SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPAR GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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SPAR GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 2, 2001
TO THE STOCKHOLDERS OF SPAR GROUP, INC.
The 2001 Annual Meeting of Stockholders (the "2001 Annual Meeting") of
SPAR Group, Inc. (f/k/a PIA Merchandising Services, Inc.) (the "Company" or
"SPAR"), will be held at 10:00 a.m., Eastern Standard Time, on August 2, 2001,
at 580 White Plains Road, Tarrytown, NY 10591, for the following purposes:
1. To elect six Directors of the Company to serve during the ensuing year and
until their successors are elected and qualified.
2. To approve the adoption of the 2000 Stock Option Plan, as amended, which,
with respect to all newly granted options, replaces the 1995 Amended and
Restated Stock Option Plan and Directors Stock Option Plan.
3. To approve the adoption of the 2001 Employee Stock Purchase Plan, which
replaces the existing plan.
4. To approve the adoption of the 2001 Consultant Stock Purchase Plan for
employees of certain affiliates of the Company who provide services to the
Company.
5. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2001.
6. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record, at the
close of business on June 29, 2001, will be entitled to notice of and to vote at
the 2001 Annual Meeting or any adjournment or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 2000 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
CHARLES CIMITILE
Secretary
July 13, 2001
Tarrytown, New York
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YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO
BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING. REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD
BE ADDRESSED TO CHARLES CIMITILE, SECRETARY AND CHIEF FINANCIAL OFFICER, AT THE
OFFICES OF THE COMPANY: SPAR GROUP, INC., 580 WHITE PLAINS ROAD, TARRYTOWN, NY
10591.
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SPAR GROUP, INC.
580 White Plains Road
Tarrytown, NY 10591
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PROXY STATEMENT
2001 ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 2, 2001
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of SPAR Group, Inc. (f/k/a
PIA Merchandising Services, Inc.), a Delaware corporation (the "Company"), for
use at the 2001 Annual Meeting of Stockholders (the "2001 Annual Meeting") to be
held on Thursday, August 2, 2001, at 10:00 a.m., Eastern Standard Time, at the
principal office of the Company located at 580 White Plains Road, Tarrytown, New
York, 10591, and any adjournment or postponement thereof. This Proxy Statement
and the form of proxy to be utilized at the 2001 Annual Meeting were mailed or
delivered to the stockholders of the Company on or about July 13, 2001.
MATTERS TO BE CONSIDERED
The 2001 Annual Meeting has been called to (1) elect six Directors of the
Company to serve during the ensuing year and until their successors are elected
and qualified, (2) approve the adoption of the 2000 Stock Option Plan, as
amended, which, with respect to all newly granted options, replaces the 1995
Amended and Restated Stock Option Plan and Directors Stock Option Plan, (3)
approve the adoption of the 2001 Employee Stock Purchase Plan, which replaces
the existing employee stock purchase plan, (4) approve the adoption of the 2001
Consultant Stock Purchase Plan for employees of certain affiliates of the
Company who provide services to the Company, (5) ratify the appointment of Ernst
& Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 2001, and (6) transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on June 29, 2001, as the
record date (the "Record Date") for the determination of stockholders entitled
to vote at the 2001 Annual Meeting and any adjournment or postponement thereof.
As of the Record Date, there were outstanding 18,279,830 shares of the Company's
common stock, $.01 par value (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record on the record date of a majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business at the 2001 Annual Meeting. As to all matters, each stockholder of
record on the record date is entitled to one vote for each share of Common Stock
held. Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. The
Director nominees who receive the greatest number of votes at the 2001 Annual
Meeting will be elected to the Board of the Company. Stockholders are not
entitled to cumulate votes. Votes against a candidate and votes withheld have no
legal effect. In matters other than the election of Directors, abstentions are
counted as votes against in tabulations of the votes cast on proposals presented
to stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
All proxies which are properly completed, signed and returned prior to
the 2001 Annual Meeting will be voted. Any proxy given by a stockholder may be
revoked at any time before it is exercised by
filing with the Secretary of the Company an instrument revoking it, by
delivering a duly executed proxy bearing a later date or by the stockholder
attending the 2001 Annual Meeting and voting his or her shares in person.
PROPOSAL 1- ELECTION OF DIRECTORS
Six Directors are to be elected at the 2001 Annual Meeting to serve
until the next Annual Meeting of Stockholders and until their respective
successors have been elected and qualified. In the absence of instructions to
the contrary, proxies covering shares of Common Stock will be voted in favor of
the election of each of Mr. Robert G. Brown, Mr. William H. Bartels, Mr. Robert
O. Aders, Mr. Jack W. Partridge, Mr. Jerry B. Gilbert, and Mr. George W. Off. In
the event that any nominee for election as Director should become unavailable to
serve, it is intended that votes will be cast, pursuant to the enclosed proxy,
for such substitute nominee as may be nominated by the Company. Management has
no present knowledge that any of the persons named will be unavailable to serve.
No arrangement or understanding exists between any nominee and any
other person or persons pursuant to which any nominee was or is to be selected
as a Director or nominee. None of the nominees has any family relationship to
any other nominee or to any executive officer of the Company.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES IDENTIFIED
ABOVE.
INFORMATION CONCERNING NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the nominee Directors, all of
whom are incumbent Directors. The Board of Directors has fixed at seven the
number of directors that will constitute the board for the ensuing year. The
Board is actively seeking an additional outside director to fill the remaining
vacancy. Each nominee has consented to being named in this Proxy Statement as a
nominee for Director and has agreed to serve as a Director if elected.
Name Age Position with SPAR Group, Inc.
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Robert G. Brown................ 58 Chairman, Chief Executive Officer,
President and Director
William H. Bartels............. 57 Vice Chairman and Director
Robert O. Aders (1)(2)......... 74 Director
Jack W. Partridge (1)(2)....... 55 Director
Jerry B. Gilbert (1)(2)........ 67 Director
George W. Off (1)(2)........... 54 Director
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(1) Member of the Compensation Committe
(2) Member of the Audit Committee
Robert G. Brown serves as the Chairman, the Chief Executive Officer,
the President and a Director of the Company and has held such positions since
July 8, 1999, the effective date of the merger of the SPAR Marketing Companies
(as defined below) with PIA Merchandising Services, Inc. (the "Merger"). Mr.
Brown served as the Chairman, President and Chief Executive Officer of the SPAR
Marketing Companies (SPAR/Burgoyne Retail Services, Inc. ("SBRS") since 1994,
SPAR, Inc. ("SINC") since 1979, SPAR Marketing, Inc. ("SMNEV") since November
1993, and SPAR Marketing Force, Inc. ("SMF") since SMF acquired its assets and
business in 1996) (SBRS, SINC, SMNEV and SMF may be referred to collectively as
the "SPAR Marketing Companies").
William H. Bartels serves as the Vice Chairman and a Director of the
Company and has held such positions since July 8, 1999 (the effective date of
the Merger). Mr. Bartels served as the Vice-Chairman,
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Secretary, Treasurer and Senior Vice President of the SPAR Marketing Companies
(SBRS since 1994, SINC since 1979, SMNEV since November 1993 and SMF since SMF
acquired its assets and business in 1996), and has been responsible for the
Company's sales and marketing efforts, as well as for overseeing joint ventures
and acquisitions.
Robert O. Aders serves as a Director of the Company and has done so
since July 8, 1999. Mr. Aders has served as Chairman of The Advisory Board,
Inc., an international consulting organization since 1993, and also as President
Emeritus of the Food Marketing Institute ("FMI") since 1993. Immediately prior
to his election to the presidency of FMI in 1976, Mr. Aders was Acting Secretary
of Labor in the Ford Administration. Mr. Aders was the Chief Executive Officer
of FMI from 1976 to 1993. He also served in The Kroger Co., in various executive
positions from 1957-1974 and was Chairman of the Board from 1970 to 1974. Mr.
Aders also serves as a Director of FMI, the Stedman Nutrition Foundation at Duke
Medical Center, Coinstar, Inc., The Source Interlink and Telepanel Systems, Inc.
Jack W. Partridge serves as a Director of the Company and has done so
since January 29, 2001. Mr. Partridge is President of Jack W. Partridge &
Associates. He previously served as Vice Chairman of the Board of The Grand
Union Company from 1998 to 2000. Mr. Partridge's service with Grand Union
followed a distinguished 23-year career with The Kroger Company, where he served
as Group Vice President, Corporate Affairs, and as a member of the Senior
Executive Committee, as well as various other executive positions. Mr. Partridge
has been a leader in industry and community affairs for over two decades. He
also served as Chairman of the Food Marketing Institute's Government Relations
Committee, the Food and Agriculture Policy Task Force, and as Chairman of the
Board of The Ohio Retail Association. He has also served as Vice Chairman of the
Cincinnati Museum Center and a member of the boards of the United Way of
Cincinnati, the Childhood Trust, Second Harvest and the Urban League.
Jerry B. Gilbert serves as a Director of the Company and has done so
since June 4, 2001. Mr. Gilbert served as Vice President of Customer Relations
for Johnson & Johnson's Consumer and Personal Care Group of Companies from 1989
to 1997. Mr. Gilbert joined Johnson & Johnson in 1958 and from 1958-1989 held
various executive positions. Mr. Gilbert also serves on the Advisory Boards of
the Food Marketing Institute, the National Association of Chain Drug Stores and
the General Merchandise Distributors Council where he was elected the first
President of the GMDC Educational Foundation. He was honored with lifetime
achievement awards from GMAC, Chain Drug Review, Drug Store News and the Food
Marketing Institute. He is the recipient of the prestigious National Association
of Chain Drug Stores (NACDS) Begley Award, as well as the National Wholesalers
Druggist (NWDA) Tim Barry Award. In June 1997, Gilbert received an Honorary
Doctor of Letters Degree from Long Island University.
George W. Off serves as a Director of the Company and has done so since
July 1, 2001. Mr. Off was a co-founder of Catalina Marketing Corporation, a New
York Stock Exchange listed company. He served as Chairman of the Board from July
1998 until he retired in July 2000. He served as President and CEO from 1994 to
1998. Prior to that, Mr. Off was President and Chief Operating Officer, from
1992 to 1994, and Executive Vice President from 1990 to 1992. Catalina is a
leading supplier of in-store electronic scanner -activated consumer promotions.
Mr. Off also serves on the Board of Directors of Telephone and Data Systems,
Inc. and is a member of the Board of Trustees of Eckerd College in Florida.
Certain Relationships And Related Transactions
Mr. Robert G. Brown, a Director, the Chairman and the Chief Executive
Officer of the Company, and Mr. William H. Bartels, a Director and the Vice
Chairman of the Company (collectively, the "SMS Principals"), are the sole
stockholders and executive officers and directors of SPAR Marketing Services,
Inc. ("SMS"), SPAR Management Services, Inc. ("SMSI"), SPAR Infotech, Inc.
("SIT"), and certain other affiliated companies.
SMS and SMSI (through SMS) provided field representative (through its
independent contractor field force) and field management services to the Company
at a total cost of $9.6, and $8.5 million for the twelve months ended December
31, 2000 and 1999, respectively, and $4.8 million for the nine months ended
December 31, 1998. Under the terms of the Field Service Agreement, SMS provides
the services of
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approximately 2,900 field representatives and through SMSI provides 35 regional
and district managers to the Company as it may request from time to time, for
which SPAR has agreed to pay SMS for all of its costs of providing those
services plus 4%. However, SMS may not charge the Company for any past taxes or
associated costs for which the SMS Principals have agreed to indemnify the
Company.
SIT provided computer programming services to the Company at a total
cost of $769,000 and $608,000 for the twelve months ended December 31, 2000 and
1999, respectively, and $0 for the nine months ended December 31, 1998. Under
the terms of the programming agreement between SMF and SIT effective as of
October 1, 1998 (the "Programming Agreement"), SIT continues to provide
programming services to the Company as the Company may request from time to
time, for which the Company has agreed to pay SIT competitive hourly wage rates
and to reimburse SIT's out-of-pocket expenses (see Note 10 to the Financial
Statements).
In July 1999, SMF, SMS and SIT entered into a Software Ownership
Agreement with respect to Internet job scheduling software jointly developed by
such parties. In addition, STM, SMS and SIT entered into trademark licensing
agreements whereby STM has granted non-exclusive royalty-free licenses to SIT,
SMS and SMSI for their continued use of the name "SPAR" and certain other
trademarks and related rights transferred to SPAR Trademarks, Inc. ("STM"), a
wholly owned subsidiary of the Company, in connection with the Merger.
In the event of any material dispute in the business relationships
between SPAR, SMS, SMSI, or SIT, it is possible that Messrs. Brown or Bartels
may have one or more conflicts of interest with respect to these relationships
and dispute that could have a material adverse effect on SPAR Group, Inc. (see
Note 10 to the Financial Statements).
THE BOARD OF DIRECTORS
Committees
The standing committees of the Board are the Audit Committee (the
"Audit Committee") and the Compensation Committee (the "Compensation
Committee"). SPAR does not have a standing nominating committee or any committee
performing the functions thereof.
The Audit Committee, which during 2000 consisted of Messrs. Aders and
Lewis, prior to August 3, 2000 and Mr. Aders, thereafter, met four times during
2000. The Audit Committee makes recommendations concerning the engagement of
independent public accountants; reviews with the independent public accountants
the plans for and scope of the audit, the audit procedures to be utilized and
results of the audit; approves the professional services provided by the
independent public accountants; reviews the independence of the independent
public accountants; and reviews the adequacy and effectiveness of the Company's
internal accounting controls. See "Reports of The Audit Committee of The Board
of Directors".
The Compensation Committee, which during 2000 consisted of Mr. Aders
and Mr. Lewis prior to August 3, 2000, and Mr. Aders, thereafter, met four times
during 2000. The Compensation Committee determines compensation for the
Company's executive officers and administers the Company's stock incentive
plans. See "Report of the Compensation Committee of the Board of Directors."
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was at any time during the year
ended December 31, 2000, or at any other time an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any other entity, that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee, except as disclosed above in Certain Relationship And
Related Transactions.
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Meetings
During the year ended December 31, 2000, the Board held four meetings
and took various actions by written consent. Each incumbent Director attended
(in person or via conference call). Each Director is elected to hold office
until the next annual meeting of stockholders and until his respective successor
is elected and qualified.
Compensation of Directors
In January 2001, the Company adopted a new Director Compensation Plan.
Under the new plan, each non-employee director will receive twenty thousand
dollars ($20,000.00) per annum. Payment will be made quarterly in equal
installments. It is intended that payment will be 50% in cash ($2,500) and 50%
($2,500) in stock or stock options. The number of shares of stock issued will be
a calculation based upon the closing stock price at the end of each quarter. In
addition, each non-employee director will receive 10,000 stock options upon
acceptance of the directorship, 2,500 stock options after one year of service
and 2,500 stock options for each additional year of service thereafter. Each
member of the SPAR Board is eligible to participate in the 2000 Stock Option
Plan described below. All options will have an exercise price equal to the
closing price on the day of issuance. Non-employee directors will be reimbursed
for all reasonable expenses incurred during the course of their duties. There is
no additional compensation for committee participation, phone meetings, or other
board activities.
During 2000, compensation for each outside director consisted of $3,000
per each meeting attended, up to four meetings per year, and an additional $500
per meeting for special meetings, including telephonic meetings. All related
expenses for these meetings were also reimbursed. During the year ended December
31, 2000, SPAR paid $12,000 to Mr. Aders for services as a member of the SPAR
Board. Mr. Aders was also reimbursed for certain expenses in connection with his
attendance at SPAR Board and committee meetings. During 2000, Mr. Aders was
granted an option to purchase 1,500 shares of SPAR's common stock at an exercise
price of $1.2188 per share. The option vests ratably over a four-year period.
Limitation of Liability and Indemnification Matters
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a company will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its
officers and directors and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company's Bylaws also permit it to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the Bylaws would permit indemnification. The Company maintains director
and officer liability insurance.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company in which indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding, which may result in a claim for such indemnification.
Proposal 2 - APPROVAL OF THE ADOPTION OF THE 2000 STOCK OPTION PLAN
At the 2001 Annual Meeting, the Company's stockholders will be asked to
approve the adoption of the Company's 2000 Stock Option Plan, as amended (the
"2000 SOP"). The 2000 SOP will replace the Company's Amended and Restated 1995
Stock Option, as amended (the "1995 SOP"), for all options issued after the 2000
SOP Effective Date. The Company's Board of Directors (the "Board") on December
4, 2000 (the "SOP Effective Date"), adopted the 2001 SOP, and amended it on June
29, 2001. The adoption of the 2000 SOP is subject to the approval of the
Company's stockholders. Such stockholder's approval will
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require the affirmative vote of a majority of the voting power of all
outstanding shares of the Company's Common Stock present or represented and
entitled to vote at the 2000 Annual Meeting. The 2000 SOP is briefly summarized
below, but these descriptions are subject to and qualified in their entirety by
the full text of the 2000 SOP, which is attached as Annex A to this Proxy
Statement.
As of the 2000 SOP Effective Date, there were options outstanding under
the 1995 SOP to purchase 2,816,477 shares of the Company's Common Stock ("Common
Stock"), and 683,523 shares of Common Stock remained available for future grants
under the 1995 SOP. In January of 2001, holders of options under the 1995 SOP
surrendered options to purchase 2,349,825 shares of Common Stock. As of the
Record Date, there were options outstanding under the 1995 SOP to purchase
310,250 shares of Common Stock, there were options outstanding under the 2000
SOP to purchase 218,500 shares of Common Stock, and 3,381,500 shares remained
available for future grants under the 2000 SOP.
SUMMARY OF THE 2000 STOCK OPTION PLAN
The 2000 SOP and information regarding options granted thereunder is
summarized below, but these descriptions are subject to and are qualified in
their entirety by the full text of the 2000 SOP, which is attached as Annex A to
this Proxy Statement.
Under the 2000 SOP, employees, directors, officers and consultants
providing services to the Company or its subsidiaries, including the employees
of the SPAR Affiliates (as defined below) (collectively referred to as the
"Participants" with respect to the 2000 SOP), may be granted certain options
("Options") to purchase shares of the Company's Common Stock. The 2000 SOP
permits the granting of both Options that qualify for treatment as incentive
stock options ("Incentive Stock Options") under Section 422 of the United States
Internal Revenue Code of 1986 as amended (the "Code"), and Options that do not
qualify as Incentive Stock Options ("Nonqualified Stock Options"). Incentive
Stock Options may only be granted to employees of the Company or its
subsidiaries.
The purpose of the 2000 SOP and of granting Options to specified
persons is to promote the interests of the Company and its stockholders, by
providing stock-based incentives to certain Participants. Under the 2000 SOP,
the mutuality of interest between the Participants and the Company is
strengthened because the Participants have a proprietary interest in pursuing
the Company's long-term growth and financial success. In addition, by allowing
the Participants to participate in the Company's success, the Company is better
able to attract, retain and reward quality employees, directors, officers and
consultants. In selecting the Participants to whom Options may be granted,
consideration is given to factors such as employment position, duties and
responsibilities, ability, productivity, length of service, morale, interest in
the Company and recommendations of supervisors. The maximum number of shares
that may be issued to a single Participant during any calendar year is
1,000,000.
The 2000 SOP is administered by the Board or by the Compensation
Committee established by the Board. (The entity actually administering the 2000
SOP is referred to herein as the "Committee.") The Committee is, when possible,
composed of two or more persons who are non-employee directors, as defined in
Rule 16b-3(b)(3) of the Exchange Act of 1934, as amended (the "Exchange Act")
and who are "outside directors" under Section 162(m) of the Code.
The Committee has full and complete authority, subject to the express
provisions of the 2000 SOP: (1) to select the Participants, to specify the
number of shares of the Company's Common Stock with respect to which Options are
granted to each Participant, to specify the terms of the Options and whether
such Options shall be Incentive Stock Options or Nonqualified Stock Options, and
in general to grant Options; (2) to determine the dates upon which Options shall
be granted and the terms and conditions thereof in a manner consistent with the
2000 SOP, which terms and conditions need not be identical as to the various
Options granted; (3) to interpret the 2000 SOP; (4) to prescribe, amend and
rescind rules relating to the 2000 SOP; (5) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Committee; (6) to determine the rights and
obligations of Participants under the 2000 SOP; (7) to specify the Option price;
(8) to accelerate the time during which an Option may be
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exercised, including, but not limited to, upon a change of control of the
Company, and to otherwise accelerate the time or extend the post-termination
exercise period during which an Option may be exercised; and (9) to make all
other determinations deemed necessary or advisable for the administration of the
2000 SOP.
If this proposal is approved, the maximum number of shares of the
Company's Common Stock, in respect of options that may be granted under the 2000
SOP, shall not exceed 3,600,000 less the number of shares of Common Stock for
which options have been issued under the 2000 SOP, less the number of shares of
Common Stock for which options have been issued under the 1995 SOP and are
outstanding as of December 4, 2000, and plus the number of shares of Common
Stock in respect to the above options that were cancelled or voided, subject to
certain adjustments that may be made by the Committee upon the occurrence of
certain changes in the Company's capitalization or structure.
Each option granted under the Option Plan will be evidenced by a
written agreement ("Option Agreement") in a form approved by the Committee and
executed by the Company and the Participant to whom the Option is granted.
Options will be exercisable at such time(s) and subject to such terms and
conditions as may be set forth in the Option Agreement.
The purchase price of shares of the Company's Common Stock subject to
each Option which is intended to qualify as an Incentive Stock Option will be
equal to the fair market value of such shares (110% of fair market value in the
case of a holder of more than 10% of the Company's Common Stock) on the date of
grant of such Option. The purchase price of any Option which does not qualify as
an Incentive Stock Option shall be determined by the Committee, but shall not be
less than the fair market value of the Company's Common Stock in the case of an
Option granted to an individual who is a "covered employee" under Section 162(m)
of the Code in order to preserve the deductibility of the compensation that will
be recognized upon the exercise of the Option. The fair market value of such
shares is the closing price of the Company's Common Stock on the Nasdaq Stock
Market on the date of grant.
Options granted under the 2000 SOP may be exercised, to the extent
vested, by the Participant by payment of the full purchase price therefor in
cash, by cashier's or certified check, by surrender of outstanding shares of the
Common Stock previously acquired by the Participant, or in the discretion of the
Committee by the sale of part of the shares covered by the option through a
concurrent brokerage transaction if the Company has arranged for a broker to
conduct such sales generally. Options granted to a Participant are not
transferable during the individual's lifetime, and may be transferred in the
event of death only by will or the laws of descent and distribution, except for
Nonqualified Stock Options which, with the consent of the Committee, may be
transferred to the employee's immediate family members, a trust for their
exclusive benefit of such family members, or a partnership in which such family
members are the only partners.
Each option granted under the 2000 SOP shall set forth a termination
date thereof, which shall not be later than ten years (five years in the case of
a holder of more than 10% of the Company's Common Stock) from the date such
option is granted, subject to earlier termination or forfeiture as set forth
below, or as otherwise set forth in each particular Option Agreement.
Unless earlier terminated by the Board, the 2000 SOP will terminate on
December 4, 2010. The Board may make such further amendments to the 2000 SOP as
it shall deem advisable.
Future Participants in the 2000 SOP and the amounts of their future
allotments are to be determined by the Committee subject to any restrictions in
the text of the 2000 SOP or the applicable Option Agreement. Because no such
determinations have yet been made, it is not possible to state the terms of any
individual awards that may be issued under the 2000 SOP or the names or
positions of or respective amounts of the allotment to any individual who may
participate.
FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO THE 2000 SOP
The following general discussion of the principal federal income tax
considerations is based upon the statutes and regulations existing at the date
of this document, both of which are subject to modification at anytime.
Participants should consult with their own tax advisors with respect to the
federal, state and local tax consequences of the receipt and exercise of
Incentive Stock Options and Nonqualified Stock Options, as well as disposition
of the shares of Common Stock received upon exercise of such options, as those
tax consequences relate to their own particular circumstances.
-7-
INCENTIVE STOCK OPTIONS. No taxable income will be recognized by a
Participant upon the grant or exercise of any Incentive Stock Option under the
2000 SOP. The Company will not be entitled to any income tax deduction as the
result of the grant or exercise of any Incentive Stock Option.
Any gain or loss resulting from the subsequent sale of stock acquired
upon exercise of an Incentive Stock Option will be long-term capital gain or
loss if such sale is made after the later of (a) two years from the date of the
grant of the option or (b) one year from the transfer of such stock to the
Participant upon exercise.
If the subsequent sale of stock is made prior to the expiration of such
two-year or one-year periods, the Participant will recognize ordinary income in
the year of sale in an amount equal to the difference between the exercise price
and the fair market value of the stock on the date of exercise. Furthermore, if
such sale is a transaction in which a loss (if sustained) would have been
recognized by the Participant, the amount of ordinary income recognized by the
Participant will not exceed the excess (if any) of the amount realized on the
sale over the option price. The Company will then be entitled to an income tax
deduction in the amount of the amount of ordinary income that the Participant
recognizes. Any excess gain recognized by the Participant upon such sale would
then be taxable as capital gain, either long-term or short-term, depending upon
whether the stock had been held for more than one year prior to sale.
If the sale of shares of the Company's Common Stock received upon
exercise of an option qualifies for long-term capital gain treatment, the
capital gain from such sale would be taxed at the current maximum federal tax
rate of generally 20%. Ordinary income is currently taxed at the Participant's
maximum federal income tax marginal rate, which can be as much as 39.6%. The
amount by which the fair market value of stock purchased upon exercise of an
Incentive Stock Option exceeds the option price of such stock generally
constitutes an item of tax preference, which could be subject to the alternative
minimum tax in the year that the option is exercised.
NONQUALIFIED STOCK OPTIONS. Generally, at the time of the grant of any
option under the 2000 SOP, no taxable income will be recognized by the
Participant and the Company will not be entitled to a deduction. Upon the
exercise of such option, the Participant generally will recognize ordinary
income, and the Company will then be entitled to a deduction, in the amount by
which the then fair market value of the shares of the Company's Common Stock
issued to such Participant exceeds the option price.
Income recognized by the Participant upon exercise of a Nonqualified
Stock Option will be taxed as ordinary income up to the Participant's current
maximum marginal rate, which can be as much as 39.6%. Such income constitutes
"wages" with respect to which the Company is required to deduct and withhold
federal, state, and local income tax. Such deductions will be made from the
wages, salary, bonus or other income to which the Participant would otherwise be
entitled and, at the Company's election, the Participant may be required to pay
to the Company (for withholding on the Participant's behalf) any amount not so
deducted but required to be so withheld. The Company may permit the Participant
to elect to surrender, or authorize the Company to withhold, shares of the
Company's Common Stock (valued at their fair market value on the date of
surrender or withholding of such shares) in satisfaction of the Company's
withholding obligation.
Upon the subsequent disposition of shares acquired upon the exercise of
the Option, the Participant will recognize capital gain or loss in an amount
equal to the difference between the proceeds received upon disposition and the
fair market value of such shares at the time of exercise. If such shares have
been held for more than one year at the time of such disposition, the capital
gain or loss will be long-term.
EXERCISING OPTIONS WITH SHARES OF THE COMPANY'S COMMON STOCK. To the
extent a Participant pays all or part of the option price by tendering shares of
the Company's Common Stock owned by the Participant, the tax consequences
described above generally would apply. However, the number of shares received
(upon exercise) equal to the number of shares surrendered in payment of the
aggregate option price will have the same basis and tax holding period as the
shares surrendered. The additional shares received upon such exercise will have
a tax basis equal to the amount of ordinary income recognized and any cash paid
on such exercise and a holding period, which commences on the date of exercise.
-8-
If a Participant exercises an option by tendering shares previously
acquired on the exercise of an Incentive Stock Option, a disqualifying
disposition will occur if the applicable holding period requirements have not
been satisfied with respect to the surrendered stock. The consequences of such a
disqualifying disposition is that the Participant may recognize ordinary income
at the time.
The foregoing summary of the effects of federal income taxation upon
the Participants, and the Company with respect to shares issued under the 2000
SOP does not purport to be complete and reference is made to the applicable
provisions of the Code.
VOTE REQUIRED
Approval of the 2000 SOP requires the affirmative vote of a majority of
the voting power of all outstanding shares of the Company's Common Stock present
or represented and entitled to vote at the 2001 Annual Meeting. The Board has
unanimously determined that the 2000 SOP is advisable and in the best interests
of the Company and the stockholders of the Company.
THE BOARD BELIEVES THAT THE 2000 STOCK OPTION PLAN IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE
SPECIFICALLY INDICATED.
PROPOSAL 3 - APPROVAL OF THE ADOPTION OF THE 2001 EMPLOYEE STOCK
PURCHASE PLAN
At the 2001 Annual Meeting, the Company's stockholders will be asked to
approve the adoption of the Company's 2001 Employee Stock Purchase Plan (the
"ESP Plan"). The ESP Plan will replace the existing Employee Stock Purchase Plan
of the Company adopted in 1997 (the "1997 ESP"). On June 29, 2001, the Board
adopted the ESP Plan, subject to stockholder approval as described herein. Such
stockholders' approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock present or
represented and entitled to vote at the 2001 Annual Meeting. The ESP Plan is
briefly summarized below, but these descriptions are subject to and qualified in
their entirety by the full text of the ESP Plan, which is attached as Annex B to
this Proxy Statement.
There were 200,000 shares of Common Stock available for purchase by the
Company's employees under the 1997 ESP Plan, of which employees have purchased
an aggregate of 19,876 shares of Common Stock.
The ESP Plan is an employee stock purchase plan under Code Section 423.
The ESP Plan allows employees of the Company and its subsidiaries to purchase
the Company's Common Stock from the Company without having to pay any brokerage
commissions with respect to the purchases and (if the Board elects to offer such
shares at a discount) at a discount without being subject to tax until they sell
the stock. The effective date of the ESP Plan is as of June 1, 2001. The purpose
of the ESP Plan is to promote the interests of the Company and its stockholders
by enabling the Company to offer an opportunity for employees of the Company and
its subsidiaries to acquire an equity interest in the Company. The ESP Plan is
administered by the Board or a Committee appointed by the Board (the
"Committee").
The purpose of the ESP Plan and of granting Purchase Rights (as defined
below) to employees of the Company and its subsidiaries is to promote the
interests of the Company and its stockholders by providing stock-based
incentives to such employees. Under the ESP Plan, the mutuality of interest
between the Company and eligible employees is strengthened because the employees
have a proprietary interest in pursuing the Company's long-term growth and
financial success. In addition, by allowing employees to participate in the
Company's success, the Company is better able to attract, retain and reward
quality employees, directors, officers and consultants.
All employees of the Company and its subsidiaries are eligible to
participate in the ESP Plan. However, employees who directly or indirectly own
five percent (5%) or more of the combined voting power or value of all classes
of stock of the Company or a subsidiary may not participate in the ESP Plan.
-9-
Employees will be granted the right to purchase Common Stock ("Purchase
Right") at the end of a fixed period ("Purchase Right Period"), which periods
will be established from time to time by the Committee. Employees can commence
participation only on the first day of a Purchase Right Period. The Board has
determined that there will be four Purchase Right Periods in each year
corresponding to calendar quarters: (i) January 1--March 31; (ii) April 1--June
30; (iii) July 1--September 30; and (iv) October 1--December 31. The first
Purchase Right Period will be July 1, 2001--September 30, 2001. Employees may
not sell or otherwise transfer their Purchase Rights.
Prior to the beginning of the Purchase Right Period, employees may
elect to contribute amounts to the ESP Plan to purchase Common Stock. Employees
must designate a fixed dollar amount (not a percentage of compensation), which
cannot be increased or decreased during the Purchase Right Period, except that
employees may elect to stop contributing to the ESP Plan at any time. The
maximum amount an employee can contribute to the ESP Plan is $6,250 during a
quarterly Purchase Right Period and $25,000 during a calendar year. However, in
no event will a participant be entitled to purchase more than 10,000 shares in a
single Purchase Right Period provided that the maximum number of shares that can
be purchased is determined by dividing the amount that the participant elects to
contribute by the Fair Market Value of a share of the Common Stock on the first
day of the Purchase Right Period. The minimum contribution per month is forty
dollars ($40).
Employee contributions can be made by means of payroll withholding in
equal amounts over the entire Purchase Right Period, and/or by means of a cash
lump sum contribution to the ESP Plan at the beginning of the Purchase Right
Period.
The purchase price for the Common Stock under the ESP Plan is 100% of
the "Fair Market Value" (as defined in the ESP Plan, currently the last reported
sale price by the Nasdaq Stock Market) of the Common Stock on the last day of
the Purchase Right Period; provided, however, that the Board in its discretion
from time to time may determine that it is in the best interests of the Company
to change the purchase price to such lesser percentage of Fair Market Value with
respect to newly issued shares of Common Stock as may be specified by the Board
and permitted by the Code.
A participant may elect to terminate his or her contributions to the
ESP Plan and receive a refund of all of his or her contributions at any time
prior to the fifteenth (15th) day of the last month of the then current Purchase
Right Period by notifying the Company in writing. Upon the termination of his or
her contributions to the ESP Plan, all amounts held in the employee's account
shall be refunded to the employee no later than 90 days after the date of
termination of the Purchase Right. Alternatively, employees who terminate their
contributions can elect to leave their contributions in the ESP Plan to be used
to purchase stock at the end of the Purchase Right Period.
The maximum number of shares of Common Stock that can be purchased
under the ESP Plan is 500,000, less any shares purchased under the Consultant
Stock Purchase Plan (see below), subject to adjustment in certain circumstances.
The Common Stock issuable under the ESP Plan may be previously unissued or may
have been reacquired by the Company in the open market. The Company currently
intends to use unissued shares.
If after the end of a Purchase Right Period and before the issuance of
the affected shares the outstanding shares of Common Stock of the Company are
increased, decreased, or exchanged for different securities through a
reorganization, recapitalization, reclassification or other similar transaction,
a proportionate adjustment will be made by the Committee in the number, kind or
other relevant affected attribute of the shares subject to outstanding Purchase
Rights.
The Board may at any time amend or terminate the ESP Plan, except as to
outstanding Purchase Rights. However, any amendment that relates to the class of
individuals who may be participants or the aggregate number of shares granted
under the ESP Plan must also be approved by the stockholders of the Company.
All Purchase Rights will be automatically exercised upon (and
immediately before) (i) the dissolution, liquidation or sale of all or
substantially all of the business, properties and assets of the Company, (ii)
any reorganization, merger or consolidation in which the Company, does not
survive, (iii) any
-10-
reorganization, merger, consolidation or exchange of securities in which the
Company, does survive and any of the stockholders have the opportunity to
receive cash, securities of another corporation and/or other property in
exchange for their capital stock of the Company, or (iv) any future acquisition
by any person or group (other than ownership by Robert G. Brown, William H.
Bartels, their respective families, trusts under which either of them is a
trustee or beneficiary, and corporations and other entities under their
individual or collective control) of beneficial ownership of more than fifty
percent (50%) of the Common Stock of the Company.
FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO THE ESP PLAN
The following general discussion of the principal federal income tax
considerations is based upon the statutes and regulations existing at the date
of this document, both of which are subject to modification at any time.
Participants should consult with their own tax advisors with respect to the
federal, state and local tax consequences of the exercise of Purchase Rights and
the sale of Common Stock acquired upon the exercise of Purchase Rights, as those
tax consequences relate to their own particular circumstances.
The ESP Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Code Section 423. The ESP Plan is not a
tax-qualified retirement plan under Code Section 401(a) nor is it subject to the
Employee Retirement Income Security Act of 1974 ("ERISA").
GRANT AND EXERCISE
As an Employee Stock Purchase Plan, participants will not recognize any
income either at the time of the grant of the Purchase Rights or the time of the
issuance of the shares of Common Stock upon the exercise of the Purchase Rights.
Correspondingly, the Company will not be entitled to a federal income tax
deduction as the result of the grant or the exercise of any Purchase Right.
TAXATION OF PROCEEDS
CAPITAL GAINS TREATMENT. Upon the subsequent sale or other disposition
of Common Stock acquired upon the exercise of a Purchase Right, an employee will
generally recognize long-term capital gain or loss if such sale is made after
one year from the last day of the Purchase Right Period; provided, however, that
if the purchase price was less than 100% of Fair Market Value, long term capital
gain treatment will only be available for sales after the later of: (1) two
years from the first day of the Purchase Right Period; or (2) one year from the
last day of the Purchase Right Period.
If a participant purchases Common Stock for 100% of Fair Market Value
and then sells or otherwise disposes of such shares prior to the expiration of
the applicable holding period, the participant will generally recognize a
short-term capital gain (generally taxed at ordinary income tax rates).
ORDINARY INCOME. If the participant purchases Common Stock for less
than 100% of Fair Market Value and then sells or otherwise disposes of Common
Stock prior to the expiration of the one- two-year holding periods, the
participant will generally recognize ordinary income in the year of sale or
other disposition in an amount equal to the excess of (1) the fair market value
of the share on the last day of the Purchase Right period over (2) the exercise
price of the Purchase Right. The amount of ordinary income recognized by the
participant will be added to the participant's basis in the Common Stock
received upon exercise of the Purchase Right. Any remaining gain or loss
recognized upon the disposition of the Common Stock will be short-or long-term
capital gain or loss depending on whether the sale occurs more than one year
following the last day of the Purchase Right Period in which the Common Stock
was purchased. In the case of a premature disposition that triggers the gain or
loss of ordinary income, subject to the deduction limitations under Code Section
162(m), the Company will be entitled to a deduction equal to the amount of
ordinary income taxable to the participant. Accordingly, the participant is
required to notify the Company in the event of such a premature disposition.
The foregoing summary of the effects of federal income taxation upon
the participants and the Company with respect to Purchase Rights issued under
the 2001 ESP Plan does not purport to be complete and reference is made to the
applicable provisions of the Code.
-11-
THE BOARD BELIEVES THAT THE ESP PLAN IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY
INDICATED.
PROPOSAL 4 - APPROVAL OF THE ADOPTION OF THE 2001 CONSULTANT STOCK
PURCHASE PLAN
At the 2001 Annual Meeting, the Company's stockholders will be asked to
approve the adoption of the Company's 2001 Consultant Stock Purchase Plan (the
"CSP Plan"). On June 29, 2001, the Board adopted the CSP Plan, subject to
stockholder approval as described herein. Such stockholders' approval will
require the affirmative vote of a majority of the voting power of all
outstanding shares of the Company's Common Stock present or represented and
entitled to vote at the 2001 Annual Meeting. The CSP Plan is briefly summarized
below, but these descriptions are subject to and qualified in their entirety by
the full text of the CSP Plan, which is attached as Annex C to this Proxy
Statement.
The CSP Plan is an employee stock purchase plan that is not intended to
qualify as an employee stock purchase plan under Code Section 423. The CSP Plan
allows participants under the CSP Plan to purchase the Company's Common Stock
from the Company without having to pay any brokerage commissions with respect to
the purchases, but no discount is available (as is possible, but not currently
intended, under the ESP). The effective date of the CSP Plan is as of June 1,
2001. The purpose of the CSP Plan is to promote the interests of the Company and
its stockholders by enabling the Company to offer an opportunity for employees
of its affiliates (including SMS, SMSI and SIT, the "SPAR Affiliates"), who the
Company believes provide valuable field, management, programming and other
services to the Company, to acquire an equity interest in the Company. The CSP
Plan is administered by the Board or a Committee appointed by the Board (the
"Committee").
All employees of the SPAR Affiliates are eligible to participate in the
CSP Plan. The purpose of the CSP Plan and of granting Purchase Rights (as
defined below) to employees is to promote the interests of the Company and its
stockholders by providing stock-based incentives to the employees of the SPAR
Affiliates. Under the CSP Plan, the mutuality of interest between the Company
and the employees of the SPAR Affiliates is strengthened because the employees
have a proprietary interest in pursuing the Company's long-term growth and
financial success. In addition, by allowing such employees to participate in the
Company's success, the Company is better able to attract, retain and reward
quality consultants and the SPAR Affiliates are better able to attract, retain
and reward quality employees, directors, officers and consultants.
Employees of the SPAR Affiliates will be granted the right to purchase
Common Stock ("Purchase Right") at the end of a fixed period ("Purchase Right
Period"), which periods will be established from time to time by the Committee.
Employees of the SPAR Affiliates can commence participation only on the first
day of a Purchase Right Period. The Board has determined that there will be four
Purchase Right Periods in each year corresponding to calendar quarters: (i)
January 1--March 31; (ii) April 1--June 30; (iii) July 1--September 30; and (iv)
October 1--December 31. The first Purchase Right Period will be July 1,
2001--September 30, 2001. Employees of the SPAR Affiliates may not sell or
otherwise transfer their Purchase Rights.
Prior to the beginning of the Purchase Right Period, employees of the
SPAR Affiliates may elect to contribute amounts to the CSP Plan to purchase
Common Stock. Employees must designate a fixed dollar amount (not a percentage
of compensation), which cannot be increased or decreased during the Purchase
Right Period, except that employees of the SPAR Affiliates may elect to stop
contributing to the CSP Plan at any time. The maximum amount an employee of a
SPAR Affiliate can contribute to the CSP Plan is $6,250 during a quarterly
Purchase Right Period and $25,000 during a calendar year. However, in no event
will a participant be entitled to purchase more than 10,000 shares in a single
Purchase Right Period provided that the maximum number of shares that can be
purchased is determined by dividing the amount that the participant elects to
contribute by the Fair Market Value of a share of the Common Stock on the first
day of the Purchase Right Period. The minimum contribution per month is forty
dollars ($40).
-12-
Affiliate employee contributions can be made by means of payroll
withholding by such affiliate in equal amounts over the entire Purchase Right
Period, and/or by means of a cash lump sum contribution to the CSP Plan at the
beginning of the Purchase Right Period.
The purchase price for the Common Stock under the CSP Plan is 100% of
the "Fair Market Value" (as defined in the CSP Plan, currently the last reported
sale price by the Nasdaq Stock Market) of the Common Stock on the last day of
the Purchase Right Period.
A participant may elect to terminate his or her contributions to the
CSP Plan and receive a refund of all of his or her contributions at any time
prior to the fifteenth (15th) day of the last month of the then current Purchase
Right Period by notifying the Company in writing. Upon the termination of his or
her contributions to the CSP Plan, all amounts held in the employee's account
shall be refunded to the employee no later than 90 days after the date of
termination of the Purchase Right. Alternatively, employees who terminate their
contributions can elect to leave their contributions in the CSP Plan to be used
to purchase stock at the end of the Purchase Right Period.
The maximum number of shares of Common Stock that can be purchased
under the CSP Plan is 500,000, less any shares purchased under the ESP Plan (see
above), subject to adjustment in certain circumstances. The Common Stock
issuable under the CSP Plan may be previously unissued or may have been
reacquired by the Company in the open market. The Company currently intends to
use unissued shares.
If after the end of a Purchase Right Period and before the issuance of
the affected shares the outstanding shares of Common Stock of the Company are
increased, decreased, or exchanged for different securities through a
reorganization, recapitalization, reclassification or other similar transaction,
a proportionate adjustment will be made by the Committee in the number, kind or
other relevant affected attribute of the shares subject to outstanding Purchase
Rights.
The Board may at any time amend or terminate the CSP Plan, except as to
outstanding Purchase Rights. However, any amendment that relates to the class of
individuals who may be participants or the aggregate number of shares granted
under the CSP Plan must also be approved by the stockholders of the Company.
All Purchase Rights will be automatically exercised upon (and
immediately before) (i) the dissolution, liquidation or sale of all or
substantially all of the business, properties and assets of the Company, (ii)
any reorganization, merger or consolidation in which the Company, does not
survive, (iii) any reorganization, merger, consolidation or exchange of
securities in which the Company, does survive and any of the Stockholders have
the opportunity to receive cash, securities of another corporation and/or other
property in exchange for their capital stock of the Company, or (iv) any future
acquisition by any person or group of beneficial ownership of more than fifty
percent (50%) of the Common Stock of the Company (other than ownership by Robert
G. Brown, William H. Bartels, their respective families, trusts under which
either of them is a trustee or beneficiary, and corporations and other entities
under their individual or collective control).
FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO THE CSP PLAN
The following general discussion of the principal federal income tax
considerations is based upon the statutes and regulations existing at the date
of this document, both of which are subject to modification at any time.
Participants should consult with their own tax advisors with respect to the tax
consequences (both state and federal) of the exercise of Purchase Rights and the
sale of Common Stock acquired upon the exercise of Purchase Rights, as those tax
consequences relate to their own particular circumstances.
The CSP Plan is NOT intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Code Section 423. The CSP Plan is not a
tax-qualified retirement plan under Code Section 401(a) nor is it subject to the
Employee Retirement Income Security Act of 1974 ("ERISA").
GRANT AND EXERCISE
-13-
As participants will purchase Common Stock at 100% of Fair Market Value
at the end of the Purchase Right Period under the CSP, participants will not
recognize any income either at the time of the grant of the Purchase Rights or
the time of the issuance of the shares of Common Stock upon the exercise of the
Purchase Rights. Correspondingly, the Company will not be entitled to a federal
income tax deduction as the result of the grant or the exercise of any Purchase
Right.
-14-
TAXATION OF PROCEEDS
CAPITAL GAINS TREATMENT. Upon the subsequent sale or other disposition
of Common Stock acquired upon the exercise of a Purchase Right, an employee will
generally recognize long-term capital gain or loss if such sale is made after
one year from the last day of the Purchase Right Period. If a participant sells
or otherwise disposes of such shares prior to the expiration of the applicable
holding period, the participant will generally recognize a short-term capital
gain (generally taxed at ordinary income tax rates).
The foregoing summary of the effects of federal income taxation upon
the participants and the Company with respect to Purchase Rights issued under
the 2001 CSP Plan does not purport to be complete and reference is made to the
applicable provisions of the Code.
THE BOARD BELIEVES THAT THE CSP PLAN IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY
INDICATED.
Proposal 5 - Ratification Of The Appointment of Ernst & Young LLP
as Independent Accountants
The Audit Committee of the Board has selected Ernst & Young LLP as
independent public accountants to audit the financial statements of the Company
for its fiscal year end December 31, 2001. Ernst & Young LLP served as the
Company's independent public accountants for its fiscal year end December 31,
2000. Ernst & Young LLP has served as the independent public accountants for the
SPAR Marketing Companies (the acquirer of PIA Merchandising Services, Inc., for
accounting purposes) for more than the past two fiscal years. A representative
of that firm is expected to be available for the 2001 Annual Meeting, will have
an opportunity to make a statement if so desired and respond to appropriate
questions. If the stockholders do not ratify the selection of Ernst & Young LLP,
if it should decline to act or otherwise become incapable of acting, or if its
employment is discontinued, the Audit Committee will appoint independent public
accountants for fiscal 2001. Proxies solicited by the Board will be voted in
favor of ratification unless stockholders specify otherwise.
THE BOARD BELIEVES THAT THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR END DECEMBER 31, 2001 IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED FOR THIS
PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 29, 2001, by: (i) each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Company's Common Stock; (ii) each of the Company's
directors; (iii) each of the executive officers named in the Summary
Compensation Table; and (iv) the Company's directors and executive officers as a
group. Except as indicated in the footnotes to this table, the persons named in
the table, based on information provided by such persons, have sole voting and
sole investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
-15-
Number of Shares
Title of Class Name and Address of Beneficial Owner Beneficially Owned Percentage
- -------------- ------------------------------------ ------------------ ----------
Common Shares Robert G. Brown(1) 7,639,398(2)(4) 40.9%
Common Shares William H. Bartels(1) 4,982,489(5) 26.7%
Common Shares James H. Ross(1) 83,865 *
Common Shares Charles Cimitile(1) --
Common Shares Robert Aders(1) 29,700 (6) *
Common Shares Jack W. Partridge(1) 2,500 *
Common Shares Jerry B. Gilbert(1) --
Common Shares George W. Off(1) --
Common Shares Richard J. Riordan 1,209,922 6.5%
300 S. Grand Avenue, Suite 2900
Los Angeles, CA 90071
Common Shares Heartland Advisors, Inc. 1,568,100(3) 8.4%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Common Shares Executive Officers and Directors 12,737,952 68.2%
- ----------
* Less than 1%
(1) The address of such owners is c/o SPAR Group, Inc. 580 White Plains Road,
Tarrytown, New York, 10591.
(2) Includes 1,884,000 shares held by a grantor trust for the benefit of
certain family members of Robert G. Brown over which Robert G. Brown, James
R. Brown, Sr. and William H. Bartels is a trustee.
(3) All information regarding share ownership is taken from Schedule 13G
(Amendment No. 7), filed by Heartland Advisors, Inc. with the Securities
and Exchange Commission on January 30, 2001.
(4) All information regarding share ownership is taken from Form 4 filed by
Robert Brown with the Securities and Exchange Commission on July 9, 2001.
(5) All information regarding share ownership is taken from Form 4 filed by
William Bartels with the Securities and Exchange Commission on July 9,
2001.
(6) All information regarding share ownership is obtained from Robert Aders.
-16-
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
Executive Officers
Set forth in the table below are the names, ages and current offices
held by all executive officers of the Company. For biographical information
regarding Robert G. Brown and William H. Bartels, see Current Members of the
Board of Directors, above.
NAME AGE POSITION WITH THE COMPANY
- ------------------------- ----- ---------------------------------------
Robert G. Brown 58 Chairman, Chief Executive Officer, President
and Director
William H. Bartels 57 Vice Chairman and Director
Charles Cimitile 46 Chief Financial Officer and Secretary
James H. Ross 68 Treasurer
Charles Cimitile serves as the Chief Financial Officer and Secretary of
the Company and has done so since November 24, 1999. Mr. Cimitile served as
Chief Financial Officer for GT Bicycles from 1996 to 1999 and Cruise Phone, Inc.
from 1995 through 1996. Prior to 1995, he served as the Vice President Finance,
Treasurer and Secretary of American Recreation Company Holdings, Inc. and its
predecessor company.
James H. Ross serves as the Treasurer of the Company and has held such
positions since July 8, 1999 (the effective date of the Merger). Mr. Ross has
been the Chief Financial Officer of the SPAR Marketing Companies since 1991, and
was the General Manager of SBRS from 1994-1999.
Executive Compensation
The following table sets forth all compensation received for services
rendered to the Company in all capacities for the three years ended December 31,
2000, December 31, 1999, and December 31, 1998, by (i) the Company's Chief
Executive Officer, and (ii) each of the other four most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 2000 (collectively, the "Named Executive Officers").
Long Term
Annual Compensation (1) Compensation Awards (1)
----------------------------- --------------------------
Securities All Other
Salary Underlying Compensation
Name and Principal Positions Year Salary ($) Bonus ($) Options (#) ($)(2)
- ---------------------------- ---- ---------- --------- ----------- ------------
Robert G. Brown 2000 16,800 -- -- --
Chief Executive Officer, 1999 7,500 -- 765,972 --
Chairman of the Board, 1998 125,000 -- -- 791
President, and Director
William H. Bartels 2000 16,800 -- -- --
Vice Chairman and Director 1999 16,307 -- 471,992 --
1998 75,000 -- -- 1,439
3,337
Charles Cimitile 2000 188,000 -- 25,000 --
Chief Financial Officer 1999 17,090 -- 75,000 --
James H. Ross 2000 94,800 9,000 5,000 3,337
Treasurer and Vice President 1999 99,237 12,408 92,665 2,187
1998 80,535 1,710 -- 1,897
- ----------
(1) For accounting purposes, the Merger is treated as an acquisition of
PIA Merchandising Services, Inc., by the SPAR Marketing Companies and
related entities. Accordingly, these figures represent the
compensation paid by the Company since July 8, 1999, the effective
date of the Merger, and the SPAR Marketing Companies prior to that
date.
-17-
(2) Other compensation represents the Company's 401k contribution.
Stock Option Grants in Last Fiscal Year
The following table sets forth information regarding each grant of
stock options made during the year ended December 31, 2000, to each of the Named
Executive Officers. No stock appreciation rights ("SAR's") were granted during
such period to such persons.
Individual Grants
---------------------------------------------------------------
Number of Percent of Potential Realizable Value at
Securities Total Options Exercise Expiration Assumed Annual Rates of Stock
Underlying Granted to Price ($/Sh) Date Price Appreciation for Option(2)
Options Employees in ----------------------------------
Name Granted (#) Period (%) 5%($) 10%($)
- ---- -------------- --------------- -------------- ------------- ----------------- ---------------
Charles Cimitile 25,000(1) 5.2 .625 12/04/10 14,544 22,106
James H. Ross 5,000(1) 1.0 .625 12/04/10 2,909 4,421
- ----------
(1) All such options vest over four-year periods at a rate of 25% per
year, beginning on the first anniversary of the date of grant.
(2) The potential realizable value is calculated based upon the term of
the option (ten years) at its time of grant. It is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option.
Aggregated Stock Option Exercises In Last Fiscal Year And Fiscal Year End Option
Values
The following table sets forth the number and value of the exercisable
and unexercisable options held by each of the Named Executive Officers at
December 31, 2000.
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal In-the-Money Options at Fiscal
Year-End(#)(2) Year-End ($)
-------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- ---------------- ------------- ---------------
Robert G. Brown 95,747 670,225 -- --
William H. Bartels 58,999 412,993 -- --
Charles Cimitile 18,750 81,250 -- 20,313
James H. Ross (1) 10,000 35,000 -- 4,063
- ----------
(1) James H. Ross exercised 52,665 options during 2000.
(2) In January of 2001, each of the above officers voluntarily surrendered
for cancellation all of his above listed "Exercisable" Options and the
following number of his "Unexercisable" Options: Mr. Brown - 670,225
Unexercisable Options; Mr. Bartels - 412,993 Unexercisable Options;
Mr. Cimitile - 56,250 Unexercisable Options; and Mr. Ross - 30,000
Unexercisable Options.
-18-
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee is currently comprised of Mr. Aders, Mr.
Partridge, Mr. Gilbert and Mr. Off, all non-employee Directors. At December 31,
2000, the Compensation Committee of the Board was comprised solely of Mr. Aders,
a non-employee director, who administered the Company's executive compensation
programs and policies for 2000. The Company's executive compensation programs
are designed to attract, motivate and retain the executive talent needed to
optimize stockholder value in a competitive environment. The programs are
intended to support the goal of increasing stockholder value while facilitating
the business strategies and long-range plans of the Company.
The following is the Compensation Committee's report submitted to the
Board addressing the compensation of the Company's executive officers for 2000.
Compensation Policy
The Company's executive compensation policy is (i) designed to
establish an appropriate relationship between executive pay and the Company's
annual performance, its long-term growth objectives and its ability to attract
and retain qualified executive officers; and (ii) based on the belief that the
interests of the executives should be closely aligned with the Company's
stockholders. The Compensation Committee attempts to achieve these goals by
integrating competitive annual base salaries with (i) annual incentive bonuses
based on corporate performance and individual contribution, and (ii) stock
options through the Company's stock option plans. The Compensation Committee
believes that cash compensation in the form of salary and performance-based
incentive bonuses provides Company executives with short term rewards for
success in operations, and that long-term compensation through the award of
stock options encourages growth in management stock ownership which leads to
expansion of management's stake in the long-term performance and success of the
Company. The Compensation Committee considers all elements of compensation and
the compensation policy when determining individual components of pay.
Executive Compensation Components
As discussed below, the Company's executive compensation package is
primarily comprised of three components: base salary, annual incentive bonuses
and stock options.
Base Salary
In establishing base salary levels for executive officer positions, the
Committee and Robert G. Brown, the Company's Chief Executive Officer, consider
levels of compensation at comparable companies, levels of responsibility and
internal issues of consistency and fairness. In determining the base salary of a
particular executive, the Committee and Mr. Brown consider individual
performance, including the accomplishment of short- and long-term objectives,
and various subjective criteria including initiative, contribution to overall
corporate performance and leadership ability. The Compensation Committee reviews
executive officer salaries annually and exercises its judgment based on all the
factors described above. No specific formula is applied to determine the weight
of each criteria.
Annual Incentive Bonuses
The Company's executive officers are eligible for annual bonuses based
upon recommendations made by Mr. Brown (as to the other executive officers), and
the Compensation Committee (as to Mr. Brown) based upon their individual
performance and the Company's achievements of certain operating results. Amounts
of individual awards are based principally upon the results of the Company's
financial performance during the prior year. The amount of awards for senior
officers are within guidelines established by the Committee and Mr. Brown as a
result of their review of total compensation for senior management of peer
companies. The actual amount awarded, within these guidelines, will be
determined principally by the Committee and Mr. Brown's assessment of the
individual's contribution to the Company's overall financial performance.
Consideration is also given to such factors such as the individual's successful
-19-
completion of a special project, any significant increase or decrease in the
level of the participant's ability to discharge the responsibilities of his
position. The bonus related to performance in 1999 that was paid in 2000 to the
Named Executive Officer totaled $9,000, comprising 9.5% of such officer's base
salary. See "Summary Compensation Table."
Stock Options
Stock options encourage and reward effective management which results
in long-term corporate financial success, as measured by stock price
appreciation. Stock options covering 30,000 shares were granted to the executive
officers of the Company and stock options covering 479,500 shares were granted
to 48 other employees of the Company, its subsidiaries and the SPAR affiliates
during 2000. The number of options that each executive officer or employee was
granted was based primarily on the executive's or employee's ability to
influence the Company's long-term growth and profitability. The Compensation
Committee believes that option grants afford a desirable long-term compensation
method because they closely ally the interests of management with stockholder
value and that grants of stock options are the best way to motivate executive
officers to improve long-term stock market performance.
The 1995 Amended and Restated Stock Option Plan ("1995 SOP") provided
for the granting of either incentive or nonqualified stock options to specified
employees, consultants and directors of SPAR Group, Inc. for the purchase of up
to 3,500,000 shares of SPAR's common stock. The options have a term of ten
years, except in the case of incentive stock options granted to greater than 10%
stockholders, for which the term is five years. The exercise price of
nonqualified stock options must be equal to at least 85% of the fair market
value of SPAR's common stock at the date of grant, the exercise price of
incentive stock options must be equal to at least the fair market value of
SPAR's common stock at the date of grant. The vesting provisions of options
granted under the 1995 Plan are designed to encourage longevity of employment
with the Company and generally extend over a four-year period. At December 31,
2000, options to purchase 683,523 shares were available for grant under this
plan.
On July 8, 1999, in connection with the merger, the Company established
the Special Purpose Stock Option Plan of PIA Merchandising Services, Inc. to
provide for the issuance of substitute options to the holders of outstanding
options granted by Spar Acquisition, Inc. There were 134,114 options granted at
$0.01 per share. During 2000, 108,364 options were exercised. At December 31,
2000, 25,750 options remain outstanding under the Plan. The Company did not
issue any new options under this plan in 2000.
In December of 2000, the Company adopted the 2000 Stock Option Plan
("2000 SOP") Plan, as the successor to the 1995 SOP with respect to all new
options issued. The 2000 SOP provides for the granting of either incentive or
nonqualified stock options to specified employees, consultants and directors of
SPAR Group, Inc., its subsidiaries and SPAR affiliates, for the purchase of up
to 3,600,000 (less those options issued and still outstanding under the 1995 SOP
at December 31, 2000). The options have a term of ten years, except in the case
of incentive stock options granted to greater than 10% stockholders, for which
the term is five years. The exercise price of nonqualified stock options must be
equal to at least 85% of the fair market value of SPAR's common stock at the
date of grant (although typically are issued at 100%), and the exercise price of
incentive stock options must be equal to at least the fair market value of
SPAR's common stock at the date of grant. In December 2000, options to purchase
(118,500) shares were granted. At December 31, 2000, 565,023 options to purchase
shares were available for grant under this plan.
In January 2001, options under the 1995 SOP to purchase 2,349,825
shares of the Company's common stock were voluntarily surrendered and cancelled
by 117 employees of and consultants to the Company. The cancelled options will
be available for future grant. The Company expects to grant similar quantities
of options at some future date(s) under the 2000 Plan.
Compensation Of Chief Executive Officer
The relatively low compensation paid to Mr. Robert G. Brown, the Chief
Executive Officer of the Company, during the fiscal year ended December 31,
2000, in comparison to compensation paid to chief executive officers of
comparable companies, resulted from such officer's request that he not receive
higher compensation for 2000. Mr. William Bartels, the Vice Chairman, had made a
similar request.
-20-
In May 2001, the Compensation Committee, on its own initiative,
increased Mr. Brown's salary to $194,200 per year. The Compensation also
increased Mr. William Bartels' salary to the same amount.
Internal Revenue Code Section 162(M)
Under Section 162(m) of the Code, the amount of compensation paid to
certain executives that is deductible with respect to the Company's corporate
taxes is limited to $1,000,000 annually. It is the current policy of the
Compensation Committee to maximize, to the extent reasonably possible, the
Company's ability to obtain a corporate tax deduction for compensation paid to
executive officers of the Company to the extent consistent with the best
interests of the Company and its stockholders.
COMPENSATION COMMITTEE
Robert O. Aders
-21-
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee of the Board is currently comprised of Mr. Aders,
Mr. Partridge, Mr. Gilbert and Mr. Off, all non-employee directors, who
administer the Company's audit programs and policies. On March 2, 2001, the date
of the Ernst & Young LLP independent audit report, the Audit Committee was
comprised of Mr. Aders and Mr. Partridge.
The following is the Audit Committee's report submitted to the Board.
The Committee has reviewed and discussed with management of the Company
and Ernst & Young LLP, ("E&Y"), the independent auditing firm of the Company,
the audited financial statements of the Company as of December 31, 2001 for each
of the two years in the period ended December 31, 2001 (the "Audited Financial
Statements").
In addition, the Committee has discussed with E&Y the matters required
by Codification of Statements on Auditing Standards No. 61, as amended by
Statement on Auditing Standards No. 90.
The Committee also has received and reviewed the written disclosures
and the letter from E&Y required by Independence Standards Board Standard No. 1,
and has discussed with that firm its independence from the Company. The
Committee also discussed with management of the Company and the auditing firm
such other matters and received such assurances from them as we deemed
appropriate.
Management is responsible for the Company's internal controls and the
financial reporting process. E&Y is responsible for performing an independent
audit of the Company's financial statements in accordance with generally
accepted auditing standards and issuing a report thereon. The Committee's
responsibility is to monitor and oversee these processes.
Based on the foregoing review and discussions and a review of the
report of E&Y with respect to the Audited Financial Statements, and relying
thereon, the Committee has recommended to the Company's Board of Directors the
inclusion of the Audited Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001.
AUDIT COMMITTEE
Robert O. Aders
Jack W. Partridge
Company Performance
The following graph shows a comparison of cumulative total returns for
the Company, the Nasdaq Stock Market (U.S. Companies) Index and the Nasdaq
Stocks (SIC 7380-7389 U.S. Companies) Miscellaneous Business Services Index,
Russell 2000 and S&P Services (Advertising & Marketing) for the period during
which the Company's Common Stock has been registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The graph
assumes that the value of an investment in Common Stock and in each such index
was $100 on February 29, 1996 (the date the Company's Common Stock was
registered under the Exchange Act), and that all dividends have been reinvested.
The comparison in the graph below is based on historical data and is
not intended to forecast the possible future performance of the Company's Common
Stock.
-22-
COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN*
AMONG SPAR GROUP, INC.
[GRAPH APPEARS HERE]
-23-
Cumulative Total Return
-------------------------------------------------------------------------------------------------------
3/4/96 12/31/96 12/31/97 1/1/99 7/8/99 12/31/99 12/31/00
SPAR GROUP, INC. 100.00 62.69 29.85 14.93 29.85 20.15 4.85
NASDAQ STOCK MARKET (U.S.) 100.00 117.93 144.43 203.68 249.88 378.54 227.80
RUSSELL 2000 100.00 113.09 138.39 134.86 147.38 163.53 158.59
S & P SERVICES
(ADVERTISING & MARKETING) 100.00 104.98 153.93 279.61 343.58 444.18 353.34
PEER GROUP 100.00 126.24 72.78 71.65 104.94 145.80 23.99
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's directors and certain of its officers and persons who own more than
10% of the Common Stock (collectively, "Insiders"), to file reports of ownership
and changes in their ownership of the Common Stock with the Commission. Insiders
are required by Commission regulations to furnish SPAR with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5s were
required for those persons, SPAR believes that its Insiders complied with all
applicable Section 16(a) filing requirements for fiscal 1999, with the exception
of Mr. William H. Bartels, who purchased 10,000 shares of the Company's stock on
December 8, 2000 but failed to file the requisite Form 4 on a timely basis.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
2001 Annual Meeting. All shares represented by Company proxies will be voted in
favor of the proposals of the Company described herein unless otherwise
indicated on the form of proxy. If any other matters properly come before the
meeting, Company proxy holders will vote thereon according to their best
judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the
2002, Annual Meeting and who wishes to have it set forth in the corresponding
proxy statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than March 18, 2002, in such form as
required under the rules and regulations promulgated by the Securities and
Exchange Commission. Notices of stockholder proposals submitted outside the
processes of Rule 14a-18 of the Securities Exchange Act of 1934 (relating to
proposals to be presented at the meeting but not included in the Company's proxy
statement and form of proxy), will be considered untimely, and thus the
Company's proxy may confer discretionary voting authority on the persons named
in the proxy with regard to such proposals if received after June 1, 2002.
-24-
ANNUAL REPORTS
A COPY OF THE COMPANY'S 2000 ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 2000, IS BEING MAILED TO EACH STOCKHOLDER OF RECORD TOGETHER WITH THIS PROXY
STATEMENT.
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 AS AMENDED BY
ITS REPORT ON FORM 10-K/A (AMENDMENT NO. 1). A COPY OF THIS REPORT IS INCLUDED
IN THE COMPANY'S ANNUAL REPORT. THE ANNUAL REPORT, FORM 10-K AND FORM 10-K/A ARE
NOT PART OF THE COMPANY'S SOLICITING MATERIAL.
PROXIES AND SOLICITATION
The proxy accompanying this Proxy Statement is solicited on behalf of
the Company's Board of Directors. Proxies for the 2001 Annual Meeting are being
solicited by mail directly and through brokerage and banking institutions. The
Company will pay all expenses in connection with the solicitation of proxies. In
addition to the use of mails, proxies may be solicited by directors, officers
and regular employees of the Company (who will not be specifically compensated
for such services) personally or by telephone. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
CHARLES CIMITILE
Secretary
Tarrytown, New York
July 13, 2001
-25-
ANNEX A
-------
2000 STOCK OPTION PLAN
OF
SPAR GROUP, INC.
(as amended through July 1, 2001)
Section 1. Purposes of this Plan. This stock option plan (as the same
may be supplemented, modified, amended or restated from time to time in the
manner provided herein, this "Plan") is intended to provide an incentive to
employees (including directors and officers who are employees), and to
consultants and directors who are not employees, of SPAR Group, Inc., a Delaware
corporation (the "Company"), or any of its Subsidiaries (as such term is defined
in Section 19 hereof), and to offer an additional inducement in obtaining the
services of such individuals. Without in any way limiting the foregoing, such
consultants include the employees of each SPAR Affiliate (as hereinafter
defined), and this Plan is intended to provide an incentive to the employees of
each SPAR Affiliate (including directors and officers who are employees). This
Plan provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Tax Code"), and nonqualified stock options which do not qualify as ISOs
("NQSOs"). The Company makes no representation or warranty, express or implied,
as to the qualification of any option as an "incentive stock option" under the
Tax Code. Each reference to a consultant in the Plan shall be deemed to include
each of the consultant's employees in the case of a consultant that is not a
natural person.
Section 2. Stock Subject to this Plan. Subject to the provisions of
Section 12, the aggregate number of shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), for which options may be granted and
outstanding under this Plan shall not at any time exceed (a) 3,600,000 shares,
minus (b) the sum at such time of (i) the cumulative aggregate number of shares
of Common Stock covered by all options issued under this Plan, (ii) the
aggregate number of shares of Common Stock covered by all options issued under
the 1995 Plan and remaining outstanding on December 4, 2000, and plus (c) the
aggregate number of Voided Option Shares under this Plan and the 1995 Plan. Such
shares of Common Stock may, in the discretion of the Board of Directors of the
Company (the "Board of Directors"), consist either in whole or in part of
authorized but unissued shares of Common Stock or shares of Common Stock held in
the treasury of the Company. Subject to the provisions of Section 13 hereof, any
shares of Common Stock subject to an option which for any reason expires, is
canceled or is terminated unexercised or which ceases for any reason to be
exercisable (other than through exercise) shall again become available for the
granting of options under this Plan. The Company shall at all times during the
term of this Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Plan. "Voided
Option Shares" shall the aggregate number of shares of Common Stock covered by
options issued under this Plan or the 1995 Plan, as applicable, that after
December 4, 2000, through the date of calculation become void, expire, are
canceled, terminate unexercised or cease for any reason whatsoever to become
exercisable other than through exercise.
Section 3. Administration of this Plan. (a) This Plan will be
administered by the Board of Directors, or by a committee (the "Committee"),
whether the Board or the Committee, consisting of two or more directors
appointed by the Board of Directors. Those administering this Plan shall be
referred to herein as the "Administrators." Notwithstanding the foregoing, if
the Company is or becomes a corporation issuing any class of common equity
securities required to be registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to the extent necessary to
preserve any deduction under Section 162(m) of the Tax Code or to comply with
Rule 16b-3 promulgated under the Exchange Act, as amended, or any successor rule
("Rule 16b-3"), any Committee appointed by the Board of Directors to administer
this Plan shall be comprised of two or more directors each of whom shall be (i)
a "non-employee director" within the meaning of Rule 16b-3, and (ii) an "outside
director" within the meaning of Treasury Regulation Section 1.162-27(e)(3). The
delegation of powers to the Committee shall be consistent with all applicable
law (including, without limitation, applicable state law and Rule 16b-3). Unless
otherwise provided in the By-Laws of the Company, by resolution of the Board of
Directors or applicable law, a majority of the members of the Board or the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Board or the
Committee.
-A-1-
(b) Subject to the express provisions of this Plan, the Administrators
shall have the authority, in their sole discretion, to determine (among other
things): (i) the persons who shall be granted options; (ii) the times when they
shall receive options; (iii) whether an option granted to an employee shall be
an ISO or a NQSO; the type (i.e., voting or non-voting) and number of shares of
Common Stock to be subject to each option; (iv) the term of each option,
including any provisions for early termination; (v) the date each option shall
become exercisable; including any provisions for early vesting; (vi) whether an
option shall be exercisable in whole or in installments, and, if in
installments, the number of shares of Common Stock to be subject to each
installment; whether the installments shall be cumulative; the date each
installment shall become exercisable and the term of each installment; (vii)
whether to accelerate the date of exercise of any option or installment; (viii)
whether shares of Common Stock may be issued upon the exercise of an option as
partly paid, and, if so, the dates when future installments of the exercise
price shall become due and the amounts of such installments; (ix) the exercise
price of each option; the form of payment of the exercise price; (x) the fair
market value of a share of Common Stock; (xi) whether and under what conditions
to restrict the pledge, sale or other disposition of any option granted under
this Plan, the shares of Common Stock acquired upon the exercise of an option
and, if so, whether and under what conditions to waive any such restriction,
whether individually, by class or otherwise; (xii) whether and under what
conditions to subject the exercise of all or any portion of an option to the
fulfillment of certain restrictions or contingencies as specified in the
contract referred to in Section 11 hereof (the "Contract"), including (without
limitation) restrictions or contingencies relating to (A) entering into a
covenant not to compete with the Company, its Parent (if any) (as such term is
defined in Section 19 hereof) and any Subsidiaries, (B) financial objectives for
the Company, any of its Subsidiaries, a division, a product line or other
category and/or (C) the period of continued employment or consulting of the
optionee with the Company or any of its Subsidiaries, and to determine whether
such restrictions or contingencies have been met; (xiii) the amount, if any,
necessary to satisfy the obligation of the Company, any of its Subsidiaries or
any Parent to withhold taxes or other amounts; (xiv) whether an optionee has a
Disability (as such term is defined in Section 19); (xv) to cancel or modify an
option either with the consent of the optionee or as provided in the Contract;
provided, however, that the modified provision is permitted to be included in an
option granted under this Plan on the date of the modification; provided,
further, that in the case of a modification (within the meaning of Section
424(h) of the Tax Code) of an ISO, such option as modified would be permitted to
be granted on the date of such modification under the terms of this Plan; (xvi)
to construe the respective Contracts and this Plan; (xvii) to prescribe, amend
and rescind policies, rules and regulations relating to this Plan; (xviii) to
approve any provision of this Plan or any option granted under this Plan, or any
amendment to either, that under Rule 16b-3 or Section 162(m) of the Tax Code
requires the approval of the Board of Directors, a committee of non-employee
directors or the stockholders, in order (1) to be exempt under Section 16(b) of
the Exchange Act (unless otherwise specifically provided herein) or (2) to
preserve any deduction under Section 162(m) of the Tax Code; and (xix) to make
all other determinations necessary or advisable for administering this Plan.
(c) The Company will maintain a separate bookkeeping account on its
books and records for each optionee for the purpose of recording all options
granted, exercised, surrendered or expired and other actions taken with respect
thereto, and such books and records shall be conclusive as to the existence and
amounts thereof absent manifest error.
(d) Any controversy or claim arising out of or relating to this Plan,
any option granted under this Plan or any Contract on the books and records of
the Company with respect thereto shall be determined unilaterally by the
Administrators in their sole and absolute discretion. The determinations of the
Administrators on such matters shall be final, conclusive and binding on all
parties.
(e) No present or former Administrator or employee of the Company or
any of its subsidiaries or affiliates shall be liable for any action, inaction
or determination made in good faith with respect to this Plan, any option
granted, exercised, surrendered or expired hereunder or any bookkeeping entry
made in connection therewith.
Section 4. Eligibility. The Administrators may from time to time,
consistent with the purposes of this Plan, grant options to such employees
(including officers and directors who are employees) of, or consultants to, the
Company or any of its Subsidiaries, and to such directors of the Company who, at
the time of grant, are not common law employees of the Company or of any of its
Subsidiaries, as the Administrators may determine in their sole discretion. Such
options granted shall cover such number of shares of Common Stock as the
Administrators may determine in their sole discretion; provided, however, that
if on the date of grant of an option, any class of common stock of the Company
(including without limitation the Common Stock) is required to be registered
under Section 12 of the Exchange Act, the
-A-2-
maximum number of shares subject to options that may be granted to any employee
during any calendar year under this Plan shall be 1,000,000 shares; and
provided, further, that the aggregate market value (determined at the time the
option is granted) of the shares of Common Stock for which any eligible employee
may be granted ISOs under this Plan or any other plan of the Company, or of a
Parent or a Subsidiary of the Company, that are exercisable for the first time
by such optionee during any calendar year shall not exceed $100,000. The
$100,000 ISO limitation amount shall be applied by taking ISOs into account in
the order in which they were granted. Any option (or portion thereof) granted in
excess of such ISO limitation amount shall be treated as a NQSO to the extent of
such excess.
Section 5. Exercise Price. (a) The exercise price of the shares of
Common Stock under each option shall be determined by the Administrators in
their sole discretion; provided, however, that (i) except as provided below, the
exercise price of an option shall not be less than the fair market value of the
Common Stock subject to such option on the date of grant; (ii) if, at the time
an ISO is granted, the optionee owns (or is deemed to own under Section 424(d)
of the Tax Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than one hundred ten percent (110%) of the fair market value of the Common Stock
subject to such ISO on the date of grant; and (iii) the Administrators must
first obtain the approval of the Board to grant a NQSO with an exercise price
which is less than the fair market value of the shares on the date of the
granting of the NQSO; provided, however, that with respect to any NQSO granted
to a "covered employee" (as such term is defined in Section 162(m) of the Tax
Code), the exercise price of the shares of Common Stock underlying such NQSO
shall not be less than the fair market value of such shares on the date of
granting of such NQSO.
(b) The fair market value of a share of Common Stock on any day shall
be: (i) if the principal market for the Common Stock is a national securities
exchange, the closing sales price per share of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange; (ii) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the Nasdaq Stock
Market ("Nasdaq"), and (A) if actual sales price information is available with
respect to the Common Stock, the closing sales price per share of the Common
Stock on such day on Nasdaq, or (B) if such information is not available, the
average of the closing bid and asked prices per share for the Common Stock on
such day on Nasdaq; or (iii) if the principal market for the Common Stock is not
a national securities exchange and the Common Stock is not quoted on Nasdaq, the
average of the closing bid and asked prices per share for the Common Stock on
such day as reported on the OTC Bulletin Board Service or by National Quotation
Bureau, Incorporated or a comparable service; provided, however, that if clauses
(i), (ii) and (iii) of this subsection are all inapplicable because the
Company's Common Stock is not publicly traded, or if no trades have been made or
no quotes are available for such day, the fair market value of a share of Common
Stock shall be determined by the Administrators by any method consistent with
any applicable regulations adopted by the Treasury Department relating to stock
options.
Section 6. Term. Each option granted pursuant to this Plan shall be for
such term as is established by the Administrators, in their sole discretion, at
or before the time such option is granted; provided, however, that the term of
each option granted pursuant to this Plan shall be for a period not exceeding
ten (10) years from the date of grant thereof, and provided further, that if, at
the time an ISO (but not an NQSO) is granted, the optionee owns (or is deemed to
own under Section 424(d) of the Tax Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five (5) years from the date of grant. Options shall be
subject to earlier termination as hereinafter provided.
Section 7. Exercise.
(a) An option (or any installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company at its
principal office (i) specifying the option being exercised and the number of
shares of Common Stock as to which such option is being exercised, and (ii)
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the applicable Contract permits installment payments)
(A) in cash and/or by certified check, (B) with the authorization of the
Administrators, with previously acquired shares of Common Stock having an
aggregate fair market value (determined in accordance with Section 5), on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, (C) with a concurrent sale of option shares to the extent permitted
by subsection (b) of this Section, or (D) some combination thereof; provided,
however, that in no
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case may shares be tendered if such tender would require the Company to incur a
charge against its earnings for financial accounting purposes. The Company shall
not be required to issue any shares of Common Stock pursuant to the exercise of
any option until all required payments with respect thereto, including payments
for any required withholding amounts, have been made.
(b) The Administrators may, in their sole discretion, permit payment of
the exercise price of an option by delivery by the optionee of a properly
executed notice, together with a copy of the optionee's irrevocable instructions
to a broker acceptable to the Administrators to sell all or a portion of the
option shares and deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
(c) An optionee shall not have the rights of a stockholder with respect
to such shares of Common Stock to be received upon the exercise of an option
until the date of issuance of a stock certificate to the optionee for such
shares or, in the case of uncertificated shares, until the date an entry is made
on the books of the Company's transfer agent representing such shares; provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using previously acquired shares of Common Stock in payment
of an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
(d) In no case may a fraction of a share of Common Stock be purchased
or issued under this Plan.
Section 8. Termination of Relationship. (a) Except as may otherwise be
expressly provided in the applicable Contract or optionee's written employment
or consulting or termination contract, any optionee whose employment or
consulting relationship with the Company, its Parent, any of its Subsidiaries
and, in the case of consultants, with any Affiliate or other consultant of the
Company has terminated for any reason (other than the optionee's death or
Disability) may exercise any option granted to the optionee as an employee or
consultant, to the extent exercisable on the date of such termination, at any
time within three (3) months after the date of termination, but not thereafter
and in no event after the date the option would otherwise have expired;
provided, however, that if such relationship is terminated for Cause (as defined
in Section 19), such option shall terminate immediately.
(b) For the purposes of this Plan, an employment or consulting
relationship shall be deemed to exist between an individual and the Company if,
at the time of the determination, the individual was an employee of the Company,
its Parent, any of its Subsidiaries or any of its consultants (including any of
its Affiliates). As a result, an individual on military leave, sick leave or
other bona fide leave of absence shall continue to be considered an employee or
consultant for purposes of this Plan during such leave if the period of the
leave does not exceed ninety (90) days, or, if longer, so long as the
individual's right to re-employment with the Company, any of its Subsidiaries,
Parent or Affiliate or other consultant, as the case may be is guaranteed either
by statute or by contract or the Company, its Parent, any of its Subsidiaries or
Affiliate or other consultant, as the case may be, has consented in writing to
longer absence. If the period of leave exceeds ninety (90) days and the
individual's right to re-employment is not guaranteed by statute, contract or
consent, the employment or consulting relationship shall be deemed to have
terminated on the 91st day of such leave.
(c) Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose directorship with the Company has terminated for any
reason (other than the optionee's death or Disability) may exercise the options
granted to the optionee as a director who was not an employee of or consultant
to the Company or any of its Subsidiaries, to the extent exercisable on the date
of such termination, at any time within three (3) months after the date of
termination, but not thereafter and in no event after the date the option would
otherwise have expired; provided, however, that if the optionee's directorship
is terminated for Cause, such option shall terminate immediately.
(d) Nothing in this Plan or in any option granted under this Plan shall
confer on any person any right to continue in the employ of or as a director of
or consultant to the Company, its Parent, any of its Subsidiaries or any of
their respective Affiliates, or as a director of the Company, or interfere in
any way with any right of the Company, its Parent, any of its Subsidiaries or
any of their respective Affiliates to terminate such relationship at any time
for any reason whatsoever without liability to the Company, its Parent, any of
its Subsidiaries or any of their respective Affiliates.
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Section 9. Death or Disability of an Optionee. (a) Except as may
otherwise be expressly provided in the applicable Contract or optionee's written
employment or consulting or termination contract, if an optionee dies (i) while
he is employed by, or a consultant to, the Company, its Parent or any of its
Subsidiaries, (ii) within three (3) months after the termination of the
optionee's employment or consulting relationship with the Company, its Parent
and its Subsidiaries (unless such termination was for Cause or without the
consent of the Company) or (iii) within one (1) year following the termination
of such employment or consulting relationship by reason of the optionee's
Disability, the options granted to the optionee as an employee of, or consultant
to, the Company or any of its Subsidiaries, will become fully vested and may be
exercised, by the optionee's Legal Representative (as such term is defined in
Section 19), at any time within one (1) year after death, but not thereafter and
in no event after the date the option would otherwise have expired. Except as
may otherwise be expressly provided in the applicable Contract or optionee's
written employment or consulting or termination contract, any optionee whose
employment or consulting relationship with the Company, its Parent and its
Subsidiaries has terminated by reason of the optionee's Disability may exercise
such options, to the extent exercisable upon the effective date of such
termination, at any time within one (1) year after such date, but not thereafter
and in no event after the date the option would otherwise have expired.
(b) Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies (i) while the optionee is a director of the
Company, (ii) within three (3) months after the termination of the optionee's
directorship with the Company (unless such termination was for Cause) or (iii)
within one (1) year after the termination of the optionee's directorship by
reason of the optionee's Disability, the options granted to the optionee as a
director who was not an employee of or consultant to the Company or any of its
Subsidiaries, may be exercised, to the extent exercisable on the date of the
optionee's death, by the optionee's Legal Representative at any time within one
(1) year after death, but not thereafter and in no event after the date the
option would otherwise have expired. Except as may otherwise be expressly
provided in the applicable Contract, an optionee whose directorship with the
Company has terminated by reason of Disability, may exercise such options, to
the extent exercisable on the effective date of such termination, at any time
within one (1) year after such date, but not thereafter and in no event after
the date the option would otherwise have expired.
Section 10. Compliance with Securities Laws. (a) It is a condition to
the exercise of any option that either (i) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such exercise shall be effective and
current at the time of exercise, or (ii) there is an exemption from registration
under the Securities Act for the issuance of the shares of Common Stock upon
such exercise. Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act or to keep any
Registration Statement effective or current.
(b) The Administrators may require, in their sole discretion, as a
condition to the grant or exercise of an option, that the optionee execute and
deliver to the Company such optionee's representations and warranties, in form,
substance and scope satisfactory to the Administrators, as the Administrators
may determine to be necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including (without
limitation) that (i) the shares of Common Stock to be issued upon exercise of
the option are being acquired by the optionee for the optionee's own account,
for investment only and not with a view to the resale or distribution thereof,
and (ii) any subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (A) a Registration Statement under the
Securities Act which is effective and current with respect to the shares of
Common Stock being sold, or (B) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the
optionee, prior to any offer of sale or sale of such shares of Common Stock,
shall provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such Securities Act exemption to the
proposed sale or distribution.
(c) In addition, if at any time the Administrators shall determine that
the listing or qualification of the shares of Common Stock subject to such
option on any securities exchange, Nasdaq or under any applicable law, or that
the consent or approval of any governmental agency or regulatory body, is
necessary or desirable as a condition to, or in connection with, the granting of
an option or the issuance of shares of Common Stock thereunder, such option may
not be granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
by the Administrators free of any conditions not acceptable to the
Administrators.
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Section 11. Stock Option Contracts. Each option shall be evidenced by
an appropriate Contract duly executed by the Company and the optionee. Such
Contract shall contain such terms, provisions and conditions not inconsistent
herewith as may be determined by the Administrators in their sole discretion.
The terms of each option and Contract need not be identical.
Section 12. Adjustments upon Changes in Common Stock. (a)
Notwithstanding any other provision of this Plan, in the event of any change in
the outstanding Common Stock by reason of a stock dividend, recapitalization,
spin-off, split-up, combination or exchange of shares or the like that results
in a change in the number or kind of shares of Common Stock that were
outstanding immediately prior to such event, the aggregate number and kind of
shares subject to this Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof, and the maximum number
of shares subject to options that may be granted to any employee in any calendar
year, shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive and binding on all parties. Such adjustment
may provide for the elimination of fractional shares that might otherwise be
subject to options without payment therefor. Notwithstanding the foregoing, no
adjustment shall be made pursuant to this Section 12 if such adjustment (i)
would cause this Plan to fail to comply with Section 422 of the Tax Code or with
Rule 16b-3 (if applicable to such option), or (ii) would be considered as the
adoption of a new plan requiring stockholder approval.
(b) Except as provided below, unless the Administrators shall, in their
sole discretion, determine otherwise, upon (i) the dissolution, liquidation or
sale of all or substantially all of the business, properties and assets of the
Company, (ii) any reorganization, merger or consolidation in which the Company
does not survive, (iii) any reorganization, merger, consolidation or exchange of
securities in which the Company does survive and any of the Company's
stockholders have the opportunity to receive cash, securities of another
corporation and/or other property in exchange for their capital stock of the
Company, or (iv) any acquisition by any person or group (as defined in Section
13(d) of the Exchange Act) of beneficial ownership of more than fifty percent
(50%) of the Company's then outstanding shares of Common Stock (other than
ownership by Robert G. Brown, William H. Bartels, their respective families,
trusts under which either of them is a trustee or beneficiary, and corporations
and other entities under their individual or collective control) (each of the
events described in clauses (i), (ii), (iii) and (iv) are referred to herein
individually as an "Extraordinary Event"), this Plan and each outstanding option
shall terminate. In such event each optionee shall have the right to exercise,
in whole or in part, any unexpired option or options issued to the optionee, to
the extent that said option is then vested and exercisable pursuant to the
provisions of said option or options and this Plan within fifteen (15) Business
Days of the Company's giving of written notice to the optionee of such
Extraordinary Event.
(c) Except as otherwise expressly provided in this Plan, the applicable
Contract or the optionee's written employment or consulting or termination
contract, the termination of employment of, or the termination of a consulting
or other relationship with, an optionee for any reason shall not, unless the
Administrators decide otherwise, accelerate or otherwise affect the number of
shares with respect to which an option may be exercised; provided, however, that
the option may only be exercised with respect to that number of shares which
could have been purchased under the option had the option been exercised by the
optionee on the date of such termination.
(d) Notwithstanding anything to the contrary contained in this Plan, or
any provision to the contrary contained in a particular Contract, the
Administrators, in their sole discretion, at any time, or from time to time, may
elect to accelerate the vesting or all or any portion of any option then
outstanding. The decision by the Administrators to accelerate an option or to
decline to accelerate an option shall be final, conclusive and binding. In the
event of the acceleration of the exercisability of options as the result of a
decision by the Administrators pursuant to this Section 12, each outstanding
option so accelerated shall be exercisable for a period from and after the date
of such acceleration and upon such other terms and conditions as the
Administrators may determine in their sole discretion; provided, however, that
such terms and conditions (other than terms and conditions relating solely to
the acceleration of exercisability and the related termination of an option
after the stated period) may not adversely affect the rights of any optionee
without the consent of the optionee so adversely affected. Any outstanding
option that has not been exercised by the holder at the end of such stated
period shall terminate automatically and become null and void.
Section 13. Amendments and Termination of this Plan. This Plan was
adopted by the Board of Directors on December 4, 2000, and amended by the Board
of Directors on June 29, 2001. No option may be granted under this Plan after
December 4, 2010. The Board of Directors, without further
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approval of the Company's stockholders, may at any time suspend or terminate
this Plan, in whole or in part, or amend it from time to time in such respects
as it may deem advisable, including (without limitation) in order that ISOs
granted hereunder meet the requirements for "incentive stock options" under the
Tax Code, or to comply with the provisions of Rule 16b-3 of the Exchange Act or
Section 162(m) of the Tax Code or any change in applicable laws or regulations,
ruling or interpretation of any governmental agency or regulatory body;
provided, however, that no amendment shall be effective, without the requisite
prior or subsequent stockholder approval, that would (a) except as contemplated
in Section 12, increase the maximum number of shares of Common Stock for which
options may be granted under this Plan or change the maximum number of shares
for which options may be granted to employees in any calendar year, (b) change
the eligibility requirements for individuals entitled to receive options
hereunder, or (c) make any change for which applicable law or any governmental
agency or regulatory body requires stockholder approval. No termination,
suspension or amendment of this Plan shall adversely affect the rights of an
optionee under any option granted under this Plan without such optionee's
consent. The power of the Administrators to construe and administer any option
granted under this Plan prior to the termination or suspension of this Plan
shall continue after such termination or during such suspension.
Section 14. Non-Transferability. (a) Except as otherwise provided below
or in the applicable Contract, no option granted under this Plan shall be
transferable other than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or the optionee's Legal Representatives. Except to the extent provided
below or in the applicable Contract, options may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect, unless
and to the extent the Board, in the case of NQSOs, has given its express written
consent to any pledge or hypothecation to (and subsequent disposition by) a
financial institution, which NQSOs shall continue to be subject to the terms and
provisions of this Plan and the applicable Contract and may be subject to such
additional limits, conditions and provisions as the Board may require in its
sole and absolute discretion as a condition of such consent.
(b) The Administrators may, in their discretion, authorize all or a
portion of any NQSO granted to an optionee to be on terms which permit transfer
by such optionee to (i) the spouse, children or grandchildren of the optionee
("Immediate Family Members"), including (without limitation) adopted children
and grandchildren, (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (iii) a partnership in which such Immediate Family
Members are the only partners, provided that (A) there may be no consideration
for any such transfer (other than natural love and affection, the beneficial or
equity interests therein received in connection with any such transfer to a
trust or partnership, or the legal consideration for such a transfer to be
enforceable), and (B) the Contract pursuant to which such options are granted
must (1) be specifically approved by the Administrators and (2) expressly
provide for transferability in a manner consistent with this Section 14.
(c) Following any permitted transfer, any such options shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of Sections 7 and 10 reference to
"optionee" shall be deemed to refer to the transferee. The provisions in Section
8 hereof respecting the effect of termination of employment and Section 9
respecting the effect of death or Disability shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
in the Contract. Any permitted transferee shall be required prior to any
transfer of an option or shares of Common Stock acquired pursuant to the
exercise of an option to execute a written undertaking to be bound by the
provisions of this Plan and the applicable Contract.
Section 15. Withholding Taxes. The Company, or its Subsidiary or
Parent, as applicable, may withhold (a) cash or (b) with the consent of the
Administrators (in the Contract or otherwise), shares of Common Stock to be
issued upon exercise of an option or a combination of cash and shares, having an
aggregate fair market value (determined in accordance with Section 5) equal to
the amount which the Administrators determine is necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold Federal, state and
local income taxes or other amounts incurred by reason of the grant, vesting,
exercise or disposition of an option or the disposition of the underlying shares
of Common Stock. Alternatively, the Company may require the optionee to pay to
the Company such amount, in cash, promptly upon demand.
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Section 16. Legends; Payment of Expenses. (a) The Company may endorse
such legend or legends upon the certificates for shares of Common Stock issued
upon exercise of an option under this Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its sole discretion, to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, applicable state securities laws or other legal
requirements, (ii) implement the provisions of this Plan or any agreement
between the Company and the optionee with respect to such shares of Common
Stock, or (iii) permit the Company to determine the occurrence of a
"disqualifying disposition," as described in Section 421(b) of the Tax Code, of
the shares of Common Stock transferred upon the exercise of an ISO granted under
this Plan.
(b) The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
this Plan, as well as all fees and expenses incurred by the Company in
connection with such issuance.
Section 17. Use of Proceeds. Except to the extent required by law, the
Company's Certificate of Incorporation, or the Company's By-laws, the cash
proceeds to be received upon the exercise of an option under this Plan shall be
added to the general funds of the Company and used for such corporate purposes
as the Board of Directors may determine, in its sole discretion.
Section 18. Substitutions and Assumptions of Options of Certain
Constituent Corporations. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as such
term is defined in Section 19) or assume the prior options of such Constituent
Corporation.
Section 19. Definitions.
(a) "Affiliate" shall mean with respect to the Company, any other
corporation or other entity (other than a Parent or a Subsidiary), who directly
or indirectly, is in control of, is controlled by or is under common control
with the Company. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with") as used with respect to any corporation or other entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such corporation or other entity,
whether through the ownership of capital stock, by contract or otherwise.
(b) "Business Day" shall mean any day other than (i) any Saturday or
Sunday or (ii) New Year's Day, Martin Luther King's Birthday, Presidents' Day,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving, and Christmas.
(c) "Cause," in connection with the termination of an optionee, shall
mean (i) "cause", as such term (or any similar term, such as "with cause") is
defined in any employment, consulting or other applicable agreement for services
or termination agreement between the Company and such optionee, or (ii) in the
absence of such an agreement, "cause" as such term is defined in the Contract
executed by the Company and such optionee pursuant to Section 11, or (iii) in
the absence of both of the foregoing, (A) indictment of such optionee for any
illegal conduct, (B) failure of such optionee to adequately perform any of the
optionee's duties and responsibilities in any capacity held with the Company,
any of its Subsidiaries or any Parent (other than any such failure resulting
solely from such optionee's physical or mental incapacity), (C) the commission
of any act or failure to act by such optionee that involves moral turpitude,
dishonesty, theft, destruction of property, fraud, embezzlement or unethical
business conduct, or that is otherwise injurious to the Company, any of its
Subsidiaries or any Parent or any other affiliate of the Company (or its or
their respective employees), whether financially or otherwise, (D) any violation
by such optionee of any Company rule or policy, or (E) any violation by such
optionee of the requirements of such Contract, any other contract or agreement
between the Company and such optionee or this Plan (as in effect from time to
time); in each case, with respect to clauses (A) through (E), as determined by
the Board of Directors in their sole and absolute discretion.
(d) "Constituent Corporation" shall mean any corporation which engages
with the Company, its Parent or any Subsidiary in a transaction to which Section
424(a) of the Tax Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.
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(e) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Tax Code.
(f) "Legal Representative" shall mean the executor, administrator or
other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under this
Plan.
(g) "Parent" shall mean a "parent corporation" within the meaning of
Section 424(e) of the Tax Code.
(h) "SPAR Affiliate" and "SPAR Affiliates" shall respectively mean any
one or more of SPAR Marketing Services, Inc., SPAR Management Services, Inc.,
SPAR InfoTech, Inc., and any other affiliate of any of them or of the Company,
including (without limitation) any corporation or other entity directly or
indirectly under the control of one or more of Robert G. Brown, William H.
Bartels, their respective families, and trusts under which either of them is a
trustee or beneficiary.
(i) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Tax Code.
Section 20. No Additional Rights. (a) Neither the adoption of this Plan
nor the granting of any option shall: (i) affect or restrict in any way the
power of the Company, any of its subsidiaries or any SPAR Affiliate to undertake
any corporate action otherwise permitted under applicable law; or (ii) confer
upon any optionee the right to continue to be employed by the Company, any of
its subsidiaries or any SPAR Affiliate, nor shall it interfere in any way with
the right of the Company, any of its subsidiaries or any SPAR Affiliate to
terminate the employment of any optionee at any time, with or without cause.
(b) No optionee shall have any rights as a stockholder with respect to
shares covered by an option until such time as the optionee is listed as the
owner of record of the purchased shares on the books and records of the
Company's transfer agent.
(c) No adjustments will be made for cash dividends or other rights for
which the record date is prior to the date the optionee is listed as the owner
of record of the purchased shares on the books and records of the Company's
transfer agent.
Section 21. Indemnification. (a) To the maximum extent permitted by
law, the Company shall indemnify each Administrator and every other member of
the Board, as well as any other employee of the Company, any Subsidiary or any
SPAR Affiliate, from and against any and all liabilities and expenses (including
any amount paid in settlement or in satisfaction of a judgment and reasonable
attorneys fees and expenses) reasonably incurred by the individual in connection
with any claims against the individual by reason of any action, inaction or
determination by the individual under the Plan. This indemnity shall not apply,
however, if: (i) it is determined in the action, lawsuit, or proceeding that the
individual is guilty of gross negligence or intentional misconduct in the
performance of any duties under the Plan; or (ii) the individual fails to assist
the Company in defending against any such claim.
(b) Notwithstanding the above, the Company shall have the right to
select counsel and to control the prosecution or defense of the suit.
(c) Furthermore, the Company shall not be obligated to indemnify any
individual for any amount incurred through any settlement or compromise of any
action unless the Company consents in writing to the settlement or compromise.
Section 22. Governing Law. This Plan, such options as may be granted
hereunder, the Contracts and all related matters shall be governed by, and
construed in accordance with, the laws of the State of Delaware (other than
those that would defer to the substantive laws of another jurisdiction).
Section 23. Construction. Neither this Plan nor any Contract shall be
construed or interpreted with any presumption against the Company by reason of
the Company causing this Plan or Contract to be drafted. Whenever from the
context it appears appropriate, any term stated in either the singular or plural
shall include the plural and singular, respectively, and any term stated in the
masculine, feminine or neuter gender shall include the other forms as well.
Captions and headings have been provided for convenience and shall not affect
the meaning or interpretation of this Plan or any Contract.
-A-9-
Section 24. Partial Invalidity. The invalidity, illegality or
unenforceability of any provision in this Plan, any option or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
Section 25. Stockholder Approval. This Plan shall be subject to
approval by (a) the holders of a majority of the votes present in person or by
proxy entitled to vote hereon at a duly held meeting of the Company's
stockholders at which a quorum is present or (b) the Company's stockholders
acting in accordance with the provisions of Section 228 of the Delaware General
Corporation Law. No options granted hereunder may be exercised prior to such
approval, provided, however, that the date of grant of any option shall be
determined as if this Plan had not been subject to such approval.
Notwithstanding the foregoing, if this Plan is not approved by a vote of the
stockholders of the Company on or before December 4, 2001, this Plan and any
options granted hereunder shall terminate.
-A-10-
ANNEX B
-------
SPAR GROUP, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
--------------------------
Section 1.1. Purpose. The purpose of the Plan is to provide employment
incentives for, and to encourage stock ownership by Employees of SPAR Group,
Inc. or any Subsidiary that maintains the Plan in order to increase their
proprietary interest in the success of the Company (as "Employees",
"Subsidiary", "Plan" and "Company" are hereinafter defined).
Section 1.2. Effective Date. The effective date of the Plan is as of
June 1, 2001.
ARTICLE II
DEFINITIONS.
------------
Section 2.1. Whenever used in the text of this Plan, the following
terms shall have the meanings set forth below:
"Board" shall mean the Board of Directors of SPAR Group, Inc.
"Committee" shall mean the Board or a committee (which may include
nonmembers of the Board) or officer(s) of SGRP designated by the Board to
administer the Plan. The Board may appoint and remove members of the Committee
at any time. "Committee" shall include (without limitation) the Board acting as
the Committee irrespective of whether such a Committee then exists.
"Common Stock" shall mean the common stock of SPAR Group, Inc.
"Company" shall mean SGRP, as well as any Subsidiary whose employees
participate in the Plan with the consent of the Board.
"CSP Plan" shall mean SGRP's 2001 Consultant Stock Purchase Plan,
effective as of June 1, 2001, as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein.
"Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Tax Code.
"Employee" shall mean any person who is designated by the Company as
its employee for purposes of the Tax Code. This term does not include members of
the Board unless they are employed by the Company in a position in addition to
their duties as directors, and does not include individuals designated by the
Company as independent contractors, notwithstanding any subsequent determination
to the contrary by the Internal Revenue Service.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" of Common Stock shall be determined in accordance
with the following rules.
(i) If the Common Stock is admitted to trading or listed on a national
securities exchange, Fair Market Value shall be the last reported sale
price on that day, or if no such reported sale takes place on that day,
the average of the last reported bid and ask prices on that day, in
either case on the principal national securities exchange on which the
Common Stock is admitted to trading or is listed;
-B-1-
(ii) If not listed or admitted to trading on any national securities
exchange, Fair Market Value shall be the last sale price on that day of
the Common Stock reported on the Nasdaq Stock Market or any comparable
system or, if no such reported sale takes place on that day, the
average of the closing bid and asked prices on that day;
(iii) If the Common Stock is not included in the Nasdaq Stock Market or any
comparable system, Fair Market Value shall be the average of the
closing bid and asked prices on that day as furnished by any member of
the National Association of Securities Dealers, Inc. selected from time
to time by the Company for that purpose;
(iv) If the Common Stock is not traded on the day in question, its Fair
Market Value on most recent preceding day on which it was traded shall
be used.
"Participant" shall mean an Employee who has been granted a Purchase
Right under the Plan.
"Plan" shall mean this 2001 Employee Stock Purchase Plan, as the same
may be supplemented, modified, amended, restated or replaced from time to time
in the manner provided herein.
"Purchase Right" shall mean a right to purchase Common Stock granted
pursuant to the Plan.
"Purchase Right Period" shall mean the following periods: (a) January 1
- - March 31; (b) April 1 - June 30; (c) July 1 - September 30; and (d) October 1
- - December 31; or such other periods as the Committee from time to time may
approve. The first Purchase Right Period shall commence on July 1, 2001, or such
later date as the Committee may approve, and shall end on September 30, 2001.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, in each case as the same may
have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
"SGRP" shall mean SPAR Group, Inc., a Delaware corporation.
"Stockholders" shall mean the holders of Common Stock.
"Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder, in each case as the same
may have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
ARTICLE III
ELIGIBILITY AND PARTICIPATION.
------------------------------
Section 3.1. Eligibility. (a) Except as otherwise provided in Section
3.1(b) or 3.1(c) hereof, all Employees are eligible to participate in the Plan.
(b) No Employee may be granted a Purchase Right if the Employee would
immediately thereafter own, directly or indirectly, five percent (5%) or more of
the combined voting power or value of all classes of stock of the Company or of
a Subsidiary. For this purpose, an Employee's ownership interest shall be
determined in accordance with the constructive ownership rules of Tax Code
Section 424(d).
(c) The Committee from time to time may establish, and once established
from time to time may modify or repeal, additional limits on or criteria for
eligibility not prohibited by the Tax Code or other applicable law, including
(without limitation) duration of employment.
Section 3.2. Payroll Withholding. (a) Employees may enroll as
Participants by executing prior to the commencement of each Purchase Right
Period a form provided by the Committee on which they designate: (i) the dollar
amount (not a percentage of compensation) to be deducted from their paychecks
and contributed to their Accounts for the purchase of Common Stock, which shall
not be less than ten dollars ($10) per week in the case of a Participant paid on
a weekly basis, twenty dollars ($20) per pay period in the case of
-B-2-
a Participant paid on a bi-weekly or semi-monthly basis, or forty dollars ($40)
per pay period in the case of a Participant paid on a monthly basis; and/or (ii)
the amount of funds, if any, which they will deposit at the beginning of the
Purchase Right Period for the purchase of Common Stock, which amount may be
subject to a limit established by the Board or Committee from time to time. Each
Participant hereby authorizes his Company employer to make such withholdings and
remit them to SGRP to hold and apply in accordance with this Plan.
(b) Once chosen, the rate of contributions for a Purchase Right Period
cannot be decreased or increased without terminating the Purchase Right.
(c) However, pursuant to rules and procedures prescribed by the
Committee, a Participant may make additional contributions to make up any
contributions that he or she failed to make while on a leave of absence if the
Participant returns to active employment and contributes those amounts before
the end of the Purchase Right Period.
Section 3.3. Limitations. (a) Notwithstanding anything herein to the
contrary, a Participant may not accrue a right to purchase shares of Common
Stock under the Plan at a rate that exceeds either six thousand two hundred
fifty dollars ($6,250) per quarterly Purchase Right Period or twenty-five
thousand dollars ($25,000) per calendar year, determined in accordance with Tax
Code Section 423(b)(8).
(b) The twenty-five thousand dollar ($25,000) limitation shall apply to
the Participant's right to purchase Common Stock under the Plan and under all
other employee stock purchase plans that are maintained by the Company and its
Subsidiaries, including those described in Tax Code Section 423.
(c) These dollar limitations apply to the Fair Market Value of Common
Stock on the first day of the Purchase Right Period.
Section 3.4. Granting of Purchase Rights. (a) The price at which each
share covered by a Purchase Right will be purchased will in all instances be one
hundred percent (100%) of the Fair Market Value of a share of Common Stock on
the last day of that Purchase Right Period; provided, however, that the Board in
its discretion from time to time may determine that it is in the best interests
of the Company to charge, and direct that the purchase price will be (for such
period or until the Board in its discretion determines otherwise), such lesser
percentage of Fair Market Value with respect to newly issued shares of Common
Stock as may be specified by the Board and permitted by the Tax Code.
(b) Notwithstanding the provisions of Paragraph (a) above, and subject
to the limitations of Section 3.3 above, in no event will a Participant be
entitled to purchase more than ten thousand (10,000) shares in a single Purchase
Right Period.
Section 3.5. Establishment of Accounts. (a) All amounts contributed by
the Participant to the Plan (whether by means of payroll withholding or a lump
sum advance contribution, or both) will be deposited into a separate account
maintained for all of the Participants (the "Plan Account"). The Company will
maintain a separate bookkeeping account on its books and records for each
Participant for the purpose of crediting all additions to and subtractions from
the Plan Account made by or on behalf of the Participant, and such books and
records shall be conclusive as to the existence and amounts thereof absent
manifest error.
(b) No interest will be earned on any Participant contributions to the
Plan.
(c) A Participant may not withdraw any amounts from his or her deposits
(including withholdings and lump sum contributions) into the Plan Account
without terminating his or her Purchase Right for the applicable Purchase Right
Period pursuant to Section 4.1 below.
ARTICLE IV
PURCHASE RIGHTS.
----------------
Section 4.1. Termination of Purchase Rights. (a) A Participant may
withdraw from the Plan at any time with respect to the then current or the next
Purchase Right Period (as specified by the Participant) by submitting written
notice to the Company by no later than the fifteenth (15th) day of the last
month of the then current Purchase Right Period. The Participant's Purchase
Right shall terminate upon his or her withdrawal from the Plan.
(b) Except as otherwise provided in Section 4.5 hereof, a Purchase
Right shall terminate automatically if the Participant holding the Purchase
Right: (i) ceases to be employed by the Company for any
-B-3-
reason for more than ninety (90) days; or (ii) is on a leave of absence in
excess of ninety (90) days, unless the Participant's rights to reemployment are
guaranteed by statute or contract with the Company.
(c) Upon the termination of a Purchase Right, all amounts held for the
Participant in the Plan Account shall be refunded to the Participant no later
than ninety (90) days after the date of termination.
(d) Notwithstanding the above provisions of this Section 4.1, in the
event that a Participant ceases making contributions during a Purchase Right
Period but does not incur a termination of employment, the Participant may elect
to leave his or her prior contributions in the Plan to be used to purchase
Common Stock at the end of the Purchase Right Period. However, in no event can a
Participant: (i) reduce (but not eliminate) his or her contributions during a
Purchase Right Period; or (ii) suspend his or her contributions and recommence
making them in the same Purchase Right Period, unless due to a leave of absence.
Section 4.2. Exercise of Purchase Rights. (a) Unless previously
terminated, Purchase Rights will be exercised automatically on the last day of
the Purchase Right Period.
(b) Except as provided in Section 3.2(c) above, payment for shares to
be purchased at the termination of the Purchase Right Period may only be made
from funds: (i) deposited at the beginning of a Purchase Right Period; and/or
(ii) accumulated through payroll deductions made during the Purchase Right
Period.
(c) The Company, at is option may either (i) issue stock certificates
to each individual purchaser for the whole number of shares of Common Stock or
(ii) issue one or more global stock certificates for the aggregate number of
shares of Common Stock, and maintain records of the amount of Common Stock owned
by each individual purchaser, as soon as practicable following the date of the
exercise of the Purchase Right.
(d) Fractional shares will not be issued under the Plan. Any
accumulated payroll deduction or funds deposited at the beginning of a Purchase
Right Period that otherwise would have been used to purchase fractional shares
(but for the foregoing) will be carried forward and applied toward the purchase
of Common Stock under the Plan at the end of the next Purchase Right Period.
Section 4.3. Extraordinary Event. The following provisions of this
Section 4.3 shall apply, notwithstanding any other Section of this Plan to the
contrary.
(a) An "Extraordinary Event" shall be deemed to occur as a result of
(i) the dissolution, liquidation or sale of all or substantially all of the
business, properties and assets of SGRP, (ii) any reorganization, merger or
consolidation in which SGRP, does not survive, (iii) any reorganization, merger,
consolidation or exchange of securities in which SGRP, does survive and any of
the Stockholders have the opportunity to receive cash, securities of another
corporation and/or other property in exchange for their capital stock of SGRP,
or (iv) any acquisition by any person or group (as defined in Section 13(d) of
the Exchange Act) of beneficial ownership of more than fifty percent (50%) of
the Common Stock (other than ownership by Robert G. Brown, William H. Bartels,
their respective families, trusts under which either of them is a trustee or
beneficiary, and corporations and other entities under their individual or
collective control).
(b) All Purchase Rights shall be deemed automatically exercised
immediately preceding the Extraordinary Event. In such an event, the Purchase
Right Period shall be deemed to have ended on such preceding day, and
accordingly the purchase price for the Common Stock purchased in such exercise
shall be based on the Fair Market Value of the Common Stock on that date for
purposes of Section 3.4(a) above.
Section 4.4. Non-Transferability of Purchase Rights. A Purchase Right
may not be assigned or otherwise transferred by a Participant other than by will
and the laws of descent and distribution. During the lifetime of the
Participant, the Purchase Right may be exercised only by the Participant.
Section 4.5. Death or Disability. Except as may otherwise be expressly
provided in the Participant's written employment or termination contract, upon
the death or Disability of a Participant while employed by the Company, the
Purchase Rights of such Participant shall continue for the balance of the then
current Purchase Right Period, and the Participant or his estate shall purchase
and receive the shares of Common Stock provided under this Plan. The Company
shall continue to make the previously elected payroll deductions for the balance
of the then current Purchase Right Period with respect to such Participant to
the extent any amounts are due to such Participant in the relevant payroll
periods. A disabled Participant or the estate of a deceased Participant may, but
shall not be required to, make up any deduction shortfalls in the manner
contemplated by Section 3.2(c) hereof.
-B-4-
ARTICLE V
COMMON STOCK.
-------------
Section 5.1. Shares Subject to Plan. (a) The maximum number of shares
of Common Stock which may be issued under the Plan is five hundred thousand
(500,000) shares, subject to adjustment pursuant Section 5.2 below, provided
that in no event shall the aggregate number of shares of Common Stock that may
be issued under this Plan and the CSP Plan exceed 500,000 (subject to such
adjustments).
(b) If any outstanding Purchase Right is terminated for any reason
prior to its exercise, the shares allocable to the Purchase Right may again
become subject to purchase under the Plan.
(c) The Common Stock issuable under the Plan may be previously unissued
or may have been reacquired by the Company in the open market (or otherwise).
Section 5.2. Adjustment Upon Changes in Capitalization. A proportionate
adjustment shall be made by the Committee in the number, kind or other relevant
affected attribute of the shares subject to outstanding Purchase Rights if after
the end of a Purchase Right Period and before the issuance of the affected
shares the outstanding shares of Common Stock are increased, decreased or
exchanged for different securities, through reorganization, recapitalization,
reclassification or other similar transaction (not constituting an Extraordinary
Event under Section 4.3 above).
Section 5.3. Compliance with Securities Laws. (a) It is a condition to
the exercise of any Purchase Right that either (i) a Registration Statement
under the Securities Act with respect to the shares of Common Stock to be issued
upon such exercise shall be effective and current at the time of exercise, or
(ii) there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any Purchase
Right under the Securities Act or to keep any Registration Statement effective
or current.
(b) The Committee may require, in its sole discretion, as a condition
to the exercise of a Purchase Right that the Participant execute and deliver to
the Company such Participant's representations and warranties, in form,
substance and scope satisfactory to the Committee, as the Committee may
determine to be necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including (without
limitation) that (i) the shares of Common Stock to be issued upon exercise of
the Purchase Right are being acquired by the Participant for the Participant's
own account, for investment only and not with a view to the resale or distri-
bution thereof, and (ii) any subsequent resale or distribution of shares of
Common Stock by such Participant will be made only pursuant to (A) a
Registration Statement under the Securities Act which is effective and current
with respect to the shares of Common Stock being sold, or (B) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption, the Participant, prior to any offer of sale or sale of
such shares of Common Stock, shall provide the Company with a favorable written
opinion of counsel satisfactory to the Company, in form, substance and scope
satisfactory to the Company, as to the applicability of such Securities Act
exemption to the proposed sale or distribution.
(c) In addition, if at any time the Committee shall determine that the
listing or qualification of the shares of Common Stock subject to such Purchase
Right on any securities exchange, Nasdaq or under any applicable law, or that
the consent or approval of any governmental agency or regulatory body, is
necessary or desirable as a condition to, or in connection with, the granting of
a Purchase Right or the issuance of shares of Common Stock thereunder, such
Purchase Right may not be granted or exercised in whole or in part, as the case
may be, unless such listing, qualification, consent or approval shall have been
effected or obtained by the Company free of any conditions not acceptable to the
Committee.
ARTICLE VI
PLAN ADMINISTRATION.
--------------------
Section 6.1. Administration. (a) The Plan shall be administered by the
Committee. The Committee shall have the authority to: (i) interpret the Plan;
(ii) prescribe rules and procedures relating to the Plan; and (iii) take all
other actions necessary or appropriate for the administration of the Plan.
(b) A majority of the members of the Committee shall constitute a
quorum, and any action shall constitute the action of the Committee if it is
authorized by: (i) a majority of the members present at any meeting; or (ii) all
of the members in writing without a meeting.
-B-5-
(c) Any controversy or claim arising out of or relating to this Plan,
any Purchase Right granted under this Plan or the books and records of the
Company with respect thereto shall be determined unilaterally by the Committee
in their sole and absolute discretion. The determinations of the Committee on
such matters shall be final, conclusive and binding on all parties.
(d) No present or former member of the Committee or Board of Directors
or employee of the Company or any of its subsidiaries shall be liable for any
action, inaction or determination made in good faith with respect to this Plan,
any Purchase Right granted hereunder or any bookkeeping entry made in connection
therewith.
(e) Notwithstanding anything herein to the contrary, the Board may at
any time and from time to time make any determination or take any other action
delegated to the Committee hereunder.
Section 6.2. Indemnification. (a) To the maximum extent permitted by
law, the Company shall indemnify each member of the Committee and every other
member of the Board, as well as any other employee of the Company or any
Subsidiary, from and against any and all liabilities and expenses (including any
amount paid in settlement or in satisfaction of a judgment and reasonable
attorneys fees and expenses) reasonably incurred by the individual in connection
with any claims against the individual by reason of any action, inaction or
determination by the individual under the Plan. This indemnity shall not apply,
however, if: (i) it is determined in the action, lawsuit, or proceeding that the
individual is guilty of gross negligence or intentional misconduct in the
performance of any duties under the Plan; or (ii) the individual fails to assist
the Company in defending against any such claim.
(b) Notwithstanding the above, the Company shall have the right to
select counsel and to control the prosecution or defense of the suit.
(c) Furthermore, the Company shall not be obligated to indemnify any
individual for any amount incurred through any settlement or compromise of any
action unless the Company consents in writing to the settlement or compromise.
ARTICLE VII
AMENDMENT AND TERMINATION.
--------------------------
Section 7.1. Amendment and Termination. The Board may amend or
terminate the Plan at any time by means of written action, except with respect
to outstanding Purchase Rights during a Purchase Period. However,
notwithstanding the preceding sentence, the Committee may elect to accelerate
the last day of the Purchase Right Period (by means of an amendment to the Plan
or otherwise) at any time.
Section 7.2. Stockholders Approval. (a) No shares of Common Stock shall
be issued under the Plan unless the Plan is approved by the Stockholders within
twelve (12) months before or after the date of the adoption of the Plan by the
Board.
(b) If the Plan is not approved by the Stockholders within that time
period, the Plan and all Purchase Rights issued under the Plan will terminate
and all contributions will be refunded to the Participants. The approval by the
Stockholders must relate to: (i) the class of individuals who may be
Participants; and (ii) the aggregate number of shares that can be granted under
the Plan. If either of those items are changed, the approval of the Stockholders
must again be obtained.
ARTICLE VIII
MISCELLANEOUS MATTERS.
----------------------
Section 8.1. Uniform Rights and Privileges. The rights and privileges
of all Participants under the Plan shall be the same.
Section 8.2. Application of Proceeds. The proceeds received by the
Company from the sale of Common Stock pursuant to Purchase Rights may be used
for any corporate purpose.
Section 8.3. Notice of Disqualifying Disposition. If a Participant has
acquired shares of Common Stock for less than 100% of Fair Market Value, a
Participant must notify the Company if the Participant disposes of stock
acquired pursuant to the Plan prior to the expiration of the holding periods
required to qualify for long-term capital gains treatment on the sale.
-B-6-
Section 8.4. No Additional Rights.
(a) Neither the adoption of this Plan nor the granting of any Purchase
Right shall: (i) affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable law; or (ii)
confer upon any Participant the right to continue to be employed by the Company,
nor shall it interfere in any way with the right of the Company to terminate the
employment of any Participant at any time, with or without cause.
(b) No Participant shall have any rights as a Stockholder with respect
to shares covered by a Purchase Right until such time as the Participant is
listed as the owner of record of the purchased shares on the books and records
of the Company's transfer agent.
(c) No adjustments will be made for cash dividends or other rights for
which the record date is prior to the date the Participant is listed as the
owner of record of the purchased shares on the books and records of the
Company's transfer agent.
Section 8.5. Interpretation. The provisions of this Plan shall be
interpreted in a manner that is consistent with this Plan satisfying the
requirements of Tax Code Section 423.
Section 8.6. Governing Law. This Plan and all related matters shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(other than those that would defer to the substantive laws of another
jurisdiction).
Section 8.7. Construction. None of the terms or provisions of this Plan
or any related document shall be construed or interpreted with any presumption
against the Company by reason of the Company causing the drafting thereof.
Whenever from the context it appears appropriate, any term stated in either the
singular or plural shall include the plural and singular, respectively, and any
term stated in the masculine, feminine or neuter gender shall include the other
forms as well. Captions and headings have been provided for convenience and
shall not affect the meaning or interpretation of this Plan.
Section 8.8. Partial Invalidity. The invalidity, illegality or
unenforceability of any provision in this Plan shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.
-B-7-
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-B-8-
ANNEX C
SPAR GROUP, INC.
2001 CONSULTANT STOCK PURCHASE PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE.
---------------------------
Section 1.1. Purpose. The purpose of the Plan is to provide employment
incentives for, and to encourage stock ownership by employees of the affiliates
of SPAR Group, Inc., which affiliates provide consulting and other services to
the Company, in order to increase such employees proprietary interest in the
success of the Company (as "Subsidiary", "Plan" and "Company" are hereinafter
defined). The Plan is not intended to qualify as an employee stock purchase plan
under Section 423 of the Tax Code.
Section 1.2. Effective Date. The effective date of the Plan is as of
June 1, 2001.
ARTICLE II
DEFINITIONS.
------------
Section 2.1. Certain Defined Terms. Whenever used in the text of this
Plan, the following terms shall have the meanings set forth below:
"affiliate" of a referenced person shall mean (a) any other person
controlling, controlled by or under common control with such referenced person,
(b) any other person beneficially owning or controlling ten percent (10%) or
more of the outstanding voting securities or rights or of the interest in the
capital, distributions or profits of the referenced person, (c) any other person
operating the business or substantially all of the property of the referenced
person, or vice versa, or (d) any director, officer, manager or other execu-
tive of or partner, member or joint venturer in the referenced person or such
other person. If the referenced person is an individual, then the term.
"affiliate" also shall include members of the immediate family (including
parents, spouse and children) of such individual and any "affiliate" of one or
more of those family members. The terms "control", "controlling", "controlled"
and the like shall mean the direct or indirect possession of the power to direct
or cause the direction of the management or policies of a person or the
disposition of its assets or properties, whether through ownership, by contract,
arrangement or under- standing, or otherwise.
"Affiliate Employee" shall mean any person who is designated by the
Company as an employee of any SPAR Affiliate for purposes of the Tax Code and
who is not otherwise permitted to participate in the Company's ESP Plan. This
term does not include members of the Board unless they are employed by a SPAR
Affiliate, and does not include individuals designated by the Company as
independent contractors, notwithstanding any subsequent determination to the
contrary by the Internal Revenue Service.
"Board" shall mean the Board of Directors of SGRP.
"Committee" shall mean the Board or a committee (which may include
non-members of the Board) or officer(s) of SGRP designated by the Board to
administer the Plan. The Board may appoint and remove members of the Committee
at any time. "Committee" shall include (without limitation) the Board acting as
the Committee irrespective of whether such a Committee then exists.
"Common Stock" shall mean the common stock of SPAR Group, Inc.
"Company" shall mean SGRP.
"Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Tax Code.
-C-1-
"ESP Plan" shall mean SGRP's 2001 Employee Stock Purchase Plan,
effective as of June 1, 2001, as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" of Common Stock shall be determined in accordance
with the following rules.
(i) If the Common Stock is admitted to trading or listed on a national
securities exchange, Fair Market Value shall be the last reported sale
price on that day, or if no such reported sale takes place on that day,
the average of the last reported bid and ask prices on that day, in
either case on the principal national securities exchange on which the
Common Stock is admitted to trading or is listed;
(ii) If not listed or admitted to trading on any national securities
exchange, Fair Market Value shall be the last sale price on that day of
the Common Stock reported on the Nasdaq Stock Market or any comparable
system or, if no such reported sale takes place on that day, the
average of the closing bid and asked prices on that day;
(iii) If the Common Stock is not included in the Nasdaq Stock Market or any
comparable system, Fair Market Value shall be the average of the
closing bid and asked prices on that day as furnished by any member of
the National Association of Securities Dealers, Inc. selected from time
to time by the Company for that purpose;
(iv) If the Common Stock is not traded on the day in question, its Fair
Market Value on the most recent preceding day on which it was traded
shall be used.
"Participant" shall mean an Affiliate Employee who has been granted a
Purchase Right under the Plan.
"Plan" shall mean this 2001 Consultant Stock Purchase Plan, as the same
may be supplemented, modified, amended, restated or replaced from time to time
in the manner provided herein.
"Purchase Right" shall mean a right to purchase Common Stock granted
pursuant to the Plan.
"Purchase Right Period" shall mean the following periods: (a) January 1
- - March 31; (b) April 1 - June 30; (c) July 1 - September 30; and (d) October 1
- - December 31; or such other periods as the Committee from time to time may
approve. The first Purchase Right Period shall commence on July 1, 2001, or such
later date as the Committee may approve, and shall end on September 30, 2001.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, in each case as the same may
have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
"SGRP" shall mean SPAR Group, Inc., a Delaware corporation.
"SPAR Affiliate" and "SPAR Affiliates" shall respectively mean any one
or more of SPAR Marketing Services, Inc., SPAR Management Services, Inc., SPAR
InfoTech, Inc., and any other affiliate of any of them or of the Company,
including (without limitation) any corporation or other entity directly or
indirectly under the control of one or more of Robert G. Brown, William H.
Bartels, their respective families, and trusts under which either of them is a
trustee or beneficiary.
"Stockholders" shall mean the holders of Common Stock.
"Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder, in each case as the same
may have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
-----------------------------
Section 3.1. Eligibility. (a) Except as otherwise provided in Section
3.1(b) or 3.1(c) hereof, all Affiliate Employees are eligible to participate in
the Plan.
(b) The Committee from time to time may establish, and once established
from time to time may modify or repeal, additional limits on or criteria for
eligibility not prohibited by applicable law, including (without limitation)
duration of employment.
Section 3.2. Payroll Withholding. (a) Affiliate Employees may enroll as
Participants by executing prior to the commencement of each Purchase Right
Period a form provided by the Committee on which they designate: (i) the dollar
amount (not a percentage of compensation) to be deducted from their paychecks
and contributed to the Plan Account for the purchase of Common Stock, which
shall not be less than ten dollars ($10) per week in the case of a Participant
paid on a weekly basis, twenty dollars ($20) per pay period in the case of a
Participant paid on a bi-weekly or semi-monthly basis, or forty dollars ($40)
per pay period in the case of a Participant paid on a monthly basis; and/or (ii)
the amount of funds, if any, which they will deposit at the beginning of the
Purchase Right Period for the purchase of Common Stock, which amount may be
subject to a limit established by the Board or Committee from time to time. Each
Participant hereby authorizes his SPAR Affiliate employer to make such
withholdings and remit them to SGRP to hold and apply in accordance with this
Plan.
(b) Once chosen, the rate of contributions for a Purchase Right Period
cannot be decreased or increased without terminating the Purchase Right.
(c) However, pursuant to rules and procedures prescribed by the
Committee, a Participant may make additional contributions to make up any
contributions that he or she failed to make while on a leave of absence if the
Participant returns to active employment and contributes those amounts before
the end of the Purchase Right Period.
Section 3.3. Limitations. (a) Notwithstanding anything herein to the
contrary, a Participant may not accrue a right to purchase shares of Common
Stock under this Plan at a rate that exceeds either six thousand two hundred
fifty dollars ($6,250) per quarterly Purchase Right Period or twenty-five
thousand dollars ($25,000) per calendar year.
(b) The twenty-five thousand dollar ($25,000) limitation shall apply to
the Participant's right to purchase Common Stock under this Plan and under all
other employee stock purchase plans that are maintained by the Company and its
Subsidiaries, including those described in Tax Code Section 423.
(c) These dollar limitations apply to the Fair Market Value of Common
Stock on the first day of the Purchase Right Period.
Section 3.4. Granting of Purchase Rights. (a) The price at which each
share covered by a Purchase Right will be purchased will in all instances be one
hundred percent (100%) of the Fair Market Value of a share of Common Stock on
the last day of that Purchase Right Period; provided, however, that the Board in
its discretion from time to time may determine that it is in the best interests
of the Company to charge, and direct that the purchase price will be (for such
period or until the Board in its discretion determines otherwise), such lesser
percentage of Fair Market Value with respect to newly issued shares of Common
Stock as may be specified by the Board.
(b) Notwithstanding the provisions of Paragraph (a) above, and subject
to the limitations of Section 3.3 above, in no event will a Participant be
entitled to purchase more than ten thousand (10,000) shares in a single Purchase
Right Period.
Section 3.5. Establishment of the Plan Account. (a) All amounts
contributed by the Participant to the Plan (whether by means of payroll
withholding or a lump sum advance contribution, or both) will be deposited into
a separate account maintained for all of the Participants (the "Plan Account").
The Company will maintain a separate bookkeeping account on its books and
records for each Participant for the purpose of crediting all additions to and
subtractions from the Plan Account made by or on behalf of the Participant, and
such books and records shall be conclusive as to the existence and amounts
thereof absent manifest error.
-C-3-
(b) No interest will be earned on any Participant contributions to the
Plan.
(c) A Participant may not withdraw any amounts from his or her deposits
(including withholdings and lump sum contributions) into the Plan Account
without terminating his or her Purchase Right for the applicable Purchase Right
Period pursuant to Section 4.1 below.
ARTICLE IV
PURCHASE RIGHTS.
----------------
Section 4.1. Termination of Purchase Rights. (a) A Participant may
withdraw from the Plan at any time with respect to the then current or the next
Purchase Right Period (as specified by the Participant) by submitting written
notice to the Company by no later than the fifteenth (15th) day of the last
month of the then current Purchase Right Period. The Participant's Purchase
Right shall terminate upon his or her withdrawal from the Plan.
(b) Except as otherwise provided in Section 4.5 hereof, a Purchase
Right shall terminate automatically if the Participant holding the Purchase
Right: (i) ceases to be employed by the Company for any reason for more than
ninety (90) days; or (ii) is on a leave of absence in excess of ninety (90)
days, unless the Participant's rights to reemployment are guaranteed by statute
or contract with the Company.
(c) Upon the termination of a Purchase Right, all amounts held for the
Participant in the Plan Account shall be refunded to the Participant no later
than ninety (90) days after the date of termination.
(d) Notwithstanding the above provisions of this Section 4.1, in the
event that a Participant ceases making contributions during a Purchase Right
Period but does not incur a termination of employment, the Participant may elect
to leave his or her prior contributions in the Plan to be used to purchase
Common Stock at the end of the Purchase Right Period. However, in no event can a
Participant: (i) reduce (but not eliminate) his or her contributions during a
Purchase Right Period; or (ii) suspend his or her contributions and recommence
making them in the same Purchase Right Period, unless due to a leave of absence.
Section 4.2. Exercise of Purchase Rights. (a) Unless previously
terminated, Purchase Rights will be exercised automatically on the last day of
the Purchase Right Period.
(b) Except as provided in Section 3.2(c) above, payment for shares to
be purchased at the termination of the Purchase Right Period may only be made
from funds: (i) deposited at the beginning of a Purchase Right Period; and/or
(ii) accumulated through payroll deductions made during the Purchase Right
Period.
(c) The Company, at its option may either (i) issue stock certificates
to each individual purchaser for the whole number of shares of Common Stock or
(ii) issue one or more global stock certificates for the aggregate number of
shares of Common Stock, and maintain records of the amount of Common Stock owned
by each individual purchaser, as soon as practicable following the date of the
exercise of the Purchase Right.
(d) Fractional shares will not be issued under the Plan. Any
accumulated payroll deduction or funds deposited at the beginning of a Purchase
Right Period that otherwise would have been used to purchase fractional shares
(but for the foregoing) will be carried forward and applied toward the purchase
of Common Stock under the Plan at the end of the next Purchase Right Period.
Section 4.3. Extraordinary Event. The following provisions of this
Section 4.3 shall apply, notwithstanding any other Section of this Plan to the
contrary.
(a) An "Extraordinary Event" shall be deemed to occur as a result of
(i) the dissolution, liquidation or sale of all or substantially all of the
business, properties and assets of the Company, (ii) any reorganization, merger
or consolidation in which the Company does not survive, (iii) any
reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Stockholders have the opportunity to receive
cash, securities of another corporation and/or other property in exchange for
their capital stock of the Company, or (iv) any acquisition by any person or
group (as defined in Section 13(d) of the Exchange Act) of beneficial ownership
of more than fifty percent (50%) of the Common Stock (other than ownership by
Robert G. Brown, William H. Bartels, their respective families, trusts under
which either of them is a trustee or beneficiary, and corporations and other
entities under their individual or collective control).
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(b) All Purchase Rights shall be deemed automatically exercised
immediately preceding the Extraordinary Event. In such an event, the Purchase
Right Period shall be deemed to have ended on such preceding day, and
accordingly the purchase price for the Common Stock purchased in such exercise
shall be based on the Fair Market Value of the Common Stock on that date for
purposes of Section 3.4(a) above.
Section 4.4. Non-Transferability of Purchase Rights. A Purchase Right
may not be assigned or otherwise transferred by a Participant other than by will
and the laws of descent and distribution. During the lifetime of the
Participant, the Purchase Right may be exercised only by the Participant.
Section 4.5. Death or Disability. Except as may otherwise be expressly
provided in the Participant's written employment or termination contract, upon
the death or Disability of a Participant while employed by the Company or any
Subsidiary the Purchase Rights of such Participant shall continue for the
balance of the then current Purchase Right Period, and the Participant or his
estate shall purchase and receive the shares of Common Stock provided under this
Plan. The Company shall continue to make the previously elected payroll
deductions for the balance of the then current Purchase Right Period with
respect to such Participant to the extent any amounts are due to such
Participant in the relevant payroll periods. A disabled Participant or the
estate of a deceased Participant may, but shall not be required to, make up any
deduction shortfalls in the manner contemplated by Section 3.2(c) hereof.
ARTICLE V
COMMON STOCK.
-------------
Section 5.1. Shares Subject to Plan. (a) The maximum number of shares
of Common Stock which may be issued under the Plan is five hundred thousand
(500,000) shares, subject to adjustment pursuant Section 5.2 below, provided
that in no event shall the aggregate number of shares of Common Stock that may
be issued under this Plan and the ESP Plan exceed 500,000 (subject to such
adjustments).
(b) If any outstanding Purchase Right is terminated for any reason
prior to its exercise, the shares allocable to the Purchase Right may again
become subject to purchase under the Plan.
(c) The Common Stock issuable under the Plan may be previously unissued
or may have been reacquired by the Company in the open market (or otherwise).
Section 5.2. Adjustment Upon Changes in Capitalization. A proportionate
adjustment shall be made by the Committee in the number, kind or other relevant
affected attribute of the shares subject to outstanding Purchase Rights if after
the end of a Purchase Right Period and before the issuance of the affected
shares the outstanding shares of Common Stock are increased, decreased or
exchanged for different securities, through reorganization, recapitalization,
reclassification or other similar transaction (not constituting an Extraordinary
Event under Section 4.3 above).
Section 5.3. Compliance with Securities Laws. (a) It is a condition to
the exercise of any Purchase Right that either (i) a Registration Statement
under the Securities Act with respect to the shares of Common Stock to be issued
upon such exercise shall be effective and current at the time of exercise, or
(ii) there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any Purchase
Right under the Securities Act or to keep any Registration Statement effective
or current.
(b) The Committee may require, in its sole discretion, as a condition
to the exercise of a Purchase Right that the Participant execute and deliver to
the Company such Participant's representations and warranties, in form,
substance and scope satisfactory to the Committee, as the Committee may
determine to be necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including (without
limitation) that (i) the shares of Common Stock to be issued upon exercise of
the Purchase Right are being acquired by the Participant for the Participant's
own account, for investment only and not with a view to the resale or
distribution thereof, and (ii) any subsequent resale or distribution of shares
of Common Stock by such Participant will be made only pursuant to (A) a
Registration Statement under the Securities Act which is effective and current
with respect to the shares of Common Stock being sold, or (B) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption, the Participant, prior to any offer of sale or sale of
such shares of Common Stock, shall provide the Company with a favorable written
opinion of counsel satisfactory to the Company, in form, substance and scope
satisfactory to the Company, as to the applicability of such Securities Act
exemption to the proposed sale or distribution.
-C-5-
(c) In addition, if at any time the Committee shall determine that the
listing or qualification of the shares of Common Stock subject to such Purchase
Right on any securities exchange, Nasdaq or under any applicable law, or that
the consent or approval of any governmental agency or regulatory body, is
necessary or desirable as a condition to, or in connection with, the granting of
a Purchase Right or the issuance of shares of Common Stock thereunder, such
Purchase Right may not be granted or exercised in whole or in part, as the case
may be, unless such listing, qualification, consent or approval shall have been
effected or obtained by the Company free of any conditions not acceptable to the
Committee.
ARTICLE VI
PLAN ADMINISTRATION.
--------------------
Section 6.1. Administration. (a) The Plan shall be administered by the
Committee. The Committee shall have the authority to: (i) interpret the Plan;
(ii) prescribe rules and procedures relating to the Plan; and (iii) take all
other actions necessary or appropriate for the administration of the Plan.
(b) A majority of the members of the Committee shall constitute a
quorum, and any action shall constitute the action of the Committee if it is
authorized by: (i) a majority of the members present at any meeting; or (ii) all
of the members in writing without a meeting.
(c) Any controversy or claim arising out of or relating to this Plan,
any Purchase Right granted under this Plan or the books and records of the
Company with respect thereto shall be determined unilaterally by the Committee
in their sole and absolute discretion. The determinations of the Committee on
such matters shall be final, conclusive and binding on all parties.
(d) No present or former member of the Committee or Board of Directors
or employee of the Company, any of its subsidiaries or any SPAR Affiliate shall
be liable for any action, inaction or determination made in good faith with
respect to this Plan, any Purchase Right granted hereunder or any bookkeeping
entry made in connection therewith.
(e) Notwithstanding anything herein to the contrary, the Board may at
any time and from time to time make any determination or take any other action
delegated to the Committee hereunder.
Section 6.2. Indemnification. (a) To the maximum extent permitted by
law, the Company shall indemnify each member of the Committee and every other
member of the Board, as well as any other employee of the Company or any
Subsidiary or Affiliate Employee, from and against any and all liabilities and
expenses (including any amount paid in settlement or in satisfaction of a
judgment and reasonable attorneys fees and expenses) reasonably incurred by the
individual in connection with any claims against the individual by reason of any
action, inaction or determination by the individual under the Plan. This
indemnity shall not apply, however, if: (i) it is determined in the action,
lawsuit, or proceeding that the individual is guilty of gross negligence or
intentional misconduct in the performance of any duties under the Plan; or (ii)
the individual fails to assist the Company in defending against any such claim.
(b) Notwithstanding the above, the Company shall have the right to
select counsel and to control the prosecution or defense of the suit.
(c) Furthermore, the Company shall not be obligated to indemnify any
individual for any amount incurred through any settlement or compromise of any
action unless the Company consents in writing to the settlement or compromise.
ARTICLE VII
AMENDMENT AND TERMINATION.
--------------------------
Section 7.1. Amendment and Termination. The Board may amend or
terminate the Plan at any time by means of written action, except with respect
to outstanding Purchase Rights during a Purchase Period. However,
notwithstanding the preceding sentence, the Committee may elect to accelerate
the last day of the Purchase Right Period (by means of an amendment to the Plan
or otherwise) at any time.
Section 7.2. Stockholder Approval. (a) No shares of Common Stock shall
be issued under the Plan unless the Plan is approved by the Stockholders within
twelve (12) months before or after the date of the adoption of the Plan by the
Board.
-C-6-
(b) If the Plan is not approved by the Stockholders within that time
period, the Plan and all Purchase Rights issued under the Plan will terminate
and all contributions will be refunded to the Participants. The approval by the
Stockholders must relate to: (i) the class of individuals who may be
Participants; and (ii) the aggregate number of shares that can be granted under
the Plan. If either of those items are changed, the approval of the Stockholders
must again be obtained.
ARTICLE VIII
MISCELLANEOUS MATTERS.
----------------------
Section 8.1. Uniform Rights and Privileges. The rights and privileges
of all Participants under the Plan shall be the same.
Section 8.2. Application of Proceeds. The proceeds received by the
Company from the sale of Common Stock pursuant to Purchase Rights may be used
for any corporate purpose.
Section 8.3. No Additional Rights. (a) Neither the adoption of this
Plan nor the granting of any Purchase Right shall: (i) affect or restrict in any
way the power of the Company, any Subsidiary or any SPAR Affiliate to undertake
any corporate action otherwise permitted under applicable law; or (ii) confer
upon any Participant the right to continue to be employed by the Company or any
Subsidiary or SPAR Affiliate, nor shall it interfere in any way with the right
of the Company, any Subsidiary or any SPAR Affiliate to terminate the employment
of any Participant at any time, with or without cause.
(b) No Participant shall have any rights as a Stockholder with respect
to shares covered by a Purchase Right until such time as the Participant is
listed as the owner of record of the purchased shares on the books and records
of the Company's transfer agent.
(c) No adjustments will be made for cash dividends or other rights for
which the record date is prior to the date the Participant is listed as the
owner of record of the purchased shares on the books and records of the
Company's transfer agent.
Section 8.4. Governing Law. This Plan and all related matters shall be
governed by, and construed in accordance with, the laws of the State of Delaware
(other than those that would defer to the substantive laws of another
jurisdiction).
Section 8.5. Construction. None of the terms or provisions of this Plan
or any related document shall be construed or interpreted with any presumption
against the Company by reason of the Company causing the drafting thereof.
Whenever from the context it appears appropriate, any term stated in either the
singular or plural shall include the plural and singular, respectively, and any
term stated in the masculine, feminine or neuter gender shall include the other
forms as well. Captions and headings have been provided for convenience and
shall not affect the meaning or interpretation of this Plan.
Section 8.6. Partial Invalidity. The invalidity, illegality or
unenforceability of any provision in this Plan shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.
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FORM OF PROXY
-------------
PROXY
SPAR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Robert G. Brown and William H. Bartels, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of SPAR Group, Inc. (the "Company") held of record by the undersigned as
of June 29, 2001, the record date with respect to this solicitation, at the
Annual Meeting of Stockholders of the Company to be held at 580 White Plains
Road, Tarrytown, New York, 10591, beginning at 10:00 a.m., Eastern Standard
Time, on Thursday, August 2, 2001, and at any adjournments thereof, upon the
following matters:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS |_| FOR all nominees |_| WITHHOLD AUTHORITY
listed below listed to vote for
(except as noted below) all nominees
(INSTRUCTIONS: To withhold authority to vote for any nominee, line through or
otherwise strike out the nominee's name below.)
Robert G. Brown; William H. Bartels; Robert O. Aders; Jack W.
Partridge; Jerry B. Gilbert; George W. Off
2. Approval of the adoption of the 2000 Stock Option Plan, as amended.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Approval of the adoption of the 2001 Employee Stock Purchase Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Approval of the adoption of the 2001 Consultant Stock Purchase Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
5. Ratification of the selection of Ernst & Young LLP as independent auditors
for the company for the fiscal year ending December 31, 2001.
|_| FOR |_| AGAINST |_| ABSTAIN
6. Other matters.
In their discretion, Robert G. Brown and William H. Bartels are authorized to
vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4, AND 5 ABOVE. IF
ANY NOMINEE DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSONS NAMED
AS PROXIES SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY
THE BOARD OF DIRECTORS.
Dated , 2001
(Signature)
(Signature)
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, guardian or
corporate officer, please give full title as such.
The signer hereby revokes all proxies heretofore given by the signor to vote at
said meeting or any adjournments thereof.