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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 2
[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.
Delaware 33-0684451
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
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 $56,797,963.
The number of shares of the Registrant's Common Stock outstanding as of
March 30, 2000 was 18,175,348 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
INTRODUCTION
This Form 10-K/A (Amendment No. 2) amends the 1999 Form 10-K as
previously amended by Form 10-K/A (Amendment No. 1) by deleting Items 11, 12 and
13 from such form and substituting for such items the following replacements for
Items 11, 12 and 13.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION OF SPAR GROUP, INC.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to SPAR in all capacities for the years ended December 31, 1999,
December 31, 1998 and December 31, 1997.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- ---------------------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION(2)
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)
---------------------------- ---- ---------- --------- ----------- ---
<S> <C> <C> <C>
Robert G. Brown 1999 7,500 -- 765,972 --
Chief Executive Officer, Chairman of 1998 125,000 -- -- 791
the Board, President, and Director 1997 46,756 -- -- 553
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>
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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 $124,558 in compensation (including severance
payments) from SPAR after the Merger.
(2) Other compensation represents the Company's 401k contribution.
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each grant of
stock options made during the year ended December 31, 1999, to each of the Named
Executive Officers. No stock appreciation rights ("SAR's") were granted during
such period to such persons.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS EXERCISE EXPIRATION ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE DATE PRICE APPRECIATION FOR OPTION (4)
OPTIONS EMPLOYEES IN ($/SH) ---------------------------------
NAME GRANTED (#) PERIOD (%) 5% ($) 10% ($)
------------------------------------- ------------- ------------ ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <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>
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(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.
Page 3
<PAGE>
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
Page 4
<PAGE>
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. 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. 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 telephone 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 of SPAR. 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.
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) 7,478,065(2) 38.7%
Shares
Common William H. Bartels(1) 4,873,022 25.2%
Shares
Common J. Christopher Lewis 160,977(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) 6.3%
Shares 300 S. Grand Avenue, Suite 2900
Los Angeles, CA 90071
</TABLE>
Page 5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
-------------- ------------------------------------ -------------------- --------------
<S> <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 12,588,429 65.1%
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 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 7,000 shares issuable upon the exercise of options held by
Mr. Lewis in connection with the Merger.
(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, filed by Richard
J. Riordan with the Securities and Exchange Commission on February 3, 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 $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 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
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.
Page 6
<PAGE>
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.
Page 7
<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.
June 29, 2000 By: /s/ Charles Cimitile
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Charles Cimitile
Chief Financial Officer
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