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SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(A)
SPAR GROUP, INC.
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(Name of Issuer)
Common Stock, par value $.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
784933 10 3
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(CUSIP Number)
Lawrence David Swift, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 8, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box .
(CONTINUED ON FOLLOWING PAGES)
CUSIP NO. 784933 10 3 SCHEDULE 13D PAGE 2 OF 10 PAGES
----------- --- ----
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert G. Brown, individually and as co-trustee of Grantor Trust I
of Robert G. Brown
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 5,576,965
OWNED BY
EACH
REPORTING
PERSON
WITH 8 SHARED VOTING POWER
1,980,000
9 SOLE DISPOSITIVE POWER
5,576,965
10 SHARED DISPOSITIVE POWER
1,980,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,556,965 (includes 1,980,000 shares held in trusts of which Robert
G. Brown is a co-trustee)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
41.7% (includes 10.9% representing shares held in trusts of which
Robert G. Brown is a co-trustee)
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 10 pages
CUSIP NO. 784933 10 3 SCHEDULE 13D PAGE 3 OF 10 PAGES
-- --
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
James R. Brown, Sr. individually and as co-trustee of Grantor Trust
I of Robert G. Brown
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 25,000
OWNED BY
EACH
REPORTING
PERSON
WITH 8 SHARED VOTING POWER
1,980,000
9 SOLE DISPOSITIVE POWER
25,000
10 SHARED DISPOSITIVE POWER
1,980,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
205,000 (does not include 1,800,000 shares held in Grantor Trust
I of Robert G. Brown of which James R.
Brown, Sr. is a co-trustee)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.1% (does not include 9.9% representing shares held in Grantor
Trust I of Robert G. Brown of which James R.
Brown, Sr. is a co-trustee)
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 10 pages
CUSIP NO. 784933 10 3 PAGE 4 OF 10 PAGES
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D is being filed by the Reporting Persons
with respect to the common stock, par value $.01 per share (the "Common Stock"),
of SPAR Group, Inc., a Delaware corporation formerly known as PIA Merchandising
Services, Inc. (the "Company"). This statement is being filed in connection with
the consummation of the merger (the "Merger") of SG Acquisition, Inc., a Nevada
corporation and a wholly-owned subsidiary of the Company prior to the Merger
("PIA Acquisition") into SPAR Acquisition, Inc., a Nevada corporation and
wholly-owned subsidiary of the Company ("SAI"). Pursuant to the Merger, the
Company has been renamed "SPAR Group, Inc." The address of the Company's
principal executive offices is 19900 MacArthur Boulevard, Suite 900, Irvine,
California 92612.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is being filed jointly pursuant to Rule 13d-1(k)(1)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") by
(i) Mr. Robert G. Brown, individually and as a co-trustee of Grantor Trust I of
Robert G. Brown dated March 22, 1999 ("Grantor Trust I") for the benefit of
Robert G. Brown's children, and (ii) Mr. James R. Brown, Sr., individually and
as a co-trustee of Grantor Trust I. This statement is not being filed on behalf
of Grantor Trust II of Robert G. Brown dated March 22, 1999 ("Grantor Trust II")
for the benefit of James R. Brown, Sr.'s children due to the fact that Grantor
Trust II owns 180,000 shares of Common Stock, or less than 5% of the Company's
outstanding Common Stock, and as a result is not a "Reporting Person" required
to file a Schedule. However, all of the 180,000 shares owned by Grantor Trust II
are being reported on this statement under the beneficial ownership of James R.
Brown, Sr. and Robert G. Brown who, together with Mr. William H. Bartels, are
co-trustees of Grantor Trust II. Robert G. Brown and James R. Brown, Sr. are
sometimes referred to individually as a "Reporting Person" and collectively as
the "Reporting Persons".
Information with respect to each Reporting Person is given solely by
such Reporting Person, no Reporting Person has responsibility for the accuracy
or completeness of the information supplied by any other Reporting Person, and
each Reporting Person agrees that this statement is filed on behalf of such
Reporting Person only.
The Reporting Persons may be deemed to constitute a "group" for the
purposes of Section 13(d)(3) of the Exchange Act, although neither the fact of
this filing nor anything contained herein shall be deemed to be an admission by
any of the Reporting Persons that such a "group" exists.
(b) Mr. Robert G. Brown's business address is c/o the Company, 303
South Broadway, Suite 140, Tarrytown, New York 10591. The business address of
Mr. James R. Brown, Sr. is c/o Commonwealth of Massachusetts, Community College
Counsel's Office,
Page 4 of 10 pages
CUSIP NO. 784933 10 3 PAGE 5 OF 10 PAGES
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Springs Road, Bldg. 2, Bedford, MA 01730.
(c) Mr. Robert G. Brown's principal occupation is Chief Executive
Officer, President, Chairman of the Board of Directors, and Director of the
Company. Mr. James R. Brown, Sr. is an attorney for the Commonwealth of
Massachusetts.
(d) Neither of the Reporting Persons has, during the last five years,
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) Neither of the Reporting Persons has, during the last five years,
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which he was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to federal or state securities laws or finding any
violation with respect to such laws.
(f) Each of the Reporting Persons is a citizen of the United States of
America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On July 8, 1999, the Merger contemplated by the Agreement and Plan of
Merger dated as of February 28, 1999, as amended as of May 14, 1999 (as amended,
the "Merger Agreement") among the Company, PIA Acquisition, PIA Merchandising,
Co., Inc., a California corporation and a wholly-owned subsidiary of the Company
("PIA Merchandising"), SAI, SPAR MCI Performance Group, Inc., a Delaware
corporation, SPAR Incentive Marketing, Inc., a Delaware corporation, SPAR
Marketing Force, Inc., a Nevada corporation, SPAR Marketing, Inc., a Delaware
corporation, SPAR, Inc., a Nevada corporation, SPAR/Burgoyne Retail Services,
Inc., an Ohio corporation, SPAR Marketing, Inc., a Nevada corporation, and SPAR
Trademarks, Inc., a Nevada corporation (all of the SPAR companies collectively,
the "SPAR Companies"), was consummated. As a result of the Merger, PIA
Acquisition, a wholly owned subsidiary of the Company, merged with and into SAI,
the ultimate parent company of the SPAR Companies, with SAI as the surviving
corporation.
Pursuant to the Merger Agreement, on July 8, 1999, in exchange for
outstanding shares of SAI common stock, 5,576,965 shares of Common Stock were
issued to Robert G. Brown individually, 1,800,000 shares of Common Stock were
issued to Grantor Trust I, and 180,000 shares of Common Stock were issued to
Grantor Trust II. In addition, 25,000 shares of Common Stock were issued to
James R. Brown, Sr., individually. Each of Robert G. Brown, James R. Brown, Sr.
and William H. Bartels is a co-trustee of Grantor Trust I and Grantor Trust II,
respectively.
Page 5 of 10 pages
CUSIP NO. 784933 10 3 PAGE 6 OF 10 PAGES
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The description of the Merger Agreement in this statement does not
purport to be complete and is qualified in its entirety by the express terms and
provision of the Merger Agreement. A copy of the Merger Agreement and the
amendment thereto are attached as Exhibit 2 and Exhibit 3 hereto, respectively,
and are incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION.
Pursuant to the Merger Agreement, on July 8, 1999, following the
approval of the Company's stockholders at the annual meeting of stockholders
held on that date (the "Annual Meeting"), PIA Acquisition merged with and into
SAI, with SAI continuing as the surviving corporation and a wholly-owned
subsidiary of the Company. The purpose of the Merger was to combine the
businesses of the Company and the SPAR Companies and for Robert G. Brown and
William H. Bartels (together, the "SAI Principals") to acquire control of the
Company. Immediately prior to the consummation of the Merger, SAI owned,
directly or indirectly, all of the issued and outstanding capital stock of the
SPAR Companies. On July 8, 1999, as part of the transactions contemplated by the
Merger Agreement, the Company (a) amended its certificate of incorporation to
(i) change its name to "SPAR Group, Inc.", (ii) increase the number of
authorized shares of its Common Stock, from 15,000,000 to 47,000,000, and (iii)
delete the prohibition on stockholder action by written consent without a
meeting under Delaware law, and (b) amended its Amended and Restated 1995 Stock
Option Plan (the "1995 Stock Option Plan"), to increase the number of shares of
Common Stock reserved for issuance upon exercise of stock options granted
thereunder from 1.3 million to 3.5 million.
As a result of the Merger (a) the holder of each share of the common
stock of SAI issued and outstanding at the effective time of the Merger received
one share of Common Stock, or an aggregate of 12,659,487 shares of Common Stock
and (b) the Company assumed all of the stock options of SAI outstanding at the
effective time of the Merger and issued substitute options to acquire 134,114
shares of Common Stock, at an exercise price of $.01 per share, to the holders
thereof. The Company also issued stock options to acquire an aggregate of
2,133,744 shares of Common Stock to certain of its employees, consultants and
other persons performing valuable services to the Company under the 1995 Stock
Option Plan.
In exchange for their shares of SAI common stock, the existing
stockholders of SAI, including the SAI Principals prior to the Merger, Robert G.
Brown and William H. Bartels, were issued shares of Common Stock and substitute
options representing approximately 70% of the outstanding shares of Common Stock
immediately following the Merger. As a result of the Merger, Robert G. Brown may
be deemed to be the beneficial owner, directly or indirectly, of approximately
41.7% of the outstanding shares of Common Stock and Mr. William H. Bartels, the
Vice Chairman and a director of the Company, may be deemed to be the beneficial
owner of approximately 26.5% of the outstanding shares of Common Stock.
Page 6 of 10 pages
CUSIP NO. 784933 10 3 PAGE 7 OF 10 PAGES
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In connection with the Merger, Robert G. Brown was appointed the
Chairman, Chief Executive Officer and President of the Company. In addition, at
the closing of the Merger, except for Mr. Patrick W. Collins and Mr. J.
Christopher Lewis, all of the Company's seven directors elected at the Annual
Meeting resigned from the Board of Directors of the Company. Messrs. Collins and
Lewis appointed Messrs. Brown and Bartels and Mr. Robert O. Aders to fill three
of the remaining five vacancies on the Board. There are currently two vacancies
on the Board. As an officer and director of the Company, Robert G. Brown
regularly explores potential actions and transactions which may be advantageous
to the Company, including without limitation possible mergers, acquisitions, or
other material changes in the business, corporate structure, capitalization,
management, policies, securities or regulatory or reporting obligations of the
Company.
As a result of Nasdaq's determination that the Merger constituted a
"reverse merger" under Nasdaq Marketplace Rule 4330(f), Nasdaq has informed the
Company that, as a result of the Merger, the Company must satisfy Nasdaq's
initial listing requirements for continued quotation of the Common Stock on the
Nasdaq National Market. A hearing is scheduled with Nasdaq on August 12, 1999 at
which the Company will appeal Nasdaq's determination. While the Company is
appealing this determination from Nasdaq, there can be no assurance that such
appeal will be successful and, if the Company cannot meet such initial listing
requirements and all other Nasdaq requirements, the Common Stock could be
delisted from the National Market. If this occurs, the Company presently intends
to list the Common Stock on the Nasdaq Small Cap Market, American Stock Exchange
or other national securities exchange.
Except as otherwise set forth herein, and except for the activities of
Robert G. Brown on behalf of the Company, the Reporting Persons have no plans or
proposals which relate to or would result in (i) the acquisition of additional
securities of the Company; (ii) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation of the Company; (iii) a sale or transfer
of a material amount of assets of the Company or any of its subsidiaries; (iv)
any change in the present Board of Directors or management of the Company,
including any plans or proposals to change the number or term of directors or to
fill any existing vacancies on the Board; (v) any material change in the present
capitalization or dividend policy of the Company; (vi) any other material change
in the Company's business or corporate structure; (vii) any changes in the
Company's charter, by-laws or instruments corresponding thereto or other actions
which may impede the acquisition of control of the Company by any person; (viii)
causing a class of securities of the Company to be delisted from a national
securities exchange or cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association; (ix) causing a
class of equity securities of the Company to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) any action
similar to any of those enumerated above.
Page 7 of 10 pages
CUSIP NO. 784933 10 3 PAGE 8 OF 10 PAGES
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Amount beneficially owned: Robert G. Brown beneficially owns
7,556,965 shares of Common Stock, representing, based upon the approximately
18,142,459 shares of Common Stock issued and outstanding immediately following
the Merger, 41.7% of the outstanding shares of Common Stock. These shares
include 5,576,965 shares owned directly by him, 1,800,000 shares owned by
Grantor Trust I and 180,000 shares owned by Grantor Trust II. Robert G. Brown is
a co-trustee of each of Grantor Trust I and Grantor Trust II. James R. Brown,
Sr. beneficially owns 205,000 shares of Common Stock, comprising 1.1% of the
outstanding shares of Common Stock. These shares include 25,000 shares held
directly by him and 180,000 shares owned by Grantor Trust II. Pursuant to Rule
13(d)-4 of the Exchange Act, James R. Brown, Sr. disclaims any beneficial
ownership interest in the 1,800,000 shares of Common Stock owned by Grantor
Trust I. James R. Brown, Sr. is a co-trustee of each of Grantor Trust I and
Grantor Trust II.
(b) Mr. Robert G. Brown has the sole power to vote or to dispose of
5,576,965 shares of Common Stock. Mr. James R. Brown, Sr. has the sole power to
vote or to dispose of 25,000 shares of Common Stock. Robert G. Brown and James
R. Brown, Sr., as co-trustees, share the power to vote or dispose of 1,800,000
shares of Common Stock owned by Grantor Trust I and 180,000 shares of Common
Stock owned by Grantor Trust II, respectively. Mr. Williams H. Bartels is a
co-trustee of each of Grantor Trust I and Grantor Trust II, and shares the power
to vote or dispose of such shares with Messrs. Robert G. Brown and James R.
Brown, Sr.
(c) During the past 60 days, Robert G. Brown and James R. Brown, Sr.
acquired securities pursuant to the Merger discussed in Item 3 above. Also, on
July 8, 1999, the Board granted Robert G. Brown (i) options to purchase 382,986
shares of the Company's Common Stock exercisable at $5.50 per share, which
options vest in equal installments over a four year period commencing July 8,
1999 and (ii) options to purchase 382,986 shares of the Company's Common Stock
exercisable at $5.50 per share, which options vest when the stock price of the
Common Stock is equal to $10.00.
(d) Grantor Trust I and Grantor Trust II have the right to receive
dividends or proceeds from the sale of the Common Stock owned by each trust. In
addition, Robert G. Brown has the sole power to reacquire the Common Stock from
Grantor Trust I and Grantor Trust II by substituting other property with
equitable value to the Common Stock.
(e) Not applicable.
Page 8 of 10 pages
CUSIP NO. 784933 10 3 PAGE 9 OF 10 PAGES
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
In addition to the information contained elsewhere in this statement,
761,413 shares of Common Stock owned by Mr. Robert G. Brown are currently held
in escrow pursuant to an indemnity escrow agreement dated July 8, 1999 to cover
certain indemnity obligations under the Merger Agreement. A copy of the
agreement is attached hereto as Exhibit 4 and is incorporated herein by
reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1: Joint Filing Agreement dated July 14, 1999 between
Robert G. Brown, individually and as a co-trustee of
Grantor Trust I and James R. Brown, Sr. individually
and as a co-trustee of Grantor Trust I.
Exhibit 2: Agreement and Plan of Merger dated as of February
28, 1999 among the Company, SAI, PIA Merchandising,
PIA Acquisition and the SPAR Companies (the "Merger
Agreement").
Exhibit 3: First Amendment to Merger Agreement dated as of
May 14, 1999 among the Company, SAI, PIA
Merchandising, PIA Acquisition and the SPAR
Companies.
Exhibit 4: Indemnity Escrow Agreement dated as of July 8,
1999 among the Company, SAI, PIA Merchandising, PIA
Acquisition, the SPAR Companies, Robert G. Brown,
William H. Bartels, and Parker Chapin Flattau &
Klimpl, LLP, as escrow agent.
Page 9 of 10 pages
CUSIP NO. 784933 10 3 PAGE 10 OF 10 PAGES
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SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: July 19, 1999
/s/ Robert G. Brown
--------------------------------------------
Robert G. Brown, individually and as co-
trustee of Grantor Trust I of Robert G.
Brown
/s/ James R. Brown, Sr.
--------------------------------------------
James R. Brown, Sr., individually and as co-
trustee of Grantor Trust I of Robert G.
Brown
Page 10 of 10 pages
Pursuant to Rule 13d-1(k)(1) of Regulation 13D-G under the Securities
Exchange Act of 1934, as amended, the undersigned agree that the Statement on
Schedule 13D to which this Exhibit is attached is filed on behalf of each of
them in the capacities set forth below.
Dated: July 14, 1999
/s/ Robert G. Brown
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Robert G. Brown, individually
/s/ Robert G. Brown
- ---------------------------------
Robert G. Brown, as Co-Trustee of
the Grantor Trust I of Robert G. Brown
/s/ James R. Brown, Sr.
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James R. Brown, Sr., individually
/s/ James R. Brown, Sr.
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James R. Brown, Sr., as Co-Trustee of
the Grantor Trust I of Robert G. Brown
================================================================================
AGREEMENT
AND
PLAN OF MERGER
among
PIA Merchandising Services, Inc.,
SG Acquisition, Inc.,
PIA Merchandising Co., Inc.,
SPAR Acquisition, Inc.,
SPAR Marketing Inc., a Delaware Corporation,
SPAR Marketing Force, Inc.,
SPAR Marketing, Inc., a Nevada Corporation,
SPAR, Inc.,
SPAR/Burgoyne Retail Services, Inc.,
SPAR Incentive Marketing, Inc.,
SPAR MCI Performance Group, Inc.
and
SPAR Trademarks, Inc.
Dated as of February 28, 1999
================================================================================
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.01. The Merger....................................................3
Section 1.02. Closing; Effective Time of the Merger.........................3
Section 1.03. Name, Certificate of Incorporation, Bylaws, Board of
Directors and Officers of the Surviving Corporation...........3
Section 1.04. Effects of the Merger.........................................3
Section 1.05. Tax Consequences..............................................3
Section 1.06. Further Assurances............................................4
ARTICLE II
MERGER CONSIDERATION
Section 2.01. Conversion of Capital Stock, Etc..............................4
Section 2.02. Exchange Procedures...........................................4
Section 2.03. No Fractional Shares..........................................4
Section 2.04. SAI Option Assumption and Exchange............................4
Section 2.05. Granting of New Stock Options under the PIA Stock Option
Plan..........................................................5
Section 2.06. Reservation and Registration of Option Shares.................5
Section 2.07. Transfer Taxes................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SPAR PARTIES
Section 3.01. Corporate Existence...........................................5
Section 3.02. Authorization and Enforceability..............................6
Section 3.03. Capital Stock of the SPAR Parties.............................6
Section 3.04. No Violations.................................................7
Section 3.05. Financial Statements..........................................7
Section 3.06. Permits.......................................................8
Section 3.07. Real and Personal Property....................................8
Section 3.08. Contracts and Commitments.....................................9
Section 3.09. Insurance....................................................10
Section 3.10. Employees....................................................10
Section 3.11. Employee Benefit Plans and Arrangements......................10
Section 3.12. Compliance with Law..........................................12
Section 3.13. Transactions With Affiliates.................................12
Section 3.14. Litigation...................................................12
Section 3.15. Taxes........................................................12
Section 3.16. Intellectual Property Matters................................13
Section 3.17. Existing Condition...........................................14
Section 3.18. Books of Account.............................................15
Section 3.19. Environmental Matters........................................15
Section 3.20. No Illegal Payments..........................................16
Section 3.21. Brokers......................................................17
-i-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PIA PARTIES
Section 4.01. Corporate Existence..........................................17
Section 4.02. Authorization and Enforceability.............................17
Section 4.03. Capital Stock of the PIA Parties.............................18
Section 4.04. No Violations................................................18
Section 4.05. Financial Statements.........................................19
Section 4.06. Permits......................................................19
Section 4.07. Real and Personal Property...................................19
Section 4.08. Contracts and Commitments....................................20
Section 4.09. Insurance....................................................21
Section 4.10. Employees....................................................21
Section 4.11. Employee Benefit Plans and Arrangements......................21
Section 4.12. Compliance with Law..........................................23
Section 4.13. Transactions With Affiliates.................................23
Section 4.14. Litigation...................................................23
Section 4.15. Taxes........................................................23
Section 4.16. Intellectual Property Matters................................24
Section 4.17. Existing Condition...........................................24
Section 4.18. Books of Account.............................................25
Section 4.19. Environmental Matters........................................25
Section 4.20. No Illegal Payments..........................................26
Section 4.21. Brokers......................................................26
Section 4.22. SEC Filings..................................................26
Section 4.23. No Misrepresentation by the PIA Parties......................26
Section 4.24. Board Action; Opinion of Financial Advisor...................27
ARTICLE V
COVENANTS
Section 5.01. PIA Proxy Statement; Stockholders Meeting....................27
Section 5.02. Conduct Prior to the Closing Date............................27
Section 5.03. Consummation of the SPAR Reorganization Transactions;
SPAR Principal Action........................................28
Section 5.04. Access.......................................................28
Section 5.05. Negotiations.................................................28
Section 5.06. Press Releases and Other Communications......................29
Section 5.07. Third Party Approvals........................................29
Section 5.08. Notice to Bargaining Agents..................................29
Section 5.09. Notification of Certain Matters..............................29
Section 5.10. Closing Net Worth............................................29
Section 5.11. Post Merger Indemnification of Officers and Directors by
Parties......................................................29
Section 5.12. Further Assurances...........................................30
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01. Conditions to Each Party's Obligations.......................30
Section 6.02. Conditions Precedent to the Obligations of the SPAR Parties..31
Section 6.03. Conditions Precedent to the Obligations of the PIA Parties...32
-ii-
ARTICLE VII
CLOSING NET WORTH; NONSURVIVAL OF REPRESENTATIONS
Section 7.01. SPAR Closing Net Worth.......................................33
Section 7.02. Survival of Representations and Warranties...................34
ARTICLE VIII
TERMINATION OF AGREEMENT
Section 8.01. Termination..................................................34
Section 8.02. Effect of Termination........................................35
Section 8.03. Breakup Fee..................................................35
ARTICLE IX
GENERAL
Section 9.01. Successors and Assigns; Assignment...........................35
Section 9.02. No Third Party Rights........................................35
Section 9.03. Counterparts.................................................35
Section 9.04. Expenses.....................................................35
Section 9.05. Notices......................................................36
Section 9.06. Governing Law................................................37
Section 9.07. Consent to Jurisdiction, Etc.................................37
Section 9.08. Waiver of Jury Trial.........................................37
Section 9.09. Exercise of Rights and Remedies..............................37
Section 9.10. Reformation and Severability.................................37
Section 9.11. Remedies Cumulative..........................................37
Section 9.12. Captions.....................................................37
Section 9.13. Amendments...................................................37
Section 9.14. Entire Agreement.............................................38
Exhibits:
- ---------
A Articles of Merger
B Special Purpose Option Plan
C SPAR Trademark License
D Business Manager Agreement
E Proposed PIA Certificate of Amendment
F Amended and Restated 1995 Stock Option Plan
G Limited Indemnification Agreement
H Indemnity Escrow Agreement
-iii-
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of February 28,
1999 (as the same may be supplemented, modified, amended, restated or replaced
from time to time in the manner provided herein, this "Agreement"), is made by
and among PIA Merchandising Services, Inc., a Delaware corporation ("PIA
Delaware"), SG Acquisition, Inc., a Nevada corporation ("PIA Acquisition"), PIA
Merchandising Co., Inc., a California corporation ("PIA California"), SPAR
Acquisition, Inc., a Nevada corporation ("SAI"), SPAR Marketing, Inc., a
Delaware corporation ("SMI"), SPAR Marketing Force, Inc., a Nevada corporation
("SMF"), SPAR Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR, Inc., a
Nevada corporation ("SINC"), SPAR/Burgoyne Retail Services, Inc., an Ohio
corporation ("SBRS"), SPAR Incentive Marketing, Inc., a Delaware corporation
("SIM"), SPAR MCI Performance Group, Inc., a Delaware corporation ("SMCI"), and
SPAR Trademarks, Inc., a Nevada corporation ("STM"). SMF, SMNEV, SINC and SBRS
are sometimes referred to herein individually as a "SPAR Marketing Company" and
collectively as the "SPAR Marketing Companies". SMI and the SPAR Marketing
Companies are sometimes referred to herein individually as a "SPAR Marketing
Party" and collectively as the "SPAR Marketing Parties". SIM and SMCI are
sometimes referred to herein individually as a "SPAR Incentive Party" and
collectively as the "SPAR Incentive Parties". SAI, STM, the SPAR Marketing
Parties and the SPAR Incentive Companies are sometimes referred to herein
individually as a "SPAR Party" and collectively as the "SPAR Parties". PIA
Delaware, PIA Acquisition and PIA California are sometimes referred to herein
individually as a "PIA Party" and collectively as the "PIA Parties". The PIA
Parties and the SPAR Parties are sometimes referred to herein individually as a
"Party" and collectively as the "Parties".
Recitals
A. Robert G. Brown and William H. Bartels (each a "SPAR Principal", and
collectively the "SPAR Principals") own a majority of all of the outstanding
shares of common stock of SAI, par value $0.01 per share ("SAI Stock"), and all
of the outstanding capital stock of the other SPAR Parties as of the date
hereof. The SPAR Principals together with other owners of SAI Stock are
sometimes referred to herein individually as a "SPAR Stockholder" and
collectively as the "SPAR Stockholders". Options to acquire shares of common
stock of SAI (each a "SAI Option" and collectively the "SAI Options") will be
held by certain employees of the SPAR Parties, certain others providing services
to the SPAR Parties and certain other persons (each a "SAI Option Holder" and
collectively the "SAI Option Holders") in the aggregate amount and on the terms
described in the SPAR Disclosure Letter.
B. The SPAR Principals also own all of the outstanding shares of
capital stock, and are officers and directors, of: (i) SPAR Marketing Services,
Inc., a Nevada Corporation ("SMS"), which provides certain field services
pursuant to 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 therein, the "Field Service Agreement"); (ii) SPAR InfoTech,
Inc. ("SIT"), a startup venture that provides certain programming services to
the SPAR Marketing Parties; and (iii) SPAR Group, Inc. ("SGI"), a Delaware
corporation that will change its name prior to the Effective Time. SMS, SIT,
STM, SGI and any other companies owned by the SPAR Principals (other than the
SPAR Parties) and their respective assets and properties are not part of the
proposed merger transactions.
C. On January 15, 1999, SMCI purchased substantially all of the assets
and assumed certain liabilities (the "MCI Acquisition") of MCI Performance
Group, Inc., a Texas corporation ("MCI"), pursuant to an Asset Purchase
Agreement dated as of December 22, 1998, among MCI, John H. Wile (the "MCI
Stockholder") and SMCI, as amended by a First Amendment dated as of January 15,
1999 (as amended, and as the same may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the "MCI
Purchase Agreement"), under which SGI is a guarantor. The MCI Acquisition was
financed in part by SMCI's issuance of its Promissory Note to MCI dated as of
January 15, 1999 (as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein, the "MCI Note"),
which MCI Note is secured by the pledge to MCI of all of the stock of SMCI
pursuant to the Hypothecation Agreement from the SPAR Principals dated as of
January 15, 1999 (as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein, the "MCI
Hypothecation"). The MCI Purchase Agreement contains certain representations,
warranties and indemnifications of MCI and the MCI Stockholder with respect to
the assets, business and liabilities of MCI acquired by SMCI thereunder.
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D. The SPAR Principals have entered into an agreement with the SPAR
Parties dated as of February 28, 1999 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "SPAR Reorganization Agreement"), pursuant to which (i) the SPAR
Principals have agreed to contribute to SAI all of their shares of STM, the SPAR
Marketing Parties and SPAR Incentive Parties in return for the issuance to them
of additional shares of SAI Stock as provided therein, and (ii) SAI would then
contribute the capital stock of SMCI to SIM and the capital stock of the SPAR
Marketing Companies to SMI, such that SAI will be the sole stockholder of STM,
SIM and SMI, SIM will be the sole stockholder of SMCI, and SMI will be the sole
stockholder of the SPAR Marketing Companies. The transactions to be effected
pursuant to the Reorganization Agreement will be referred to as the "SPAR
Reorganization Transactions" and collectively with the MCI Acquisition will be
referred to as the "SPAR Premerger Transactions". The MCI Purchase Agreement,
the MCI Note and related documents and the SPAR Reorganization Agreement may be
referred to individually as a "SPAR Premerger Agreement" and collectively as the
"SPAR Premerger Agreements".
E. Pursuant to the SPAR Reorganization Agreement, SAI will issue to the
SPAR Principals sufficient additional shares of SAI Stock such that (after such
issuance and including shares previously issued to them) they will then together
own shares of SAI Stock equal in number to (i) the product of (A) 2.2546 times
(B) the total number of shares of PIA Delaware Stock (as hereinafter defined)
issued and outstanding as of the close of business on the Business Day preceding
the Closing Date (as defined in the Reorganization Agreement), minus (ii) the
sum of the number of shares of SAI Stock issuable upon exercise of the SAI
Options (without regard to the vesting provisions thereof).
F. The SPAR Principals and the respective Boards of Directors of the
SPAR Parties have approved the SPAR Premerger Transactions.
G. PIA Acquisition and PIA California each is a direct wholly owned
subsidiary of PIA Delaware.
H. The respective Boards of Directors of the PIA Parties and of the
SPAR Parties deem it advisable and in the best interests of such corporations
and their respective stockholders that, following the consummation of the SPAR
Reorganization Transactions, PIA Acquisition merge with and into SAI (the
"Merger") pursuant to this Agreement and the applicable provisions of the
General Corporation Law of the State of Nevada (the "NGCL"). SAI and PIA
Acquisition are sometimes collectively referred to as the "Constituent
Corporations" and SAI, following the Merger, is sometimes referred to as the
"Surviving Corporation".
I. As provided herein, (i) as a result of the Merger, each outstanding
share of SAI Common Stock will be converted into the right to receive one share
of common stock of PIA Delaware, par value $0.01 per share ("PIA Delaware
Stock"), and (ii) following the Merger, each SAI Option Holder will receive a
Substitute Option (as hereinafter defined) to purchase the same number of shares
of PIA Delaware Stock on the same terms as the number of shares of SAI Stock
that such SAI Option Holder was entitled to purchase under such SAI Option.
Immediately following the Merger, (A) the SPAR Stockholders will hold and the
SAI Option Holders will have the right to acquire upon exercise (without regard
to vesting) shares of PIA Delaware Stock that, in the aggregate, will represent
approximately 69.274% of the sum of (1) the total number of shares of PIA
Delaware Stock issued and outstanding immediately after the Merger plus (2) the
total number of shares of PIA Delaware Stock issuable upon exercise of the
Substitute Options (without regard to vesting), and (B) the shares of PIA
Delaware Stock held by stockholders of PIA Delaware immediately prior to the
Merger will represent approximately 30.726% of such post-Merger sum.
J. The respective Boards of Directors of PIA Delaware, PIA Acquisition
and SAI have approved the Merger on the terms and subject to the conditions set
forth herein.
K. The Parties intend the Merger to qualify as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
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:
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ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and conditions
hereinafter set forth and in accordance with the NGCL, at the Effective Time (as
defined in Section 1.02), PIA Acquisition shall be merged with and into SAI, and
thereupon the separate existence of PIA Acquisition shall cease, and SAI, as the
Surviving Corporation, shall continue to exist under and be governed by the
NGCL.
Section 1.02. Closing; Effective Time of the Merger. The
consummation of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Parker Chapin Flattau & Klimpl, LLP, in New
York, New York, at 10:00 a.m. on a date to be designated by mutual agreement of
PIA Delaware and SAI (the "Closing Date"), which shall be no later than the
second business day after the satisfaction (or, to the extent permitted by law,
the waiver) of the conditions set forth in Article VI. Concurrently with or as
soon as practicable after the Closing, PIA Delaware, PIA Acquisition and SAI
will cause Articles of Merger in substantially the form of Exhibit A attached
hereto (the "Articles of Merger") to be executed and filed with the Secretary of
State of the State of Nevada as provided in Section 92A.200 of the NGCL. The
Merger shall become effective immediately upon such filing of the Articles of
Merger with the Secretary of State of the State of Nevada or at such other time
as PIA Acquisition and SAI shall agree and specify in the Articles of Merger.
The time of the effectiveness of the Merger is sometimes referred to as the
"Effective Time."
Section 1.03. Name, Certificate of Incorporation, Bylaws,
Board of Directors and Officers of the Surviving Corporation. Upon the
effectiveness of the Merger:
(a) the name of the Surviving Corporation shall be "SPAR Acquisition, Inc."
(b) the Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of SAI until thereafter duly amended
or restated;
(c) the Bylaws of the Surviving Corporation shall be the Bylaws of SAI
until thereafter duly amended or restated;
(d) the directors of SAI shall serve as the directors of the Surviving
Corporation until their respective successors have been duly elected
and qualified; and
(e) the officers of SAI shall serve as the officers of the Surviving
Corporation in the same capacity or capacities until their respective
successors have been duly appointed.
Section 1.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 92A.250 of the NGCL. Without in any way limiting
such effects, at and after the Effective Time (a) the Constituent Corporations
shall merge and become and continue as part of a single corporation, SAI, which
is the Surviving Corporation, and (b) the Surviving Corporation shall (to the
same extent and with the same effect as was the case with the applicable
Constituent Corporation): (i) own and possess any and all (A) financial assets,
accounts, documents, instruments, equipment, inventory, intellectual property,
contracts, general intangibles, real property and improvements, and other assets
and properties of each Constituent Corporation, and (B) rights, powers,
privileges, security or other entitlements, licenses, franchises and other
interests of each Constituent Corporation, all of which will be automatically
vested in the Surviving Corporation at the Effective Time (subject to any
existing liens or encumbrances thereon, which shall continue unimpaired), and
none of which shall be impaired or otherwise adversely affected by the Merger;
and (ii) be liable for all of the debts, liabilities, obligations and duties of
each Constituent Corporation, all of which will continue unimpaired and may be
enforced against the Surviving Corporation to the same extent as it would have
been enforceable against the applicable Constituent Corporation.
Section 1.05. Tax Consequences. The Merger is intended to
constitute a reorganization within the meaning of Section 368 of the Code for
federal income tax purposes, and the Parties will take all commercially
reasonable steps in furtherance thereof, including (without limitation) the
making of all required filings and the keeping of all required records. The
parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of ss.ss.1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
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Section 1.06. Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts are necessary,
desirable or proper to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, the title to any property or right of the Constituent
Corporations acquired or to be acquired by reason of, or as a result of, the
Merger, or otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors (on behalf of PIA Acquisition
or SAI) shall execute and deliver all such deeds, assignments and assurances in
law and do all acts necessary, desirable or proper to vest, perfect or confirm
title to such property or right in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and the proper officers and directors
of the Surviving Corporation are fully authorized to take any and all such
action.
ARTICLE II
MERGER CONSIDERATION
Section 2.01. Conversion of Capital Stock, Etc. At the
Effective Time and without any further action on the part of the holder thereof:
(a) each share of SAI Stock that is issued and outstanding immediately
prior to the Effective Time shall automatically be converted into the
right to receive one (1) fully paid and nonassessable share of PIA
Delaware Stock (which 1:1 ratio will be referred to as the "Exchange
Ratio"); and
(b) each share of common stock of PIA Acquisition, par value $.01 per
share, that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on
the part of PIA Delaware as the holder thereof, be converted into and
become one (1) share of common stock of the Surviving Corporation, par
value $.01 per share.
Section 2.02. Exchange Procedures. Following the Effective
Time, upon surrender to PIA Delaware of stock certificates representing
outstanding shares of SAI Stock (the "Certificates"), each holder of SAI Stock
shall be entitled to receive, in exchange therefor, one or more new stock
certificates representing, in the aggregate, that number of whole shares of PIA
Delaware Stock which such holder has the right to receive pursuant to Section
2.01(a) in respect of the shares of SAI Stock evidenced by the Certificate
surrendered, and each Certificate so surrendered shall forthwith be canceled;
provided, however, that PIA Delaware shall cause ten percent (10%) of the shares
which each SPAR Principal and their Family Members (as herinafter defined) would
otherwise have had the right to receive pursuant to Section 2.01(a) (the "Share
Escrow Amount") to be registered in the name of, and delivered to, the Indemnity
Escrow Agent (as such term is defined in Section 6.01(g) hereof) to be held in
accordance with the provisions of the Limited Indemnification Agreement and the
Indemnity Escrow Agreement (as such terms are defined in Section 6.01(g)
hereof); and provided further that the Share Escrow Amount may be satisfied by
the shares of the SPAR Principals as opposed to the shares of such Family
Members.
Section 2.03. No Fractional Shares. Notwithstanding any other
provision of this Article II, no fractional shares of PIA Delaware Stock shall
be issued in connection with the Merger and any holder of SAI Stock entitled
hereunder to receive a fractional share of PIA Delaware Stock but for this
Section shall be entitled to receive from PIA Delaware a cash payment (rounded
to the nearest whole cent) equal to the product of such fraction multiplied by
the last sale price of PIA Delaware Stock as reported on the Nasdaq National
Market on the Closing Date.
Section 2.04. SAI Option Assumption and Exchange. As of the
Effective Time, PIA Delaware shall be deemed to have assumed all of the
outstanding SAI Options, in each case on the terms and conditions set forth in
the written option agreements (copies of which have been provided to PIA
Delaware). PIA Delaware shall issue to each holder of an outstanding SAI Option,
against delivery and cancellation of the agreement evidencing such outstanding
SAI Option, a new substitute option (a "Substitute Option") under PIA Delaware's
Special Purpose Stock Option Plan substantially in the form of Exhibit B hereto,
together with such changes therein as may be made with the approval of the PIA
Delaware Board and SAI (the "PIA Special Purpose Plan"). Each Substitute Option
shall entitle the SAI Option Holder to purchase the same number of shares of PIA
Delaware Stock as the number of shares of SAI Stock that could have been
purchased under the SAI Option (reflecting the 1:1 Exchange Ratio) and shall
otherwise be issued upon the same terms and conditions as set forth in the
written agreement evidencing the SAI Option so surrendered, including (without
limitation) the same per share exercise price and the same vesting (if any) as
the surrendered SAI Option. Each SAI Option so surrendered shall forthwith be
canceled.
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Section 2.05. Granting of New Stock Options under the PIA
Stock Option Plan. Subject to the consummation of the Merger and the approval by
the stockholders of PIA Delaware of the Proposed Plan Amendment (as hereinafter
defined), effective as of the close of business on the date on which the Merger
is consummated, PIA Delaware shall issue, subject to the availability of shares
under PIA Delaware's Amended and Restated 1995 Stock Option Plan (the "PIA Stock
Option Plan"), stock options under the PIA Stock Option Plan (each a "New PIA
Option") to the persons and in the amounts (which may include unallocated
amounts for later allocation by SAI) listed in the letter of even date herewith
delivered to PIA Delaware (the "New Option Schedule"), which stock options shall
cover an aggregate of 2,133,744 shares of PIA Delaware Stock. Except as
otherwise indicated on the New Option Schedule or in the terms of the agreements
governing such options, each New PIA Option shall (i) vest (become exercisable)
in four equal annual installments, (ii) have an exercise price equal to the last
sale price for the PIA Delaware Stock as reported on the Nasdaq National Market
on the date of issuance and (iii) have such other terms and conditions
consistent with the PIA Stock Option Plan as the Board of Directors of PIA
Delaware may determine. The New Option Schedule may be amended by SAI (by
written notice to PIA Delaware) at any time prior to the issuance of the
affected New PIA Options to add or delete names or to increase or decrease the
number of shares to be covered by any unissued proposed New PIA Option;
provided, however, that the aggregate number of shares of PIA Delaware Stock
issuable upon exercise of all New PIA Options (without regard to the vesting
provisions thereof) shall not exceed 2,133,744 shares without the prior written
consent of PIA Delaware; and provided further that the terms and conditions of
any New PIA Option indicated on the New Option Schedule as of the date hereof
may not be materially improved (other than a reallocation of shares or
allocation of previously unallocated shares to any employee or other recipient
permitted under the PIA Stock Option Plan) without the prior written consent of
PIA Delaware.
Section 2.06. Reservation and Registration of Option Shares.
PIA Delaware shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of PIA Delaware Stock for delivery upon exercise of
the Substitute Options and the New PIA Options. As soon as practicable after the
Effective Time, to the extent such form is available therefor, PIA Delaware
shall file a registration statement on Form S-8 (or any successor form) with
respect to the shares of PIA Delaware Stock subject to the Substitute Options
and the New PIA Options (and any other PIA Options that the PIA Board may wish
to treat similarly). PIA Delaware shall use commercially reasonable efforts to
maintain the effectiveness of such registration statement(s) so long as any
options covered thereby remain outstanding and unexercised.
Section 2.07. Transfer Taxes. PIA Delaware shall pay any
and all transfer taxes incurred in connection the Merger and the stock and
option issuances and other transactions contemplated hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SPAR PARTIES
Except as otherwise disclosed in that certain letter of even
date herewith delivered to PIA Delaware prior to the execution hereof (which
letter shall contain appropriate references and cross references to identify the
Sections hereof to which the information in such letter relates) (the "SPAR
Disclosure Letter"), each SPAR Party, jointly and severally, represents and
warrants to the PIA Parties as follows:
Section 3.01. Corporate Existence. Except as otherwise set
forth in the SPAR Disclosure Letter:
(a) Each SPAR Party is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation. Each
SPAR Party is duly qualified to conduct business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct of its business
requires it to be so qualified, except where the failure to be so qualified
would not have a material adverse effect on the business, operations,
properties, assets or financial condition of the SPAR Parties taken as a whole
(a "SPAR Material Adverse Effect").
(b) As of the date hereof, neither SAI, SIM nor SMI has any
assets or liabilities or has conducted any business operations except in
anticipation of and in connection with the SPAR Reorganization Transactions and
the other transactions contemplated by the SPAR Reorganization Agreement and
this Agreement.
(c) As of the date of this Agreement, no SPAR Party has any
subsidiary or owns, of record or beneficially, or controls, directly or
indirectly, any other capital stock, any securities convertible into capital
stock or any other equity interest in any corporation, association or other
business entity or is, directly or indirectly, a
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participant in any joint venture, partnership or other non-corporate entity.
However, the Parties acknowledge and understand that immediately prior to the
Effective Time, upon the terms and subject to the conditions set forth in the
Reorganization Agreement, the Reorganization Transactions described in the
Recitals hereto will occur.
(d) The SPAR Disclosure Letter sets forth a list of (i) the
names of all predecessor companies of each SPAR Marketing Company, (ii) the
names of all entities from which any SPAR Party previously acquired any
significant assets, and (iii) all sales (other than in the ordinary course of
business) and spinoffs of significant assets by any SPAR Marketing Company since
March 31, 1996.
Section 3.02. Authorization and Enforceability. Except as
otherwise set forth in the SPAR Disclosure Letter:
(a) Each SPAR Party has the corporate power, authority and
legal right to execute, deliver and perform (i) the SPAR Reorganization
Agreement, (ii) this Agreement, and (iii) to the extent a party thereto (A) the
Business Manager Agreement to be delivered pursuant to Section 6.01(f)(i)
hereof, (B) the Trademark License Agreements to be delivered pursuant to Section
6.01(f)(ii) hereof, (C) the Limited Indemnification Agreement and the Indemnity
Escrow Agreement to be delivered pursuant to Section 6.01(g) hereof, and (D) the
releases from SPAR Principals to be delivered pursuant to Section 6.03(g)
(together with the SPAR Reorganization Agreement and this Agreement, each a
"Merger Document" and collectively the "Merger Documents"). The execution,
delivery and performance of the SPAR Reorganization Agreement, this Agreement
and the other Merger Documents by each SPAR Party (to the extent it is a party
thereto) have been duly authorized by all necessary corporate action and no
further corporate action on the part of any SPAR Party is necessary to authorize
the SPAR Premerger Agreements to which it is a party or this Agreement or any
other Merger Document to which it is a party or the performance of the
transactions contemplated hereby or thereby .
(b) The SPAR Premerger Agreements and this Agreement (i) have
been duly executed and delivered on behalf of each SPAR Party (to the extent it
is a party thereto) and (ii) constitute legal, valid and binding obligations of
such SPAR Party, enforceable in accordance with their respective terms, except
as may be limited by (A) applicable bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization or other laws affecting any rights,
powers, privileges, remedies and interests of creditors generally, (B) rules or
principles of equity or public policy affecting the enforcement of obligations
generally, whether at law, in equity or otherwise, including (without
limitation) those pertaining to materiality, reasonableness, unconscionability,
impossibility of performance, redemption or other cure, surety rights or
defenses, waiver, latches, estoppel, or judicial deference, or (C) discretionary
powers of any court or other authority before which may be brought any
proceeding seeking equitable or other remedies, in each case whether at law, in
equity or otherwise (the "Bankruptcy Exceptions").
Section 3.03. Capital Stock of the SPAR Parties. Except as
otherwise set forth in the SPAR Disclosure Letter:
(a) As of the date of this Agreement, the authorized SAI Stock
consists of 50,000,000 shares of capital stock of SAI, which may be issued as
either common or preferred stock. The SPAR Disclosure Letter sets forth (i) the
issued and outstanding capital stock of SAI as of the date of this Agreement and
(ii) the names of each proposed SAI Option Holder and the number of shares of
SAI Stock purchasable pursuant to their respective SAI Options as of the date
hereof. The PIA Parties acknowledge and agree that the schedule of SAI Options
may be amended by SAI (by written notice to PIA Delaware) to add or delete names
or to increase or decrease the number of shares to be covered by any proposed
SIA Option at any time prior to (1) the mailing of the PIA Proxy Statement in
the case of any individual whose present or future holdings of shares of PIA
Delaware Stock or options to acquire such shares are disclosed in the PIA Proxy
Statement, or (2) the Effective Time in the case of any other person. Each of
the SAI Options will be evidenced by a written option agreement, copies of which
have been provided to PIA Delaware. The SPAR Disclosure Letter sets forth the
authorized and the issued and outstanding capital stock of each other SPAR Party
as of the date of this Agreement. As of the date of this Agreement, all of the
issued and outstanding shares of the capital stock of each SPAR Party are owned
beneficially and of record by the SPAR Stockholders in the case of SAI, and by
the SPAR Principals in the case of all other SPAR Parties, free and clear of all
Restrictions (as hereinafter defined), and have been validly issued and are
fully paid and nonassessable. "Restrictions" shall mean any and all material
liens, security interests, pledges, charges, voting trusts, equities,
restrictions, encumbrances and claims of every kind, except for (A) restrictions
on sale or resale under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (as the same may be supplemented,
modified, amended, restated or replaced from time to time, the "Securities
Act"), or state securities laws, (B) in the case of the SMCI shares, the pledge
of the SMCI shares pursuant to the MCI Hypothecation, and (C) in the case of
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the SPAR Parties that certain Agreement dated December 14, 1992, by and between
Robert G. Brown, William H. Bartels and Donald R. Young as escrow agent (as
amended, the "Buy-Sell Agreement").
(b) Upon the consummation of the SPAR Reorganization
Transactions upon the terms and subject to the conditions set forth in the
Reorganization Agreement, (i) the outstanding shares of SAI Stock will be equal
to the number described in the Recitals, above, and will have been validly
issued and will be fully paid and nonassessable, (ii) the SPAR Stockholders will
own beneficially and of record all of the shares of capital stock of SAI in the
amounts indicated in the SPAR Disclosure Letter, free and clear of all
Restrictions, (iii) SAI will acquire all of the capital stock of the SPAR
Marketing Companies and the SPAR Incentive Companies (subject to the pledge of
the SMCI shares pursuant to the MCI Hypothecation), (iv) SIM will acquire all of
the capital stock of SMCI (subject to the pledge of the SMCI shares pursuant to
the MCI Hypothecation), and (v) SMI will acquire all of the capital stock of the
SPAR Marketing Companies.
(c) Other than the proposed SAI Options or in connection with
the SPAR Reorganization Transactions or this Agreement, as of the date hereof:
(i) there are no outstanding rights, subscriptions, warrants, calls, convertible
securities, unsatisfied preemptive rights, options or other agreements of any
kind pursuant to which any SPAR Party is required to issue any of its authorized
but unissued capital stock; and (ii) no SPAR Party has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
outstanding shares of capital stock or to pay any dividend or make any
distribution in respect thereof.
Section 3.04. No Violations. Except as otherwise set forth
in the SPAR Disclosure Letter:
(a) The execution, delivery and performance of the SPAR
Premerger Agreements and this Agreement by each SPAR Party (to the extent it is
a party thereto) do not and will not violate or result in the breach of any
term, condition or provision of, or require the consent of any other person
under, (i) any existing applicable law, ordinance, or governmental rule or
regulation ("Applicable Law") to which any SPAR Party or any SPAR Principal is
subject, (ii) any judgment, order, writ, injunction, decree or award of any
Governmental Entity (as defined in Section 3.04(d) hereof) that is applicable to
any SPAR Party or any SPAR Principal (each a "SPAR Court Order"), (iii) the
charter documents of any SPAR Party, or (iv) any SPAR Contract (as defined in
Section 3.08), SPAR Realty Lease (as defined in Section 3.07(a)), material SPAR
Personalty Lease (as defined in Section 3.07(b)) or other material mortgage,
indenture, agreement, contract, commitment, lease, permit, plan, authorization,
instrument or document to which any SPAR Marketing Company or any SPAR Principal
is a party, by which any SPAR Marketing Company or any SPAR Principal has any
rights or by which any of the properties or assets of any SPAR Marketing Company
is bound or subject (each a "Material SPAR Document").
(b) The execution, delivery and performance of the SPAR
Premerger Agreements and this Agreement by each SPAR Marketing Company (to the
extent it is a party thereto) will not be reasonably likely to result in (A) any
termination, cancellation or acceleration of any Material SPAR Document or (B)
termination, modification or other change in any material respect of the
existing rights and obligations of any SPAR Marketing Company under such
Material SPAR Document.
(c) No SPAR Marketing Company, and to the knowledge of each
SPAR Marketing Company, no other party thereto, is in default in any material
respect under any Material SPAR Document, and to the knowledge of each SPAR
Marketing Company, no event has occurred that with the giving of notice or lapse
of time (or both) would constitute such a default.
(d) Other than the filing of a pre-merger notification report
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act") and in
connection with or in compliance with the provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(as the same may be supplemented, modified, amended, restated or replaced from
time to time, the "Exchange Act"), and the Securities Act, no authorization,
approval or consent of, and no registration or filing with, any Governmental
Entity is required in connection with the execution and delivery of the SPAR
Premerger Agreements or this Agreement by any SPAR Party or any SPAR Principal
and the performance of the transactions contemplated hereunder and thereunder.
As used herein, the term "Governmental Entity" means any court, administrative
or regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
Section 3.05. Financial Statements. Except as otherwise set
forth in the SPAR Disclosure Letter:
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(a) The SPAR Parties have delivered to PIA Delaware copies of
(i) the combined balance sheets of the SPAR Marketing Companies at March 31,
1998 (the "Audited SPAR Marketing Balance Sheet Date"), and March 31, 1997, and
the related combined statements of income, cash flows and changes in
stockholders' equity for the fiscal years then ended, together with the report
of Ernst & Young, LLP thereon (the "Audited SPAR Marketing Financial
Statements"); (ii) the unaudited (but reviewed) combined balance sheets of the
SPAR Marketing Companies at December 31, 1998 (the "Interim SPAR Marketing
Balance Sheet Date"), and the related combined statements of income and cash
flows for the nine month period then ended (the "Interim SPAR Marketing
Financial Statements" and together with the Audited SPAR Marketing Financial
Statements, the "SPAR Marketing Financial Statements"); and (iii) the balance
sheets of MCI at December 31, 1998 (the "Audited MCI Balance Sheet Date"), and
December 31, 1997, and the related combined statements of income, cash flows and
changes in stockholders' equity for the fiscal years then ended, together with
the report of Ernst & Young, LLP thereon (the "Audited MCI Financial
Statements"), in each case adjusted to exclude the MCI assets not acquired by
SMCI and the other pro forma adjustments contemplated by the MCI Purchase
Agreement. The SPAR Marketing Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved and fairly present the combined
financial position and the combined results of operations of the SPAR Marketing
Companies as of the dates and for the periods indicated, subject in the case of
the Interim SPAR Marketing Financial Statements to nonrecurring year end audit
adjustments, which adjustments would not in the aggregate be materially adverse
to the financial condition of the SPAR Marketing Companies. To the knowledge of
the SPAR Parties, based upon such audit, the Audited MCI Financial Statements
have been prepared in accordance with GAAP consistently applied throughout the
periods involved and fairly present the pro forma financial position and the
results of operations of MCI as of the dates and for the periods indicated.
(b) The Interim SPAR Marketing Financial Statements contain
all adjustments of a normal recurring nature, based upon historical operations
of the SPAR Marketing Companies and reporting determinations made with respect
to the most recent Audited SPAR Marketing Financial Statements, necessary to
present fairly the financial position for the periods then ended.
Section 3.06. Permits. Except as otherwise set forth in the
SPAR Disclosure Letter:
(a) Each SPAR Marketing Company owns, holds, possesses or
lawfully uses in the operation of its business all governmental franchises,
licenses, permits, easements, rights, applications, filings, registrations and
other authorizations that are necessary for it to conduct its business as now
conducted in all material respects or for the ownership and use of the material
assets owned or used by such SPAR Marketing Company in the conduct of its
business (each a "SPAR Permit" and collectively the "SPAR Permits").
(b) Each SPAR Permit is valid and in full force and effect,
and no SPAR Permit will be terminated or impaired in any material respect or
become terminable as a result of the SPAR Premerger Transactions, the Merger or
any other transaction contemplated by this Agreement.
Section 3.07. Real and Personal Property. Except as otherwise
set forth in the SPAR Disclosure Letter:
(a) All buildings, leasehold improvements, structures,
facilities, and fixtures used in any material respect by any SPAR Marketing
Company in the conduct of its business (limited in the case of leased property
to the primary demised premises) (each a "SPAR Premises") (i) are leased by any
SPAR Marketing Company pursuant to a valid lease (each a "SPAR Realty Lease" and
collectively the "SPAR Realty Leases"), except as may be limited by the
Bankruptcy Exceptions, (ii) are in good operating condition and repair (subject
to normal wear and tear, replacement, retirement, and maintenance), (iii) are
usable in the regular and ordinary course of business, and (iv) are used in
compliance in all material respects with all Applicable Laws and authorizations
relating to their construction (limited to tenant improvements in the case of
leased property), use and operation. A list of all SPAR Realty Leases is set
forth in the SPAR Disclosure Letter. No SPAR Marketing Company owns any real
estate.
(b) All items of equipment and other tangible property and
assets used in any material respect by any SPAR Marketing Company in the conduct
of its business (i) are either (A) owned by any SPAR Marketing Company, or (B)
leased by any SPAR Marketing Company pursuant to a valid lease (each a "SPAR
Personalty Lease" and collectively the "SPAR Personalty Leases"), except as may
be limited by the Bankruptcy Exceptions, (ii) are in good operating condition
and repair (subject to normal wear and tear, replacement, retirement, and
maintenance), (iii) are usable in the regular and ordinary course of business,
and (iv) comply in all material respects
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with all Applicable Laws and authorizations relating to their construction, use
and operation. A list of all SPAR Personalty Leases is set forth in the SPAR
Disclosure Letter.
Section 3.08. Contracts and Commitments. The SPAR Disclosure
Letter sets forth an accurate, correct and complete list of all material
agreements, contracts, commitments, arrangements and understandings, written or
oral, including all amendments and supplements thereto, of each SPAR Marketing
Company (the "SPAR Contracts"), to which any SPAR Marketing Company is a party
or is bound, or by which any of their respective assets are bound, and which
involve any:
(a) agreement, contract, commitment or other legally binding arrangement
with any present or former (within the past two years) officer,
employee or material consultant involving annual salaries or minimum
annual payments of $100,000 or more (excluding normal salesmen's
commissions);
(b) agreement, contract, commitment or other legally binding arrangement
for the future purchase of, or payment for, supplies or products, or
for the performance of services by a third party involving in any one
case $100,000 or more (other than those that may be terminated without
penalty);
(c) agreement, contract, commitment or other legally binding arrangement to
sell or supply products or to perform services involving in any one
case $100,000 or more (other than those that may be terminated without
penalty);
(d) agreement, contract, commitment or other legally binding arrangement
continuing over a period of more than twelve months from the date
hereof and requiring more than $100,000 in annual payments by a SPAR
Marketing Company;
(e) sales representative, sales agency or similar agreement, contract,
commitment or other legally binding arrangement with any Person not
under the employ, control or direction of a SPAR Marketing Company;
(f) agreement, contract, commitment or other legally binding arrangement
containing a provision to indemnify any person or entity or assume any
tax, environmental or other non-ordinary course liability;
(g) agreement, contract, commitment or other legally binding arrangement
with any Governmental Entity (other than a SPAR Permit);
(h) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement or other contract for the borrowing or
lending of money, or any guarantee, pledge or undertaking of or credit
support for the indebtedness of any other person by any SPAR Marketing
Company;
(i) agreement, contract, commitment or other legally binding arrangement
for any charitable or political contribution;
(j) agreement, contract, commitment or other legally binding arrangement
for any capital expenditure or leasehold improvement in excess of
$100,000;
(k) agreement, contract, commitment or other legally binding arrangement
limiting or restraining: (i) any SPAR Marketing Company or any
successor thereto from engaging in the businesses of the SPAR Parties
or PIA Parties post Merger (other than any customer contract not in
excess of $100,000 that may contain such a prohibition with respect to
the performance of services for the customer's competitors); or (ii) to
the knowledge of any SPAR Marketing Company, any employee of any SPAR
Marketing Company from engaging in or competing with the businesses of
the SPAR Parties or PIA Parties post Merger on behalf of the Parties;
or
(l) agreement, contract, commitment or other legally binding arrangement of
any SPAR Marketing Company not made in the ordinary course of business
(other than as would have been disclosable in one of the preceding
clauses but for the amount or term thereof);
in each case excluding the SPAR Premerger Agreements, the SPAR Realty Leases,
the SPAR Personalty Leases, the SPAR Trademark Licenses, the SPAR Permits and
this Agreement (which are not intended, and shall not be deemed or construed, to
be SPAR Contracts). Except as otherwise set forth in the SPAR Disclosure Letter:
(A) each of the
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SPAR Contracts is valid and enforceable in all material respects, except as may
be limited by the Bankruptcy Exceptions; (B) each SPAR Marketing Company is, and
to the knowledge of such SPAR Marketing Company, all other parties thereto are,
in material compliance with the provisions thereof in all material respects; and
(C) no SPAR Marketing Company is nor has ever been a party to any contract with
any Governmental Entity subject to retroactive price redetermination or
renegotiation.
Section 3.09. Insurance. Except as otherwise set forth in the
SPAR Disclosure Letter: (a) the assets, properties and operations of each SPAR
Marketing Company are insured under various policies of general liability,
workers' compensation and other forms of insurance in amounts that are adequate
in the judgment of the SPAR Marketing Companies in relation to the business and
assets of such SPAR Marketing Company; (b) all such policies are in full force
and effect in accordance with their terms, no notice of cancellation has been
received, and to the knowledge of the SPAR Marketing Companies, with respect to
any such policy, there is no existing default or event that with the giving of
notice or lapse of time (or both), would constitute a material default under any
such policy; and (c) no SPAR Marketing Company has been refused any insurance,
nor has any SPAR Marketing Company's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years.
Section 3.10. Employees. Except as otherwise set forth in the
SPAR Disclosure Letter: (a) there have not been in the past five years and, to
the knowledge of the SPAR Marketing Companies, there are not pending, any
organized or coordinated labor disputes, work stoppages, requests for
representation, pickets or work slow-downs due to labor disagreements; (b) there
are and have been no unresolved material violations of any laws of any
Governmental Entity respecting the employment of any employees; (c) there is no
unfair labor practice, charge or complaint pending, unresolved or, to the
knowledge of the SPAR Marketing Companies, overtly threatened that would be
reasonably likely to be brought or filed with the National Labor Relations Board
or similar body in any foreign country; (d) the employees of the SPAR Marketing
Companies are not covered by any collective bargaining agreement; and (e) each
SPAR Marketing Company has paid or properly accrued in accordance with GAAP in
the ordinary course of business all wages and compensation due to employees,
including all vacations or vacation pay, holidays or holiday pay, sick days or
sick pay, and bonuses.
Section 3.11. Employee Benefit Plans and Arrangements. Except
as otherwise set forth in the SPAR Disclosure Letter:
(a) The SPAR Disclosure Letter sets forth a complete and
accurate list of each Benefit Plan covering any present or former officers,
employees, consultants, or directors of any SPAR Marketing Company (a "SPAR
Benefit Plan"). As used in this Agreement: "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder, as the same may be supplemented, modified,
amended, restated or replaced from time to time; "Pension Plan" of a referenced
party shall mean each "employee pension benefit plan" (as defined in Section
3(2) of ERISA) of the referenced party; "Welfare Plan" of a referenced party
shall mean each "employee welfare benefit plan" (as defined in Section 3(i) of
ERISA) of the referenced party; "Other ERISA Benefit" of a referenced party
shall mean any plan or agreement governed by ERISA or the Code of the referenced
party relating to deferred compensation, bonus and performance compensation
(other than salesmen commissions), stock purchase, stock option, stock
appreciation, severance, vacation, sick leave, holiday fringe benefits,
personnel policy, reimbursement program, insurance, welfare or similar plan,
program, policy or arrangement; and "Benefit Plan" of a referenced party shall
mean each Pension Plan, Welfare Plan and Other ERISA Benefit of the referenced
party; in each case to the extent maintained or contributed to, or required to
be maintained or contributed to, by or for which there otherwise is any
liability as of the Effective Time, of such party or its respective affiliates
or any other person or entity that, together with such party, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each,
together with such party, a "Commonly Controlled Entity") for the benefit of any
present or former officer, employee, consultant or director.
(b) Each SPAR Benefit Plan is in substantial compliance with
all reporting, disclosure and other requirements applicable to such SPAR Benefit
Plan. Each SPAR Benefit Plan that is a Pension Plan and intended to be qualified
under Section 401(a) of the Code (each a "SPAR Pension Plan") has been
determined by the Internal Revenue Service to be so qualified and, to the
knowledge of the SPAR Marketing Companies, no condition exists or has occurred
that would adversely affect any such determination. Neither any SPAR Benefit
Plan, nor any SPAR Marketing Company, nor to the knowledge of any SPAR Marketing
Company any Commonly Controlled Entity of any SPAR Marketing Company or any
trustee or agent of any SPAR Benefit Plan, has been or is presently engaged in
any prohibited transactions as defined by Section 406 of ERISA or Section 4975
of the Code (i) for which an exemption is not applicable, or (ii) that would be
reasonably likely to subject any SPAR Marketing Company to
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a material amount of tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA. To the knowledge of the SPAR Marketing Companies, there is
no event or condition existing that would be deemed a "reportable event" (within
the meaning of Section 4043 of ERISA) with respect to which the thirty-day
notice requirement has not been waived. To the knowledge of the SPAR Marketing
Companies, no condition exists that would be reasonably likely to subject any
SPAR Marketing Company to a material amount of penalty under Section 4071 of
ERISA.
(c) Neither any SPAR Marketing Company nor any Commonly
Controlled Entity of any SPAR Marketing Company is or has ever been party to any
"'multi-employer plan," as that term is defined in Section 3(37) of ERISA. True
and correct copies of (i) the most recent annual report (Form 5500 series) and
any attached schedules for each SPAR Benefit Plan (if any such report was
required by applicable law), (ii) the most recent summary plan description for
each SPAR Benefit Plan and (iii) the most recent determination letter issued by
the Internal Revenue Service for each SPAR Pension Plan have been provided to
PIA Delaware.
(d) With respect to each SPAR Benefit Plan, there are no
actions, suits or claims (other than routine claims for benefits in the ordinary
course or relating to qualified domestic relations orders within the meaning of
Section 414(p) of the Code) pending or, to the knowledge of the SPAR Marketing
Companies, overtly threatened against any SPAR Benefit Plan, any SPAR Marketing
Company, any Commonly Controlled Entity of any SPAR Marketing Company or any
trustee or agent of any SPAR Benefit Plan, nor to the knowledge of the SPAR
Marketing Companies, is there any reasonable basis for such claims.
(e) With respect to each SPAR Benefit Plan to which any SPAR
Marketing Company or any Commonly Controlled Entity of any SPAR Marketing
Company is a party which constitutes a group health plan subject to Section
4980B of the Code, each such SPAR Benefit Plan substantially complies, and in
each case has substantially complied, with all applicable requirements of
Section 4980B of the Code. There is no outstanding material liability (except
for premiums that have not become overdue) or other accrued but unpaid
obligations under Title IV of ERISA with respect to any SPAR Pension Plan, and
no condition exists that would be reasonably expected to result in any SPAR
Marketing Company incurring a material liability under Title IV of ERISA, either
directly or with respect to any Commonly Controlled Entity of any SPAR Marketing
Company. All premiums payable to the Pension Benefit Guaranty Corporation (the
"PBGC") have been paid prior to becoming overdue. Neither the PBGC nor any SPAR
Marketing Company nor any Commonly Controlled Entity of any SPAR Marketing
Company has instituted proceedings to terminate any SPAR Pension Plan that is
subject to Title IV of ERISA, and the PBGC has not informed any SPAR Marketing
Company of its intent to institute proceedings to terminate any such plan. Full
payment has been made of all amounts that any SPAR Marketing Company or any
Commonly Controlled Entity of any SPAR Marketing Company was required to have
paid as a contribution to any SPAR Pension Plan that is subject to Title IV of
ERISA (with applicability determined as of the last day of the most recent
fiscal year of each of the SPAR Pension Plans ended prior to the date of this
Agreement), and none of the SPAR Pension Plans has incurred any material amount
of "accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of each such SPAR Pension Plan ended prior to the date of
this Agreement.
(f) No SPAR Pension Plan is a defined benefit pension plan.
Each SPAR Benefit Plan is, and its administration is and at all times has been
in substantial compliance with, and no SPAR Marketing Company has received any
claim or notice that any such SPAR Benefit Plan is not in substantial compliance
with, its terms and all Applicable Laws, including without limitation, to the
extent applicable, the requirements of ERISA and the Code. No SPAR Marketing
Company and no Commonly Controlled Entity of any SPAR Marketing Company is in
default in any material respect in performing any of its contractual obligations
under any SPAR Benefit Plan or any related trust agreement or insurance
contract. There are no material outstanding liabilities of any SPAR Benefit Plan
other than liabilities for benefits to be paid to participants in any SPAR
Benefit Plan and their beneficiaries in accordance with the terms of such SPAR
Benefit Plan. Each SPAR Benefit Plan may be amended or modified or terminated by
the applicable SPAR Marketing Company or a Commonly Controlled Entity of a SPAR
Marketing Company at any time without liability except under any defined pension
benefit plan. No SPAR Benefit Plan other than a SPAR Pension Plan, retiree
medical plan or severance plan provides benefits to any individual after
termination of employment.
(g) The consummation of the transactions contemplated by the
SPAR Premerger Agreements and this Agreement will not: (A) entitle any employee
of any SPAR Marketing Company to severance pay, unemployment compensation or any
other payment or benefit; (B) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee; (C) result in any
liability under Title IV of ERISA;
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(D) result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available; or (E) result
(either alone or in conjunction with any other event) in the payment or series
of payments by any SPAR Marketing Company or any of its affiliates to any person
of an "excess parachute payment" within the meaning of Section 280G of the Code.
(h) With respect to each SPAR Benefit Plan that is funded
wholly or partially through an insurance policy, all material amounts of
premiums required to have been paid to date under the insurance policy have been
paid, all material amounts of premiums required to be paid under the insurance
policy through the Closing Date will have been paid on or before the Closing
Date and, as of the Closing Date, there will be no material amount of liability
of any SPAR Marketing Company or any Commonly Controlled Entity of any SPAR
Marketing Company under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Closing Date.
(i) Each SPAR Benefit Plan that constitutes a "welfare benefit
plan" (within the meaning of Section 3(i) of ERISA) for which contributions are
claimed by any SPAR Marketing Company or any Commonly Controlled Entity of any
SPAR Marketing Company as deductions under any provision of the Code is in
material compliance with all applicable requirements pertaining to such
deduction. With respect to any "welfare benefit fund" (within the meaning of
Section 419 of the Code) related to such a welfare benefit plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code. All
welfare benefit funds intended to be exempt from tax under Section 501(a) of the
Code have been determined by the Internal Revenue Service to be so exempt and no
event or condition exists or has occurred which would adversely affect any such
determination.
(j) No SPAR Marketing Company has any Benefit Plan outside of
the United States.
(k) All persons classified by any SPAR Marketing Company as
independent contractors or "leased employees" within the meaning of Section
414(n) of the Code ("SPAR Leased Employees") satisfy and have at all times
satisfied the requirements of applicable law to be so classified. Each SPAR
Marketing Company has fully and accurately reported their compensation on IRS
Forms 1099 when required to do so. No SPAR Marketing Company has any obligation
to provide benefits with respect to such independent contractors or SPAR Leased
Employees under any SPAR Benefit Plan or otherwise.
Section 3.12. Compliance with Law. Except as otherwise set
forth in the SPAR Disclosure Letter: each SPAR Marketing Company has complied in
all material respects with each, and is not in violation in any material respect
of, any Applicable Law to which such SPAR Marketing Company's business,
operations, assets or properties are subject.
Section 3.13. Transactions With Affiliates. Except as
otherwise set forth in the SPAR Disclosure Letter: (a) no stockholder and no
director, officer or employee of any SPAR Marketing Company, or any member of
his or her immediate family or any other of its, his or her affiliates, owns or
has a 5% or more ownership interest in any material business, corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement, commitment or legally binding arrangement with such SPAR
Marketing Company; and (b) the SPAR Disclosure Letter includes a complete list
as of the date hereof of all amounts owed by any SPAR Marketing Company to any
SPAR Principal (other than salary and expense reimbursements in the normal
course) or any affiliate of any SPAR Principal (other than for goods purchased
or services rendered in the normal course) or owed on account of any loan or
advance to any SPAR Marketing Company by any SPAR Principal or any affiliate of
any SPAR Principal (other than for goods purchased or services rendered in the
normal course).
Section 3.14. Litigation. Except as otherwise set forth in the
SPAR Disclosure Letter, as of the date hereof: (a) no litigation, including any
arbitration, investigation or other proceeding of or before any Governmental
Entity, is pending (or to the knowledge of the SPAR Marketing Companies) overtly
threatened against any SPAR Marketing Company, other than litigation that (i) is
not reasonably likely to be adversely determined or (ii) if reasonably likely to
be adversely determined, would not be reasonably likely to have, individually or
in the aggregate with other such litigation, a SPAR Material Adverse Effect; and
(b) no SPAR Marketing Company is a party to or subject to the provisions of any
SPAR Court Order.
Section 3.15. Taxes. Except as otherwise set forth in the SPAR
Disclosure Letter:
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(a) All federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by any SPAR
Marketing Company (the "SPAR Tax Returns") with respect to any material federal,
state, local or foreign taxes, assessments, interest, penalties, deficiencies,
fees and other governmental charges or impositions (including without limitation
all income tax, unemployment compensation, social security, payroll,
withholding, sales and use, excise, privilege, property, ad valorem, franchise,
license, school and any other tax or similar governmental charge or imposition,
and interest and penalties therein, under the Applicable Laws of the United
States or any state or Municipal or political subdivision thereof or any foreign
country or political subdivision thereon ("Taxes") have been timely filed with
the appropriate governmental agencies in all jurisdictions in which such SPAR
Tax Returns are required to be filed, and all such SPAR Tax Returns are true,
complete and correct in all material respects and fairly reflect the liabilities
of the SPAR Marketing Companies for Taxes for the periods, property or events
covered thereby.
(b) All Taxes, including (without limitation) those called for
by the SPAR Tax Returns, required to be paid or withheld by any SPAR Marketing
Company and any deficiency assessments, penalties and interest for which a
notice of assessment has been received (other than as may have been settled and
paid in full in accordance therewith, and other than those being contested, if
any, as set forth in the SPAR Disclosure Letter) have been timely paid or
withheld.
(c) The accruals for Taxes contained in the Interim SPAR
Marketing Financial Statements for the Tax liabilities of the SPAR Marketing
Companies have been made in accordance with GAAP as of that date and include
adequate provision under GAAP for all deferred Taxes (other than necessary
increments due to the passage of time), except that no accruals have been made
for income Taxes for SINC and SBRS, which are Subchapter S corporations under
the Code. SMF utilizes the accrual method of accounting for income tax purposes,
SINC and SBRS utilize the cash method of accounting for income tax purposes, and
none of them has changed its method of accounting for income tax purposes in the
past five years. Each SPAR Marketing Company that has filed SPAR Tax Returns
under Subchapter S of the Code has made a timely and effective election to be
taxed under the provisions of Subchapter S of the Code and has at no time been
taxable under the provisions of Subchapter C of the Code. No such SPAR Marketing
Company has any net unrealized built-in gain that has not been recognized within
the meaning of Section 1374 of the Code.
(d) No SPAR Marketing Company is or has at any time ever been
a party to a Tax sharing, Tax indemnity or Tax allocation agreement, and no SPAR
Marketing Company has assumed any Tax liability of any other person or entity
under contract.
(e) No SPAR Marketing Company has received any notice of
assessment or proposed assessment in connection with any SPAR Tax Returns, other
than as may have been settled and paid in full in accordance therewith, and
there are no pending tax examinations of or material tax claims asserted against
any SPAR Marketing Company or any of its assets or properties. No SPAR Marketing
Company has extended, or waived the application of, any statute of limitations
of any jurisdiction regarding the assessment or collection of any Taxes.
(f) There are now, and as of immediately following the
Effective Time there will be, no liens (other than any lien for Taxes not yet
overdue and payable) on any of the assets or properties of any SPAR Marketing
Company relating to or attributable to Taxes. To the knowledge of the SPAR
Marketing Companies, there is no reasonable basis for the assertion of any claim
relating to or attributable to Taxes that, if adversely determined, would result
in any lien on the assets of any SPAR Marketing Company or otherwise have a SPAR
Material Adverse Effect.
(g) None of the SPAR Marketing Companies has any knowledge of
any reasonable basis for any additional assessment of any Taxes for any period
ending on or before the Closing Date (other than increased Taxes based upon
increased business units, business sites, payroll, profits or other taxable
attribute relating to an expanding enterprise prior to the Closing Date). All
Tax payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the SPAR
Marketing Companies, have been fully and properly paid, withheld, accrued or
recorded.
Section 3.16. Intellectual Property Matters. Except as
otherwise set forth in the SPAR Disclosure Letter:
(a) The SPAR Disclosure Letter sets forth all patents,
trademarks, trade names, service marks, copyrights, software, material trade
secrets or material know-how owned or used in any material respect by any
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SPAR Marketing Company in the conduct of its business (the "SPAR Intellectual
Property"), excluding, however, all readily commercially available software
programs licensed to a SPAR Marketing Company (for example, without limitation,
Windows, Windows NT, MS Word, MS Excel, and MS Explorer) ("Commercial
Software"), which Commercial Software need not be set forth on such schedule.
All of the SPAR Intellectual Property is (or will be as of the Effective Time)
owned by or licensed to STM or one of the SPAR Marketing Companies free and
clear of any liens (except insofar as a license or the restrictions thereunder
may constitute a lien, and except for the SPAR Trademark Licenses and the
Business Manager Agreement). At or before the Closing, (i) SIT and SMS will
enter into non-exclusive perpetual royalty free licenses with STM respecting
their use of the name "SPAR" and certain other trademarks and related rights
owned or to be owned by STM (the "SPAR Trademark Licenses") such agreement to be
substantially in the form attached as Exhibit C hereto, and (ii) SMF, SMS and
SIT will enter into a Software Ownership Agreement with respect to the Internet
job scheduling software (called "Business Manager") jointly developed and owned
by them, such agreement to be substantially in the form attached as Exhibit D
hereto (the "Business Manager Agreement").
(b) There are no ongoing royalty, commission or similar
arrangements, and no licenses, sublicenses or agreements from any SPAR Marketing
Company as a licensor, pertaining to the current use of the SPAR Intellectual
Property, except as may be applicable under the Commercial Software, the SPAR
Trademark Licenses and the Business Manager Agreement.
(c) No SPAR Marketing Company infringes upon or unlawfully or
wrongfully uses any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by any other person or entity. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the SPAR
Marketing Companies, overtly threatened relating to any, patent, trademark,
trade name, service mark, copyright or trade secret formerly or currently used
by any SPAR Marketing Company. None of the SPAR Intellectual Property is subject
to any outstanding order, decree or judgment. No SPAR Marketing Company has
agreed to indemnify any person or entity for or against any infringement of or
by the SPAR Intellectual Property. Except for (i) the SPAR Intellectual Property
licensed or to be licensed to SMS and SIT by STM, (ii) the common ownership of
the software reflected in the Business Manager Agreement, and (iii) the
ownership of and director and officer positions in the SPAR Marketing Companies,
SGI, SMS, SIT, STM and the SPAR Parties, no present or former employee of any
SPAR Marketing Company, and no person or entity other than SGI, SMS, SIT, STM
and the SPAR Parties (and the SPAR Principals solely as the officers and
shareholders thereof), directly or indirectly owns or has any proprietary,
financial or other interest in, in whole or in part, any SPAR Intellectual
Property.
(d) All SPAR Intellectual Property in the form of computer
software that is utilized by any SPAR Marketing Company in the operation of its
business is capable of processing date data between and within the twentieth and
twenty-first centuries or can be rendered capable of processing such data prior
to the date necessary to avoid disruption of its business by utilizing the
employees of one or more of the SPAR Marketing Companies in the normal course of
business and by expenditure of not more than $100,000 in excess of the cost of
software purchased for reasons other than the failure of existing software to be
capable of such processing.
Section 3.17. Existing Condition. Except as otherwise set
forth in the SPAR Disclosure Letter, since the Interim SPAR Marketing Balance
Sheet Date, no SPAR Marketing Company has:
(a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice (including,
without limitation, advances under its commitments and lines of
credit), the liabilities contemplated under the SPAR Premerger
Agreements;
(b) discharged or satisfied any lien or encumbrance or paid any
liabilities, other than in the ordinary course of business consistent
with past practice (including, without limitation, repayments under its
commitments and lines of credit), or failed to pay or discharge when
due any liabilities, other than in the ordinary course of business
consistent with past practice, or where the obligation is being
contested in good faith, and the failure to pay or discharge has not
caused and would not be reasonably likely to cause any SPAR Material
Adverse Effect;
(c) sold, encumbered, assigned or transferred any assets, properties or
rights or any interest therein, or made any agreement or commitment or
granted any option or right with, of or to any person to acquire any
assets, properties or rights of any SPAR Marketing Company or any
interest therein, except for sales and dispositions in the ordinary
course of business consistent with past practice, and except for the
transactions contemplated under the SPAR Premerger Agreements and this
Agreement;
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(d) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract
or other encumbrance of any nature whatsoever, other than (i) in the
ordinary course of business (including, without limitation, future
advances and floating liens under existing, increased or replacement
credit facilities), or (ii) in connection with the financing of the MCI
Acquisition;
(e) made or suffered any early cancellation or termination of any Material
SPAR Document (other than in the ordinary course of business with a
vendor to a SPAR Marketing Company); or amended, modified or waived any
substantial debts or claims held by it under any Material SPAR Document
other than in the ordinary course of business;
(f) declared, set aside or paid any dividend or made or agreed to make any
other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or acquire any of shares of its capital stock or its other ownership
interests;
(g) suffered any damage, destruction or loss that has had or will have (i)
a SPAR Material Adverse Effect, or (ii) a replacement cost individually
or in the aggregate at more than $100,000;
(h) suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to
conduct its business and operations;
(i) suffered any material adverse change in the business, operations,
properties, assets or financial condition of the SPAR Marketing
Companies taken as a whole;
(j) received notice or had knowledge of any actual or overtly threatened
organized or coordinated labor trouble, strike or other similar
occurrence, event or condition of any similar character that has had or
would be reasonably likely to have a SPAR Material Adverse Effect;
(k) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition
to, other benefits to which any of its employees are entitled (in each
case other than increases in salaries or other compensation in the
ordinary course of business consistent with past practice and that in
the aggregate have not resulted in a SPAR Material Adverse Effect);
(l) changed any of the accounting principles followed by it or the methods
of applying such principles, other than the contemplated change for
certain of the SPAR Marketing Companies from "subchapter s" status to
"subchapter c" status for federal income tax purposes (to be effected
shortly before the Effective Time) and other changes in implementing
the SPAR Premerger Transactions;
(m) except as contemplated by the SPAR Premerger Agreements or this
Agreement, entered into any transaction other than in the ordinary
course of business consistent with past practice;
(n) except as contemplated by the SPAR Premerger Agreements or this
Agreement, changed its authorized capital or its securities outstanding
or otherwise changed its ownership interests, or granted any options,
warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(o) agreed to take any of the actions referred to above.
Section 3.18. Books of Account. Except as otherwise set forth
in the SPAR Disclosure Letter: (a) the books, records and accounts of each SPAR
Marketing Company accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of such SPAR Marketing Company; and
(b) no SPAR Marketing Company has engaged in any transaction, maintained any
bank account or used any of the funds of such SPAR Marketing Company except for
transactions, bank accounts and funds that have been and are fairly reflected in
the normally maintained books and records of the business.
Section 3.19. Environmental Matters. Except as otherwise
set forth in the SPAR Disclosure Letter:
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(a) Each SPAR Marketing Company has secured, and is in
compliance in all material respects with, all Environmental Permits (as such
term is defined below), with respect to any premises on which its business is
operated. Each SPAR Marketing Company is in compliance in all material respects
with all applicable Environmental Laws (as hereinafter defined).
(b) As used herein: (i) "Environmental Laws" shall mean any
and all treaties, laws, regulations, ordinances, enforceable requirements,
binding determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses or binding agreements issued, promulgated or
entered into by any Governmental Entity, relating to the environment,
preservation or reclamation of natural resources, or to the management, Release
(as defined below) or overtly threatened Release of or exposure to Hazardous
Substances (as such term is defined below), including, CERCLA (as such term is
defined below), the Resource Conservation and Recovery Act. 42 U.S.C. Section
6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et
seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et. seq., the Safe Drinking
Water Act, 42 U.S.C. Section 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., and any similar or
implementing state or local law and all amendments or regulations promulgated
thereunder; (ii) "Release" shall mean any spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, emanation or
migration of any Hazardous Substance in, into, onto or through the environment
(including ambient air, surface water, ground water, soils, land surface,
subsurface strata, workplace or structure); (iii) "CERCLA" shall mean the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq.; (iv) "Hazardous Substances" shall mean any waste or other
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials; and (v) the term
"Environmental Permits" means all permits, licenses, approvals or authorizations
from any Governmental Entity required under Environmental Laws.
(c) No SPAR Marketing Company has: (x) received any written
communication from any Governmental Entity that alleges that any SPAR Marketing
Company is not in compliance in any material respect with any Environmental Laws
or Environmental Permits; (y) entered into or agreed to any court decree or
order, and no SPAR Marketing Company is subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law in any material
respect; or (z) received a CERCLA 104(e) information request or has been named a
potentially responsible party for any National Priorities List site under CERCLA
or any site under analogous state law or received an analogous notice or request
from any non-U.S. Governmental Entity, which notice, request or any resulting
inquiry or litigation has not been fully and finally resolved without
possibility of reopening. No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the SPAR Marketing Companies, overtly
threatened to or against any material assets or properties of any SPAR Marketing
Company pursuant to any Environmental Law.
(d) To the knowledge of the SPAR Marketing Companies: (i)
there has been no unlawful treatment, storage, disposal or release by any SPAR
Marketing Company or any of its representatives of any Hazardous Substance on
any SPAR Premises; (ii) there has been no unlawful treatment, storage, disposal
or release of any Hazardous Substance on any SPAR Premises; (iii) there are no
aboveground storage tanks located on or underground storage tanks located within
any SPAR Premises; (iv) each aboveground storage tank formerly located on or
underground storage tank formerly located within any SPAR Premises (if any) have
been removed in accordance with all Environmental Laws and no residual
contamination from any Hazardous Substance, if any, remains at such sites in
excess of applicable standards under Applicable Law; (v) there are no
polychlorinated biphenyls ("PCBs") leaking from any article, container or
equipment located on or under any SPAR Premises, and there are no such articles,
containers or equipment containing leaking PCBs; and (vi) there is no asbestos
containing material not contained in a manner reasonably acceptable under
Applicable Law in any material respect located on or under any SPAR Premises.
Section 3.20. No Illegal Payments. No SPAR Marketing Company
and, to the knowledge of the SPAR Marketing Companies, no affiliate, officer,
agent or employee of any SPAR Marketing Company, has directly or indirectly on
behalf of or with respect to any SPAR Marketing Company during the past five
years, (a) made any unlawful domestic or foreign political contributions, (b)
made any payment or provided services that were unlawful in any material respect
for such Person to make or provide or for the recipient to receive, (c) received
any payment
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or services that were unlawful in any material respect for the payer or the
provider of such services to make or provide, or (d) made any payment to any
person or entity, or agent or employee thereof, in connection with any SPAR
Contract to induce such person or entity to enter into such SPAR Contract that
were unlawful in any material respect for the payer to make or provide or the
recipient to receive. No SPAR Marketing Company has during the past five years,
(i) had any transactions or payments not recorded in their accounting books and
records in accordance with GAAP in any material respect, or (ii) had any
off-book bank or cash accounts or "slush funds" related to any SPAR Marketing
Company.
Section 3.21. Brokers. The SPAR Disclosure Letter lists all
investment banking fees, finders' fees, brokers' commissions and similar
payments which any SPAR Marketing Company or (to the knowledge of any SPAR
Marketing Company) any SPAR Principal has paid or will be obligated to pay in
connection with the transactions contemplated by the SPAR Premerger Agreements
or this Agreement.
Section 3.22. No Misrepresentation by the SPAR Marketing
Companies. The representations and warranties of the SPAR Marketing Companies
made or contained in this Agreement (whether with respect to any SPAR Marketing
Company or otherwise), and the information contained in the SPAR Disclosure
Letter and the other certificates, schedules and documents furnished by or on
behalf of any SPAR Marketing Company in connection with the transactions
contemplated by this Agreement (whether with respect to any SPAR Marketing
Company or otherwise), do not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein in order to make
it, in the light of the circumstances under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PIA PARTIES
Except as otherwise disclosed in that certain letter of even
date herewith delivered to the SPAR Parties prior to the execution hereof (which
letter shall contain appropriate references and cross references to identify the
Sections hereof to which the information in such letter relates) (the "PIA
Disclosure Letter"), each PIA Party, jointly and severally, represents and
warrants to the SPAR Parties as follows:
Section 4.01. Corporate Existence. Except as otherwise
disclosed in the PIA Disclosure Letter:
(a) Each PIA Party is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation. PIA
Delaware has no subsidiaries other than PIA California. The PIA Disclosure
Letter sets forth a complete list of the subsidiaries of PIA California
(individually, a "PIA Subsidiary" and collectively, the "PIA Subsidiaries") and
the owner of each.
(b) Each PIA Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. PIA Delaware, PIA California, and the PIA Subsidiaries are
sometimes collectively referred to individually as a "PIA Company" and
collectively as the "PIA Companies".
(c) Each PIA Company is duly qualified to conduct business and
is in good standing as a foreign corporation in each jurisdiction in which the
conduct of its business requires it to be so qualified, except where the failure
to be so qualified would not have a material adverse effect on the business,
operations, properties, assets or financial condition of the PIA Companies taken
as a whole (a "PIA Material Adverse Effect").
(d) As of the date of this Agreement, except to the extent it
is the sole stockholder of another PIA Company, no PIA Company owns, of record
or beneficially, or controls, directly or indirectly, any capital stock, any
securities convertible into capital stock or any other equity interest in any
corporation, association or other business entity or is, directly or indirectly,
a participant in any joint venture, partnership or other non-corporate entity.
Section 4.02. Authorization and Enforceability. Except as
otherwise disclosed in the PIA Disclosure Letter:
(a) Each PIA Party has the corporate power , authority and
legal right to execute, deliver and perform this Agreement and the other Merger
Documents to which it is a party.
(b) The execution, delivery and performance of this Agreement
and each of the other Merger Documents by each PIA Party (to the extent it is a
party thereto) have been duly authorized by all necessary corporate
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action and no further corporate action on the part of any PIA Party is necessary
to authorize this Agreement or any other Merger Document to which it is a party
or the performance of the transactions contemplated hereby or thereby; provided
however, that the issuance of the shares of PIA Delaware Stock pursuant to
Section 2.01(a) (the "Share Issuance") (i) must be approved by the stockholders
of PIA Delaware in accordance with Rule 4310(c)(25) of The Nasdaq Stock Market
(the "Nasdaq Rules") and (ii) cannot be effected prior to the approval of the
Proposed PIA Certificate of Amendment (as defined in Section 4.03(b) hereof) by
the stockholders of PIA Delaware as required by the General Corporation Law of
the State of Delaware (the "DGCL").
(c) This Agreement has been duly executed and delivered on
behalf of each PIA Party and constitutes a legal, valid and binding obligation
of each PIA Party, enforceable in accordance with its terms, except as may be
limited by the Bankruptcy Exceptions.
Section 4.03. Capital Stock of the PIA Parties. Except as
otherwise disclosed in the PIA Disclosure Letter:
(a) As of the date of this Agreement, the authorized capital
stock of PIA Delaware consists of (i) 15,000,000 shares of PIA Delaware Stock,
of which 5,478,458 shares are issued and outstanding and fully paid and non
assessable, and (ii) 3,000,000 shares of preferred stock, $0.01 par value per
share, of which none have been issued or are outstanding. All of the issued and
outstanding shares of capital stock of PIA California are owned beneficially and
of record by PIA Delaware, all of the issued and outstanding shares of capital
stock of each of the PIA Subsidiaries are owned beneficially and of record by
PIA California, and all such shares of capital stock are free and clear of all
Restrictions and have been validly issued and are fully paid and nonassessable.
(b) The Board of Directors of PIA Delaware (the "PIA Delaware
Board") (i) has authorized and approved the adoption of an amendment to PIA
Delaware's certificate of incorporation in the form annexed hereto as Exhibit E
(together with such changes as may be made therein in accordance with the PIA
Delaware Board's approval, but subject to the consent of the SPAR Parties, the
"Proposed PIA Certificate of Amendment"), which (among other things) provides
for an increase in the authorized number of shares of PIA Delaware Stock to
47,000,000 shares, changes the name of PIA Delaware to "SPAR Group, Inc." (or
such other name as the Parties may mutually agree prior to the mailing of the
PIA Proxy Materials) and deletes Article Tenth containing the prohibition
against actions by stockholders without a meeting, and (ii) has directed that
the Proposed PIA Certificate of Amendment be submitted to PIA Delaware's
stockholders at the PIA Stockholders Meeting (as such term is defined in Section
5.01). Upon the approval of the Proposed PIA Certificate of Amendment by the
stockholders of PIA Delaware as required by the DGCL and the filing thereof with
the Secretary of State of the State of Delaware, the shares of PIA Delaware
Stock to be issued in connection with the Merger will be duly authorized and,
when issued as contemplated hereby at and after the Effective Time, will be
validly issued, fully paid and nonassessable and free of all Restrictions.
(c) The PIA Disclosure Letter sets forth a complete list of
all outstanding rights, subscriptions, warrants, calls, convertible securities,
unsatisfied preemptive rights, options or other agreements or arrangements of
any kind pursuant to which any PIA Company may be required to issue any of its
authorized but unissued capital stock. No PIA Company has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
outstanding shares of capital stock or to pay any dividend or make any
distribution in respect thereto. The PIA Delaware Board has approved the
adoption of the PIA Special Purpose Plan, a copy of which is annexed hereto as
Exhibit B, pursuant to which the Substitute Options will be issued as provided
in Section 2.04 hereof. The PIA Delaware Board has also approved an amendment
and restatement of the PIA 1995 Stock Option Plan, a copy of which is annexed
hereto as Exhibit F (together with such changes as may be made therein in
accordance with the PIA Delaware Board's approval, but subject to the consent of
the SPAR Parties, the "Proposed Plan Amendment"), that would (among other
things) increase the number of shares of Common Stock issuable upon the exercise
of options granted thereunder from 1,300,000 shares to 3,500,000 shares, subject
to the consummation of the Merger.
Section 4.04. No Violations. Except as otherwise disclosed
in the PIA Disclosure Letter:
(a) The execution, delivery and performance of this Agreement
by the PIA Parties do not and will not violate or result in the breach of any
term, condition or provision of, or require the consent of any other person
under (i) any existing Applicable Law to which any PIA Company is subject, (ii)
any judgment, order, writ, injunction, decree or award of any Governmental
Entity that is applicable to any PIA Company (each a "PIA Court Order"), (iii)
the charter documents of any PIA Company, or (iv) any PIA Contract, PIA Realty
Lease, material PIA
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Personalty Lease or other material mortgage, indenture, agreement, contract,
commitment, lease, permit, plan, authorization, instrument or document to which
any PIA Company is a party, by which any PIA Company has any rights or by which
any of the properties or assets of any PIA Company is bound or subject (each a
"Material PIA Document").
(b) The execution, delivery and performance of this Agreement
by each PIA Party (to the extent it is a party thereto) will not be reasonably
likely to result in (A) any termination, cancellation or acceleration of any
Material PIA Document or (B) termination, modification or other change in any
material respect of the existing rights and obligations of any PIA Party under
such Material PIA Document.
(c) No PIA Company, and to the knowledge of each PIA Party, no
other party thereto, is in default in any material respect under any Material
PIA Document, and to the knowledge of each PIA Party, no event has occurred that
with the giving of notice or lapse of time (or both) would constitute such a
default.
(d) Other than the filing of a pre-merger notification report
under the HSR Act and in connection with or in compliance with the provisions of
the Securities Act and the Exchange Act, no authorization, approval or consent
of, and no registration or filing with, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by any PIA Party
and the performance of the transactions contemplated hereunder .
Section 4.05. Financial Statements. Except as otherwise
disclosed in the PIA Disclosure Letter: PIA Delaware has delivered to the SPAR
Parties copies of the consolidated balance sheets of the PIA Companies at
December 31, 1998 (the "PIA Balance Sheet Date"), and December 31, 1997, and the
related consolidated statements of income, cash flows and changes in
stockholder's equity for the fiscal years then ended, together with the report
of Deloitte & Touche LLP thereon (the "PIA Financial Statements"). The PIA
Financial Statements have been prepared in accordance with GAAP consistently
applied throughout the periods involved and fairly present the consolidated
financial position and the consolidated results of operations of the PIA
Companies as of the dates and for the periods indicated.
Section 4.06. Permits. Except as otherwise disclosed in the
PIA Disclosure Letter:
(a) Each PIA Company owns, holds, possesses or lawfully uses
in the operation of its business all governmental franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
that are necessary for it to conduct its business as now conducted in all
material respects or for the ownership and use of the material assets owned or
used by such PIA Company in the conduct of its business (each a "PIA Permit" and
collectively the "PIA Permits").
(b) Each PIA Permit is valid and in full force and effect and
no PIA Permit will be terminated or impaired in any material respect or become
terminable as a result of the Merger or any other transaction contemplated by
this Agreement.
Section 4.07. Real and Personal Property. Except as
otherwise set forth in the PIA Disclosure Letter:
(a) All buildings, leasehold improvements, structures,
facilities, and fixtures used in any material respect by any PIA Company in the
conduct of its business (limited in the case of leased property to the primary
demised premises) (each a "PIA Premises") (i) are leased by a PIA Party pursuant
to a valid lease (each a "PIA Realty Lease" and collectively the "PIA Realty
Leases"), except as may be limited by the Bankruptcy Exceptions, (ii) are in
good operating condition and repair (subject to normal wear and tear,
replacement, retirement, and maintenance), (iii) are usable in the regular and
ordinary course of business, and (iv) used in compliance in all material
respects with all Applicable Laws and authorizations relating to their
construction (limited to tenant improvements in the case of leased property),
use and operation. A list of all PIA Realty Leases is set forth in the PIA
Disclosure Letter. No PIA Company owns any real estate.
(b) All items of equipment and other tangible property and
assets used in any material respect by any PIA Company in the conduct of its
business (i) are either (A) owned by a PIA Company, or (B) leased by a PIA
Company pursuant to a valid lease (each a "PIA Personalty Lease" and
collectively the "PIA Personalty Leases"), except as may be limited by the
Bankruptcy Exceptions, (ii) are in good operating condition and repair (subject
to normal wear and tear, replacement, retirement, and maintenance), (iii) are
usable in the regular and
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ordinary course of business, and (iv) comply in all material respects with all
Applicable Laws and authorizations relating to their use and operation. A list
of all PIA Personalty Leases is set forth in the PIA Disclosure Letter.
Section 4.08. Contracts and Commitments. The PIA Disclosure
Letter sets forth an accurate, correct and complete list of all material
agreements, contracts, commitments, arrangements and understandings, written or
oral, including all amendments and supplements thereto, of each PIA Company (the
"PIA Contracts"), to which any PIA Company is a party or is bound, or by which
any of their respective assets are bound, and which involve any:
(a) agreement, contract, commitment or other legally binding arrangement
with any present or former (within the past two years) officer,
employee or material consultant involving annual salaries or minimum
annual payments of $100,000 or more (excluding normal salesmen's
commissions);
(b) agreement, contract, commitment or other legally binding arrangement
for the future purchase of, or payment for, supplies or products, or
for the performance of services by a third party involving in any one
case $100,000 or more (other than those that may be terminated without
penalty);
(c) agreement, contract, commitment or other legally binding arrangement to
sell or supply products or to perform services involving in any one
case $100,000 or more (other than those that may be terminated without
penalty);
(d) agreement, contract, commitment or other legally binding arrangement
continuing over a period of more than twelve months from the date
hereof and requiring more than $100,000 in annual payments by a PIA
Company;
(e) sales representative, sales agency or similar agreement, contract,
commitment or other legally binding arrangement with any Person not
under the employ, control or direction of a PIA Company;
(f) agreement, contract, commitment or other legally binding arrangement
containing, a provision to indemnify any person or entity or assume any
tax, environmental or other non-ordinary course liability;
(g) agreement, contract, commitment or other legally binding arrangement
with any Governmental Entity (other than a PIA Permit);
(h) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement or other contract for the borrowing or
lending of money, or any guarantee, pledge or undertaking of or credit
support for the indebtedness of any other person by any PIA Company;
(i) agreement, contract, commitment or other legally binding arrangement
for any charitable or political contribution;
(j) agreement, contract, commitment or other legally binding arrangement
for any capital expenditure or leasehold improvement in excess of
$100,000;
(k) agreement, contract, commitment or other legally binding arrangement
limiting or restraining: (i) any PIA Company or any successor thereto
from engaging in the businesses of the SPAR Parties or PIA Parties post
Merger (other than any customer contract not in excess of $100,000 that
may contain such a prohibition with respect to the performance of
services for the customer's competitors); or (ii) to the knowledge of
any PIA Delaware or PIA California, any employee of any PIA Company
from engaging in or competing with the businesses of the SPAR Parties
or PIA Parties post Merger on behalf of the Parties; or
(l) agreement, contract, commitment or other legally binding arrangement of
any PIA Company not made in the ordinary course of business (other than
as would have been disclosable in one of the preceding clauses but for
the amount or term thereof).
in each case excluding the PIA Realty Leases, the PIA Personalty Leases and this
Agreement (which are not intended, and shall not be deemed or construed, to be
PIA Contracts). Each of the PIA Contracts is valid and enforceable in all
material respects, except as may be limited by the Bankruptcy Exceptions. No PIA
Company is nor has ever been a party to any contract with any Governmental
Entity subject to retroactive price redetermination or renegotiation.
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Section 4.09. Insurance. Except as otherwise disclosed in the
PIA Disclosure Letter: (a) the assets, properties and operations of each PIA
Company are insured under various policies of general liability, workers'
compensation and other forms of insurance in amounts which are adequate in the
judgment of the PIA Companies in relation to the business and assets of such PIA
Company; (b) all such policies are in full force and effect in accordance with
their terms, no notice of cancellation has been received and to the knowledge of
the PIA Companies with respect to any such policy, and there is no existing
default or event that with the giving of notice or lapse of time (or both) would
constitute a material default under any such policy; and (c) no PIA Company has
been refused any insurance, nor has any Company's coverage been limited, by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five years.
Section 4.10. Employees. Except as otherwise disclosed in the
PIA Disclosure Letter: (a) there have not been in the past five years and, to
the knowledge of the PIA Parties, there are not pending, any organized or
coordinated labor disputes, work stoppages, requests for representation, pickets
or work slow-downs due to labor disagreements; (b) there are and have been no
unresolved material violations of any laws of any Governmental Entity respecting
the employment of any employees; (c) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the PIA Parties,
overtly threatened that would be reasonably likely to be brought or filed with
the National Labor Relations Board or similar body in any foreign country; (d)
the PIA Disclosure Letter describes each collective bargaining agreement which
covers any employees of any PIA Company; and (e) each PIA Company has paid or
properly accrued in accordance with GAAP in the ordinary course of business all
wages and compensation due to employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses.
Section 4.11. Employee Benefit Plans and Arrangements.
Except as otherwise disclosed in the PIA Disclosure Letter:
(a) The PIA Disclosure Letter sets forth a complete and
accurate list of each Benefit Plan covering any present or former officers,
employees, consultants or directors of any PIA Company (a "PIA Benefit Plan").
ERISA, Benefit Plan, Welfare Plan, Pension Plan and Commonly Controlled Entity
are defined in Section 3.11.
(b) Each PIA Benefit Plan is in substantial compliance with
all reporting, disclosure and other requirements applicable to such PIA Benefit
Plan. Each PIA Benefit Plan that is a Pension Plan (a "PIA Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code, has been
determined by the Internal Revenue Service to be so qualified and, to the
knowledge of the PIA Parties, no condition exists or has occurred that would
adversely affect any such determination. Neither any PIA Benefit Plan nor any
PIA Company, nor to the knowledge of any PIA Company any Commonly Controlled
Entity of any PIA Company or any trustee or agent of any PIA Benefit Plan, has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which would be reasonably likely to subject any PIA Company to a
material amount of tax or penalty imposed by Section 4975 of the Code or Section
502 of ERISA. To the knowledge of the PIA Companies, there is no event or
condition existing that would be deemed a "reportable event" (within the meaning
of Section 4043 of ERISA) with respect to which the thirty-day notice
requirement has not been waived. To the knowledge of the PIA Parties, no
condition exists that would be reasonably likely to subject any PIA Company to a
material amount of penalty under Section 4071 of ERISA.
(c) Neither any PIA Company nor any Commonly Controlled Entity
of any PIA Company is or has ever been party to any "'multi-employer plan," as
that term is defined in Section 3(37) of ERISA. True and correct copies of (i)
the most recent annual report (Form 5500 series) and any attached schedules for
each PIA Benefit Plan (if any such report was required by applicable law), (ii)
the most recent summary plan description for each PIA Benefit Plan and (iii) the
most recent determination letter issued by the Internal Revenue Service for each
PIA Pension Plan have been provided to the SPAR Parties.
(d) With respect to each PIA Benefit Plan, there are no
actions, suits or claims (other than routine claims for benefits in the ordinary
course or relating to qualified domestic relations orders within the meaning of
Section 414(p) of the Code) pending or, to the knowledge of the PIA Parties,
overtly threatened against any PIA Benefit Plan, any PIA Company, any Commonly
Controlled Entity of any PIA Company or any trustee or agent of any PIA Benefit
Plan, nor to the knowledge of the PIA Parties is there any reasonable basis for
such claims.
(e) With respect to each PIA Benefit Plan to which any PIA
Company or any Commonly Controlled Entity of any PIA Company is a party which
constitutes a group health plan subject to Section 4980B
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of the Code, each such PIA Benefit Plan substantially complies, and in each case
has substantially complied, with all applicable requirements of Section 4980B of
the Code. There is no outstanding material liability (except for premiums that
have not become overdue) or other accrued but unpaid obligations under Title IV
of ERISA with respect to any PIA Pension Plan and no condition exists that would
be reasonably expected to result in any PIA Company incurring a material
liability under Title IV of ERISA, either directly or with respect to any
Commonly Controlled Entity of any PIA Company. All premiums payable to the PBGC
have been paid when due. Neither the PBGC nor any PIA Company nor any Commonly
Controlled Entity of any PIA Company has instituted proceedings to terminate any
PIA Pension Plan that is subject to Title IV of ERISA and the PBGC has not
informed any PIA Company of its intent to institute proceedings to terminate any
such plan. Full payment has been made of all amounts that any PIA Company or any
Commonly Controlled Entity of any PIA Company was required to have paid as a
contribution to any PIA Pension Plan that is subject to Title IV of ERISA (with
applicability determined as of the last day of the most recent fiscal year of
each of the PIA Pension Plans ended prior to the date of this Agreement), and
none of any PIA Pension Plans has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such PIA
Pension Plan ended prior to the date of this Agreement.
(f) To the knowledge of the PIA Parties, the actuarial
assumptions utilized, where appropriate, in connection with determining the
funding of each PIA Pension Plan that is a defined benefit pension plan (as set
forth in the actuarial report for such PIA Pension Plan) are reasonable. Copies
of the most recent actuarial reports have been furnished to the SPAR Parties.
Based on such actuarial assumptions, as of the PIA Balance Sheet Date, the fair
market value of the assets or properties held under each such PIA Pension Plan
exceeds the actuarially determined present value of all accrued benefits of such
PIA Pension Plan (whether or not vested) determined on an ongoing basis. Each
PIA Benefit Plan is, and its administration is and at all times has been in
substantial compliance with, and no PIA Company has received any claim or notice
that any such PIA Benefit Plan is not in substantial compliance with, its terms
and all Applicable Laws, including without limitation, to the extent applicable,
the requirements of ERISA and the Code. No PIA Company and no Commonly
Controlled Entity of any PIA Company is in default in any material respect in
performing any of its contractual obligations under any PIA Benefit Plan or any
related trust agreement or insurance contract. There are no material outstanding
liabilities of any PIA Benefit Plan other than liabilities for benefits to be
paid to participants in such PIA Benefit Plan and their beneficiaries in
accordance with the terms of such PIA Benefit Plan. Each PIA Benefit Plan may be
amended or modified or terminated by the applicable PIA Company or a Commonly
Controlled Entity of a PIA Company at any time without liability except under
any defined pension benefit plan. No PIA Benefit Plan other than a PIA Pension
Plan, retiree medical plan or severance plan provides benefits to any individual
after termination of employment.
(g) The consummation of the transactions contemplated by this
Agreement will not (A) entitle any employee of any PIA Company to severance pay,
unemployment compensation or any other payment or benefit; (B) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such employee; (C) result in any liability under Title IV of ERISA; (D) result
in any prohibited transaction described in Section 406 of ERISA or Section 4975
of the Code for which an exemption is not available; or (E) result (either alone
or in conjunction with any other event) in the payment or series of payments by
any PIA Company or any of its affiliates to any person of an "excess parachute
payment" within the meaning of Section 280G of the Code.
(h) With respect to each PIA Benefit Plan that is funded
wholly or partially through an insurance policy, all material amounts of
premiums required to have been paid to date under the insurance policy have been
paid, all material amounts of premiums required to be paid under the insurance
policy through the Closing Date will have been paid on or before the Closing
Date and, as of the Closing Date, there will be no material amount of liability
of any PIA Company or any Commonly Controlled Entity of any PIA Company under
any insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Closing Date.
(i) Each PIA Benefit Plan that constitutes a "welfare benefit
plan," within the meaning of Section 3(i) of ERISA, for which contributions are
claimed by any PIA Company or any Commonly Controlled Entity of any PIA Company
as deductions under any provision of the Code, is in material compliance with
all applicable requirements pertaining to such deduction. With respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related to
a welfare benefit plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a tax under
Section 4976(a) of the Code. All welfare benefit funds intended to be exempt
from tax under Section 501(a) of the Code have been determined by the
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Internal Revenue Service to be so exempt and no event or condition exists or has
occurred which would adversely affect any such determination. No PIA Company has
any Benefit Plan outside of the United States.
(j) No PIA Company has any Benefit Plan outside of the United
States.
(k) All persons classified by any PIA Company as independent
contractors or leased employees within the meaning of Section 414(n) of the Code
("PIA Leased Employees") satisfy and have at all times satisfied the
requirements of applicable law to be so classified. Each PIA Company has fully
and accurately reported their compensation on IRS Forms 1099 when required to do
so. No PIA Company has any obligation to provide benefits with respect to such
independent contractors or PIA Leased Employees under any PIA Benefit Plan or
otherwise.
Section 4.12. Compliance with Law. Except as otherwise
disclosed in the PIA Disclosure Letter, each PIA Company has complied in all
material respects with each, and is not in violation in any material respect of,
any Applicable Law to which such PIA Company's business, operations, assets or
properties are subject.
Section 4.13. Transactions With Affiliates. Except as
otherwise disclosed in the PIA Disclosure Letter, no stockholder and no
director, officer or employee of any PIA Company, or any member of his or her
immediate family or any other of its, his or her affiliates, owns or has a 5% or
more ownership interest in any material business, corporation or other entity
that is or was during the last three years a party to, or in any property which
is or was during the last three years the subject of, any contract, agreement,
commitment or legally binding arrangement with such PIA Company; and (b) the PIA
Disclosure Letter includes a complete list as of the date hereof of all material
amounts owed by any PIA Company to any PIA officer, director (other than salary
and expense reimbursements in the normal course) or affiliate or owed to any PIA
Company by any PIA officer, director or affiliate.
Section 4.14. Litigation. Except as otherwise disclosed in the
PIA Disclosure Letter: (a) no litigation, including any arbitration,
investigation or other proceeding of or before any Governmental Entity is
pending (or to the knowledge of the PIA Parties) overtly threatened against any
PIA Company, other than litigation that (i) is not reasonably likely to be
adversely determined or (ii) if reasonably likely to be adversely determined,
would not be reasonably likely to have, individually or in the aggregate with
other such litigation, a PIA Material Adverse Effect; and (b) no PIA Company is
a party to or subject to the provisions of any PIA Court Order.
Section 4.15. Taxes. Except as otherwise disclosed in the
PIA Disclosure Letter:
(a) All federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by any PIA
Company (the "PIA Tax Returns") with respect to any Taxes have been timely filed
with the appropriate governmental agencies in all jurisdictions in which such
PIA Tax Returns are required to be filed, and all such PIA Tax Returns are true,
complete and correct in all material respects and properly reflect the
liabilities of the PIA Companies for Taxes for the periods, property or events
covered thereby.
(b) All Taxes, including (without limitation) those called for
by the PIA Tax Returns, required to be paid or withheld by any PIA Company and
any deficiency assessments, penalties and interest for which a notice of
assessment has been received (other than as may have been settled and paid in
full in accordance therewith) and other than those being contested, if any, as
set forth in the PIA Disclosure Letter, have been timely paid or withheld.
(c) The accruals for Taxes contained in the PIA Financial
Statements for the Tax liabilities of the PIA Companies have been made in
accordance with GAAP as of that date and include adequate provision under GAAP
for all deferred Taxes (other than necessary increments due to the passage of
time).
(d) No PIA Company is or has at any time ever been a party to
a Tax sharing, Tax indemnity or Tax allocation agreement, and no PIA Company has
assumed any Tax liability of any other person or entity under contract. No PIA
Company has received any notice of assessment or proposed assessment in
connection with any PIA Tax Returns other than as may have been settled and paid
in full in accordance therewith, and there are no pending tax examinations of or
material tax claims asserted against any PIA Company or any of its assets or
properties. No PIA Company has extended or waived the application of, any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Taxes. There are now (and as of immediately, following the
Effective Time there will be no liens (other than any lien for Taxes not yet
overdue and payable) on any of the assets or properties of any PIA Company
relating, to or attributable to Taxes. To the knowledge of the PIA Parties,
there is
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no reasonable basis for the assertion of any claim relating to or attributable
to Taxes that, if adversely determined, would result in any lien on the assets
of any PIA Company or otherwise have a PIA Material Adverse Effect.
(e) None of the PIA Companies has any knowledge of any
reasonable basis for any additional assessment of any Taxes for any period
ending on or before the Closing Date (other than increased Taxes based upon
increased business units, business sites, payroll, profits or other taxable
attribute relating to an expanding enterprise prior to the Closing Date). All
Tax payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the PIA Companies
have been fully and properly paid, withheld, accrued or recorded.
Section 4.16. Intellectual Property Matters. Except as
otherwise disclosed in the PIA Disclosure Letter:
(a) The PIA Disclosure Letter sets forth all patents,
trademarks, trade names, service marks, copyrights, software, material trade
secrets or material know-how owned or used in any material respect by any PIA
Company in the conduct of its business (the "PIA Intellectual Property"),
excluding, however, all Commercial Software, which Commercial Software need not
be set forth on such schedule. All of the PIA Intellectual Property is owned by
or licensed to one of the PIA Companies free and clear of any liens (except
insofar as a license or the restrictions thereunder may constitute a lien).
(b) There are no ongoing royalty, commission or similar
arrangements, and no licenses, sublicenses or agreements, from any PIA Company
as licensor, pertaining to the current use of the PIA Intellectual Property,
except as may be applicable under the Commercial Software.
(c) No PIA Company infringes upon or unlawfully or wrongfully
uses any patent, trademark, trade name, service mark, copyright or trade secret
owned or claimed by any other person or entity. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the PIA Parties,
overtly threatened relating to any, patent, trademark, trade name, service mark,
copyright or trade secret formerly or currently used by any PIA Company. None of
the PIA Intellectual Property is subject to any outstanding order, decree or
judgment. No PIA Company has agreed to indemnify any person or entity for or
against any infringement of or by the PIA Intellectual Property. No present or
former employee of any PIA Company and no other person or entity owns or has any
proprietary, financial or other interest, direct or indirect, in whole or in
part, in any patent, trademark, trade name, service mark or copyright, or in any
application therefor, or in any trade secret, which any PIA Company owns,
possesses or uses in its operations as now or heretofore conducted.
(d) All PIA Intellectual Property in the form of computer
software that is utilized by any PIA Company in the operation of its business is
capable of processing date data between and within the twentieth and
twenty-first centuries or can be rendered capable of processing such data prior
to the date necessary to avoid disruption of its business by utilizing the
employees of one or more of the PIA Companies in the normal course of business
and by expenditure of not more than $100,000 in excess of the cost of software
purchased for reasons other than the failure of existing software to be capable
of such processing.
Section 4.17. Existing Condition. Except as otherwise
disclosed in the PIA Disclosure Letter, since the PIA Balance Sheet Date, no PIA
Company has:
(a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice;
(b) discharged or satisfied any lien or encumbrance or paid any
liabilities, other than in the ordinary course of business consistent
with past practice, or failed to pay or discharge when due any
liabilities, other than in the ordinary course of business consistent
with past practice, or where the obligation is being contested in good
faith, and the failure to pay or discharge has not caused and would not
be reasonably likely to cause any PIA Material Adverse Effect;
(c) sold, encumbered, assigned or transferred any assets, properties or
rights or any interest therein, or made any agreement or commitment or
granted any option or right with, of or to any person to acquire any
assets, properties or rights of any PIA Company or any interest
therein, except for sales and dispositions in the ordinary course of
business consistent with past practice and except for the transactions
contemplated under this Agreement;
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(d) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract
or other encumbrance of any nature whatsoever other than in the
ordinary course of business (including, without limitation, future
advances and floating liens under existing or replacement credit
facilities);
(e) made or suffered any early cancellation or termination of any Material
PIA Document (other than in the ordinary course of business with a
vendor to a PIA Company); or amended, modified or waived any
substantial debts or claims held by it under any Material PIA Document
other than in the ordinary course of business;
(f) declared, set aside or paid any dividend or made or agreed to make any
other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or acquire any shares of its capital stock or its other ownership
interests;
(g) suffered any damage, destruction or loss that has had or will have (i)
a PIA Material Adverse Effect, or (ii) a replacement cost individually
or in the aggregate at more than $100,000;
(h) suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to
conduct its business and operations;
(i) suffered any material adverse change in the business, operations,
properties, assets or financial condition of the PIA Parties taken as a
whole;
(j) received notice or had knowledge of any actual or overtly threatened
organized or coordinated labor trouble, strike or other similar
occurrence, event or condition of any similar character that has had or
would be reasonably likely to have a PIA Material Adverse Effect;
(k) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition
to, other benefits to which any of its employees are entitled (in each
case other than increases in salaries or other compensation in the
ordinary course of business consistent with past practice and that in
the aggregate have not resulted in a PIA Material Adverse Effect);
(l) changed any of the accounting principles followed by it or the methods
of applying such principles;
(m) except as contemplated by this Agreement, entered into any transaction
other than in the ordinary course of business consistent with past
practice;
(n) except as contemplated by this Agreement, changed its authorized
capital or its securities outstanding or otherwise changed its
ownership interests, or granted any options, warrants, calls,
conversion rights or commitments with respect to any of its capital
stock or other ownership interests; or
(o) agreed to take any of the actions referred to above.
Section 4.18. Books of Account. Except as otherwise disclosed
in the PIA Disclosure Letter: (a) the books, records and accounts of each PIA
Company accurately and fairly reflect, in reasonable detail, the transactions
and the assets and liabilities of such PIA Company; and (b) no PIA Company has
engaged in any transaction, maintained any bank account or used any of the funds
of such PIA Company except for transactions, bank accounts and funds that have
been and are reflected in the normally maintained books and records of the
business.
Section 4.19. Environmental Matters. Except as otherwise
disclosed in the PIA Disclosure Letter:
(a) Each PIA Company has secured, and is in compliance in all
material respects with, all Environmental Permits, with respect to any premises
on which its business is operated. Each PIA Company is in compliance in all
material respects with all applicable Environmental Laws.
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(b) No PIA Party has (x) received any written communication
from any Governmental Entity that alleges that any PIA Company is not in
compliance in any material respect with any Environmental Laws or Environmental
Permits; (y) entered into or agreed to any court decree or order, and no PIA
Company is subject to any judgment, decree or order, relating to compliance with
any Environmental Law or to investigation or cleanup of a Hazardous Substance
under any Environmental Law in any material respect; (z) received a CERCLA
104(e) information request or has been named a potentially responsible party for
any National Priorities List site under CERCLA or any site under analogous state
law or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening. No lien,
charge, interest or encumbrance has been attached, asserted, or to the knowledge
of the PIA Parties, overtly threatened to or against any assets or properties of
any PIA Company pursuant to any Environmental Law.
(c) To the knowledge of the PIA Companies: (i) there has been
no unlawful treatment, storage, disposal or release of any Hazardous Substance
on any PIA Premises; (ii) there has been no unlawful treatment, storage,
disposal or release of any Hazardous Substance on any PIA Premises; (iii) there
are no aboveground storage tanks located on or underground storage tanks located
within any PIA Premises; (iv) each aboveground storage tank formerly located on
or underground storage tank formerly located within any PIA Premises (if any)
have been removed in accordance with all Environmental Laws and no residual
contamination from any Hazardous Substance, if any, remains at such sites in
excess of applicable standards under Applicable Law; (v) there are no PCBs
leaking from any article, container or equipment located on or under any PIA
Premises and there are no such articles, containers or equipment containing
leaking PCBs; and (vi) there is no asbestos containing material not contained in
a manner reasonably acceptable under Applicable Law in any material respect
located on or under any PIA Premises.
Section 4.20. No Illegal Payments. Except as otherwise
disclosed in the PIA Disclosure Letter: (a) no PIA Company and, to the knowledge
of the PIA Parties, no affiliate, officer, agent or employee of any PIA Company,
has directly or indirectly on behalf of or with respect to any PIA Company
during the past five years, (i) made any unlawful domestic or foreign political
contributions, (ii) made any payment or provided services that were unlawful in
any material respect for such Person to make or provide or for the recipient to
receive, (iii) received any payment or services that were unlawful in any
material respect for the payer to make or provide, or (iv) made any payment to
any person or entity, or agent or employee thereof, in connection with any PIA
Contract to induce such person or entity to enter into such PIA Contract that
were unlawful in any material respect for the payer to make or provide or the
recipient to receive; and (b) no PIA Company has during the past five years (i)
had any transactions or payments not recorded in their accounting books and
records in accordance with GAAP , or (ii) had any off-book bank or cash accounts
or "slush funds" related to any PIA Company.
Section 4.21. Brokers. The PIA Disclosure Letter lists all
investment banking fees, finders' fees, brokers' commissions and similar
payments which any PIA Company has paid or will be obligated to pay in
connection with the transactions contemplated by this Agreement.
Section 4.22. SEC Filings. PIA Delaware has delivered to the
SPAR Parties true and complete copies of (i) PIA Delaware's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 (the "PIA 10-K") as filed
with the Securities and Exchange Commission (the "Commission"), (ii) PIA's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998 and October 2, 1998, and (iii) PIA's proxy statement relating to the annual
meeting of its stockholders held on May 12, 1998 (collectively, the "PIA SEC
Filings"). As of the respective times such documents were filed or, as
applicable, became effective, the PIA SEC Filings did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.23. No Misrepresentation by the PIA Parties. The
representations and warranties of the PIA Parties made or contained in this
Agreement (whether with respect to any PIA Company or otherwise), and the
information contained in the PIA Disclosure Letter and the other certificates,
schedules and documents furnished by or on behalf of any PIA Party in connection
with the transactions contemplated by this Agreement (whether with respect to
any PIA Company or otherwise), do not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein in order
to make it, in the light of the circumstances under which made, not misleading.
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Section 4.24. Board Action; Opinion of Financial Advisor. The
PIA Delaware Board has unanimously determined that the transactions contemplated
by this Agreement are fair to and in the best interests of PIA Delaware's
stockholders and has resolved to recommend in the PIA Proxy Statement the
approval by PIA Delaware's stockholders of (i) the Share Issuance, (ii) the
Proposed PIA Certificate of Amendment, and (iii) the Proposed Plan Amendment.
PIA Delaware has received the opinion of ING Baring Furman Selz LLC, dated the
date of this Agreement, substantially to the effect that the Exchange Ratio is
fair to PIA Delaware and its stockholders from a financial point of view.
ARTICLE V
COVENANTS
Section 5.01. PIA Proxy Statement; Stockholders Meeting. As
promptly as practicable after the execution of this Agreement, but in no event
later than April 8, 1999, PIA Delaware will file with the Commission preliminary
proxy materials ("Preliminary Proxy Materials") relating to the solicitation of
proxies for a special meeting of PIA Delaware's stockholders (the "PIA
Stockholders Meeting") seeking (among other things) stockholder approval of the
Share Issuance, the Proposed PIA Certificate of Amendment and the Proposed Plan
Amendment. PIA Delaware shall respond promptly to any comments made by the
Commission with respect to such preliminary proxy materials and cause a
definitive proxy statement (the "PIA Proxy Statement") and proxy to be mailed to
its stockholders at the earliest practicable time calling for the PIA
Stockholders Meeting at the earliest practicable time. PIA Delaware shall submit
the Share Issuance, the Proposed PIA Certificate of Amendment and the Proposed
Plan Amendment to its stockholders for approval at the PIA Stockholders Meeting.
The PIA Delaware Board shall recommend in the PIA Proxy Statement the approval
of (i) the Share Issuance, (ii) the Proposed PIA Certificate of Amendment, and
(iii) the Proposed Plan Amendment by its stockholders. Each SPAR Party and each
SPAR Principal will cooperate in the preparation of the PIA Proxy Statement and
shall provide PIA Delaware with all information reasonably requested by PIA
Delaware for inclusion in the PIA Proxy Statement. The PIA Parties and the SPAR
Parties shall use their reasonable best efforts to ensure that the PIA Proxy
Statement is not false or misleading with respect to any material fact, and does
not omit to state any material fact necessary in order to make the statements
therein not misleading. If, at any time prior to the date of the PIA
Stockholders Meeting, any event relating to any PIA Company is discovered by any
PIA Party that should be set forth in a supplement to the PIA Proxy Statement,
such PIA Party will promptly inform the SPAR Parties, and such amendment or
supplement shall be promptly filed with the Commission and disseminated to the
stockholders of PIA Delaware, to the extent required by applicable law. If, at
any time prior to the date of the PIA Stockholders Meeting, any event relating
to any SPAR Party is discovered by any SPAR Party that should be set forth in a
supplement to the PIA Proxy Statement, such SPAR Party will promptly inform PIA,
and such amendment or supplement shall be promptly filed with the Commission and
disseminated to the stockholders of PIA Delaware, to the extent required by
applicable law.
Section 5.02. Conduct Prior to the Closing Date. (a) Except as
otherwise contemplated in the SPAR Disclosure Letter, from and after the date of
this Agreement through the Closing Date, each SPAR Party shall, and shall cause
each other SPAR Party to, and each PIA Party shall, and shall cause each other
PIA Company to, use their respective reasonable best efforts to: (i) conduct
their respective businesses in the ordinary course and consistent in all
material respects with past practice; (ii) maintain and service their respective
properties and assets in order to preserve their value and usefulness in the
conduct of their respective business consistent with past practice and
commercially reasonable standards; (iii) keep available the services of their
current employees and agents and maintain their relations and goodwill with
suppliers, customers, distributors and any others with whom or with which they
have business relations; (iv) comply in all material respects with all laws,
ordinances, rules, regulations and orders; and (v) cause all of the conditions
to the consummation of the transactions contemplated by this Agreement to be
satisfied on or prior to the Closing Date.
(b) Without limiting the generality of subsection (a) of this
Section, no PIA Party and no SPAR Party shall, without the prior written consent
of SAI in the case of any proposed action by a PIA Party, or PIA Delaware in the
case of any proposed action by a SPAR Party: (A) enter into any agreement or
other legally binding arrangement with respect to the acquisition or proposed
acquisition of any other corporation, business or entity, whether by means of an
asset purchase, stock purchase, merger or otherwise; (B) except as expressly
contemplated by this Agreement or upon the exercise of stock options outstanding
on the date hereof, issue or agree to issue, any shares of, or rights of any
kind to acquire any shares of its capital stock; (C) increase the compensation
payable or to become payable to any officer or director except in accordance
with employment agreements or benefit plans in effect on the date hereof and
except for increases consistent with past practice; (D) adopt or enter into any
bonus, profit sharing, pension, retirement, deferred compensation, employment or
other payment or employee compensation
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plan, agreement or arrangement except for individual employment agreements and
arrangements in the ordinary course of business consistent with past practice;
(E) make any loan or advance to, or enter into any non-employment contract,
lease or commitment with, any officer or director; (F) assume, guarantee,
endorse or otherwise become responsible for any material obligations of any
other individual, firm or corporation or make any material loans or advances to
any individual, firm or corporation (other than pursuant to existing agreements
disclosed to the other hereunder); (G) modify or amend in any material respect
or take any action to voluntarily terminate any material contract (including,
without limitation, in the case of the SPAR Parties, any amendment to any
agreement related to the MCI Acquisition) or any amendment to the Field Service
Agreement; (H) waive, release, grant or transfer any rights of material value
except (i) in the ordinary course of business or (ii) for transfers of capital
stock by the SPAR Principals to each spouse, child, sibling, lineal descendant
or ancestor whether by blood, marriage or adoption, or anyone related by blood,
marriage or adoption to such individual, each trust, foundation, partnership,
limited liability company or other entity organized for gift or estate planning
or other similar purposes, in each case created principally for the benefit of
one or more of the foregoing persons, and each custodian or guardian of any
property of one or more of the foregoing persons in his capacity as such
custodian or guardian (the "Family Members"), or (iii) as contemplated under the
Reorganization Agreement or this Agreement; (I) transfer, lease, license, sell,
mortgage, pledge, dispose of or encumber any material assets other than in the
ordinary course of business and consistent with past practice; (J) take any
action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures, except for changes required by GAAP; (K) settle or compromise any
material federal, state, local or foreign income tax proceeding or audit with
respect to such Party; or (L) enter into an agreement to do any of the
foregoing.
Section 5.03. Consummation of the SPAR Reorganization
Transactions; SPAR Principal Action. The SPAR Parties shall cause the SPAR
Reorganization Transaction to be consummated no later than the Effective Time,
in accordance with the terms and provisions of the SPAR Reorganization Agreement
and shall cause the SPAR Principals to execute such written consents prior to
the mailing of the PIA Proxy Statement as shall be necessary to approve the SPAR
Reorganization Transactions and the Merger (the "SPAR Stockholder Action").
Section 5.04. Access. Each Party (and in the case of the PIA
Parties, each PIA Company) shall give the other Party's officers, employees,
counsel, accountants and other representatives free and full access to and the
right to audit and inspect, during normal business hours with reasonable advance
notice, all of the premises, properties, assets, records, contracts and other
documents relating to such Party or company and shall permit them to consult
with the officers, employees, accountants, counsel and agents of such Party or
company for the purpose of making such investigation as the other Party shall
desire to make; provided, however, that such investigation shall not
unreasonably interfere with any Party's or company's business operations. Each
Party (and in the case of the PIA Parties, each PIA Company) shall furnish to
the other Party all such documents and copies of documents and records and
information with respect to the affairs of such Party or company and copies of
any working papers relating thereto as shall from time to time reasonably
request. No information or knowledge obtained in any investigation by any Party
or any of its representatives or affiliates pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
Section 5.05. Negotiations. Except in the furtherance of the
transactions contemplated hereby, prior to the Closing Date, no PIA Party shall
or shall direct and cause its respective directors, officers, employees,
representatives or agents to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making or implementation of any proposal or
offer, with respect to any merger, acquisition, consolidation, share exchange,
business combination or other transaction involving, or which would result in,
(A) the acquisition of a majority of the outstanding equity securities of any
PIA Company, (B) the issuance by any PIA Company, in a single transaction or a
series of related transactions, of equity securities which would represent upon
issuance a majority of the outstanding equity securities of PIA Party, or (C)
the acquisition of a majority of the consolidated assets of any PIA Company (any
such proposal or offer being hereinafter referred to as an"Acquisition
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person or
entity relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Section shall prohibit the PIA Delaware Board from
exercising their respective fiduciary duties by (i) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, or (ii) furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
bona fide Acquisition Proposal.
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Section 5.06. Press Releases and Other Communications. Except
to the extent required by law or by any listing agreement with the Nasdaq Stock
Market, no Party shall issue any press release or otherwise making any public
statement with respect to any of the transactions contemplated hereby without
prior consultation with the other Parties.
Section 5.07. Third Party Approvals. Prior to the Closing,
Date, each Party shall use its best efforts to satisfy any requirement for
notice and approval of the transactions contemplated by this Agreement under all
SPAR Material Documents and all PIA Material Documents.
Section 5.08. Notice to Bargaining Agents. Prior to the
Closing Date, each Party shall satisfy any requirement for notice of the
transactions contemplated by this Agreement under any applicable collective
bargaining agreement.
Section 5.09. Notification of Certain Matters.
(a) Each Party shall give prompt notice to each other Party of
(i) the occurrence or non-occurrence of any event known to such Party which
would be likely to cause any representation or warranty of such Party contained
in this Agreement to be untrue or inaccurate in any material respect at or prior
to the Closing Date, and (ii) any failure of such Party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
such Party hereunder in any material respect.
(b) Each Party shall have the continuing obligation until the
Closing Date to supplement or amend promptly its Disclosure Letter delivered to
the other Party group with respect to any matter hereafter arising or discovered
that, if existing or known at the date of this Agreement, would have been
required to have been set forth or described in such Disclosure Letter (in each
case, "Amended Disclosure") in order that the corresponding representation or
warranty would not have been untrue in any material respect, which may include
supplemental disclosure to a representation or warranty with respect to which no
disclosure was made previously. Any Amended Disclosure that would constitute a
failure to satisfy the condition precedent set forth in Section 6.02(a), (b) or
(c) or in Section 6.03(a), (b) or (c) shall not be effective unless consented to
in the sole discretion of the other Party group (i.e., by SPAR in the case of a
failure to satisfy Section 6.02(a), (b) or (c) and by PIA Delaware in the case
of a failure to satisfy Section 6.03(a), (b) or (c)). To the extent such consent
is obtained, or to the extent the condition precedent is waived on the Closing
Date, the Amended Disclosure shall be deemed effective.
Section 5.10. Closing Net Worth. The SPAR Parties shall use
their reasonable best efforts to ensure that the Closing Net Worth (as such term
is defined in Section 7.01) is not less than the Target Amount (as such term is
defined in Section 7.01(b) hereof).
Section 5.11. Post Merger Indemnification of Officers and
Directors by Parties.
(a) For a period of six years following the Closing Date, no
PIA Party will (or will permit any other PIA Company to) and no SPAR Party will,
amend, repeal or limit in any way the provisions limiting the personal liability
of any present or former director, officer, employee or agent (and their
respective heirs and assigns) of any PIA Company or any SPAR Party (the
"Indemnified Parties"), as set forth in the certificate of incorporation or
by-laws or such company or party as of the date of this Agreement. In addition,
for a period of six years following the Closing Date, the PIA Parties shall, and
shall cause each of the other PIA Companies to, indemnify, to the fullest extent
permitted by applicable law, (i) the directors of each PIA Company as of the
date of this Agreement, (ii) any persons who served as directors of any PIA
Company prior to the date of this Agreement, (iii) all officers holding the
title of Senior Vice President or any higher office with any PIA Company as of
the date of this Agreement, in each case from and against any and all amounts
for which an employee may be indemnified under the corporate laws of its state
of incorporation. Without limiting the generality of the foregoing, costs and
expenses (including reasonable attorney's fees and expenses) incurred by such
indemnified person shall be advanced to or on behalf such indemnified person (in
advance of any final disposition of such matter) if such indemnified person (A)
agrees in writing with the indemnitor to repay all such advances in the event
that it is ultimately determined that he or she is not entitled to such
indemnification hereunder or under applicable law, and (B) furnishes reasonable
documentation with respect to such amounts.
(b) This Section is expressly intended to benefit each of the
Indemnified Parties (each of whom shall be entitled to enforce the provisions of
this Section).
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(c) For a period of six years following the Closing Date, the
PIA Parties and the SPAR Parties shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained as
of the Closing Date (or substitute policies with reputable and financially sound
carriers of at least the same coverage and amounts containing terms and
conditions which are not materially less advantageous in the aggregate) with
respect to claims arising from or related to facts or events which occurred at
or prior to the Effective Time; provided, however, that no Party shall be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid by such Party as of the date
hereof for such insurance (such 150% amount, the "Maximum Premium"). If such
insurance coverage cannot be obtained at all, or can only be obtained at an
annual premium in excess of the Maximum Premium, such Party shall maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Premium.
Section 5.12. Further Assurances. The SPAR Parties shall at
any time after the Effective Time, upon request, take such further action and
execute such further agreements as may be necessary, desirable or proper to give
effect to the intentions of the parties as set forth in Section 6.03(g), (h),
(i), (j), and (k).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01. Conditions to Each Party's Obligations. The
respective obligations of each Party hereunder are subject to the satisfaction
(or to the extent permitted by law, the waiver) at or prior to the Closing Date
of the following conditions:
(a) Stockholder Approvals. (i) The Proposed PIA Certificate of
Amendment shall have been approved at the PIA Stockholders Meeting by the vote
of a majority of the outstanding shares of PIA Delaware Stock as required by
Section 242 of the DGCL and the Share Issuance shall have been approved at the
PIA Stockholder Meeting by the vote of a majority of the total votes cast with
respect thereto.
(ii) The Proposed Agreement and Plan Merger shall have been
approved by the vote of a majority of the outstanding shares of PIA Acquisition
as required by Section 92A.120 of the NGCL, and PIA Delaware (as the sole
shareholder of PIA Acquisition) hereby covenants and agrees that it will vote in
favor thereof.
(iii) The Proposed Agreement and Plan Merger shall have been
approved pursuant to the SPAR Principals Action by the vote of a majority of the
outstanding shares of SAI Stock as required by Section 92A.120 of the NGCL.
(b) Filing of the PIA Restated Certificate. The Proposed PIA
Certificate of Amendment shall have been duly filed with the Secretary of State
of the State of Delaware and become effective.
(c) HSR. Any waiting period applicable to the Merger under the
HSR Act shall have expired or been terminated.
(d) Nasdaq Approval. The shares of PIA Delaware Stock issuable
in connection with the Merger as contemplated by this Agreement shall have been
authorized for listing on the Nasdaq Stock Market, upon official notice of
issuance, and the existing shares of PIA Delaware Stock shall continue to be
traded on such market.
(e) No Injunctions. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, injunction
or other order (whether temporary, preliminary or permanent) which is in effect
and has the effect of making illegal or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement.
(f) SPAR Intellectual Property. (i) SMF, SMS and SIT shall
have entered into the Business Manager Agreement.
(ii) STM shall have received the assignment of the SPAR
trademark registrations in the United States and Canada.
(iii) STM shall have executed the SPAR Trademark Licenses with
the SMS and SIT.
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(g) Indemnity Agreement and Indemnity Escrow Agreement. The
PIA Parties and the SPAR Parties shall have executed and delivered the Limited
Indemnification Agreement with the SPAR Principals in substantially in the form
annexed hereto as Exhibit G with respect to the SMS tax litigation and ADVO
matters (the "Limited Indemnification Agreement"); and the Surviving
Corporation, the PIA Parties, the SPAR Marketing Companies and Parker Chapin
Flattau & Klimpl, LLP (the "Indemnity Escrow Agent"), shall have executed and
delivered to the SPAR Principals the Indemnity Escrow Agreement substantially in
the form annexed hereto as Exhibit H (the "Indemnity Escrow Agreement").
Section 6.02. Conditions Precedent to the Obligations of the
SPAR Parties. The obligations of the SPAR Parties hereunder are subject to the
satisfaction (or waiver) on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the PIA Parties contained in this Agreement (other than as
contained in Section 4.17(i) hereof, which is addressed by Section 6.02(c),
below) shall be accurate in all material respects as of the Closing Date (other
than as a result of (i) any proposed or pending transactions described in the
PIA Disclosure Letter and this Agreement or (ii) any adverse change(s) in the
overall economy or in the market segments in which such parties do business) as
though such representations and warranties had been made as of such time.
(b) Performance of Obligations. All of the terms, covenants
and conditions of this Agreement to be complied with and performed by any PIA
Party on or before the Closing Date shall have been duty complied with and
performed in all material respects.
(c) No Material Adverse Change. Except as previously disclosed
in the PIA Disclosure Letter: no material adverse change in the business,
operations, assets, properties or condition (financial or otherwise) of the PIA
Companies taken as a whole (a "PIA Material Adverse Change") shall have occurred
since December 31, 1998 (other than as a result of adverse change(s) in the
overall economy or in the market segments in which such parties do business, and
with the understanding that the loss of a single material customer as a result
of the announcement of the transactions contemplated by this agreement shall not
constitute a PIA Material Adverse Change); and since the PIA Balance Sheet Date
the PIA Companies (taken as a whole) shall not have suffered any material
uninsured loss or damage to any of its properties or assets that would be
reasonably likely to materially affect or impair the ability of the PIA
Companies to conduct their business as now conducted or as proposed to be
conducted.
(d) Officer's Certificate. A certificate dated the Closing
Date and signed by the President or any Vice President of PIA Delaware shall
have been delivered to the SPAR Parties certifying that the conditions specified
in the foregoing clauses (a), (b) and (c) have been satisfied.
(e) Election of Directors. The members of the PIA Delaware
Board shall have taken all necessary action to cause the PIA Delaware Board and
the PIA California Board, from and after the Effective Time, until duly changed,
to be comprised of seven members and to cause the following persons to be
elected to serve as the members of the PIA Delaware Board and of the PIA
California Board, until the next annual meeting or until their successors shall
have been duly elected and qualified: Robert G. Brown, William H. Bartels,
Patrick W. Collins, one person nominated by PIA Delaware (the "PIA Nominee") and
one person nominated by the SPAR Principals (the "SPAR Nominee") who is
reasonably acceptable to PIA Delaware. The PIA Nominee and the SPAR Nominee
shall be identified prior to the mailing of the PIA Proxy Statement and named
therein. Without limiting the generality of the foregoing, each member of the
PIA Delaware Board and each member of the PIA California Board who will not
continue in such capacity after the Effective Time, and each member of the Board
of Directors of each PIA Subsidiary, shall have delivered to the SPAR Parties a
resignation from such Board of Directors dated the Closing Date which shall
become effective at the Effective Time.
(f) Appointment of Officers. The PIA Delaware Board shall have
taken all necessary action to cause the following persons to be appointed to the
offices indicated as of the Effective Time to serve until their successors shall
have been duly elected and qualified:
Name Office
---- ------
Robert G. Brown Chairman, Chief Executive Officer and President
William H. Bartels Vice Chairman
Terry R. Peets Vice Chairman
Cathy L. Wood Chief Financial Officer and Executive Vice President
James R. Ross Treasurer
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(g) Opinion of Counsel. The SPAR Parties shall have received
an opinion from Riordan & McKinzie, counsel for the PIA Companies, dated the
Closing Date in form and substance reasonably satisfactory to the SPAR Parties.
(h) Good Standing Certificates. The PIA Parties shall have
delivered to the SPAR Parties certificates, dated as of a date no earlier than
five days prior to the Closing Date, duly issued by the appropriate governmental
authority in each PIA Company's jurisdiction of incorporation and in each state
in which each PIA Company is qualified to do business, showing that each PIA
Party is in good standing and qualified to do business and that all state
franchise and/or income tax returns and taxes for such PIA Party for all periods
prior to the dates of such certificates have been filed and paid.
Section 6.03. Conditions Precedent to the Obligations of the
PIA Parties. The obligations of the PIA Parties hereunder are subject to the
satisfaction (or waiver) on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the SPAR Parties contained in this Agreement (other than as
contained in Section 3.17(i) hereof, which is addressed by Section 6.03(c),
below) shall be accurate in all material respects as of the Closing Date (other
than as a result of any proposed or pending transactions described in the SPAR
Disclosure Letter, this Agreement and the SPAR Premerger Agreements or (ii) any
adverse change(s) in the overall economy or in the market segments in which such
parties do business) as though such representations and warranties had been made
as of such time.
(b) Performance of Obligations. All of the terms, covenants
and conditions of this Agreement to be complied with and performed by any SPAR
Party on or before the Closing Date shall have been duly complied with and
performed in all material respects.
(c) No Material Adverse Change. Except as previously disclosed
in the SPAR Disclosure Letter: no material adverse change in the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the SPAR Parties taken as a whole (a "SPAR Material Adverse Change") shall
have occurred since December 31, 1998 (other than as a result of adverse
change(s) in the overall economy or in the market segments in which such parties
do business, and with the understanding that the loss of a single material
customer as a result of the announcement of the transactions contemplated by
this agreement shall not constitute a SPAR Material Adverse Change); and since
the Interim SPAR Marketing Balance Sheet Date the SPAR Parties (taken as a
whole) shall not have suffered any material uninsured loss or damage to their
assets and properties that would be reasonably likely to materially affect or
impair the ability of the SPAR Parties to conduct their business as now
conducted or as proposed to be conducted.
(d) Certificate of the SPAR Parties. A certificate dated the
Closing Date and signed by each SPAR Party shall have been delivered to the PIA
Parties certifying that the conditions specified in the foregoing clauses (a),
(b) and (c) have been satisfied.
(e) Opinion of Counsel. The PIA Parties shall have received an
opinion from Parker Chapin Flattau & Klimpl, LLP, counsel to the SPAR Parties
and the SPAR Principals, dated the Closing Date, in form and substance
reasonably satisfactory to the PIA Parties.
(f) Good Standing Certificates. The SPAR Parties shall have
delivered to the PIA Parties certificates, dated as of a date no earlier than
ten days prior to the Closing Date (30 days in the case of separate tax
certificates), duly issued by the appropriate governmental authority in each
SPAR Party's state of incorporation and in each state in which each SPAR Party
is qualified to do business, showing that each SPAR Party is in good standing
and qualified to do business and that all state franchise and/or income tax
returns and taxes for such SPAR Party for all periods prior to the dates of such
certificates have been filed and paid.
(g) SPAR Principals' and Parties' Mutual Releases. The SPAR
Principals shall have delivered to the PIA Parties a mutual release dated the
Closing Date releasing each SPAR Party from any and all claims of the SPAR
Principals against each such SPAR Party with respect to matters preceding the
Closing Date.
(h) Transfer of Other Assets. All assets and properties
currently used by any SPAR Party in the conduct of its business that are not
owned (in whole or in part) by, licensed to or leased by a SPAR Party as of the
date of this Agreement (if any) shall have been transferred or assigned to a
SPAR Party without the payment of
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any consideration therefor, as evidenced by the certificate of the SPAR Parties
and copies of all such assignments (if any).
(i) Termination of Phantom Stock Plan. PIA Delaware shall have
received evidence reasonably satisfactory to it that the SPAR Phantom Stock Plan
(the "Phantom Plan") has been terminated and that all obligations of any SPAR
Party thereunder have been satisfied in full by the SPAR Parties, without any
further recourse to or liability any SPAR Party or the Surviving Corporation
thereunder.
(j) Termination or Separation of SPAR Benefit Plans. PIA
Delaware shall have received evidence reasonably satisfactory to it that either
(at the option of the SPAR Parties) (i) each SPAR Benefit Plan (A) has been
terminated, or (B) has been modified to exclude any employer other than a SPAR
Party, or (ii) each non-SPAR Party to a SPAR Benefit Plan shall have entered
into a separation, reimbursement and indemnity agreement with such SPAR Party on
terms and provisions reasonably acceptable to PIA Delaware providing for the
eventual exclusion of such person from the applicable SPAR Benefit Plan.
(k) Termination of Buy-Sell Agreement. The SPAR Principals
shall have amended the Buy-Sell Agreement to terminate its applicability to the
stock of any SPAR Party.
ARTICLE VII
CLOSING NET WORTH; NONSURVIVAL OF REPRESENTATIONS
Section 7.01. SPAR Closing Net Worth.
(a) As soon as practicable, but in any event within thirty
(30) days following the Closing Date, PIA Delaware shall cause Ernst & Young LLP
to audit the books of SAI and its subsidiaries to determine the SPAR Net Worth
(as hereinafter defined) immediately prior to the Merger (the "Closing Net
Worth"). "SPAR Net Worth" shall mean the consolidated net worth of SAI and its
subsidiaries, calculated in accordance with generally accepted accounting
principles ("GAAP") consistently applied, excluding (i.e., without taking into
account) (i) up to $300,000 of non-capitalizable merger transaction charges and
other one time expenses, reserves or accruals related to the SPAR Reorganization
Transactions or the Merger, and (ii) any tax accruals and similar adjustments
necessitated by the SPAR Premerger Transactions.
(b) Promptly after such calculation of the Closing Net Worth,
the Surviving Corporation shall deliver to the SPAR Principals written notice of
the Closing Net Worth as so calculated (the "Closing Net Worth Notice").
Following the delivery of the Closing Net Worth Notice, the SPAR Principals
shall have the right to review the calculation thereof for a period of thirty
(30) days after the delivery of the Closing Net Worth Notice to the SPAR
Principals (the "Review Period"). If, the SPAR Principals do not provide PIA
Delaware with written objection to the calculation of the Closing Net Worth
prior to the expiration of the Review Period, then, (i) to the extent that the
Closing Net Worth, as set forth in the Closing Net Worth Notice, is greater than
five hundred thousand dollars ($500,000) (the "Target Amount"), no adjustment
will be made, and the SPAR Principals will have no further obligations
hereunder; and (ii) to the extent the Closing Net Worth, as set forth in the
Closing Net Worth Notice, is less than the Target Amount, the SPAR Principals
shall pay to PIA Delaware, within five (5) business days after the last day of
the Review Period, the amount of such shortfall, such payment obligation to be
borne by the SPAR Principals pro rata (44/72 by Mr. Brown and 28/72 by Mr.
Bartels), and to be satisfied either (at the election of the SPAR Principals)
(A) by wire transfer of immediately available funds to such account as PIA
Delaware may designate or (B) by corresponding reductions in the loans owed to
the SPAR Principals from SMCI.
(c) If the SPAR Principals provide PIA Delaware with written
objection (which objection shall specify the basis for such objection in
reasonable detail) to the calculation of the Closing Net Worth prior to the
expiration of the Review Period, PIA Delaware and the SPAR Principals shall
attempt to resolve such dispute through good faith negotiations for a period of
at least thirty (30) days (or such longer period as PIA Delaware and the SPAR
Principals may agree). If PIA Delaware and the SPAR Principals cannot resolve
such dispute in such period, then such dispute shall be resolved by an
independent nationally recognized accounting firm which is reasonably acceptable
to PIA Delaware and the SPAR Principals (the "Independent Accounting Firm"). The
Independent Accounting Firm shall make its determination of the Closing Date Net
Worth within thirty (30) days of its selection. The determination made by the
Independent Accounting Firm shall be final and binding on the parties hereto.
The costs of the Independent Accounting Firm shall be borne by PIA Delaware.
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Section 7.02. Survival of Representations and Warranties. If
the Merger occurs, the representations and warranties made by the parties in
this Agreement, or in any certificate or other instrument delivered pursuant to
this Agreement, shall not survive the Merger, but rather shall terminate at the
Effective Time.
ARTICLE VIII
TERMINATION OF AGREEMENT
Section 8.01. Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time:
(a) by the mutual written agreement of PIA Delaware and SAI;
(b) by PIA Delaware, on forty eight (48) hours' written notice
to SAI, if there is a breach of any of the representations and warranties of any
SPAR Party (other than as a result of (i) the conduct of their businesses as
permitted and required hereunder, (ii) the culmination of any proposed or
pending transactions described in the SPAR Disclosure Letter, this Agreement and
the SPAR Premerger Agreements, or (iii) any adverse change(s) in the overall
economy or in the market segments in which such parties do business), or if any
SPAR Party fails to comply after notice with any of its covenants or agreements
contained herein, which breaches or failures, as the case may be, are, in the
aggregate, material in the context of the transactions contemplated by this
Agreement and cannot reasonably be anticipated to be cured within thirty (30)
days of the date of such notice;
(c) by SAI, on forty eight (48) hours' written notice to PIA
Delaware, if there is a breach of any of the representations and warranties of
any PIA Party (other than as a result of (i) the conduct of their businesses as
permitted and required hereunder, (ii) the culmination of any proposed or
pending transactions described in the PIA Disclosure Letter and this Agreement,
or (iii) any adverse change(s) in the overall economy or in the market segments
in which such parties do business), or if any PIA Party fails to comply after
notice with any of its covenants or agreements contained herein, which breaches
or failures, as the case may be, are, in the aggregate, material in the context
of the transactions contemplated by this Agreement and cannot reasonably be
anticipated to be cured within thirty (30) days of the date of such notice;
(d) by PIA Delaware on written notice to SAI, if (i) an
Acquisition Proposal has been made and not withdrawn, (ii) a majority of
disinterested members of the PIA Delaware Board determines in good faith (with
the advice of independent financial advisors and legal counsel) that such
Acquisition Proposal is superior for PIA Delaware's stockholders to the
transaction contemplated by this Agreement, (iii) PIA Delaware has notified SAI
in writing of the determination described in clause (ii) above, (iv) at least
five (5) business days have elapsed following receipt by SAI of such written
notice and (taking into account any revised proposal made by SAI since receipt
of such written notice) such Acquisition Proposal remains an Acquisition
Proposal and a majority of the disinterested directors of the PIA Delaware Board
has again made the determination referred to in clause (ii) above, (v) the PIA
Delaware Board concurrently approves, and (vii) PIA Delaware concurrently enters
into a definitive agreement providing for the implementation of such Acquisition
Proposal, subject to the payment by the PIA Parties of the breakup fee and
expense reimbursement as provided below in Section 8.03;
(e) by either PIA Delaware or SAI, on written notice to the
other, if the Merger shall not have been consummated on or before June 30, 1999;
provided, however, that (i) PIA Delaware may not terminate this Agreement
pursuant to this clause (e) if such failure to consummate the Merger is the
result of a failure to satisfy any of the conditions to the obligation of the
SPAR Parties to effect the Merger set forth in Section 6.02 and (ii) SAI may not
terminate this Agreement pursuant to this clause (e) if such failure to
consummate the Merger is the result of a failure to satisfy any of the
conditions to PIA Delaware's obligation to effect the Merger set forth in
Section 6.03;
(f) by either PIA Delaware or SAI, on written notice to the
other, if a Governmental Entity shall have enacted, issued, promulgated,
enforced, or entered any law, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and has the
effect of making illegal or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; and
(g) by SAI or PIA Delaware, if upon a vote at the PIA
Stockholders Meeting, PIA Delaware's stockholders do not approve, (i) the Share
Issuance as required under the Nasdaq Rules or (ii) the Proposed PIA Certificate
of Amendment as required under the DGCL.
-34-
Section 8.02. Effect of Termination. Except as otherwise
provided in Section 8.03 with respect to any termination by PIA Delaware
pursuant to subsection (d) of Section 8.01, in the event of any termination of
this Agreement pursuant to subsection (a), (d), (e), (f) or (g) or of Section
8.01, no Party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other Party to this Agreement. In the
event of any termination of this Agreement pursuant to clauses (b) or (c) of
Section 8.01, such termination shall not limit or affect in any way the ability
of the non-breaching Parties to seek damages from the breaching Parties for any
breach of this Agreement.
Section 8.03. Breakup Fee. In the event of any termination of
this Agreement pursuant to Section 8.01(d) by PIA Delaware, PIA Delaware shall
within five Business Days pay (or cause to be paid) to the SPAR Parties (a) a
breakup fee equal to the product of (i) 0.035 times (ii) the Value Per Share (as
defined below) times the number of shares of PIA Delaware Stock then outstanding
(without giving effect to any shares of PIA Delaware Stock to be issued in such
transaction), and (b) the amount of the reasonable costs and expenses of the
SPAR Parties and the SPAR Principals incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and all
related instruments and documents and all securities, anti-trust and other
governmental filings, including (without limitation) the reasonable fees,
disbursements and expenses of attorneys, accountants and other professionals,
subject to receipt of appropriate invoices and other documentation therefor.
"Value Per Share" shall mean (A) the cash purchase price per share of PIA
Delaware Stock where all or a majority of the outstanding shares of PIA Delaware
Stock are to be purchased for cash, or (B) in all other cases, the value of each
share of PIA Delaware Stock, as valued in good faith by the Board of Directors
of PIA Delaware (based on the fairness opinion or other valuation furnished to
them by the investment bankers or others providing comfort to the PIA Delaware
Board in connection with the alternative Acquisition Proposal), but in any event
not less than the average of the last sale price for PIA Delaware Stock on the
Nasdaq Stock Market for the five trading days preceding the effective date of
the termination of this Agreement.
ARTICLE IX
GENERAL
Section 9.01. Successors and Assigns; Assignment. Whenever in
this Agreement or any other Merger Document reference is made to any Party or
other 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, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that the rights of a Party hereunder may not be assigned
without the consent of the other parties hereto.
Section 9.02. No Third Party Rights. The representations,
warranties and other terms and provisions of this Agreement and the other Merger
Documents are for the exclusive benefit of the Parties hereto, and, except as
otherwise expressly provided herein or therein, 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 9.03. Counterparts. 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.
Section 9.04. Expenses. Except as otherwise expressly provided
herein, whether or not the transactions herein contemplated shall be
consummated, (i) the PIA Parties shall pay the fees, expenses and disbursements
of the PIA Parties and their respective agents, representatives, accountants and
counsel incurred in connection with the preparation and negotiation of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
the SPAR Parties shall pay the fees, expenses and disbursements of the SPAR
Parties and the SPAR Principals and their respective agents, representatives,
accountants and counsel incurred in connection with the preparation and
negotiation of this Agreement and the consummation of the transactions
contemplated hereby. The PIA Parties and the SPAR Parties shall each pay
one-half of the filing fee required to be paid in connection with any filings
required to be made by any Party under the HSR Act with respect to the Merger.
-35-
Section 9.05. Notices. All notices, requests and other
communications hereunder shall be in writing and shall be sent, delivered or
mailed as follows:
(a) If to any PIA Party:
Terry R. Peets, President and Chief Executive Officer
PIA Merchandising Services, Inc.
19900 MacArthur Blvd., Suite 900
Irvine, California 92612
Telephone: (949) 474-3506
Telecopier: (949) 474-3570
E-Mail: Terry.Peets@PIAmerch.com
with a copy to:
James W. Loss, Esq.
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Telephone: (714) 433-2900
Telecopier: (714) 549-3244
E-Mail: jwl@riordan.com
And a copy to:
Lawrence David Swift, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
Telephone: (212) 704-6147
Telecopier: (212) 704-6159
E-Mail: LDSwift@PCFK.com
(b) If to any SPAR Party:
Robert G. Brown, Chairman and Chief Executive Officer
SPAR Marketing Force, Inc.
303 South Broadway, Suite 140
Tarrytown, New York 10591
Telephone: (914) 332-4100
Telefax: (914) 332-0741
E-Mail: RBrown@MSN.com
With a copy to:
William H. Bartels, Vice Chairman and Senior Vice President
SPAR Marketing Force, Inc.
303 South Broadway, Suite 140
Tarrytown, New York 10591
Telephone: (914) 332-4100
Telefax: (914) 332-0741
E-Mail: BBartels@SPARinc.com
with a copy, in either case, to:
Lawrence David Swift, Esq.
Parker Chapin Flattau & Klimpl, LLP
121 1 Avenue of the Americas
New York, NY 10036-8735
Telephone: (212) 704-6147
Telecopier: (212) 704-6159
E-Mail: LDSwift@PCFK.com
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telecopier, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
-36-
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section (or in accordance with the latest
unrevoked written direction from such Party) and (ii) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section (or in accordance with the latest unrevoked written direction from such
Party), and the appropriate confirmation is received.
Section 9.06. Governing Law. This Agreement shall be governed
by and construed in accordance with the Applicable Laws pertaining in the State
of New York (other than those laws that would defer to the substantive laws of
another jurisdiction); provided, however, that the approval by the Constituent
Corporations, the Articles of Merger and filing, the effects of the Merger, and
other corporate organization and governance matters pertaining to the
Constituent Corporations shall be governed by and construed in accordance with
the Applicable Laws pertaining in the State of Nevada. Without in any way
limiting the preceding choice of law, the parties intend (among other things) to
thereby avail themselves of the benefit of Section 5-1401 of the General
Obligations Law of the State of New York.
Section 9.07. Consent to Jurisdiction, Etc. The Parties each
hereby consent and agree that the Supreme Court of the State of New York for the
County of Westchester and the United States District Court for Westchester
County, New York, and the Superior Court of the County of Orange, California,
and the United States District Court for the Central District of California,
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 to voluntarily commence or participate in any
action, suit or proceeding in any other court having jurisdiction and venue over
the other Parties. In any dispute with the SPAR Parties, the PIA Parties will
not raise, and each hereby expressly waives, any objection or defense to any
such New York jurisdiction as an inconvenient forum. Without in any way limiting
the preceding consents to jurisdiction and venue, the parties intend (among
other things) to thereby avail themselves of the benefit of Section 5-1402 of
the General Obligations Law of the State of New York.
Section 9.08. Waiver of Jury Trial. In any action, suit or
proceeding in any jurisdiction, the Parties each hereby expressly waive trial by
jury.
Section 9.09. Exercise of Rights and Remedies. Except as
otherwise provided herein, no delay of or omission in the exercise of any right,
power or remedy accruing to any Party as a result of any breach or default by
any other Party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later. No
waiver of any single breach or default shall be deemed a waiver of any other
breach or default occurring before or after such waiver.
Section 9.10. Reformation and Severability. In case any
provision of this Agreement shall be invalid, illegal or unenforceable, it
shall, to the extent possible, be modified in such manner as to be valid, legal
and enforceable but so as to most nearly retain the intent of the parties, and
if such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
Section 9.11. Remedies Cumulative. No right, remedy or
election given by any term of this Agreement shall be deemed exclusive, but each
shall be cumulative with all other rights, remedies and elections available at
law or in equity.
Section 9.12. Captions. The headings of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement
or be used to construe or interpret any provision hereof.
Section 9.13. Amendments. This Agreement may be modified or
amended only by a written instrument executed by the SPAR Parties and the PIA
Parties.
[END OF PAGE]
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Section 9.14. Entire Agreement. This Agreement, the SPAR
Disclosure Letter, the PIA Disclosure Letter, and the other Merger Documents
constitute the entire agreement and understanding among the parties, and
supersede any prior agreements and understandings, relating to the subject
matter of this Agreement and the other Merger Documents.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
PIA Merchandising Services, Inc. SPAR Acquisition, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
SG Acquisition, Inc. SPAR Marketing Force, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
PIA Merchandising Co., Inc. SPAR, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
SPAR/Burgoyne Retail Services, Inc. SPAR Marketing, Inc., a Delaware corporation
By: /s/ Robert G. Brown By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Robert G. Brown Name: Robert G. Brown
Title: Chairman, Chief Executive Officer Title: Chairman, Chief Executive Officer
and President and President
SPAR Incentive Marketing, Inc. SPAR MCI Performance Group, Inc.
By: /s/ Robert G. Brown By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Robert G. Brown Name: Robert G. Brown
Title: Chairman, Chief Executive Officer Title: Chairman and Chief Executive
and President Officer
-38-
SPAR Trademarks, Inc. SPAR Marketing, Inc., a Nevada corporation
By: /s/ Robert G. Brown By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Robert G. Brown Name: Robert G. Brown
Title: Chairman, Chief Executive Officer Title: Chairman, Chief Executive Officer
and President and President
-39-
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger, dated as
of May 14, 1999 (this "Amendment"), is by and among PIA Merchandising Services,
Inc., a Delaware corporation ("PIA Delaware"), SG Acquisition, Inc., a Nevada
corporation ("PIA Acquisition"), PIA Merchandising Co., Inc., a California
corporation ("PIA California"), SPAR Acquisition, Inc., a Nevada corporation
("SAI"), SPAR Marketing, Inc., a Delaware corporation ("SMI"), SPAR Marketing
Force, Inc., a Nevada corporation ("SMF"), SPAR, Inc., a Nevada corporation
("SINC"), SPAR/Burgoyne Retail Services, Inc., an Ohio corporation ("SBRS"),
SPAR Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR Incentive Marketing,
Inc., a Delaware corporation ("SIM"), SPAR MCI Performance Group, Inc., a
Delaware corporation ("SMCI"), and SPAR Trademarks, Inc., a Nevada corporation
("STM"). SMF, SINC, SMNEV and SBRS are sometimes referred to herein individually
as a "SPAR Marketing Company" and collectively as the "SPAR Marketing
Companies". SMI and the SPAR Marketing Companies are sometimes referred to
herein individually as a "SPAR Marketing Party" and collectively as the "SPAR
Marketing Parties". SIM and SMCI are sometimes referred to herein individually
as a "SPAR Incentive Party" and collectively as the "SPAR Incentive Parties".
SAI, STM, the SPAR Marketing Parties and the SPAR Incentive Companies are
sometimes referred to herein individually as a "SPAR Party" and collectively as
the "SPAR Parties". PIA Delaware, PIA Acquisition and PIA California are
sometimes referred to herein individually as a "PIA Party" and collectively as
the "PIA Parties". The PIA Parties and the SPAR Parties are sometimes referred
to herein individually as a "Party" and collectively as the "Parties".
Recitals
The PIA Parties and the SPAR Parties are parties to that
certain Agreement and Plan of Merger dated as of February 28, 1999, which
includes modifications made pursuant to the Page Substitution Amendment to
Merger Agreement and Merger Documents among the Parties dated as of March 1,
1999 (as so modified, the "Existing Merger Agreement", and as modified by this
Amendment, and as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein, the "Merger
Agreement"). Capitalized terms used and not otherwise defined or amended in this
Amendment shall have the meanings respectively assigned to them in the Merger
Agreement or other "Merger Documents" (as defined in the Merger Agreement).
The Parties have each determined that it is in its best
interest to amend the Existing Merger Agreement as provided below, and have
entered into this Amendment in order to do so, all upon the terms and provisions
and subject to the conditions hereinafter set forth.
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 are hereby acknowledged by the Parties), the
Parties hereto hereby agree as follows:
Section 1. Amendment to Existing Merger Agreement. The
Existing Merger Agreement is hereby amended as follows, effective as of the date
first written above:
(A) Recital E of the Existing Merger Agreement is hereby
deleted in its entirety, and the following new Recital E is hereby inserted in
its place:
E. Pursuant to the SPAR Reorganization Agreement, SAI will
issue to the SPAR Principals sufficient additional shares of SAI Stock
such that (after such issuance and including shares previously issued
to them) they will then together own shares of SAI Stock equal in
number to (i) the product of (A) two and one-third (2 1/3) times (B)
the total number of shares of PIA Delaware Stock (as hereinafter
defined) issued and outstanding as of the close of business on the
Business Day preceding the Closing Date (as defined in the
Reorganization Agreement), minus (ii) the sum of the number of shares
of SAI Stock
-1-
issuable upon exercise of the SAI Options (without regard to the
vesting provisions thereof) plus shares of SAI Stock owned by
stockholders other than the SPAR Principals.
(B) Recital I of the Existing Merger Agreement is hereby
deleted in its entirety, and the following new Recital I is hereby inserted in
its place:
I. As provided herein, (i) as a result of the Merger, each
outstanding share of SAI Common Stock will be converted into the right
to receive one share of common stock of PIA Delaware, par value $0.01
per share ("PIA Delaware Stock"), and (ii) following the Merger, each
SAI Option Holder will receive a Substitute Option (as hereinafter
defined) to purchase the same number of shares of PIA Delaware Stock on
the same terms as the number of shares of SAI Stock that such SAI
Option Holder was entitled to purchase under such SAI Option.
Immediately following the Merger, (A) the SPAR Stockholders will hold
and the SAI Option Holders will have the right to acquire upon exercise
(without regard to vesting) shares of PIA Delaware Stock that, in the
aggregate, will represent approximately 70% of the sum of (1) the total
number of shares of PIA Delaware Stock issued and outstanding
immediately after the Merger plus (2) the total number of shares of PIA
Delaware Stock issuable upon exercise of the Substitute Options
(without regard to vesting), and (B) the shares of PIA Delaware Stock
held by stockholders of PIA Delaware immediately prior to the Merger
will represent approximately 30% of such post-Merger sum.
(C) In Section 4.03 of the Existing Merger Agreement,
subsection (b) is hereby deleted in its entirety, and the following new
subsection (b) is hereby inserted in its place:
(b) The Board of Directors of PIA Delaware (the "PIA Delaware
Board") (i) has authorized and approved the adoption of an amendment to
PIA Delaware's certificate of incorporation in the form annexed hereto
as Exhibit E (together with such changes as may be made therein in
accordance with the PIA Delaware Board's approval, but subject to the
consent of the SPAR Parties, the "Charter Amendment"), which (among
other things) provides for an increase in the authorized number of
shares of PIA Delaware Stock to 47,000,000 shares, changes the name of
PIA Delaware to "SPAR Group, Inc." (or such other name as the Parties
may mutually agree prior to the mailing of the PIA Proxy Materials),
and deletes Article Tenth containing the prohibition against actions by
stockholders without a meeting (i.e., Charter Amendment No. 1, Charter
Amendment No. 2, Charter Amendment No. 3 as defined in the PIA Proxy
Statement); (ii) has authorized for inclusion in the proxy statement, a
proposal to authorize the PIA Delaware Board, if deemed necessary in
its sole discretion (after obtaining the consent of the SPAR Parties,
if such amendment is to be effected prior to the Merger or the
termination of this Agreement), to amend PIA Delaware's certificate of
incorporation (in the form annexed hereto as Exhibit E-1) to effect a
reverse stock split of the issued and outstanding shares of PIA
Delaware Stock on the basis of one of the following ratios: one new
share in exchange for every two issued and outstanding shares, one new
share in exchange for every three issued and outstanding shares, or one
new share in exchange for every four issued and outstanding shares,
with the PIA Delaware Board having the discretion to determine the
appropriate ratio to use immediately prior to effecting the reverse
stock split (the "Reverse Split Proposal" and together with the Charter
Amendment, the "Proposed PIA Certificate of Amendment"), and (iii) has
directed that the Proposed PIA Certificate of Amendment be submitted to
PIA Delaware's stockholders at the PIA Stockholders Meeting (as such
term is defined in Section 5.01). Upon the approval of the Proposed PIA
Certificate of Amendment by the stockholders of PIA Delaware as
required by the Delaware General Corporation Law (the "DGCL") and the
filing thereof with the Secretary of State of the State of Delaware,
the shares of PIA Delaware Stock to be issued in connection with the
Merger will be duly authorized and, when issued as contemplated hereby
at and after the Effective Time, will be validly issued, fully paid and
nonassessable and free of all Restrictions.
(D) In Section 7.01 of the Existing Merger Agreement,
subsection (b) is hereby deleted in its entirety, and the following new
subsection (b) is hereby inserted in its place:
(b) Promptly after such calculation of the Closing Net Worth,
the Surviving Corporation shall deliver to the SPAR Principals written
notice of the Closing Net Worth as so calculated (the "Closing Net
Worth Notice"). Following the delivery of the Closing Net Worth Notice,
the SPAR Principals shall have the right to review the calculation
thereof for a period of thirty (30) days after the delivery of the
Closing Net Worth Notice to the SPAR Principals (the "Review Period").
If, the SPAR Principals do not provide PIA Delaware with written
objection to the calculation of the Closing Net Worth prior to the
expiration of the Review Period, then, (i) to the extent that the
Closing Net Worth, as set forth in the Closing Net Worth
-2-
Notice, is greater than one million four hundred thirty-six thousand
dollars ($1,436,000) (the "Target Amount"), no adjustment will be made,
and the SPAR Principals will have no further obligations hereunder; and
(ii) to the extent the Closing Net Worth, as set forth in the Closing
Net Worth Notice, is less than the Target Amount, the SPAR Principals
shall pay to PIA Delaware, within five (5) business days after the last
day of the Review Period, the amount of such shortfall, such payment
obligation to be borne by the SPAR Principals pro rata (44/72 by Mr.
Brown and 28/72 by Mr. Bartels), and to be satisfied either (at the
election of the SPAR Principals) (A) by wire transfer of immediately
available funds to such account as PIA Delaware may designate or (B) by
corresponding reductions in the loans owed to the SPAR Principals from
SMCI.
(E) Exhibit E-1 to the Existing Merger Agreement is hereby
inserted in the form annexed hereto as Exhibit 1.
(F) Each of the Parties hereto hereby acknowledges and, to the
extent such Party's consent may be required under the Merger Agreement, consents
to the First Amendment to Reorganization Agreement, dated as of the date hereof,
a copy of which is annexed hereto as Exhibit 2.
Section 2. Counterparts. This Amendment may be signed 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.
Section 3. Governing Law, Etc. This Amendment is a Merger
Document and shall be governed by and construed in accordance with the
applicable terms and provisions of Article IX (as well as any applicable
definitions or provisions appearing elsewhere) of the Merger Agreement as if
this Amendment were the Agreement referred to therein, which terms and
provisions are incorporated herein by reference.
Section 4. Agreement to Continue as Amended. The Merger
Agreement, as supplemented, modified and amended by this Amendment, shall remain
and continue in full force and effect after the date hereof.
[END OF PAGE]
-3-
Section 5. Entire Agreement. This Amendment contains the
entire agreement of the Parties and supersedes 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 hereto have executed and
delivered this Amendment as of the date first written above.
PIA Merchandising Services, Inc. SPAR Acquisition, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
SG Acquisition, Inc. SPAR Marketing Force, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
PIA Merchandising Co., Inc. SPAR, Inc.
By: /s/ Terry R. Peets By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Terry R. Peets Name: Robert G. Brown
Title: President and Chief Executive Title: Chairman, Chief Executive Officer
Officer and President
SPAR/Burgoyne Retail Services, Inc. SPAR Marketing, Inc.
By: /s/ Robert G. Brown By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Robert G. Brown Name: Robert G. Brown
Title: Chairman, Chief Executive Officer Title: Chairman, Chief Executive Officer
and President and President
SPAR MCI Performance Group, Inc. SPAR Trademarks, Inc.
By: /s/ Robert G. Brown By: /s/ Robert G. Brown
---------------------------------------------- ----------------------------------------------
Name: Robert G. Brown Name: Robert G. Brown
Title: Chairman, Chief Executive Officer Title: Chairman, Chief Executive Officer
and President
-4-
SPAR Marketing, Inc., a Nevada corporation
By: /s/ Robert G. Brown
----------------------------------------------
Name: Robert G. Brown
Title: Chairman, Chief Executive Officer
and President
-5-
EXHIBIT 1 TO FIRST AMENDMENT TO MERGER AGREEMENT
Exhibit E-1
FORM OF REVERSE SPLIT AMENDMENT TO PIA DELAWARE CERTIFICATE OF INCORPORATION
Upon this Certificate of Amendment to the Certificate
of Incorporation of the Corporation becoming effective pursuant
to the General Corporation Law of the State of Delaware (the
"Effective Time"), each share of the Corporation's common
stock, par value $.01 per share (the "Old Common Stock"),
issued and outstanding immediately prior to the Effective Time,
will be automatically reclassified as and converted into
[_________] of a share of common stock, par value $.01 per
share, of the Corporation (the "New Common Stock"). Any stock
certificate that, immediately prior to the Effective Time,
represented shares of the Old Common Stock will, from and after
the Effective Time, automatically and without the necessity of
presenting the same for exchange, represent the number of
shares of the New Common Stock as equals the product obtained
by multiplying the number of shares of Old Common Stock
represented by such certificate immediately prior to the
Effective Time by [________]. No fractional shares of New
Common Stock will be issued in connection with the
reclassification and conversion of the Old Common Stock into
the New Common Stock. In lieu of any fractional shares, each
holder of Old Common Stock who would otherwise receive a
fractional share of New Common Stock will be entitled to
receive cash in an amount equal to the product obtained by
multiplying (1) the closing sales price of the Corporation's
Common Stock at the Effective Time as reported on the Nasdaq
National Market (or, if applicable, the Nasdaq SmallCap Market
or any exchange that the PIA Common Stock may be traded on at
the Effective Time) by (2) the number of shares of Old Common
Stock held by such holder that would otherwise have been
exchanged for such fractional share interest.
-6-
INDEMNITY ESCROW AGREEMENT
Introduction
This Indemnity Escrow 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 among PIA
MERCHANDISING SERVICES, INC., a Delaware corporation ("PIA Delaware"), SG
ACQUISITION, INC., a Nevada corporation ("PIA Acquisition"), PIA MERCHANDISING
CO., INC., a California corporation ("PIA California") (PIA Delaware, PIA
Acquisition and PIA California are sometimes referred to herein individually as
a "PIA Party" and collectively as the "PIA Parties"), SPAR ACQUISITION, INC., a
Nevada corporation ("SAI"), SPAR MARKETING, INC., a Delaware corporation
("SMI"), SPAR Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR MARKETING
FORCE, INC., a Nevada corporation ("SMF"), SPAR, INC., a Nevada corporation
("SINC"), SPAR/BURGOYNE RETAIL SERVICES, INC., an Ohio corporation ("SBRS"),
SPAR INCENTIVE MARKETING, INC., a Delaware corporation ("SIM"), SPAR MCI
PERFORMANCE GROUP, INC., a Delaware corporation ("SMCI"), and SPAR TRADEMARKS,
INC., a Nevada Corporation ("STM") (SAI, SMI, SMNEV, SMF, SINC, SBRS, SIM, SMCI
and STM are sometimes referred to herein individually as a "SPAR Party" and
collectively as the "SPAR Parties"), and ROBERT G. BROWN and WILLIAM H. BARTELS
(each a "SPAR Principal,"and collectively the "SPAR Principals"), and PARKER
CHAPIN FLATTAU & KLIMPL, LLP, a New York limited liability partnership having an
address at 1211 Avenue of the Americas, New York, New York 10036, as Escrow
Agent (the "Indemnity Escrow Agent"). The PIA Parties and the SPAR Parties are
sometimes referred to herein individually as a "Merger Party" and collectively
as the "Merger Parties". The Merger Parties and the SPAR Principals are
sometimes referred to herein individually as a "Beneficiary" and collectively as
the "Beneficiaries". The Beneficiaries and the Indemnity Escrow Agent are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties".
RECITALS
A. The Merger Parties have entered into the Agreement and Plan
of Merger dated as of February 28, 1999 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "Merger Agreement"), and the Merger Parties and the SPAR Principals
(I.E., the Beneficiaries) have entered into the Limited Indemnification
Agreement dated as of [Closing Date], 1999 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "Limited Indemnification Agreement").
B. The Beneficiaries desire to have shares of common stock of
PIA Delaware ("PIA Delaware Stock") deposited in escrow in accordance with
Section 2.02 of the Merger Agreement and held and disbursed by the Indemnity
Escrow Agent in accordance with this Agreement in order to secure the
obligations of the SPAR Principals to the Merger Parties under the Limited
Indemnification Agreement, and the Indemnity Escrow Agent has agreed to receive,
hold and disburse such stock, all upon the terms and subject to the conditions
hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
Section 1. Escrow of Instruments. (a) In accordance with the
provisions of Section 2.02 of the Merger Agreement, (i) PIA Delaware shall cause
ten percent (10%) of the shares of PIA Delaware Stock that each SPAR Principal
and their Family Members (as defined in the Merger Agreement) would otherwise
have had the right to receive pursuant to Section 2.01(a) of the Merger
Agreement (the "Escrow Shares") to be registered in the name of the applicable
SPAR Principal and delivered to the Indemnity Escrow Agent, provided however
that the Share Escrow Amount may be satisfied by the shares of the SPAR
Principals as opposed to the shares of such Family Members; and (ii) each SPAR
Principal shall deposit with the Indemnity Escrow Agent four stock powers
(separate from the certificates) endorsed to PIA Delaware, all of which shall be
held in accordance with the provisions of the Limited Indemnity Agreement and
this Agreement.
(b) The SPAR Principals shall be entitled to vote the Escrow
Shares in accordance with their respective interests therein on all matters
submitted to a vote of the stockholders of PIA Delaware so long as such Escrow
Shares are held in escrow pursuant to the term of this Agreement.
(c) Capitalized terms used and not otherwise defined herein
shall have the meanings respectively assigned to them in the Merger Agreement or
the Limited Indemnification Agreement, as applicable. However, no reference to
the Merger Agreement or the Limited Indemnification Agreement or any other
instrument or document shall be deemed to incorporate any term or provision
thereof into this Agreement unless expressly so provided.
Section 2. Investment of Funds. The Indemnity Escrow Agent may
invest or deposit any dividends or other distributions paid with respect to the
Escrow Shares (the "Escrow Funds"; collectively, with the Escrow Shares, the
"Escrow Deposit"), in (a) one of its normal interest bearing escrow deposit
accounts with Citibank, N.A., The Chase Manhattan Bank, or their respective
affiliates, (b) securities issued or guarantied by the United States of America,
or (c) other interest bearing deposit accounts in, or certificates of deposit,
commercial paper or similar products of, or money market mutual funds affiliated
with, (i) domestic commercial banks that have, or are members of a group of
domestic commercial banks that has, consolidated total assets of at least
$1,000,000,000, or (ii) such other banks or other financial institutions as may
be acceptable to the Beneficiaries.
Section 3. Release of Funds and Documents. The Indemnity
Escrow Agent shall release the Escrow Shares and other property in the escrow
created hereunder as follows:
(a) the Indemnity Escrow Agent shall release all of the then remaining
Escrow Shares and other property in the Escrow Deposit to the SPAR
Principals, in accordance with their respective interests therein, on
the second Business Day after receipt by the Indemnity Escrow Agent of
written notice from PIA Delaware certifying that the obligations of the
SPAR Principals under the Limited Indemnity Agreement have been
satisfied in full;
(b) the Indemnity Escrow Agent shall release all of the then remaining
Escrow Shares and other property in the Escrow Deposit to the SPAR
Principals, in accordance with their respective interests therein, on
the eleventh Business Day after receipt by the Indemnity Escrow Agent
of written notice (a "Release Notice") from any SPAR Principal
certifying that the obligations of the SPAR Principals under the
Limited Indemnity Agreement have been satisfied in full and certifying
that PIA Delaware has concurrently been given a copy of such Release
Notice; provided, however, that the Escrow Deposit shall not be so
released if PIA Delaware delivers written objection to such release to
the Indemnity Escrow Agent prior to the close of business on the tenth
Business Day after the Indemnity Escrow Agent's receipt of such Release
Notice, in which event the Parties shall resolve such dispute in the
manner provided in Section 7 hereof;
(c) the Indemnity Escrow Agent shall release such portion of the Escrow
Shares and/or other property then held in the Escrow Deposit to PIA
Delaware as shall be specified by written notice from PIA Delaware, on
the eleventh Business Day following receipt by the Indemnity Escrow
Agent of such written request from PIA Delaware, acting in its own name
or as agent for any other Beneficiary (an "Indemnity Claim Notice"),
which notice shall (i) concurrently be delivered to the SPAR Principals
and the Indemnity Escrow Agent (and shall include a certification to
such effect), (ii) state that the Escrow Shares and other property
requested to be released are required to satisfy an unpaid claim for
indemnification under the Limited Indemnification Agreement, (iii) set
forth the dollar amount of the claim for indemnification, and (iv)
contain such facts and information as are then reasonably available
concerning the basis for the claim for indemnification; provided,
however, that the Indemnity Escrow Agent shall not release such Escrow
Shares or other property as requested if one or both of the SPAR
Principals has delivered written objection to such release to the
Indemnity Escrow Agent prior to the close of business on the tenth
Business Day following the receipt of such Indemnity Claim Notice, in
which event the Parties shall resolve such dispute in the manner
provided in Section 7 hereof;
(d) the Indemnity Escrow Agent shall release one half of the then remaining
Escrow Shares and Escrow Funds and other property attributable thereto
in the Escrow Deposit to the SPAR Principals, in accordance with their
respective interests therein, if by the close of business on March 31,
2000, the Indemnity Escrow Agent has not received an Indemnity Claim
Notice under Article III of the Limited Indemnification Agreement that
then to its knowledge remains unsatisfied or in dispute (which the
Indemnity Escrow Agent may in its discretion confirm through notices to
the Beneficiaries); provided, however, that the Escrow Deposit shall
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not be so released if PIA Delaware delivers written objection to such
release and an Indemnity Claim Notice under Article III of the Limited
Indemnification Agreement to the Indemnity Escrow Agent prior to the
close of business on March 29, 2000, in which event the Parties shall
resolve such dispute in the manner provided in Section 7 hereof;
(e) the Board of Directors of PIA Delaware shall in their board meetings
preceding the second, third and fourth anniversaries of the date of
this Agreement evaluate the amount of collateral reasonably necessary
to continue to secure the SPAR Principals' obligations under the
Limited Indemnification Agreement (the "Continuing Amount"), not to
exceed $1,500,000, and give written notice to the Indemnity Escrow
Agent of the Continuing Amount; and the Indemnity Escrow Agent shall
retain Escrow Shares having a Fair Market Value (as hereinafter
defined) equal to the Continuing Amount and release all the then
remaining Escrow Shares and other property in the Escrow Deposit in
excess of the Continuing Amount to the SPAR Principals, in accordance
with their respective interests therein, if the Indemnity Escrow Agent
has received that notice and the Indemnity Escrow Agent has not
received an Indemnity Claim Notice under Article II of the Limited
Indemnification Agreement that then to its knowledge remains
unsatisfied or in dispute (which the Indemnity Escrow Agent may in its
discretion confirm through notices to the Beneficiaries); provided,
however, that the Escrow Deposit shall not be so released if PIA
Delaware delivers written objection to such release and an Indemnity
Claim Notice under Article II of the Limited Indemnification Agreement
to the Indemnity Escrow Agent prior to the close of business on the
tenth Business Day prior to the applicable anniversary of the date
hereof, in which event the Parties shall resolve such dispute in the
manner provided in Section 7 hereof; and
(f) the Indemnity Escrow Agent shall release all of the then remaining
Escrow Shares and other property in the Escrow Deposit to the SPAR
Principals, in accordance with their respective interests therein, if
by the close of business on the eleventh Business Day following the
fifth anniversary of the date of this Agreement the Indemnity Escrow
Agent has not received an Indemnity Claim Notice under Article II of
the Limited Indemnification Agreement that then to its knowledge
remains unsatisfied or in dispute (which the Indemnity Escrow Agent may
in its discretion confirm through notices to the Beneficiaries);
provided, however, that the Escrow Deposit shall not be so released if
PIA Delaware delivers written objection to such release and an
Indemnity Claim Notice under Article II of the Limited Indemnification
Agreement to the Indemnity Escrow Agent prior to the close of business
on the tenth Business Day after the fifth anniversary of the date of
this Agreement, in which event the Parties shall resolve such dispute
in the manner provided in Section 7 hereof.
In determining the number of Escrow Shares to be transferred in satisfaction of
any claim against the Escrow Property pursuant to the foregoing clause (c) or
retained in escrow (if any) under the foregoing clause (e), each Escrow Share
shall be valued at the average last sale price on the Nasdaq National Market for
the PIA Delaware Stock for the twenty (20) trading days ending two trading days
prior to the date on which such shares are to be transferred or released (the
"Fair Market Value"). PIA Delaware shall notify the Indemnity Escrow Agent in
writing of the appropriate valuation for the Escrow Shares for such purposes.
Each of the SPAR Principals and other Beneficiaries hereby expressly authorizes
and instructs the Indemnity Escrow Agent to take any and all action required to
effect any transfer of Escrow Shares and/or other property pursuant to the terms
of this Agreement, including, without limitation, completing and delivering one
or more of the executed stock powers delivered to the Indemnity Escrow Agent
pursuant to Section 1.
Section 4. Substitution of Cash for Escrow Shares. The SPAR
Principals shall have the right at any time and from time to time to substitute
cash for Escrow Shares as follows: (i) the SPAR Principals shall give written
notice to the Indemnity Escrow Agent and the Merger Parties at least ten days
prior to any requested substitution; (ii) on or before the proposed substitution
date, the SPAR Principals shall deliver $5.00 per share in immediately available
funds to the Indemnity Escrow Agent for each share of PIA Delaware Stock to be
released in substitution, provided, however, that to the extent the amount of
the Escrow Shares has been reduced pursuant to Section 3(e) hereof, the per
share substitution price for the each share of PIA Delaware Stock in the
Continuing Amount shall instead be the Fair Market Value as of the business day
immediately preceding the day such written notice is sent; and (iii) upon
receipt of such funds by the Indemnity Escrow Agent, the Indemnity Escrow Agent
shall release the corresponding shares of PIA Delaware Stock to the SPAR
Principals, in accordance with their respective interests therein, whether or
not any Indemnity Claim Notice has been received by the Indemnity Escrow Agent.
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Section 5. Further Assurances. Each Beneficiary agrees to do
such further acts and things and to execute and deliver such statements,
assignments, agreements, instruments and other documents as the Indemnity Escrow
Agent 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 Indemnity Escrow Agent.
Section 6. Invalidation of Distributions, Etc. In the event
any amount or document released to any Beneficiary under this Agreement is
invalidated, declared to be fraudulent or preferential or must otherwise be
restored or returned by the Indemnity Escrow Agent in connection with the
insolvency, bankruptcy or reorganization of any Beneficiary or other person,
whether by order of or settlement before any court or other authority or
otherwise: (a) each Beneficiary shall contribute back to the Indemnity Escrow
Agent an amount received by it such that each Beneficiary will be affected by
that invalidation, declaration, restoration or return ratably in proportion to
the distributions it received under this Agreement; and (b) each Beneficiary
will return any document so affected, together with any related assignment,
release or other instrument or document the Indemnity Escrow Agent may request
to restore the status quo ante.
Section 7. Conflicting Demands.
(a) In the event that one or both of the SPAR Principals or
PIA Delaware timely objects to any requested release of or claim against any of
the Escrow Shares or other property pursuant to Section 3, then PIA Delaware and
the SPAR Principals shall, for a period of at least thirty days, negotiate in
good faith in an effort to resolve such dispute. If PIA Delaware and the SPAR
Principals are unable to resolve such dispute within such thirty day period (or
such longer period as they may mutually agree upon), then the Beneficiaries may
pursue non-binding mediation if they mutually agree, or any Beneficiary may
commence an action, to finally resolve any conflicting claims hereunder. The
final decision of any court proceeding shall be furnished in writing to the
Indemnity Escrow Agent.
(b) If conflicting or adverse claims or demands are made or
notices served upon the Indemnity Escrow Agent with respect to the escrow
provided for herein, the Beneficiaries agree that the Indemnity Escrow Agent
shall be entitled to refuse to comply with any such claim or demand and to
withhold and stop all further performance of this escrow so long as such
disagreement shall continue. In so doing, the Indemnity Escrow Agent shall not
be or become liable for damages, losses, expenses or interest to any Beneficiary
or any other person for its failure to comply with such conflicting or adverse
demands. The Indemnity Escrow Agent shall be entitled to continue to so refrain
and refuse to so act until: (a) the rights of the adverse claimants have been
finally adjudicated in a court assuming and having jurisdiction and venue over
the parties and/or the documents, instruments or funds involved herein or
affected hereby; and/or (b) the Indemnity Escrow Agent shall have received an
executed copy of a dispositive settlement agreement to which the Beneficiaries
and all other adverse claimants, if any, are parties and signatories.
(c) If conflicting or adverse claims or demands are made or
notices served upon the Indemnity Escrow Agent with respect to the escrow
provided for herein, the Beneficiaries agree that the Indemnity Escrow Agent
also may elect to commence an interpleader or other action for declaratory
judgment for the purpose of having the respective rights of the claimants
adjudicated, and may deposit with the court all funds and documents held
hereunder pursuant to this Agreement; and if it so commences and deposits, the
Indemnity Escrow Agent shall be relieved and discharged from any further duties
and obligations under this Agreement. PIA Delaware shall pay all costs, expenses
and attorneys' fees and expenses incurred by the Indemnity Escrow Agent in
seeking any such judgment.
Section 8. Consent to Jurisdiction, Etc. Each Beneficiary
hereby covenants and agrees that the Supreme Court of the State of New York for
the County of Westchester or (in a case involving diversity of citizenship) the
United States District Court for the Southern District of New York shall have
personal jurisdiction and proper venue over any dispute with the Indemnity
Escrow Agent; provided that the foregoing consent to jurisdiction and venue by
the other parties shall not deprive the Indemnity Escrow Agent of the right in
its discretion to voluntarily commence or participate in any action, suit or
proceeding in any other court having jurisdiction and venue over the
Beneficiaries. In any dispute with the Indemnity Escrow Agent, no Beneficiary
will raise, and each Beneficiary hereby expressly waives, any objection or
defense to any such jurisdiction as an inconvenient forum. Without in any way
limiting the preceding consents to jurisdiction and venue, the parties intend
(among other things)
-4-
to thereby avail themselves of the benefit of Section 5-1402 of the General
Obligations Law of the State of New York. In addition to (and without limitation
of) any delivery permitted under applicable law, each Beneficiary agrees that
service of process may be made at his or its office in Westchester County, New
York.
Section 9. Waiver of Jury Trial. In any action or proceeding
involving the Indemnity Escrow Agent in any jurisdiction, the Parties each waive
trial by jury.
Section 10. Expenses of the Indemnity Escrow Agent. PIA
Delaware shall pay any and all costs and expenses incurred by the Indemnity
Escrow Agent in connection with the administration and holding of the Escrow
Deposit and the investment of any Escrow Funds, and the enforcement, protection
and adjudication of the parties' rights hereunder by the Indemnity Escrow Agent,
including, without limitation, the disbursements, expenses and fees of the
Indemnity Escrow Agent itself and those of other attorneys it may retain, if
any.
Section 11. Reliance on Documents and Experts. The Indemnity
Escrow Agent shall be entitled to rely upon any notice, consent, certificate,
affidavit, statement, paper, document, writing or communication (which to the
extent permitted hereunder may be by telegram, cable, telex, telecopier, or
telephone) reasonably believed by it to be genuine and to have been signed, sent
or made by the proper person or persons, and upon opinions and advice of legal
counsel (including itself or counsel for any party hereto), independent public
accountants and other experts selected by the Indemnity Escrow Agent.
Section 12. Status of the Indemnity Escrow Agent, Etc. The
Indemnity Escrow Agent is acting under this Agreement as a stakeholder only and
shall be considered an independent contractor with respect to each Beneficiary.
No term or provision of this Agreement is intended to create, nor shall any such
term or provision be deemed to have created, any principal-agent, trust, joint
venture, partnership, debtor-creditor or attorney-client relationship between or
among the Indemnity Escrow Agent and any of the Beneficiaries. This Agreement
shall not be deemed to prohibit or in any way restrict the Indemnity Escrow
Agent's representation of any Beneficiary, who may be advised by the Indemnity
Escrow Agent on any and all matters pertaining to this Agreement and the Escrow
Deposit. To the extent one or more of the Beneficiaries have been, are and/or
will be represented by the Indemnity Escrow Agent, each such Beneficiary hereby
waives any conflict of interest and irrevocably authorizes and directs the
Indemnity Escrow Agent to carry out the terms and provisions of this Agreement,
in each case without regard to any representation of any such Beneficiary, with
deference to no party and fairly as to all parties, and irrespective of the
impact upon or any conflicting communication from any such Beneficiary. The
Indemnity Escrow Agent's only duties are those expressly set forth in this
Agreement, and each Beneficiary authorizes the Indemnity Escrow Agent to perform
those duties in accordance with its usual practices in holding funds and
documents of its own or those of other escrows. The Indemnity Escrow Agent may
exercise or otherwise enforce any of its rights, powers, privileges, remedies
and interests under this Agreement and applicable law or perform any of its
duties under this Agreement by or through its directors, officers, partners,
employees, attorneys, agents or designees.
Section 13. Exculpation. The Indemnity Escrow Agent and its
designees, and their respective directors, officers, partners, counsel,
employees, attorneys and agents, shall not incur any liability whatsoever for
(a) the investment or disposition of funds, the holding or delivery of documents
or the taking of any other action, in each case in accordance with the terms and
provisions of this Agreement, (b) any mistake or error in judgment, (c)
compliance with any applicable law or any attachment, order or other directive
of any court or other authority (irrespective of any conflicting term or
provision of this Agreement), or (d) any other act or omission of any other
independent person engaged by the Indemnity Escrow Agent in connection with this
Agreement; and each Beneficiary hereby waives any and all claims and actions
whatsoever against the Indemnity Escrow Agent and its designees, and their
respective directors, officers, partners, employees, attorneys and agents,
arising out of or related directly or indirectly to any and all of the foregoing
acts, omissions and circumstances. Furthermore, the Indemnity Escrow Agent and
its designees, and their respective directors, officers, partners, employees,
attorneys and agents, shall not incur any liability (other than for a person's
own acts or omissions breaching a duty or contractual obligation owed to the
claimant and amounting to gross negligence or willful misconduct as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction) for other acts and omissions arising out of or related directly or
indirectly to this Agreement or the Escrow Deposit; and each Beneficiary hereby
expressly waives any and all claims and actions (other than those attributable
to a person's own acts or omissions breaching a duty or contractual obligation
owed to the claimant and amounting to gross negligence or willful misconduct as
finally determined pursuant to applicable law by a governmental authority having
jurisdiction) against the Indemnity Escrow Agent and its designees, and their
respective directors, officers, partners, employees, attorneys and agents,
arising out of or related directly or indirectly to any and all of the foregoing
acts, omissions and circumstances.
-5-
Section 14. Indemnification. The Indemnity Escrow Agent and
its designees, and their respective directors, officers, partners, employees,
attorneys and agents, shall be indemnified, reimbursed, held harmless and, at
the request of the Indemnity Escrow Agent, defended by the Beneficiaries,
jointly and severally, from and against any and all claims, liabilities, losses
and expenses (including, without limitation, the disbursements, expenses and
fees of their respective attorneys) that may be imposed upon, incurred by, or
asserted against any of them, or any of their respective directors, officers,
partners, employees, attorneys or agents, arising out of or related directly or
indirectly to this Agreement or the Escrow Deposit, except such as are
occasioned by the indemnified person's own acts and omissions breaching a duty
or contractual obligation owed to the claimant and amounting to gross negligence
or willful misconduct as finally determined pursuant to applicable law by a
governmental authority having jurisdiction.
Section 15. Notice. Any notice, request, demand or other
communication permitted or required to be given hereunder shall be in writing,
shall be signed by the party giving it, 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 Express (or other equivalent national overnight
courier) or United States Express Mail for overnight delivery, with the cost of
overnight 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). Any notice, request, demand or other communication instead
may be sent by telecopy, with the cost of transmission prepaid or for the
account of the sender, and shall be deemed conclusively to have been given on
the first business day following the day duly sent, provided that the giving
party also sends a copy thereof by one of the other means referenced above.
Refusal to accept delivery of any item shall be deemed to be receipt of such
item by the refusing party. Copies may be sent by regular first-class mail,
postage prepaid, to such person(s) as a party may direct from time to time by
notice to the others, but failure or delay in sending copies shall not affect
the validity of any such notice, request, demand or other communication so given
to a party.
Section 16. Section and Other Headings. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 17. Governing Law. This Agreement: has been executed
and delivered in the State of New York; and 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). Without in any way limiting the preceding choice of law, the
parties intend (among other things) to thereby avail themselves of the benefit
of Section 5-1401 of the General Obligations Law of the State of New York.
Section 18. Severability. In the event that any term or
provision of this Agreement 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 (b) by or before any other authority of any of the terms and
provisions of this Agreement.
Section 19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which may be executed by one or more of the
parties hereto, but all of which, when taken together, shall constitute but one
agreement binding upon all of the parties hereto.
Section 20. Effective Date. This Agreement shall be effective
on the date as of which this Agreement shall be executed by all the parties
hereto and delivered to the Indemnity Escrow Agent.
Section 21. Successors and Assigns; Assignment. Whenever in
this Agreement reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs and legal representatives of such party,
and, without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of each
Beneficiary in this Agreement shall inure to the benefit of the successors and
assigns of the Indemnity Escrow Agent; provided, however, that nothing herein
shall be deemed to authorize or permit any Beneficiary to assign any of its
rights or obligations hereunder to any other person (whether
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or not an affiliate of the Beneficiary), and each Beneficiary covenants and
agrees that it shall not make any such assignment.
Section 22. No Third Party Rights. The representations,
warranties and other terms and provisions of this Agreement are for the
exclusive benefit of the parties hereto, and no other person, including
creditors of any Beneficiary, 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 23. 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 no manner (except as otherwise expressly
provided herein) shall affect its right at a later time to enforce any such term
or 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 interests of the
Indemnity Escrow Agent under this Agreement 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 interest of the
Indemnity Escrow Agent under this Agreement or applicable law.
Section 24. Modification, Amendment, Etc. Each and every
modification and amendment of this Agreement 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 covenant, representation, warranty or other provision of
this Agreement shall be in writing and signed by each party affected thereby.
[END OF PAGE]
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Section 25. Entire Agreement. This Agreement contains the
entire agreement of the parties and supersedes all other representations,
agreements and understandings, oral or otherwise, among the parties with respect
to the matters contained herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
THE BENEFICIARIES: PIA MERCHANDISING SERVICES, INC.
By: /s/ Cathy L. Wood
--------------------------------
Name: Cathy L. Wood
Title: Secretary
SG ACQUISITION, INC.
By: /s/ Cathy L. Wood
---------------------------------
Name: Cathy L. Wood
Title: Secretary
PIA MERCHANDISING CO., INC.
By: /s/ Cathy L. Wood
----------------------------------
Name: Cathy L. Wood
Title: Secretary
SPAR ACQUISITION, INC.
By: /s/ Robert G. Brown
----------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR MARKETING, INC., a Delaware
corporation
By: /s/ Robert G. Brown
-------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR MARKETING FORCE, INC.
By: /s/ Robert G. Brown
--------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR, INC.
By: /s/ Robert G. Brown
----------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
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SPAR/BURGOYNE RETAIL SERVICES, INC.
By: /s/ Robert G. Brown
--------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR MARKETING, INC., a Nevada
corporation
By: /s/ Robert G. Brown
---------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR INCENTIVE MARKETING, INC.
By: /s/ Robert G. Brown
---------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR MCI PERFORMANCE GROUP, INC.
By: /s/ Robert G. Brown
------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
SPAR TRADEMARKS, INC.
By: /s/ Robert G. Brown
-------------------------------
Name: Robert G. Brown
Title: Chief Executive Officer
/s/ Robert G. Brown
---------------------------------
ROBERT G. BROWN
/s/ William H. Bartels
---------------------------------
WILLIAM H. BARTELS
THE INDEMNITY ESCROW AGENT: PARKER CHAPIN FLATTAU & KLIMPL, LLP
By: /s/ Lawrence David Swift
----------------------------------
Lawrence David Swift, Partner
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