
William H. Bartels 56 Vice Chairman and Director
Charles Cimitile 45 Chief Financial Officer and Secretary
James H. Ross 66 Treasurer
</TABLE>
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
position 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.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company in all capacities for the three years ended December 31,
1999, December 31, 1998 and December 31, 1997 by (i) the Company's Chief
Executive Officer, and (ii) each of the other four most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 1999 (collectively, the "Named Executive Officers").
Summary Compensation Table (1)
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- --------------------------
ALL OTHER
SECURITIES COMPEN-
FISCAL BONUS UNDERLYING SATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) ($) OPTIONS (#) (2) ($)
---------------------------- ---- ---------- --- ----------- -------
<S> <C> <C> <C>
Robert G. Brown 1999 7,500 -- 765,972 --
Chief Executive Officer, 1998 125,000 -- -- 791
Chairman of the Board, 1997 46,756 -- -- 553
President, and Director
William H. Bartels 1999 16,307 -- 471,992 --
Vice Chairman and Director 1998 75,000 -- -- 1,439
1997 85,089 -- -- 1,724
James H. Ross 1999 99,327 12,408 92,665 2,187
Treasurer 1998 80,535 1,710 -- 1,897
1997 79,290 28,665 -- 3,001
</TABLE>
------------------------
(1) For accounting purposes, the Merger is treated as an acquisition of PIA
Merchandising Services, Inc. ("Old PIA"), by the SPAR Marketing
Companies and related entities. Accordingly, these figures represent
the compensation paid by the Company since July 8, 1999, the effective
date of the Merger, and the SPAR Marketing Companies prior to that
date, but not compensation paid by Old PIA. 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
-8-
<PAGE>
was not compensation paid by the Company) and $124,558 in compensation
(including severance payments) from SPAR after the Merger.
(2) Other compensation represents the Company's 401k contribution.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each grant of
stock options made during the year ended December 31, 1999, to each of the Named
Executive Officers. No stock appreciation rights ("SAR's") were granted during
such period to such persons.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION (4)
UNDERLYING GRANTED TO EXERCISE ----------------------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION
GRANTED (#) PERIOD (%) ($/SH) DATE 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 1,830,536 2,782,331
235,996(2) 10.3 5.500 07/08/09 1,830,536 2,782,331
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 $10.00 per share.
(3) These options are fully vested at December 31, 1999.
(4) The potential realizable value is calculated based upon the term of the
option (ten years) at its time of grant. It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate, compounded annually for the entire term of the option.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR END OPTION VALUES
The following table sets forth the number and value of the exercisable
and unexercisable options held by each of the Named Executive Officers at
December 31, 1999. None of the Named Executive Officers exercised any options
during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)(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>
----------------------------
(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.
-9-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board is currently comprised of Mr.
Lewis a non-employee director, who administers the Company's executive
compensation programs and policies. The Company's executive compensation
programs are designed to attract, motivate and retain the executive talent
needed to optimize stockholder value in a competitive environment. The programs
are intended to support the goal of increasing stockholder value while
facilitating the business strategies and long-range plans of the Company.
The following is the Compensation Committee's report submitted to the
Board addressing the compensation of the Company's executive officers for 1999.
COMPENSATION POLICY
The Company's executive compensation policy is (i) designed to
establish an appropriate relationship between executive pay and the Company's
annual performance, its long-term growth objectives and its ability to attract
and retain qualified executive officers; and (ii) based on the belief that the
interests of the executives should be closely aligned with the Company's
stockholders. The Compensation Committee attempts to achieve these goals by
integrating competitive annual base salaries with (i) annual incentive bonuses
based on corporate performance and individual contribution, and (ii) stock
options through the Amended and Restated 1995 Stock Option Plan (the "1995
Plan"). The Compensation Committee believes that cash compensation in the form
of salary and performance-based incentive bonuses provides Company executives
with short-term rewards for success in operations, and that long-term
compensation through the award of stock options encourages growth in management
stock ownership which leads to expansion of management's stake in the long-term
performance and success of the Company. The Compensation Committee considers all
elements of compensation and the compensation policy when determining individual
components of pay.
EXECUTIVE COMPENSATION COMPONENTS
As discussed below, the Company's executive compensation package is
primarily comprised of three components: base salary, annual incentive bonuses
and stock options.
BASE SALARY
In establishing base salary levels for executive officer positions, the
Committee and Robert G. Brown, the Company's Chief Executive Officer, consider
levels of compensation at comparable companies, levels of responsibility and
internal issues of consistency and fairness. In determining the base salary of a
particular executive, the Committee and Mr. Brown consider individual
performance, including the accomplishment of short- and long-term objectives,
and various subjective criteria including initiative, contribution to overall
corporate performance and leadership ability. The Compensation Committee reviews
executive officer salaries annually and exercises its judgment based on all the
factors described above. No specific formula is applied to determine the weight
of each criteria
ANNUAL INCENTIVE BONUSES
The Company's executive officers are eligible for annual bonuses based
upon recommendations made by Mr. Brown (as to the other executive officers), and
the Compensation Committee (as to Mr. Brown) based upon their individual
performance and the Company's achievements of certain operating results. Amounts
of individual awards are based principally upon the results of the Company's
financial performance during the prior year. The amount of awards for senior
officers are within guidelines established by the Committee and Mr. Brown as a
result of their review of total compensation for senior management of peer
companies. The actual amount awarded, within these guidelines, will be
determined principally by the Committee's and Mr. Brown's assessment of the
individual's contribution to the Company's overall financial performance.
Consideration is also given to such factors such as the individual's successful
completion of a special project, any significant increase or decrease in the
level of the participant's ability to discharge the responsibilities of
-10-
<PAGE>
his position. Bonuses related to performance in 1998 that were paid in 1999 to
the Named Executive Officers totaled $12,408, comprising 12.5% of such officer's
base salary. See "Summary Compensation Table."
STOCK OPTIONS
Stock options encourage and reward effective management which results
in long-term corporate financial success, as measured by stock price
appreciation. Stock options covering 1,352,964 shares were granted to the
executive officers of the Company and stock options covering 807,780 shares were
granted to 129 other employees of the Company during 1999 under the 1995 Plan.
The number of options that each executive officer or employee was granted was
based primarily on the executive's or employee's ability to influence the
Company's long-term growth and profitability. The Compensation Committee
believes that option grants afford a desirable long-term compensation method
because they closely ally the interests of management with stockholder value and
that grants of stock options are the best way to motivate executive officers to
improve long-term stock market performance.
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. The
vesting provisions of options granted under the 1995 Plan are designed to
encourage longevity of employment with the Company and generally extend over a
four-year period. At December 31, 1999, options to purchase 500,256 shares were
available for grant under this plan.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The relatively low compensation paid to Mr. Robert G. Brown, the Chief
Executive Officer of the Company, during the fiscal year ended December 31,
1999, in comparison to compensation paid to chief executive officers of
comparable companies, results from such officer's request that he not receive
higher compensation. Mr. Brown and the Compensation Committee believe that,
since Mr. Brown is the largest single shareholder of the Company, his interests
and those of the other shareholders are aligned, and therefore Mr. Brown has
sufficient incentive to want to maximize shareholder value. The Compensation
Committee has granted Mr. Brown an aggregate of 765,972 options under the 1995
Plan in recognition of his contributions to the company.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) of the Internal Revenue Code (the "Code"), the
amount of compensation paid to certain executives that is deductible with
respect to the Company's corporate taxes is limited to $1,000,000 annually. It
is the current policy of the Compensation Committee to maximize, to the extent
reasonably possible, the Company's ability to obtain a corporate tax deduction
for compensation paid to executive officers of the Company to the extent
consistent with the best interests of the Company and its stockholders.
COMPENSATION COMMITTEE
J. Christopher Lewis
-11-
<PAGE>
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for
the Company, the Nasdaq Stock Market (U.S. Companies) Index and the Nasdaq
Stocks (SIC 7380-7389 U.S. Companies) Miscellaneous Business Services Index,
Russell 2000 and S&P Services (Advertising & Marketing) for the period during
which the Company's Common Stock has been registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The graph
assumes that the value of an investment in Common Stock and in each such index
was $100 on February 29, 1996 (the date the Company's Common Stock was
registered under the Exchange Act), and that all dividends have been reinvested.
The comparison in the graph below is based on historical data and is
not intended to forecast the possible future performance of the Company's Common
Stock.
COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN*
*AMONG SPAR GROUP, INC., THE NASDAQ STOCK MARKET (U.S. COMPANIES) INDEX, THE
NASDAQ STOCKS (SIC 7380-7389 U.S. COMPANIES) MISCELLANEOUS BUSINESS SERVICES
INDEX, RUSSELL 2000 AND THE S&P SERVICES (ADVERTISING & MARKETING)
[LINE GRAPH APPEARS BELOW]
*$100 INVESTED ON 3/1/96 IN STOCK OR ON 2/29/96
IN INDEX-INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
-12-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------------------------------------
3/1/96 12/31/96 12/31/97 1/1/99 7/8/99 12/31/99
<S> <C> <C> <C> <C> <C> <C>
SPAR GROUP, INC. 100.00 67.74 32.26 16.13 27.42 21.77
PEER GROUP 100.00 118.85 63.50 131.55 198.52 453.31
NASDAQ STOCK MARKET 100.00 117.93 144.49 203.75 249.99 377.68
(U.S.)
RUSSELL 2000 100.00 118.71 156.44 146.35 154.04 144.17
S & P SERVICES 100.00 104.98 153.93 279.61 343.58 444.18
(ADVERTISING &
MARKETING)
</TABLE>
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 the Common Stock (collectively, "Insiders"), to file reports of ownership
and changes in their ownership of the 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 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.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
2000 Annual Meeting. All shares represented by Company proxies will be voted in
favor of the proposals of the Company described herein unless otherwise
indicated on the form of proxy. If any other matters properly come before the
meeting, Company proxy holders will vote thereon according to their best
judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 2001
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than March 16, 2001 in such form as
required under the rules and regulations promulgated by the Securities and
Exchange Commission. Notices of stockholder proposals submitted outside the
processes of Rule 14a-18 of the Securities Exchange Act of 1934 (relating to
proposals to be presented at the meeting but not included in the Company's proxy
statement and form of proxy), will be considered untimely, and thus the
Company's proxy may confer discretionary voting authority on the persons named
in the proxy with regard to such proposals, if received after May 30, 2001.
ANNUAL REPORTS
A COPY OF THE COMPANY'S 1999 ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 1999, IS BEING MAILED TO EACH STOCKHOLDER OF RECORD TOGETHER WITH THIS PROXY
STATEMENT.
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AS AMENDED BY
ITS REPORT ON FORM 10-K/A (AMENDMENT NO. 1) AND FORM 10-K/A (AMENDMENT NO. 2). A
COPY OF THIS REPORT IS INCLUDED IN THE COMPANY'S ANNUAL REPORT. THE ANNUAL
REPORT, FORM 10-K AND FORM 10-K/A ARE NOT PART OF THE COMPANY'S SOLICITING
MATERIAL.
-13-
<PAGE>
PROXIES AND SOLICITATION
The proxy accompanying this Proxy Statement is solicited on behalf of
the Company's Board of Directors. Proxies for the 2000 Annual Meeting are being
solicited by mail directly and through brokerage and banking institutions. The
Company will pay all expenses in connection with the solicitation of proxies. In
addition to the use of mails, proxies may be solicited by Directors, officers
and regular employees of the Company (who will not be specifically compensated
for such services) personally or by telephone. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
CHARLES CIMITILE
SECRETARY
Tarrytown, New York
July 14, 2000
-14-
<PAGE>
APPENDIX-1
FORM OF PROXY
PROXY
SPAR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned appoints Robert G. Brown and William H. Bartels, and
each of them, proxies with full power of substitution, to vote all shares of
Common Stock of SPAR Group, Inc. (the "Company") held of record by the
undersigned as of June 16, 2000, the record date with respect to this
solicitation, at the Annual Meeting of Stockholders of the Company to be held at
580 White Plains Road, Tarrytown, New York, 10591, beginning at 10:00 a.m.,
Eastern Standard Time, on Thursday, August 3, 2000, and at any adjournments
thereof, upon the following matters:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS
|_|FOR all nominees listed below |_|WITHHOLD AUTHORITY LISTED
(EXCEPT AS NOTED BELOW) TO VOTE FOR ALL NOMINEES
(INSTRUCTIONS: To withhold authority to vote for any nominee, line through or
otherwise strike out the nominee's name below.)
Robert G. Brown
William H. Bartels
Robert O. Aders
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000
|_|FOR |_|AGAINST |_|ABSTAIN
3. OTHER MATTERS
In their discretion, Robert G. Brown and William H. Bartels are
authorized to vote upon such other business as may properly come before the
meeting.
-15-
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 ABOVE. IF ANY NOMINEE
DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSONS
NAMED AS PROXIES SHALL HAVE FULL DISCRETION TO VOTE FOR ANY
OTHER PERSON DESIGNATED BY THE BOARD OF DIRECTORS.
Dated _________________, 2000
---------------------------
(Signature)
---------------------------
(Signature)
Please sign exactly as your
name appears hereon. Joint
owners should each sign.
When signing as attorney,
executor, administrator,
trustee, guardian or
corporate officer, please
give full title as such.
The signer hereby revokes
all proxies heretofore
given by the signor to vote
at said meeting or any
adjournments thereof.
-16-
