UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 for the first quarterly period ended March 31, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 for the transition period from ____________ to
_____________
Commission file number: 0-27824
SPAR Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0684451
State of Incorporation IRS Employer Identification No.
580 White Plains Road, Tarrytown, New York, 10591
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (914) 332-4100
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: [ X ] Yes [ ] No
Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act): [ ] Yes [ X ] No
On March 31, 2004, there were 18,858,972 shares of Common Stock outstanding.
SPAR Group, Inc.
Index
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
as of March 31, 2004 and December 31, 2003.......................................3
Consolidated Statements of Operations for the three
months ended March 31, 2004 and 2003.............................................4
Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003.......................................5
Notes to Consolidated Financial Statements.......................................6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................13
Item 3: Quantitative and Qualitative Disclosures About Market Risk......................21
Item 4: Controls and Procedures.........................................................21
PART II: OTHER INFORMATION
Item 1: Legal Proceedings...............................................................23
Item 2: Changes in Securities and Use of Proceeds.......................................23
Item 3: Defaults upon Senior Securities.................................................23
Item 4: Submission of Matters to a Vote of Security Holders.............................23
Item 5: Other Information...............................................................23
Item 6: Exhibits and Reports on Form 8-K................................................24
SIGNATURES............................................................................................25
2
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
SPAR Group, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
March 31, December 31,
2004 2003
-------- --------
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net 11,401 13,942
Prepaid expenses and other current assets 964 415
Deferred income taxes 1,873 1,305
-------- --------
Total current assets 14,238 15,662
Property and equipment, net 2,038 2,099
Goodwill 9,201 8,749
Deferred income taxes 434 434
Other assets 630 926
-------- --------
Total assets $ 26,541 $ 27,870
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 2,596 $ 1,445
Accrued expenses and other current liabilities 2,220 4,367
Accrued expenses, due to affiliates 1,576 996
Restructuring charges, current 685 685
Line of credit, short-term 3,889 4,084
-------- --------
Total current liabilities 10,966 11,577
Other long-term liabilities 275 270
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 3,000,000
Issued and outstanding shares - none - -
Common stock, $.01 par value:
Authorized shares - 47,000,000
Issued and outstanding shares -
18,858,972 - March 31, 2004 and
December 31, 2003 189 189
Treasury stock (242) (384)
Accumulated other comprehensive loss (8) (7)
Additional paid-in capital 11,175 11,249
Retained earnings 4,186 4,976
-------- --------
Total stockholders' equity 15,300 16,023
-------- --------
Total liabilities and stockholders' equity $ 26,541 $ 27,870
======== ========
Note: The Balance Sheet at December 31, 2003, has been derived from the
audited financial statements at that date but does not include any of
the information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements.
See accompanying notes.
3
SPAR Group, Inc.
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
Three Months Ended
--------------------
March 31, March 31,
2004 2003
-------- --------
Net revenues $ 12,803 $ 18,739
Cost of revenues 8,694 11,251
-------- --------
Gross profit 4,109 7,488
Selling, general and administrative expenses 4,967 4,943
Depreciation and amortization 362 378
-------- --------
Operating (loss) income (1,220) 2,167
Interest expense 34 68
Other expense 1 38
-------- --------
(Loss) income before income taxes (1,255) 2,061
(Benefit) provision for income taxes (465) 783
-------- --------
Net (loss) income $ (790) $ 1,278
======== ========
Basic/diluted net (loss) income per common share:
Net (loss) income - basic/diluted $ (0.04) $ 0.07
======== ========
Weighted average common shares - basic 18,859 18,841
======== ========
Weighted average common shares - diluted 18,859 19,443
======== ========
See accompanying notes.
4
SPAR Group, Inc.
Consolidated Statements of Cash Flows
(unaudited) (In thousands)
Three Months Ended
------------------
March 31, March 31,
2004 2003
------- -------
Operating activities
Net (loss) income $ (790) $ 1,278
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation 362 378
Share of loss in joint venture 1 38
Changes in operating assets and liabilities:
Accounts receivable 2,541 (1,590)
Prepaid expenses, other assets and deferred taxes (821) (418)
Accounts payable, accrued expenses and other current
liabilities (996) 1,175
Accrued expenses due to affiliates 580 -
Restructuring charges - (816)
Other long-term liabilities 5 -
------- -------
Net cash provided by operating activities 882 45
Investing activities
Purchases of property and equipment (301) (421)
Acquisition of businesses (453) (38)
------- -------
Net cash used in investing activities (754) (459)
Financing activities
Net (payments) borrowings on line of credit (195) 3,469
Proceeds from employee stock purchase plan and exercised options 68 23
Payments to certain stockholders - (3,000)
Purchase of treasury stock - (78)
Translation (loss) (1) -
------- -------
Net cash (used in) provided by financing activities (128) 414
Net change in cash - -
Cash at beginning of period - -
------- -------
Cash at end of period $ - $ -
======= =======
Supplemental disclosure of cash flow information
Interest paid $ 35 $ 56
See accompanying notes.
5
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited, consolidated financial statements of SPAR
Group, Inc., a Delaware corporation ("SGRP"), and its subsidiaries (together
with SGRP, collectively, the "Company" or the "SPAR Group") have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included in these interim financial
statements. However, these interim financial statements should be read in
conjunction with the annual consolidated financial statements and notes thereto
for the Company as contained in Company's Annual Report for 2003 on Form 10-K
for the year ended December 31, 2003, as filed with the Securities Exchange
Commission on March 30, 2004 (the "Company's Annual Report for 2003 on Form
10-K"). The Company's results of operations for the interim periods are not
necessarily indicative of its operating results for the entire year.
2. Restructuring Charges
In 1999, the Company's Board of Directors approved a plan to
restructure the operations of the PIA Companies. Restructuring costs were
composed of committed costs required to integrate the SPAR Companies' and the
PIA Companies' field organizations and the consolidation of administrative
functions to achieve beneficial synergies and costs savings. (For the specific
definitions of those terms, see Item 1 - Business - GENERAL - Continuing
Operations - Merchandising Services Division in the Company's Annual Report for
2003 on Form 10-K.)
The restructuring reserve relates to equipment and office lease
settlements and remains unchanged from the December 31, 2003 balance of
$685,000.
6
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
3. Net (Loss) Income Per Share
The following table sets forth the computations of basic and diluted
(loss) income per share (in thousands, except per share data):
Three Months Ended
----------------- ---------------------
March 31, March 31,
2004 2003
----------------- ---------------------
Numerator:
Net (loss) income $ (790) $ 1,278
Denominator:
Shares used in basic (loss) income per
share calculation 18,859 18,841
Effect of diluted securities:
Employee stock options - 602
----------------- ---------------------
Shares used in diluted (loss) income per
share calculation 18,859 19,443
================= =====================
Basic and diluted (loss) income per common share:
Net (loss) income - basic $ (0.04) $ 0.07
- diluted $ (0.04) $ 0.07
The computation of dilutive loss per share excluded anti-dilutive stock
options to purchase 501,000 shares as of March 31, 2004.
4. Line of Credit and Long-Term Liabilities
In January 2003, the Company and Webster Business Credit Corporation,
then known as Whitehall Business Credit Corporation ("Webster"), entered into
the Third Amended and Restated Revolving Credit and Security Agreement (as
amended, collectively, the "Credit Facility"). The Credit Facility provides a
$15.0 million revolving credit facility that matures on January 23, 2006. The
Credit Facility allows the Company to borrow up to $15.0 million based upon a
borrowing base formula as defined in the agreement (principally 85% of
"eligible" accounts receivable). The Credit Facility bears interest at Webster's
"Alternative Base Rate" plus one-half percent (a total of 4.5% per annum at
March 31, 2004), or LIBOR plus three percent, and is secured by all the assets
of the Company and its subsidiaries.
7
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
The Credit Facility contains certain financial covenants that must be
met by the Company on a consolidated basis, among which are a minimum "Net
Worth", a minimum "Fixed Charge Coverage Ratio", a capital expenditure
limitation and a minimum EBITDA, as such terms are defined in the Credit
Facility. The Company was in compliance with such financial covenants at March
31, 2004, except for the minimum "Fixed Charge Coverage Ratio" and minimum
EBITDA. On May 17, 2004, the Company secured a waiver from Webster for these
covenant violations. As consideration for the waiver, among other things, the
Company has agreed to reduce the revolving credit facility to $10.0 million from
$15.0 million.
Because of the requirement to maintain a lock box arrangement with
Webster and Webster's ability to invoke a subjective acceleration clause at its
discretion, borrowings under the Credit Facility are classified as current at
March 31, 2004, and December 31, 2003, in accordance with EITF 95-22.
The revolving loan balances outstanding under the Credit Facility were
$3.9 million and $4.1 million at March 31, 2004, and December 31, 2003,
respectively. There were letters of credit outstanding under the Credit Facility
of $0.7 million at March 31, 2004 and December 31, 2003. As of March 31, 2004,
the SPAR Group had unused availability under the Credit Facility of $1.1 million
out of the remaining maximum $11.1 million unused revolving line of credit after
reducing the borrowing base by the outstanding loans and letters of credit.
5. Related-Party Transactions
Mr. Robert G. Brown, a Director, the Chairman, President and Chief
Executive Officer and a major stockholder of the Company, and Mr. William H.
Bartels, a Director, the Vice Chairman and a major stockholder of the Company
(collectively, the "SMS Principals"), are executive officers and the sole
stockholders and directors of SPAR Marketing Services, Inc. ("SMS"), SPAR
Management Services, Inc. ("SMSI"), and SPAR Infotech, Inc. ("SIT").
As consideration for Webster's waiver as of March 31, 2004 (See Note 4
- - Line of Credit and Long-Term Liabilities), the SMS Principals have provided
personal guarantees to Webster that the Company's obligations will be paid in
accordance with the terms of the Credit Facility. However, the guarantees from
the SMS Principals are limited to a maximum of $1.0 million, with Mr. Brown
limited to $600,000 and Mr. Bartels limited to $400,000. These guarantees will
remain in effect until the Company has achieved certain financial criteria.
For the 3-month period ended March 31, 2004, SMS provided approximately
92% of the Company's field representatives (through its independent contractor
field force), and SMSI provided approximately 95% of the Company's field
management. Pursuant to the Amended and Restated Field Service Agreement dated
as of January 1, 2004 (the "Field Service Agreement"), SMS provides the services
of approximately 6,000 field representatives to the Company at its request from
time to time, for which the Company has agreed to reimburse SMS for all of its
costs of providing those services and to pay SMS a premium equal to 4% of such
costs. Pursuant to the terms of the Amended and Restated Field Management
Agreement dated as of January 1, 2004 (the "Field Management Agreement"), SMSI
provides approximately 70 full-time national, regional and district managers to
the Company at its request, from time to time, for which the Company has agreed
to reimburse SMSI for all of its costs of providing those services and to pay
SMSI a premium equal to 4% of such costs, except that for 2004 SMSI agreed (as
an accommodation to the Company) to not be paid for certain administrative costs
(which concession saved the Company approximately $145,000 for the 3-month
period ended March 31, 2004). The SMS Principals were not paid any salaries as
officers of SMS or SMSI for the 3-month period ended March 31, 2004, so there
were no salary reimbursements for them included in such costs or
8
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
premium. However, since SMS and SMSI are "Subchapter S" corporations, the SMS
Principals benefit from any income of such companies allocated to them.
SIT provided substantially all of the Internet computer programming
services to the Company for the 3-month period ended March 31, 2004. Pursuant to
the Amended and Restated Programming and Support Agreement dated as of January
1, 2004 (the "Programming and Support Agreement"), SIT continues to provide
programming services to the Company at its request, from time to time, for which
the Company has agreed to pay SIT competitive hourly wage rates for time spent
on Company matters and to reimburse the related out-of-pocket expenses of SIT
and its personnel. No hourly charges or business expenses for the SMS Principals
were charged to the Company for the 3-month period ended March 31, 2004.
However, since SIT is a "Subchapter S" corporation, the SMS Principals benefit
from any income of such company allocated to them.
Through arrangements with the Company, SMS, SMSI and SIT participate in
various benefit plans, insurance policies and similar group purchases by the
Company, for which the Company charges them their allocable shares of the costs
of those group items and the actual costs of all items paid specifically for
them.
The following transactions occurred between the SPAR Companies and the
above affiliates (in thousands):
Three Months Ended
------------------
March 31, March 31,
2004 2003
------------------
Services provided by affiliates:
SMS: Independent contractor field services $6,361 $7,697
====== ======
SMSI: Field management services $1,354 $1,759
====== ======
SIT: Internet and computer programming services $ 381 $ 406
====== ======
Reimbursed costs from affiliates $ 263 $ 97
====== ======
Accrued expenses due to affiliates (in thousands):
March 31,
2004 2003
------------------
SMS $1,576 $2,030
====== ======
9
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
6. Stock Options
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock Based Compensation, requires disclosure of the fair value method of
accounting for stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair value
of the award and is recognized over the service period, which is usually the
vesting period. The Company has chosen, under the provisions of SFAS No. 123, to
continue to account for employee stock-based transactions under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
Under the disclosure-only provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, as amended by SFAS 148, no compensation cost has been
recognized for the stock option grants to Company employees. Compensation cost
for the Company's option grants to Company employees has been determined based
on the fair value at the grant date consistent with the provisions of SFAS No.
123, the Company's net (loss) income and pro forma net (loss) income per share
from operations would have been reduced to the adjusted amounts indicated below
(in thousands, except per share data):
Three Months Ended
-------------------
March 31, March 31,
2004 2003
------ ------
Net (loss) income, as reported $ (790) $1,278
Stock based employee compensation expense
under the fair market value method 156 315
------ ------
Adjusted pro forma net (loss) income $ (946) $ 963
Basic and diluted net (loss) income per share, as reported $(0.04) $ 0.07
Basic and diluted adjusted pro forma net (loss) income $(0.05) $ 0.05
per share, after adjustment for stock based
employee compensation expense under the fair market
value method
The pro forma effect on net (loss) income is not representative of the
pro forma effect on net (loss) income in future years because the options vest
over several years and additional awards may be made in the future.
10
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
For the three months ended March 31, 2004, there was no expense under
the provision of SFAS No. 123 dealing with stock options to non-employees for
stock option grants that were awarded to the employees of the Company's
affiliates resulting from the decrease in the market price from December 31,
2003 to March 31, 2004. The Company determines the fair value of the options
granted to non-employees using the Black-Scholes valuation model and expenses
that value over the service period. Until an option is vested, the fair value of
the option continues to be updated through the vesting date. The options granted
have a ten (10) year life and vest over four-year periods at a rate of 25% per
year, beginning on the first anniversary of the date of grant.
7. Treasury Stock
As of March 31, 2004, the Company has 48,806 shares of treasury stock
at a cost of $242,504. During the three months ended March 31, 2004, the Company
utilized 27,250 shares of treasury stock for the issuance of common stock
resulting from the exercise of stock options. During the three months ended
March 31, 2003, the Company repurchased 22,899 shares of its common stock for
$78,327. Currently, the Company has no stock repurchase program in place.
8. Line of Credit and Advances due from SPAR Performance Group, Inc. (now
called STIMULYS, Inc.); Inability to Consolidate under FIN 46
In connection with the sale of SPAR Performance Group, Inc. ("SPGI"),
on June 30, 2002, the Company sold all of the stock of its subsidiary, SPGI. In
connection with the sale, SPGI entered into a term loan agreement with the
Company under which SPGI borrowed $6.0 million in term loans, which due to their
speculative nature have been fully reserved.
In connection with such sale, the Company also agreed to provide a
discretionary revolving line of credit to SPGI not to exceed $2.0 million
through September 30, 2005 (the "SPGI Revolver"). The SPGI Revolver is secured
by a pledge of all the assets of SPGI and is guarantied by its parent,
Performance Holdings, Inc. Under the SPGI Revolver terms, SPGI is required to
deposit all of its cash into the Company's lock box with Webster. The SPGI
Revolver provided for advances in excess of the borrowing base through September
30, 2003. As of October 1, 2003, the SPGI Revolver includes a borrowing base
calculation (principally 85% of "eligible" accounts receivable). In September
2003, SPGI requested and the Company agreed to provide advances of up to $1.0
million in excess of SPGI's borrowing base through September 30, 2004. In
December of 2003, SPAR Performance Group, Inc. changed its name to STIMULYS,
Inc.
At March 31, 2004, there was approximately $1.2 million advanced under
the SPGI Revolver and $70,000 in outstanding letters of credit, while the
borrowing base was approximately $0.4 million. Due to the speculative nature of
the SPGI Revolver, the Company has a reserve of approximately $800,000 against
the SPGI Revolver at March 31, 2004. The amount due under the SPGI Revolver, net
of the reserve, is included in other current assets.
11
SPAR Group, Inc.
Notes to Consolidated Financial Statements
(unaudited) (continued)
In accordance with FASB Interpretation No. 46 - Consolidation of
Variable Interest Entities (FIN 46), as a result of the term loans and revolving
advances, the Company has concluded that it is the primary beneficiary of SPGI
and is, therefore, required to consolidate SPGI in its financial statements.
However, the Company has been unable to perform certain accounting procedures
necessary to include SPGI in the consolidated financial statements, as required
by FIN 46, and has been unable to obtain the necessary permission from SPGI to
include that organization in the Company's consolidated financial statements. At
March 31, 2004, the Company's maximum loss exposure is $470,000, which
represents the amounts outstanding under the revolving line of credit in excess
of the $800,000 reserve. The Company's maximum potential loss exposure resulting
from the revolving line of credit agreement with SPGI is limited to $1.2
million, which is the $2.0 million revolving line of credit less the $800,000
reserve.
12
SPAR Group, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
Statements contained in this Quarterly Report on Form 10-Q for the
three months ended March 31, 2004 (this "Quarterly Report"), of SPAR Group, Inc.
("SGRP", and together with its subsidiaries, the "SPAR Group" or the "Company"),
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, including, in particular and
without limitation, the statements contained in the discussions under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations". Forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the Company's actual results,
performance and achievements, whether expressed or implied by such
forward-looking statements, to not occur or be realized or to be less than
expected. Such forward-looking statements generally are based upon the Company's
best estimates of future results, performance or achievement, current conditions
and the most recent results of operations. Forward-looking statements may be
identified by the use of forward-looking terminology such as "may", "will",
"expect", "intend", "believe", "estimate", "anticipate", "continue" or similar
terms, variations of those terms or the negative of those terms. You should
carefully consider such risks, uncertainties and other information, disclosures
and discussions which contain cautionary statements identifying important
factors that could cause actual results to differ materially from those provided
in the forward-looking statements.
Although the Company believes that its plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, it cannot assure that such plans, intentions or expectations will be
achieved in whole or in part. You should carefully review the risk factors
described and any other cautionary statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003, as filed with
the Securities and Exchange Commission on March 30, 2004 (the "Company's Annual
Report for 2003 on Form 10-K"), and the cautionary statements contained in this
Quarterly Report. All forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified by the risk factors (see
Item 1 - Certain Risk Factors) and other cautionary statements in the Company's
Annual Report for 2003 on Form 10-K and in this Quarterly Report. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Overview
The Company's operations are divided into two divisions: the
Merchandising Services Division and the International Division. The
Merchandising Services Division provides merchandising services, product
demonstrations, product sampling, database marketing, teleservices and marketing
research to manufacturers and retailers with product distribution primarily in
mass merchandisers, drug chains and grocery stores in the United States. The
International Division, established in July 2000, currently provides
merchandising services in Japan, Canada, Turkey and India.
13
SPAR Group, Inc.
Merchandising Services Division
The Company provides nationwide merchandising and other marketing
services to general merchandise, health and beauty care, consumer goods, home
entertainment, PC software and food products companies in drug chains, mass
merchandisers and retail grocery stores in the United States. Merchandising
services primarily consist of regularly scheduled dedicated routed services and
special projects provided at the store level for a specific retailer or multiple
manufacturers primarily under single or multi-year contracts or agreements.
Services also include stand-alone, large-scale implementations such as new store
openings, new product launches, special seasonal or promotional merchandising,
focused product support and product recalls. These services may include sales
enhancing activities such as ensuring that client products authorized for
distribution are in stock and on the shelf, adding new products that are
approved for distribution but not presently on the shelf, setting category
shelves in accordance with approved store schematics, ensuring that shelf tags
are in place, checking for the overall salability of client products and setting
new and promotional items, placing and/or removing point of purchase and other
related media advertising. Specific in-store services can be initiated by
retailers or manufacturers, and include new store openings, new product
launches, special seasonal or promotional merchandising, focused product support
and product recalls. In 2003, the Company added in-store product demonstration
and in-store product sampling services to its merchandising service offerings.
Marketing services consist of database marketing, teleservices and marketing
research.
International Division
In July 2000, the Company established its International Division,
through a wholly owned subsidiary, SPAR Group International, Inc. ("SGI"), to
focus on expanding its merchandising services business worldwide. In May 2001,
the Company entered into a 50% owned joint venture with a large Japanese
distributor to provide merchandising services in Japan. In June 2003, the
Company expanded its merchandising services into Canada through a wholly owned
subsidiary. In July 2003, the Company established a 51% owned joint venture
based in Istanbul to provide merchandising services throughout Turkey.
In April 2004, the Company announced the establishment of a joint
venture in India. The joint venture is headquartered in New Delhi and is owned
51% by the Company.
Critical Accounting Policies
The Company's critical accounting policies have been consistently
applied in all material respects and address such matters as revenue
recognition, depreciation methods, asset impairment recognition, business
combination accounting, and discontinued business accounting. While the
estimates and judgments associated with the application of these policies may be
affected by different assumptions or conditions, the Company believes the
estimates and judgments associated with the reported amounts are appropriate in
the circumstances. Three critical accounting policies are revenue recognition,
allowance for doubtful accounts and sales allowance, and internal use software
development costs.
14
SPAR Group, Inc.
Revenue Recognition
The Company's services are provided under contracts or agreements that
consist primarily of service fees and per unit fee arrangements. Revenues under
service fee arrangements are recognized when the service is performed. The
Company's per unit contracts or agreements provide for fees to be earned based
on the retail sales of client's products to consumers. The Company recognizes
per unit fees in the period such amounts become determinable and are reported to
the Company.
Allowance for Doubtful Accounts and Sales Allowance
The Company continually monitors the collectability of its accounts
receivable based upon current customer credit information and other information
available. Utilizing this information, the Company has established an allowance
for doubtful accounts of $531,000 and $515,000 at March 31, 2004 and December
31, 2003, respectively. The Company also recorded a sales allowance of $788,000
and $448,000 at March 31, 2004 and December 31, 2003, respectively, to reflect
potential customer credits.
Internal Use Software Development Costs
Under the rules of SOP 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, the Company capitalizes certain
costs incurred in connection with developing or obtaining internal use software.
Capitalized software development costs are amortized over three years.
The Company capitalized $184,651 and $212,896 of costs related to
software developed for internal use in the three months ended March 31, 2004 and
2003, respectively.
15
SPAR Group, Inc.
Results of Operations
Three months ended March 31, 2004 compared to three months ended March 31, 2003
The following table sets forth selected financial data and data as a
percentage of net revenues for the periods indicated (in thousands except
percent data).
Three Months Ended
-----------------------------------------------------------------
March 31, 2004 March 31, 2003
---------------------- ---------------------
(Decrease)
Amount % Amount % Increase %
-------- ----- -------- ----- ----------
Net revenues $ 12,803 100.0% $ 18,739 100.0% (31.7)%
Cost of revenues 8,694 67.9% 11,251 60.0% (22.7)%
Selling, general and administrative expense 4,967 38.8% 4,943 26.4% 0.5%
Depreciation and amortization 362 2.8% 378 2.0% (4.2)%
Interest expense 34 0.3% 68 0.4% (50.0)%
Other expense 1 0.0% 38 0.2% (97.3)%
-------- ----- -------- -----
(Loss) income before income taxes (1,255) (9.8)% 2,061 11.0% (160.9)%
(Benefit) provision for income taxes (465) (3.6)% 783 4.2% (159.4)%
-------- ----- -------- -----
Net (loss) income $ (790) (6.2)% $ 1,278 6.8% (161.8)%
======== ===== ======== =====
Net revenues for the three months ended March 31, 2004, were $12.8
million, compared to $18.7 million for the three months ended March 31, 2003, a
decrease of 31.7%. The decrease in net revenues resulted primarily from
decreased project revenue from a particular client, reduced business from the
Company's second largest customer for whom the Company will no longer provide
service subsequent to March 31, 2004 and reduced per unit fee revenue primarily
resulting from the loss of a certain customer.
16
SPAR Group, Inc.
One customer, a division of a major retailer, accounted for 44% and 28%
of the Company's net revenues for the three months ended March 31, 2004 and
2003, respectively. This customer also accounted for approximately 47% and 42%
of accounts receivable at March 31, 2004 and 2003, respectively. In April of
2004, the customer's parent company announced that they have signed definitive
agreements for the sale of this business. There can be no assurances that the
purchasers will continue to use the services of the Company. The loss of this
business could have a material adverse effect on the Company's business, results
of operations and financial condition.
For the three months ended March 31, 2003, a second customer accounted
for 14% of net revenue as a result of a particular project. This project did not
recur in 2004 and, as a result, this customer's net revenues were less than 10%
of total net revenues for the three months ended March 31, 2004. A third
customer accounted for 11% of the Company's net revenue for the three months
ended March 31, 2003. This customer's net revenues were significantly reduced
and fell before 10% of total net revenues for the three months ended March 31,
2004. Subsequent to March 31, 2004, the Company will no longer provide service
to this customer.
In addition, approximately 15% and 16% of the Company's net revenues
for the three months ended March 31, 2004 and 2003, respectively, resulted from
merchandising services performed for manufacturers at Kmart retail stores. Kmart
filed for protection under the U.S. Bankruptcy Code in January of 2002 and
emerged from bankruptcy in May of 2003. During its time in bankruptcy, Kmart
closed a number of stores in the United States. While the Company's customers
and the resultant contractual relationships are with various manufacturers and
not Kmart, a significant reduction of this retailer's stores or cessation of
this retailer's business would negatively impact the Company. As of August 31,
2003, one customer discontinued its merchandising programs with the Company.
Some, but not all, of these programs were performed at Kmart stores. This
customer accounted for 15% of the business generated from Kmart for the three
months ended March 31, 2003.
Failure to attract new large customers could significantly impede the
growth of the Company's revenues, which could have a material adverse effect on
the Company's future business, results of operations and financial condition.
Cost of revenues from operations consists of in-store labor and field
management wages, related benefits, travel and other direct labor-related
expenses. Cost of revenues as a percentage of net revenues was 67.9% for the
three months ended March 31, 2004, compared to 60.0% for the three months ended
March 31, 2003. The increase is primarily a result of certain fixed field costs
that did not decrease with the lower volume as well as higher cost programs.
Approximately 89% and 84% of cost of revenues were purchased from the
Company's affiliate, SMS, in the three months ended March 31, 2004 and 2003,
respectively, and substantially all of the field management services were
purchased from the Company's affiliate, SMSI, during those periods (See note 5
to the Financial Statements in this Quarterly Report).
17
SPAR Group, Inc.
Operating expenses include selling, general and administrative expenses
as well as depreciation and amortization. Selling, general and administrative
expenses include corporate overhead, project management, information technology,
executive compensation, human resource expenses, legal and accounting expenses.
The following table sets forth the operating expenses as a percentage of net
revenues for the time periods indicated (in millions except percent data):
Three Months Ended
---------------------------------------------------------
Increase
March 31, 2004 March 31, 2003 (Decrease)
---------------- ---------------- --------------
Amount % Amount % %
------ ---- ------ ---- --------------
Selling, general and administrative $ 4.9 38.8% $ 4.9 26.4% 0.5%
Depreciation and amortization $ 0.4 2.8% $ 0.4 2.0% (4.2)%
Selling, general and administrative expenses were $4.9 million for the
three months ended March 31, 2004 and 2003, respectively. For the three months
ended March 31, 2004, the Company reduced selling, general and administrative
costs by $450,000 versus the same period in 2003. These savings were offset by
the selling, general and administrative costs associated with acquisitions
during 2003. As a result, selling, general and administrative costs for the
three months ending March 31, 2004 were consistent with the prior period.
Other Expense
Other expense represents the Company's share in the Japanese joint
venture loss totaling approximately $1,000 and $38,000 for the three months
ended March 31, 2004 and 2003, respectively.
Income Taxes
The income tax (benefit) provision represents a combined federal and
state income tax rate of 37% and 38% for the three months ended March 31, 2004
and 2003, respectively.
Net Income
The Company had a net loss of $0.8 million for the three months ended
March 31, 2004, or $0.04 per diluted share, compared to net income of $1.3
million, or $0.07 per diluted share, for the corresponding period last year.
Liquidity and Capital Resources
In the three months ended March 31, 2004, the Company had a net loss of
$0.8 million. Net cash provided by operating activities for the three months
ended March 31, 2004, was $0.9 million, compared with net cash provided by
operations of $45,000 for the three months ended March 31, 2003. The cash
provided by operating activities in 2004 was primarily a result of decreases in
accounts
18
SPAR Group, Inc.
receivable and increases in accrued expenses due to affiliates significantly
offset by net operating losses, increases in prepaid expenses, other assets and
deferred taxes and decreases in accounts payable, accrued expenses and other
current liabilities.
Net cash used in investing activities for the three months ended March
31, 2004, was $0.8 million, compared with net cash used in investing activities
of $0.5 million for the three months ended March 31, 2003. The cash used in
investing activities in 2004 resulted from the acquisition of businesses and
purchases of property and equipment.
Net cash used in financing activities for the three months ended March
31, 2004, was $0.1 million, compared with net cash provided by financing
activities of $0.4 million for the three months ended March 31, 2003. The cash
used in financing activities in 2004 was primarily a result of net payments on
the line of credit.
The above activity resulted in no change in cash and cash equivalents
for the three months ended March 31, 2004, as the Company utilizes excess cash
to pay down its line of credit.
At March 31, 2004, the Company had positive working capital of $3.3
million, as compared to a positive working capital of $4.1 million at December
31, 2003. The decrease in working capital is due primarily to decreases in
accounts receivable, increases in accounts payable and accrued expenses due to
affiliates, partially offset by increases in prepaid expenses and deferred taxes
and decreases in accrued expenses. The Company's current ratio was 1.32 at March
31, 2004, and 1.35 at December 31, 2003.
In January 2003, the Company and Webster Business Credit Corporation,
then known as Whitehall Business Credit Corporation ("Webster"), entered into
the Third Amended and Restated Revolving Credit and Security Agreement (as
amended, collectively, the "Credit Facility"). The Credit Facility provides a
$15.0 million revolving credit facility that matures on January 23, 2006. The
Credit Facility allows the Company to borrow up to $15.0 million based upon a
borrowing base formula as defined in the agreement (principally 85% of
"eligible" accounts receivable). The Credit Facility bears interest at Webster's
"Alternative Base Rate" plus one-half percent (a total of 4.5% per annum at
March 31, 2004), or LIBOR plus three percent, and is secured by all the assets
of the Company and its subsidiaries.
The Credit Facility contains certain financial covenants that must be
met by the Company on a consolidated basis, among which are a minimum "Net
Worth", a minimum "Fixed Charge Coverage Ratio", a capital expenditure
limitation and a minimum EBITDA, as such terms are defined in the Credit
Facility. The Company was in compliance with such financial covenants at March
31, 2004, except for the minimum "Fixed Charge Coverage Ratio" and minimum
EBITDA. On May 17, 2004, the Company secured a waiver from Webster for these
covenant violations. As consideration for the waiver, among other things, the
Company has agreed to reduce the revolving credit facility to $10.0 million from
$15.0 million.
Because of the requirement to maintain a lock box arrangement with
Webster and Webster's ability to invoke a subjective acceleration clause at its
discretion, borrowings under the Credit Facility are classified as current at
March 31, 2004 and December 31, 2003, in accordance with EITF 95-22.
The revolving loan balance outstanding under the Credit Facility were
$3.9 million and $4.1 million at March 31, 2004 and December 31, 2003,
respectively. There were letters of credit outstanding under the Credit Facility
of $0.7 million at March 31, 2004 and December 31, 2003. As of March 31, 2004,
the SPAR Group had unused availability under the Credit Facility of
19
SPAR Group, Inc.
$1.1 million out of the remaining maximum $11.1 million unused revolving line of
credit after reducing the borrowing base by outstanding loans and letters of
credit.
Management believes that based upon the Company's current working
capital position and the existing credit facilities, funding will be sufficient
to support ongoing operations over the next twelve months. However, delays in
collection of receivables due from any of the Company's major clients, or a
significant reduction in business from such clients, or the inability to acquire
new clients or the Company's inability to return to profitability, could have a
material adverse effect on the Company's cash resources and its ongoing ability
to fund operations.
In connection with the sale of SPGI on June 30, 2002, the Company
agreed to provide a discretionary revolving line of credit to SPGI not to exceed
$2.0 million (the "SPGI Revolver") through September 30, 2005. The SPGI Revolver
is secured by a pledge of all the assets of SPGI and is guarantied by SPGI's
parent, Performance Holdings, Inc. The SPGI Revolver provided for advances in
excess of the borrowing base through September 30, 2003. As of October 1, 2003,
the SPGI Revolver was adjusted, as per the agreement, to include a borrowing
base calculation (principally 85% of "eligible" accounts receivable). In
September 2003, SPGI requested and the Company agreed to provide advances of up
to $1.0 million in excess of the borrowing base through September 30, 2004. At
March 31, 2004, there was approximately $1.2 million borrowed under the SPGI
Revolver and $70,000 in outstanding letters of credit, while the borrowing base
was approximately $0.4 million. Under the SPGI Revolver terms, SPGI is required
to deposit all of its cash to the Company's lock box.
Certain Contractual Obligations
The following table contains a summary of certain of the Company's
contractual obligations by category as of March 31, 2004 (in thousands).
Contractual Obligations Payments due by Period
- --------------------------------------------------------------------------------------------------------------------
Total Less than 1 1-3 years 3-5 years More than 5
year years
- --------------------------------------------------------------------------------------------------------------------
New Credit Facility $3,889 $3,889 $ - $ - $ -
- --------------------------------------------------------------------------------------------------------------------
Operating Lease Obligations 1,955 858 1,009 88 0
- --------------------------------------------------------------------------------------------------------------------
Total $5,844 $4,747 $1,009 $ 88 $ 0
- --------------------------------------------------------------------------------------------------------------------
In addition to the above table, the Company had agreed to provide a
discretionary line of credit to SPGI not to exceed $2.0 million through
September 30, 2005. Outstanding loans to SPGI under the discretionary line of
credit totaled $1.2 million at March 31, 2004. The Company also had $737,337 in
outstanding Letters of Credit at March 31, 2004.
In May 2001, the Company and Paltac, Inc. ("Paltac"), a large Japanese
distributor, entered into a joint venture to create a Japanese company, SPAR FM.
SPAR FM entered into a 300 million Yen Revolving Credit Agreement with a
Japanese bank. The bank required Paltac guarantee the outstanding balance on the
revolving credit facility. As part of the joint venture agreement, should Paltac
be required
20
SPAR Group, Inc.
to make a payment on its guarantee to the bank, then the Company has
agreed to remit to Paltac 50% of any such payment up to a maximum of 150 million
Yen or approximately $1.4 million. As of March 31, 2004, SPAR FM has borrowed
100 million Yen under its Revolving Credit Agreement. Therefore, the Company's
current exposure to Paltac respecting outstanding loans to SPAR FM at March 31,
2004 would be 50 million Yen or approximately $0.5 million.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk related to the variable interest
rate on the line of credit and the variable yield on its cash and cash
equivalents. The Company's accounting policies for financial instruments and
disclosures relating to financial instruments require that the Company's
consolidated balance sheets include the following financial instruments: cash
and cash equivalents, accounts receivable, accounts payable and long term debt.
The Company considers carrying amounts of current assets and liabilities in the
consolidated financial statements to approximate their fair value because of the
relatively short period of time between their origination and their expected
realization. The Company monitors the risks associated with interest rates. The
Company's investment policy objectives require the preservation and safety of
the principal, and the maximization of the return on investment based upon the
safety and liquidity objectives.
Currently, the Company's international operations are not material and,
therefore, the risk related to foreign currency exchange rates is not material.
The Company has no derivative financial instruments or derivative
commodity instruments in its cash and cash equivalents and investments. Excess
cash is normally used to pay down its revolving line of credit.
Item 4. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) as of the end of the period
covering this report. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to provide reasonable assurance that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified by the Securities and Exchange Commission's rules and
forms. There were no material changes in the Company's internal control over
financial reporting during the first quarter of 2004.
21
SPAR Group, Inc.
CODES OF ETHICS
The Company has adopted codes of ethics that apply to its Directors,
Officers and Employees. They are contained in the SPAR Group Code of Ethical
Conduct for its Directors, Senior Executives and Employees Dated (as of) May 1,
2004 (the "Ethics Code"), and the SPAR Group Statement of Policy Regarding
Personal Securities Transactions in SGRP Stock Amended Non-Public Information
Dated, Amended and Restated as of May 1, 2004 (the "Securities Policy"). The
Company has filed copies of the Ethics Code and Securities Policy as Exhibits to
its Periodic Report on Form 8-K, dated May 1, 2004, filed with the U.S.
Securities and Exchange Commission on May 5, 2004.
22
SPAR Group, Inc.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
No change.
Item 2: Changes in Securities and Use of Proceeds
Item 2(a): Not applicable
Item 2(b): Not applicable
Item 2(c): Not applicable
Item 2(d): Not applicable
Item 3: Defaults upon Senior Securities
Item 3(a): Defaults under Indebtedness: None.
Item 3(b): Defaults under Preferred Stock: Not Applicable.
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5: Other Information
In February 2004, the Company's Audit Committee approved the
Field Service Agreement, Field Management Agreement and
Programming and Support Agreement effective as of January 1,
2004, which amended, restated and completely replaced the
predecessor agreements pursuant to which SMS, SMSI and SIT had
previously provided their respective services to the Company. The
Company has filed copies of the Field Service Agreement, Field
Management Agreement and Programming and Support Agreement as
Exhibits 10.1, 10.2 and 10.3, respectively, to this quarterly
report on Form 10-Q for the fiscal quarter ending March 31, 2004.
These restated agreements extended the previous contract
maturities for four years, strengthened various contractual
provisions and continued the basic economic terms of the previous
agreements, except that the restated Field Management Agreement
provides for a temporary reduction in SMSI's fees for 2004 by
excluding certain administrative costs as described above. The
Company's agreements and other arrangements with SMS, SMSI and
SIT are periodically reviewed by the Company's Audit Committee,
which review includes an examination of the overall fairness of
the arrangements and the resulting income (if any) to the SMS
Principals.
23
SPAR Group, Inc.
Item 6: Exhibits And Reports On Form 8-K.
Exhibits.
10.1 Amended and Restated Field Service Agreement dated and
effective as of January 1, 2004, by and between SPAR Marketing
Services, Inc., SPAR Marketing Force, Inc., as filed herewith.
10.2 Amended and Restated Field Management Agreement dated and
effective as of January 1, 2004, by and between SPAR
Management Services, Inc., and SPAR Marketing Force, Inc., as
filed herewith.
10.3 Amended and Restated Programming and Support Agreement dated
and effective as of January 1, 2004, by and between SPAR
InfoTech, Inc., and SPAR Marketing Force, Inc., as filed
herewith.
31.1 Certification of the CEO pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, as filed herewith.
31.2 Certification of the CFO pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, as filed herewith.
32.1 Certification of the CEO pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, as filed herewith.
32.2 Certification of the CFO pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, as filed herewith.
Reports On Form 8-K.
1. Periodic Report on Form 8-K, dated March 26, 2004 filed with
the U.S. Securities and Exchange Commission on March 26, 2004,
respecting the earnings press release for 2003.
2. Periodic Report on Form 8-K, dated May 1, 2004, filed with the
U.S. Securities and Exchange Commission on May 5, 2004,
respecting the adoption and filing of the SPAR Group Code of
Ethical Conduct for its Directors, Senior Executives and
Employees Dated (as of) May 1, 2004, and the SPAR Group
Statement of Policy Regarding Personal Securities Transactions
in SGRP Stock and Non-Public Information Dated, Amended and
Restated as of May 1, 2004.
3. Periodic Report on Form 8-K, dated May 14, 2004, filed with
the U.S. Securities and Exchange Commission on May 14, 2004,
respecting the earnings press release for the quarter ended
March 31, 2004.
24
SPAR Group, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 18, 2004 SPAR Group, Inc., Registrant
By: /s/ Charles Cimitile
--------------------
Charles Cimitile
Chief Financial Officer and duly
authorized signatory
25
EXHIBIT 10.1
AMENDED AND RESTATED FIELD SERVICE AGREEMENT
This Amended and Restated Field Service Agreement dated and
effective as of January 1, 2004 (as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided herein,
this "Agreement"), is by and between SPAR Marketing Services, Inc., a Nevada
corporation ("SMS"), and SPAR Marketing Force, Inc., a Nevada corporation (the
"Company"). SMS and the Company may be referred to individually as a "Party" and
collectively as the "Parties".
Recitals
SMS and the Company are parties to a Service Agreement dated
as of January 4, 1999 (as the same may have been supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein,
the "Existing Service Agreement"), pursuant to which SMS has provided and
currently provides certain field representative, scheduling and management
services to the Company and (through the Company) SPAR Group, Inc., and its
subsidiaries (together with the Company, each a "SPAR Company" and collectively
the "SPAR Companies"), which scheduling and management services have been
delegated to and performed by its affiliate, SPAR Management Services, Inc.
("SMSI"). SMSI will now enter into a direct agreement with the Company
respecting such scheduling and management services. The Company and SMS have
agreed to update the terms and conditions on which SMS will continue to provide,
on a nonexclusive basis, the field representative services described below on
behalf of the SPAR Companies with respect to in-store merchandising and related
services at the stores and other locations of the customers of the SPAR
Companies as a SPAR Company may from time to time request (collectively,
"Stores") within the continental United States and Canada and such other places
as they may mutually agree (the "Territory"), all upon the terms and provisions
and subject to the conditions hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties hereto hereby agree as follows:
Section 1. Term. This Agreement shall commence upon the date
hereof, and shall continue through December 31, 2007, and shall be automatically
renewed and continue for additional one year periods thereafter (the "Term"),
unless and until (a) either Party gives the other written notice at least sixty
days prior to December 31 of any year (commencing in 2007) of its desire to not
renew this Agreement, or (b) this Agreement is sooner terminated pursuant to
Section 5 hereof.
Section 2. Merchandising and Related Services. During the
Term, SMS shall stock, restock and replenish merchandise and perform other
merchandising and related activities and services requested from time to time by
the Company (the "Merchandising Services") in Stores within the Territory on
behalf of the Company and the Company's affiliates as they may from time to time
request for themselves or their customers, and (b) all related services
(together with the Merchandising, the "Services"). Any merchandise needed for
the Merchandising Services shall be delivered to the Stores (or at such other
location as may be mutually agreed upon by the Parties with respect to any
particular task) from time to time by or on behalf the Company or the applicable
customers, all at no cost and expense to SMS. The Company and SMS shall in good
faith establish and implement mutually acceptable procedures for the scheduling
and coordination of the performance of the Services.
Section 3. Cost Plus Compensation. Except as otherwise
provided in the second and third sentences of this Section 3, the Company shall
compensate SMS for the performance of the Services for the SPAR Companies in an
amount equal to (a) all costs and expenses reasonably incurred by SMS in
performing the Services for the SPAR Companies pursuant hereto, including
(without limitation) any and all independent contractor payments, wages and
other employment costs of all personnel, travel and other reimbursable field and
administrative out of pocket costs and expenses, purchases of equipment and
supplies, depreciation and amortization, courier, postage and special mailing
charges, rent, utilities, and other overhead (the "Services Costs"), plus (b)
four percent of the sum of the items in clause (a), above (collectively with the
Services Costs, the "Services Compensation"); provided, however, that the
Services Costs shall include any payroll and employment taxes payable to field
employees with respect to Services performed after the date hereof. The Company
and SMS acknowledge and agree the stockholders of have entered into a Limited
Indemnification Agreement dated as of July 8, 1999 (the "Indemnity Agreement")
in connection with the consummation of the transactions contemplated by the
Merger Agreement (as such term is defined in the Indemnity Agreement).
Notwithstanding the provisions of
-1-
this Section 3 or any other provision of this Agreement, the Company shall not
be required to compensate SMS for or otherwise pay or reimburse (and Services
Costs shall not include) any amount with respect to which the stockholders of
SMS (i) would have been required to indemnify, defend and hold harmless any
Merger Party (as such term is defined in the Indemnity Agreement) pursuant to
the Indemnity Agreement were it executed and effective as of the date of this
Agreement, or (ii) are required to indemnify, defend and hold harmless any
Merger Party pursuant to the Indemnity Agreement after it is executed and
becomes effective (collectively, "Indemnified Amounts").
Section 4. Payments. The Company shall pay to SMS by wire
transfer a monthly retainer of $250,000 (as adjusted from time to time by the
mutual agreement of the Parties) on or before the first of each month on account
of the Services Compensation respecting the estimated administrative and
overhead costs of performing the Services (i.e., the Services Compensation other
than the field personnel costs). SMS shall invoice the Company weekly for all
field personnel costs, and such invoices shall be paid by the Company by wire
transfer to SMS within two business days after receipt thereof. SMS may from
time to time, and at least once per quarter shall, reconcile the retainer and
field personnel payments and invoice the Company for any shortfall, or credit
the Company's future invoices for any excess, in the Services Compensation
received by SMS during the calculation period. The Company shall have the right
at its own cost and expense to audit such costs and expenses from time to time
upon reasonable notice to SMS, provided that the audit shall be conducted in a
manner that is not unreasonably disruptive of SMS's business.
Section 5. Early Termination. Notwithstanding any provision to
the contrary contained herein, either Party shall have the right to terminate
this Agreement: (a) at any time for any reason or no reason upon six (6) months
prior written notice to the other Party; (b) upon ten (10) business days prior
written notice to the other Party in the event such other Party material
breaches this Agreement and fails to cure such breach within thirty (30) days
after notice of such breach from the terminating Party; or (c) upon ten (10)
business days prior written notice from the terminating Party to the other Party
in the event of (i) any voluntary or involuntary filing or submission of any
petition or other document for relief, bankruptcy, insolvency, receivership or
other remedy by or with respect to such other Party, or (ii) the existence of
any case, action, suit, or proceeding by or with respect to such other Party,
whether voluntary or involuntary, under the United States Bankruptcy Code, as
amended, or any other present or future federal, state, provincial or foreign
applicable law respecting bankruptcy, reorganization, insolvency, readjustment
of debts, relief of debtors, dissolution or liquidation.
Section 6. Force Majeure. Notwithstanding any other term or
provision of this Agreement, no Party shall be responsible for or be in breach
of or default under this Agreement for any performance delay or failure that is
the result of any and all acts of God and other acts, events, circumstances,
impediments or occurrences beyond the control of the delayed person (each a
"Force Majeure"), including (without limitation) any (i) accident or mishap not
caused by the delayed person, (ii) assault, attack, battle, blockade, bombing,
embargo, police action, siege or other act of defense, offense, terrorism or war
(whether or not declared), in each case whether civilian, militia, military or
otherwise and whether domestic or foreign, (iii) governmental regulation or
decree or other act or failure to act of any governmental authority or other
regulatory body, in each case whether civil, military or otherwise and whether
domestic or foreign, (iv) earthquake, explosion, fire, flood, hurricane or other
natural or man-made calamity or disaster, (v) epidemic, environmental
contamination or other natural or man-made pestilence or toxic exposure (whether
biological, chemical, radiological or otherwise), or any quarantine or other
restriction arising therefrom, (vi) failure of, interruption in or impairment of
any delivery, internet, mail, monetary, power, telecommunication, transmission,
transportation or utility system or any other service, product or equipment
provided or maintained by a third party, (vii) lockout, strike or similar labor
interruptions, (viii) insurrection, riot or other civil disturbance, (ix)
hacking or other unauthorized access, spamming, virus, trojan or other
unauthorized program, or other computer or technological tampering or attack, or
(x) sabotage or other criminal or intentionally disruptive third party act, in
each case together with any and all consequential disruptions, delays, effects
or other acts, events, circumstances, impediments or occurrences and
irrespective of how localized or widespread. Upon prompt notice to the other
Party, the Party affected by any Force Majeure shall be excused from performance
hereunder to the extent and for so long as its performance hereunder is
prevented or restricted by a Force Majeure (and the other Party shall likewise
be excused from performance of its obligations hereunder relating to such
delayed or failed performance to the same extent and for the same duration);
provided that the Party so affected shall use reasonable efforts (without
increased cost) to avoid, mitigate or remove such Force Majeure and to minimize
the consequences thereof, and both Parties shall resume performance hereunder
with the utmost dispatch whenever such non-performance causes are removed.
Section 7. General Representations of the Parties. Each Party
represents and warrants to the other Party that, as of the date hereof and as of
the date of each extension, modification or
-2-
amendment of this Agreement, and covenants and agrees with the other Party that
for so long as products and services are being provided by SMS to the Company or
any of its affiliates under this Agreement: (a) such Party is and will continue
to be a corporation or other entity duly organized, validly existing and in good
standing under the laws of its state of organization and maintains its chief
executive office at the address(es) set forth for it either on the signature
page to this Agreement or in the introduction thereto, or as otherwise set forth
in a written notice to the other Party; (b) such Party has and will maintain the
legal capacity, power, authority and unrestricted right to execute and deliver
this Agreement and to perform all of its obligations hereunder; (c) the
execution and delivery by such Party of this Agreement and the performance by
such Party of all of its obligations hereunder will not violate or be in
conflict with any term or provision of (i) any applicable law, (ii) any
judgment, order, writ, injunction, decree or consent of any court or other
judicial authority applicable to such Party or any material part of such Party's
assets and properties, (iii) any of the organizational or governing documents of
such Party, or (iv) any material agreement, document or obligation to which it
is a Party, and such Party will not adopt any such conflicting organizational or
governing document or enter into any such conflicting agreement, document or
obligation; (d) no consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition precedent, concurrent or subsequent to or in connection
with the due and valid execution, delivery and performance by such Party of this
Agreement or the legality, validity, binding effect or enforceability of any of
the terms and provisions of this Agreement; (e) this Agreement is a legal, valid
and binding obligation of such Party, enforceable against such Party in
accordance with their respective terms and provisions; (f) the Services will not
be requested, provided or used for any illicit or illegal business or scheme;
(g) the financial information (if any) respecting the Customer furnished to SPAR
is complete, accurate and fairly presents the financial condition of the
Customer; (h) the information furnished or to be furnished by or on behalf of a
Party to the other Party does not and will not contain a misstatement of a
material fact or omit to state a material fact required to be stated therein in
order to make it, in the light of the circumstances under which made, not
misleading; and (i) each Party has independently and fully reviewed and
evaluated this Agreement and all related documents, the contemplated obligations
and transactions and the potential effects of such obligations and transactions
on the assets, business, cash flow, expenses, income, liabilities, operations,
properties, prospects, reputation, taxation or condition (financial or
otherwise) of such Party and its affiliates, which review and evaluation was
made together with the officers, directors and other representatives of such
Party, its legal counsel and (to the extent deemed prudent by such Party) other
legal counsel and financial and other advisors to such Party, and such Party
hereby absolutely, unconditionally, irrevocably, expressly and forever assumes
any and all attendant risks and waives any and all rights, claims, defenses or
objections with respect thereto.
Section 8. Independent Contractor, Non-exclusive Status, Etc.
The Parties each acknowledge and agree that SMS's sole relationship with the
Company is that of independent contractor, and that no term or provision of this
Agreement or any related document is intended to create, nor shall any such term
or provision be deemed or construed to have created, any joint venture,
partnership, trust, agency or other fiduciary relationship between the Parties
or any of their respective affiliates. No term or provision of this Agreement or
any related document is intended, or shall be deemed or construed, to in any way
(a) limit the power, authority or discretion of SMS to conduct its business in
such manner as it may choose, or (b) confer upon the Company any right, power or
privilege to control, direct, approve or otherwise affect any manner chosen by
SMS or any of its affiliates to conduct its business, irrespective of whether
any of the Services may be involved in or affected by any such conduct. Without
limiting the generality of the foregoing, SMS shall have full and exclusive
power, authority and discretion at any time and from time to time (i) to hire,
direct and discharge from time to time any and all officers, employees, agents,
brokers and other representatives of SMS (including, without limitation, the
stockholders), (ii) to engage such independent contractors, affiliates and other
subcontractors as it may deem necessary or appropriate in the performance of the
Services, (iii) to exercise or otherwise enforce any of its rights, powers,
privileges, remedies or interests in whole or in part, (iv) to delay, refrain
from or discontinue any such exercise or other enforcement, (v) to perform the
same or similar services for others and pursue any and all other continuing, new
or other business opportunities of any nature or description, which may include
(without limitation,) one or more of the business activities engaged in by the
Company or its affiliates or aspects thereof, whether independently or for or
with other persons, and irrespective of location, and (vi) to allocate the time
and attention and the other resources of SMS among the Services and its various
other activities, provided that such allocation does not adversely affect the
performance of SMS hereunder in any material respect, in each case without
notice to the Company (except as otherwise expressly required hereunder), for
any reason or no reason whatsoever and whether intentionally or otherwise. The
Company shall not be required to use SMS exclusively for the provision of
Services in any Stores or otherwise at any time and may purchase Services from
any affiliate or other person without limitation or restriction of any kind.
Section 9. No Other Warranties, Waiver of Set-Off, Special
Damages, Etc. Except as otherwise expressly provided in this Agreement, the
Company (on behalf of itself and each other SPAR
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Company) acknowledges and agrees that: (a) SMS makes no representation or
warranty of any kind or nature whatsoever with respect to any product or service
provided under this Agreement, whether express or implied (either in fact, by
operation of law or otherwise), including (without limitation) no warranty as to
merchantability, fitness or usefulness for a particular purpose, title,
interference, infringement or conformance to any specifications; (b) SMS shall
not be liable or responsible for any claim, liability, loss or expense of any
SPAR Company or any other person on account of or directly or indirectly arising
from the use of any product or service furnished by or through SMS; all of which
are hereby expressly disclaimed by SMS and all of which are hereby irrevocably,
unconditionally, expressly and forever waived and released by the Company (on
behalf of itself, each other SPAR Company and all those using or receiving such
products and services through any SPAR Company); (c) none of the SPAR Companies
will seek, recover or retain any, and the Company (on behalf of itself and each
other SPAR Company) hereby irrevocably, unconditionally, expressly and forever
waives any and all, special, exemplary, punitive, statutory and/or consequential
damages (whether through action, suit, counterclaim or otherwise and whether in
contract, tort, strict liability or otherwise) to the extent waiver is not
limited under applicable law; and (d) the Company will not exercise or enforce,
and the Company (on behalf of itself and each other SPAR Company) hereby
irrevocably, unconditionally, expressly and forever waives, any right of setoff,
recoupment, abatement or reduction that may now or hereafter be accorded to it
(whether under this Agreement, applicable law or otherwise) against or in
respect of any payment due (whether as scheduled or required, upon demand or as
sought in any action, suit or proceeding) to or for the benefit of SMS or any
SMS Affiliate under this Agreement or applicable law, except to the extent
required as a compulsory counterclaim in any related ongoing proceeding, and the
Company will pursue separate exercise and enforcement thereof.
Section 10. Indemnification. (a) The Company, its affiliates and their
respective officers, employees, independent contractors, agents, brokers and
other representatives (a "MF Indemnified Person") shall not incur any liability
for any acts or omissions (and the other Party hereby absolutely,
unconditionally, irrevocably and expressly waives and releases forever any and
all related claims and actions against each MF Indemnified Person), and each
shall be indemnified, reimbursed and held harmless by SMS upon demand, and
defended at the expense of SMS with counsel selected by SMS (and reasonably
acceptable to the Company), from and against, any and all claims, liabilities,
expenses (including, without limitation, the disbursements, expenses and
reasonable fees of their respective attorneys) and other losses that may be
imposed upon, incurred by or asserted against any MF Indemnified Person
resulting from, arising out of or directly or indirectly related to (i) any
Service or other activity performed by SMS or any of its representatives or (ii)
any misrepresentation, omission, breach, default or wrongdoing by SMS or any of
its representatives; in each case (A) other than to the extent occasioned by the
acts or omissions of any MF Indemnified Person materially breaching this
Agreement or any duty owed to the other Party hereunder and amounting to gross
negligence, willful misconduct or material breach of this Agreement as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction, and (B) subject to the limitations, waivers and other terms and
provisions of Sections 9 and 12 hereof (which are intended to limit this
subsection).
(b) SMS, its affiliates and their respective officers,
employees, independent contractors, agents, brokers and other representatives (a
"SMS Indemnified Person") shall not incur any liability for any acts or
omissions (and the other Party hereby absolutely, unconditionally, irrevocably
and expressly waives and releases forever any and all related claims and actions
against each SMS Indemnified Person), and each shall be indemnified, reimbursed
and held harmless by the Company upon demand, and defended at the expense of the
Company with counsel selected by the Company (and reasonably acceptable to SMS),
from and against, any and all claims, liabilities, expenses (including, without
limitation, the disbursements, expenses and reasonable fees of their respective
attorneys) and other losses that may be imposed upon, incurred by or asserted
against any SMS Indemnified Person resulting from, arising out of or directly or
indirectly related to (i) any Service or other activity performed substantially
in accordance with the directions of the Company or any of its representatives,
(ii) any product defect in or other condition of any merchandise or equipment
provided the Company, its affiliate, its customer, any Store or any of their
respective representatives or (iii) any misrepresentation, omission, breach,
default or wrongdoing by the Company or any of its representatives, but
excluding any Indemnified Amounts; in each case (A) other than to the extent
occasioned by the acts or omissions of any SMS Indemnified Person materially
breaching this Agreement or any duty owed to the other Party hereunder and
amounting to gross negligence, willful misconduct or material breach of this
Agreement as finally determined pursuant to applicable law by a governmental
authority having jurisdiction, and (B) subject to the limitations, waivers and
other terms and provisions of Sections 9 and 12 hereof (which are intended to
limit this subsection).
(c) The preceding general exculpations and indemnifications
are not intended (and shall not be deemed or construed) to in any way qualify,
condition, diminish, restrict, limit or otherwise affect any
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(and is in addition to each) other release, waiver, consent, acknowledgment,
agreement or other term or provision of this Agreement or any related document.
Section 11. Notice. Any notice, request, demand or other
communication permitted or required to be given to a Party under this Agreement
shall be in writing and shall be sent to the addressee at the address set forth
above (or at such other address as shall be designated by notice to the other
Party and Persons receiving copies), effective upon actual receipt (or refusal
to accept delivery) by the addressee on any business day or the first business
day following receipt after the close of normal business hours or on any
non-business day, by (a) FedEx (or other equivalent national or international
overnight courier) or United States Express Mail, (b) certified, registered,
priority or express United States mail, return receipt requested, (c) telecopy
or (d) messenger, by hand or any other means of actual delivery.
Section 12. Use of Electronic Systems, Responsibilities and
Waiver of Liability. The Parties desire to send and receive applications, calls,
data, emails, invoices, orders and other documents and information ("eData")
among themselves and their respective representatives by any one or more of the
following means (each an "eSystem"): (a) email or other internet communication;
(b) any internet site, whether maintained by or on behalf of a Party or
otherwise (each a "Web Site"); (c) telecopy; (d) cellular or other wireless
communication; or (e) other electronic communication; in each case whether or
not open, guarded, scrambled or encrypted. Each Party hereby authorizes and
directs the other Party to send and receive eData through any eSystem and to act
upon any request or other content of any eData received or obtained through any
eSystem by the receiving Party, any of its affiliates or any of their respective
representatives purporting to be from or on behalf of the sending Party or its
representatives, and the sending Party acknowledges and agrees that the
receiving Party or person may in good faith rely upon as accurate, authentic and
duly authorized. Each Party acknowledges and agrees that the other Party, its
affiliates and their respective representatives shall not under any circumstance
be or become responsible or liable in any way for, and each Party hereby
irrevocably, unconditionally, expressly and forever waives and releases any and
all related claims and actions against each of the other Party, its affiliates
and their respective representatives respecting, any claim, cost, expense, loss,
or liability whatsoever directly or indirectly arising from: (A) any
transmission, receipt or use of or reliance upon any eData or use of any
eSystem; (B) any unauthorized Person's use of or access to any eData, any Web
Site or any other eSystem; (C) any access, misuse or appropriation a Party's
eData or any failed, forged, altered, deciphered, intercepted, incomplete or
inaccurate transmission of any eData; (D) any eSystems, anti-virus firewalls and
security measures, their use or operation or their compatibility with any Web
Site or other eSystem of the other Party or any of its affiliates; (E) any
virus, macro or similar program or script; (F) the viability, integrity,
robustness, fitness or adequacy of any encryption, firewall or other security
measures used by a Party or any of its affiliates; (G) any eData of a Party sent
or received through or stored on the Web Site or other eSystem of the other
Party or any of its affiliates or the security or retention thereof; (H) any
failure to act on any request or other eData (1) not actually received by the
appropriate the representative, (2) that appears to be unauthorized, incomplete
or inaccurate in any respect; or (3) pending receipt from the sender of any
resubmission, clarification, confirmation or verification of any eData requested
by a Party; or (I) without limiting any applicable force majeure, (1) any error,
poor transmission or other casualty to, loss of or delay or failure in sending
or receiving any eData, or (2) any failure of any ISP or other eSystem provider.
Section 13. No Waiver by Action, Etc. Any waiver or consent
from either Party respecting any provision of this Agreement or any related
document shall be effective only in the specific instance for which given and
shall not be deemed, regardless of frequency given, to be a further or
continuing waiver or consent. The failure or delay of any Party at any time to
require performance of, or to exercise or enforce its rights or remedies with
respect to, any provision of this Agreement shall not affect such Party's right
at a later time to exercise or enforce any such provision. No notice to or
demand on any Party shall entitle such Party to any other notice or demand in
similar or other circumstances. Any acceptance by or on behalf of a Party of (A)
any partial or late payment, reimbursement or performance shall not constitute a
satisfaction or waiver of the obligation then due or the resulting default, or
(B) any payment, reimbursement or performance of any obligation during the
continuance of any default shall not constitute a waiver or cure thereof, and
the Party or its designee may accept or reject any such payment, reimbursement
or performance without affecting any obligation or any of the Party's rights,
powers, privileges, remedies and other interests under this Agreement, any
related document or applicable law. All rights, powers, privileges, remedies and
other interests of each Party hereunder are cumulative and not alternatives, and
they are in addition to (and shall not limit) any other right, power, privilege,
remedy or other interest of such Party under this Agreement, any related
document or applicable law.
Section 14. Successors and Assigns; Assignment; Intended
Beneficiaries. This Agreement and each related document shall be binding upon
and inure to the benefit of the successors, permitted assigns and legal
representatives of each Party (including, without limitation, any assignee of
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substantially all of the business or assets of any Party or any successor by
merger). Neither Party may assign any of its rights or obligations under this
Agreement or any related document to any other person without the consent of the
other Party; provided, however, that (i) either Party may assign its rights and
obligations hereunder in whole or in part to any of its affiliates (without,
however, relieving the assignor of any of its obligations hereunder) by giving
the other Party a copy of such assignment, (ii) SMS acknowledges and agrees that
the Company may request (for its account hereunder) that SMS provide services
for affiliates of the Company without the need to formally assign any rights or
obligations of the Company to such affiliates to the extent the Company remains
liable for any and all payments hereunder with respect thereto, and (iii)
nothing in this Section is intended, or shall be deemed or construed, to in any
way limit the use of independent contractors as field representatives or
managers by SMS. Without limiting the generality of the foregoing, SMS
acknowledges and agrees that the Company may pledge this Agreement and all
accounts, payment intangibles, general intangibles and other rights and interest
arising hereunder to one or more lender(s), such lender(s) shall be entitled
upon default to enforce any and all of the rights, powers, privileges, remedies
and interests of the Company as so assigned in accordance with this Agreement,
the applicable loan documents and applicable law, and such lender(s) shall not
be responsible or liable for any of the acts, omissions, duties, liabilities or
obligations of the Company or any of its affiliates under this Agreement or
otherwise. Except as otherwise provided in this Agreement, the representations,
agreements and other provisions of this Agreement are for the exclusive benefit
of the Parties hereto, and no other person (including, without limitation, any
creditor of a Party) shall have any right or claim against any Party by reason
of any of those provisions or be entitled to enforce any of those provisions
against any Party.
Section 15. Counterparts, Governing Law, Amendments, Etc. This
Agreement shall be effective on the date as of which this Agreement shall be
executed and delivered by the Parties hereto. This Agreement or any related
document may be executed in two or more counterpart copies of the entire
document or of signature pages to the document, each of which may be executed by
one or more of the Parties hereto and may be sent by fax, but all of which, when
taken together, shall constitute a single agreement binding upon all of the
Parties hereto. This Agreement and all related documents shall be governed by
and construed in accordance with the applicable laws pertaining, in the State of
New York (other than those conflict of law rules that would defer to the
substantive laws of another jurisdiction). The headings contained in this
Agreement or any related document are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement or any related document.
Each and every supplement or modification to or amendment or restatement of this
Agreement or any related document shall be in writing and signed by all of the
Parties hereto, and each and every waiver of, or consent to any departure from,
any term or provision of this Agreement or any related document shall be in
writing and signed by each affected Party hereto.
Section 16. Waiver of Jury Trial; All Waivers Intentional,
Etc. In any action, suit or proceeding in any jurisdiction brought against SMS
by the Company, or vice versa, each Party hereby absolutely, unconditionally,
irrevocably and expressly waives forever trial by jury. This waiver of jury
trial by each Party, and each other waiver, release, relinquishment or similar
surrender of rights (however expressed) made by a Party in this Agreement, has
been absolutely, unconditionally, irrevocably, knowingly and intentionally made
by such Party.
Section 17. Entire Agreement. No Party or any of its
representatives has made, accepted or acknowledged any representation, warranty,
promise, assurance, agreement, obligation or understanding (oral or otherwise)
to, with or for the benefit of the other Party or any of its representatives
other than as expressly set forth in this Agreement. This Agreement contains the
entire agreement of the Parties, amends, restates and completely replaces the
Existing Service Agreement, and supersedes and completely replaces all prior and
other communications, discussions and other representations, warranties,
promises, assurances, agreements and understandings (oral, implied or otherwise)
between the Parties, with respect to the matters contained in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement
effective as of the day and year first written above.
SPAR Marketing Services, Inc., SPAR Marketing Force, Inc.,
a Nevada corporation a Nevada corporation
By: By:
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EXHIBIT 10.2
AMENDED AND RESTATED FIELD MANAGEMENT AGREEMENT
This Amended and Restated Field Management Agreement dated and
effective as of January 1, 2004 (as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided herein,
this "Agreement"), is by and between SPAR Management Services, Inc., a Nevada
corporation ("SMSI"), and SPAR Marketing Force, Inc., a Nevada corporation (the
"Company"). SMSI and the Company may be referred to individually as a "Party"
and collectively as the "Parties".
Recitals
SMSI's affiliate, SPAR Marketing Services, Inc., a Nevada
corporation ("SMS"), and the Company are parties to a Service Agreement dated as
of January 4, 1999 (as the same may have been supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the
"Existing Service Agreement"), pursuant to which SMS has provided and currently
provides certain field representative, scheduling and management services to the
Company and (through the Company) SPAR Group, Inc., and its subsidiaries
(together with the Company, each a "SPAR Company" and collectively the "SPAR
Companies"), which scheduling and management services have been delegated to and
performed by SMSI. SMS will now enter into a restated agreement with the Company
respecting the field representative services that will continue to be provided
by SMSI. The Company and SMSI desire to memorialize the terms and conditions on
which SMSI will continue to provide, on a nonexclusive basis, the field
representative scheduling and management services described below on behalf of
the SPAR Companies with respect to in-store merchandising and related services
at the stores and other locations of the customers of the SPAR Companies as any
SPAR Company may from time to time request (collectively, "Stores") within the
continental United States and Canada and such other places as they may mutually
agree (the "Territory"), all upon the terms and provisions and subject to the
conditions hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties hereto hereby agree as follows:
Section 1. Term. This Agreement shall commence upon the date
hereof, and shall continue through December 31, 2007, and shall be automatically
renewed and continue for additional one year periods thereafter (the "Term"),
unless and until (a) either Party gives the other written notice at least sixty
days prior to December 31 of any year (commencing in 2007) of its desire to not
renew this Agreement, or (b) this Agreement is sooner terminated pursuant to
Section 5 hereof.
Section 2. Scheduling, Management and Related Services. During
the Term, SMSI shall (a) operate and maintain the Internet job scheduling and
other software utilized by the field managers and personnel of SMSI and the
field personnel of the SPAR Companies as any SPAR Company may request from time
to time (the "Scheduling Services"), (b) manage and direct the field personnel
of SMSI performing the Merchandising Services and the field personnel of the
SPAR Companies as any SPAR Company may request from time to time (the "Personnel
Services"), and (c) all related services (together with the Scheduling Services
and Personnel Services, the "Services. The Company and SMSI shall in good faith
establish and implement mutually acceptable procedures for the scheduling and
coordination of the performance of the Services.
Section 3. Cost Plus Compensation. Except as otherwise
provided in the second and third sentences of this Section 3, the Company shall
compensate SMSI for the performance of the Services for the SPAR Companies in an
amount equal to: (a) all costs and expenses reasonably incurred by SMSI in
performing the Services for the SPAR Companies pursuant hereto, including
(without limitation) any and all independent contractor payments, wages and
other employment costs of all personnel, travel and other reimbursable field and
administrative out of pocket costs and expenses, purchases of equipment and
supplies, depreciation and amortization, courier, postage and special mailing
charges, rent, utilities, and other overhead (the "Services Costs"), provided
that Service Costs shall not include expenses charged during calendar year 2004
to SMS office and Accounting Department Business Insurance Account #66000,
InfoTech Fees Account #61300, IT Allocation Account #61020, or Audix usage,
lease and maintenance costs Accounts #62100/ 25-5-50-04 and 62101/ 25-5-50-04;
plus (b) four percent of the sum of the Service Costs (collectively with the
Services Costs, the "Services Compensation"); provided, however, that the
Services
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Costs shall include any payroll and employment taxes payable to management
employees with respect to Services performed.
Section 4. Payments. The Company shall pay to SMSI by wire
transfer a monthly retainer of $484,000 (as adjusted from time to time by the
mutual agreement of the Parties) on or before the first of each month on account
of the Services Compensation respecting the estimated administrative and
overhead costs of performing the Services (i.e., the Services Compensation other
than the field personnel costs). SMSI shall invoice the Company weekly for all
field management and personnel costs, and such invoices shall be paid by the
Company by wire transfer to SMSI within two business days after receipt thereof.
SMSI may from time to time, and at least once per quarter shall, reconcile the
retainer and field personnel payments and invoice the Company for any shortfall,
or credit the Company's future invoices for any excess, in the Services
Compensation received by SMSI during the calculation period. The Company shall
have the right at its own cost and expense to audit such costs and expenses from
time to time upon reasonable notice to SMSI, provided that the audit shall be
conducted in a manner that is not unreasonably disruptive of SMSI's business.
Section 5. Early Termination. Notwithstanding any provision to
the contrary contained herein, either Party shall have the right to terminate
this Agreement: (a) at any time for any reason or no reason upon six (6) months
prior written notice to the other Party; (b) upon ten (10) business days prior
written notice to the other Party in the event such other Party material
breaches this Agreement and fails to cure such breach within thirty (30) days
after notice of such breach from the terminating Party; or (c) upon ten (10)
business days prior written notice from the terminating Party to the other Party
in the event of (i) any voluntary or involuntary filing or submission of any
petition or other document for relief, bankruptcy, insolvency, receivership or
other remedy by or with respect to such other Party, or (ii) the existence of
any case, action, suit, or proceeding by or with respect to such other Party,
whether voluntary or involuntary, under the United States Bankruptcy Code, as
amended, or any other present or future federal, state, provincial or foreign
applicable law respecting bankruptcy, reorganization, insolvency, readjustment
of debts, relief of debtors, dissolution or liquidation.
Section 6. Force Majeure. Notwithstanding any other term or
provision of this Agreement, no Party shall be responsible for or be in breach
of or default under this Agreement for any performance delay or failure that is
the result of any and all acts of God and other acts, events, circumstances,
impediments or occurrences beyond the control of the delayed person (each a
"Force Majeure"), including (without limitation) any (i) accident or mishap not
caused by the delayed person, (ii) assault, attack, battle, blockade, bombing,
embargo, police action, siege or other act of defense, offense, terrorism or war
(whether or not declared), in each case whether civilian, militia, military or
otherwise and whether domestic or foreign, (iii) governmental regulation or
decree or other act or failure to act of any governmental authority or other
regulatory body, in each case whether civil, military or otherwise and whether
domestic or foreign, (iv) earthquake, explosion, fire, flood, hurricane or other
natural or man-made calamity or disaster, (v) epidemic, environmental
contamination or other natural or man-made pestilence or toxic exposure (whether
biological, chemical, radiological or otherwise), or any quarantine or other
restriction arising therefrom, (vi) failure of, interruption in or impairment of
any delivery, internet, mail, monetary, power, telecommunication, transmission,
transportation or utility system or any other service, product or equipment
provided or maintained by a third party, (vii) lockout, strike or similar labor
interruptions, (viii) insurrection, riot or other civil disturbance, (ix)
hacking or other unauthorized access, spamming, virus, trojan or other
unauthorized program, or other computer or technological tampering or attack, or
(x) sabotage or other criminal or intentionally disruptive third party act, in
each case together with any and all consequential disruptions, delays, effects
or other acts, events, circumstances, impediments or occurrences and
irrespective of how localized or widespread. Upon prompt notice to the other
Party, the Party affected by any Force Majeure shall be excused from performance
hereunder to the extent and for so long as its performance hereunder is
prevented or restricted by a Force Majeure (and the other Party shall likewise
be excused from performance of its obligations hereunder relating to such
delayed or failed performance to the same extent and for the same duration);
provided that the Party so affected shall use reasonable efforts (without
increased cost) to avoid, mitigate or remove such Force Majeure and to minimize
the consequences thereof, and both Parties shall resume performance hereunder
with the utmost dispatch whenever such non-performance causes are removed.
Section 7. General Representations of the Parties. Each Party
represents and warrants to the other Party that, as of the date hereof and as of
the date of each extension, modification or amendment of this Agreement, and
covenants and agrees with the other Party that for so long as products and
services are being provided by SMSI to the Company or any of its affiliates
under this Agreement: (a) such Party is and will continue to be a corporation or
other entity duly organized, validly existing and in good standing under the
laws of its state of organization and maintains its chief executive office at
the address(es)
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set forth for it either on the signature page to this Agreement or in the
introduction thereto, or as otherwise set forth in a written notice to the other
Party; (b) such Party has and will maintain the legal capacity, power, authority
and unrestricted right to execute and deliver this Agreement and to perform all
of its obligations hereunder; (c) the execution and delivery by such Party of
this Agreement and the performance by such Party of all of its obligations
hereunder will not violate or be in conflict with any term or provision of (i)
any applicable law, (ii) any judgment, order, writ, injunction, decree or
consent of any court or other judicial authority applicable to such Party or any
material part of such Party's assets and properties, (iii) any of the
organizational or governing documents of such Party, or (iv) any material
agreement, document or obligation to which it is a Party, and such Party will
not adopt any such conflicting organizational or governing document or enter
into any such conflicting agreement, document or obligation; (d) no consent,
approval or authorization of, or registration, declaration or filing with, any
governmental authority or other person is required as a condition precedent,
concurrent or subsequent to or in connection with the due and valid execution,
delivery and performance by such Party of this Agreement or the legality,
validity, binding effect or enforceability of any of the terms and provisions of
this Agreement; (e) this Agreement is a legal, valid and binding obligation of
such Party, enforceable against such Party in accordance with their respective
terms and provisions; (f) the Services will not be requested, provided or used
for any illicit or illegal business or scheme; (g) the financial information (if
any) respecting the Customer furnished to SPAR is complete, accurate and fairly
presents the financial condition of the Customer; (h) the information furnished
or to be furnished by or on behalf of a Party to the other Party does not and
will not contain a misstatement of a material fact or omit to state a material
fact required to be stated therein in order to make it, in the light of the
circumstances under which made, not misleading; and (i) each Party has
independently and fully reviewed and evaluated this Agreement and all related
documents, the contemplated obligations and transactions and the potential
effects of such obligations and transactions on the assets, business, cash flow,
expenses, income, liabilities, operations, properties, prospects, reputation,
taxation or condition (financial or otherwise) of such Party and its affiliates,
which review and evaluation was made together with the officers, directors and
other representatives of such Party, its legal counsel and (to the extent deemed
prudent by such Party) other legal counsel and financial and other advisors to
such Party, and such Party hereby absolutely, unconditionally, irrevocably,
expressly and forever assumes any and all attendant risks and waives any and all
rights, claims, defenses or objections with respect thereto.
Section 8. Independent Contractor, Non-exclusive Status, Etc.
The Parties each acknowledge and agree that SMSI's sole relationship with the
Company is that of independent contractor, and that no term or provision of this
Agreement or any related document is intended to create, nor shall any such term
or provision be deemed or construed to have created, any joint venture,
partnership, trust, agency or other fiduciary relationship between the Parties
or any of their respective affiliates. No term or provision of this Agreement or
any related document is intended, or shall be deemed or construed, to in any way
(a) limit the power, authority or discretion of SMSI to conduct its business in
such manner as it may choose, or (b) confer upon the Company any right, power or
privilege to control, direct, approve or otherwise affect any manner chosen by
SMSI or any of its affiliates to conduct its business, irrespective of whether
any of the Services may be involved in or affected by any such conduct. Without
limiting the generality of the foregoing, SMSI shall have full and exclusive
power, authority and discretion at any time and from time to time (i) to hire,
direct and discharge from time to time any and all officers, employees, agents,
brokers and other representatives of SMSI (including, without limitation, its
stockholders), (ii) to engage such independent contractors, affiliates and other
subcontractors as it may deem necessary or appropriate in the performance of the
Services, (iii) to exercise or otherwise enforce any of its rights, powers,
privileges, remedies or interests in whole or in part, (iv) to delay, refrain
from or discontinue any such exercise or other enforcement, (v) to perform the
same or similar services for others and pursue any and all other continuing, new
or other business opportunities of any nature or description, which may include
(without limitation,) one or more of the business activities engaged in by the
Company or its affiliates or aspects thereof, whether independently or for or
with other persons, and irrespective of location, and (vi) to allocate the time
and attention and the other resources of SMSI among the Services and its various
other activities, provided that such allocation does not adversely affect the
performance of SMSI hereunder in any material respect, in each case without
notice to the Company (except as otherwise expressly required hereunder), for
any reason or no reason whatsoever and whether intentionally or otherwise. The
Company shall not be required to use SMSI exclusively for the provision of
Services in any Stores or otherwise at any time and may purchase Services from
any affiliate or other person without limitation or restriction of any kind.
Section 9. No Other Warranties, Waiver of Set-Off, Special
Damages, Etc. Except as otherwise expressly provided in this Agreement, the
Company (on behalf of itself and each other SPAR Company) acknowledges and
agrees that: (a) SMSI makes no representation or warranty of any kind or nature
whatsoever with respect to any product or service provided under this Agreement,
whether express or implied (either in fact, by operation of law or otherwise),
including (without limitation) no warranty as to merchantability, fitness or
usefulness for a particular purpose, title, interference, infringement or
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conformance to any specifications; (b) SMSI shall not be liable or responsible
for any claim, liability, loss or expense of any SPAR Company or any other
person on account of or directly or indirectly arising from the use of any
product or service furnished by or through SMSI; all of which are hereby
expressly disclaimed by SMSI and all of which are hereby irrevocably,
unconditionally, expressly and forever waived and released by the Company (on
behalf of itself, each other SPAR Company and all those using or receiving such
products and services through any SPAR Company); (c) none of the SPAR Companies
will seek, recover or retain any, and the Company (on behalf of itself and each
other SPAR Company) hereby irrevocably, unconditionally, expressly and forever
waives any and all, special, exemplary, punitive, statutory and/or consequential
damages (whether through action, suit, counterclaim or otherwise and whether in
contract, tort, strict liability or otherwise) to the extent waiver is not
limited under applicable law; and (d) the Company will not exercise or enforce,
and the Company (on behalf of itself and each other SPAR Company) hereby
irrevocably, unconditionally, expressly and forever waives, any right of setoff,
recoupment, abatement or reduction that may now or hereafter be accorded to it
(whether under this Agreement, applicable law or otherwise) against or in
respect of any payment due (whether as scheduled or required, upon demand or as
sought in any action, suit or proceeding) to or for the benefit of SMSI or any
SMSI Affiliate under this Agreement or applicable law, except to the extent
required as a compulsory counterclaim in any related ongoing proceeding, and the
Company will pursue separate exercise and enforcement thereof.
Section 10. Indemnification. (a) The Company, its affiliates
and their respective officers, employees, independent contractors, agents,
brokers and other representatives (a "MF Indemnified Person") shall not incur
any liability for any acts or omissions (and the other Party hereby absolutely,
unconditionally, irrevocably and expressly waives and releases forever any and
all related claims and actions against each MF Indemnified Person), and each
shall be indemnified, reimbursed and held harmless by SMSI upon demand, and
defended at the expense of SMSI with counsel selected by SMSI (and reasonably
acceptable to the Company), from and against, any and all claims, liabilities,
expenses (including, without limitation, the disbursements, expenses and
reasonable fees of their respective attorneys) and other losses that may be
imposed upon, incurred by or asserted against any MF Indemnified Person
resulting from, arising out of or directly or indirectly related to (i) any
Service or other activity performed by SMSI or any of its representatives or
(ii) any misrepresentation, omission, breach, default or wrongdoing by SMSI or
any of its representatives; in each case (A) other than to the extent occasioned
by the acts or omissions of any MF Indemnified Person materially breaching this
Agreement or any duty owed to the other Party hereunder and amounting to gross
negligence, willful misconduct or material breach of this Agreement as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction , and (B) subject to the limitations, waivers and other terms and
provisions of Sections 9 and 12 hereof (which are intended to limit this
subsection).
(b) SMSI, its affiliates and their respective officers,
employees, independent contractors, agents, brokers and other representatives (a
"SMSI Indemnified Person") shall not incur any liability for any acts or
omissions (and the other Party hereby absolutely, unconditionally, irrevocably
and expressly waives and releases forever any and all related claims and actions
against each SMSI Indemnified Person), and each shall be indemnified, reimbursed
and held harmless by the Company upon demand, and defended at the expense of the
Company with counsel selected by the Company (and reasonably acceptable to
SMSI), from and against, any and all claims, liabilities, expenses (including,
without limitation, the disbursements, expenses and reasonable fees of their
respective attorneys) and other losses that may be imposed upon, incurred by or
asserted against any SMSI Indemnified Person resulting from, arising out of or
directly or indirectly related to (i) any Service or other activity performed
substantially in accordance with the directions of the Company or any of its
representatives, (ii) any product defect in or other condition of any
merchandise or equipment provided the Company, its affiliate, its customer, any
Store or any of their respective representatives or (iii) any misrepresentation,
omission, breach, default or wrongdoing by the Company or any of its
representatives, but excluding any Indemnified Amounts; in each case (A) other
than to the extent occasioned by the acts or omissions of any SMSI Indemnified
Person materially breaching this Agreement or any duty owed to the other Party
hereunder and amounting to gross negligence, willful misconduct or material
breach of this Agreement as finally determined pursuant to applicable law by a
governmental authority having jurisdiction, and (B) subject to the limitations,
waivers and other terms and provisions of Sections 9 and 12 hereof (which are
intended to limit this subsection).
(c) The preceding general exculpations and indemnifications
are not intended (and shall not be deemed or construed) to in any way qualify,
condition, diminish, restrict, limit or otherwise affect any (and is in addition
to each) other release, waiver, consent, acknowledgment, agreement or other term
or provision of this Agreement or any related document.
Section 11. Notice. Any notice, request, demand or other
communication permitted or required to be given to a Party under this Agreement
shall be in writing and shall be sent to the addressee at
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the address set forth above (or at such other address as shall be designated by
notice to the other Party and Persons receiving copies), effective upon actual
receipt (or refusal to accept delivery) by the addressee on any business day or
the first business day following receipt after the close of normal business
hours or on any non-business day, by (a) FedEx (or other equivalent national or
international overnight courier) or United States Express Mail, (b) certified,
registered, priority or express United States mail, return receipt requested,
(c) telecopy or (d) messenger, by hand or any other means of actual delivery.
Section 12. Use of Electronic Systems, Responsibilities and
Waiver of Liability. The Parties desire to send and receive applications, calls,
data, emails, invoices, orders and other documents and information ("eData")
among themselves and their respective representatives by any one or more of the
following means (each an "eSystem"): (a) email or other internet communication;
(b) any internet site, whether maintained by or on behalf of a Party or
otherwise (each a "Web Site"); (c) telecopy; (d) cellular or other wireless
communication; or (e) other electronic communication; in each case whether or
not open, guarded, scrambled or encrypted. Each Party hereby authorizes and
directs the other Party to send and receive eData through any eSystem and to act
upon any request or other content of any eData received or obtained through any
eSystem by the receiving Party, any of its affiliates or any of their respective
representatives purporting to be from or on behalf of the sending Party or its
representatives, and the sending Party acknowledges and agrees that the
receiving Party or person may in good faith rely upon as accurate, authentic and
duly authorized. Each Party acknowledges and agrees that the other Party, its
affiliates and their respective representatives shall not under any circumstance
be or become responsible or liable in any way for, and each Party hereby
irrevocably, unconditionally, expressly and forever waives and releases any and
all related claims and actions against each of the other Party, its affiliates
and their respective representatives respecting, any claim, cost, expense, loss,
or liability whatsoever directly or indirectly arising from: (A) any
transmission, receipt or use of or reliance upon any eData or use of any
eSystem; (B) any unauthorized Person's use of or access to any eData, any Web
Site or any other eSystem; (C) any access, misuse or appropriation a Party's
eData or any failed, forged, altered, deciphered, intercepted, incomplete or
inaccurate transmission of any eData; (D) any eSystems, anti-virus firewalls and
security measures, their use or operation or their compatibility with any Web
Site or other eSystem of the other Party or any of its affiliates; (E) any
virus, macro or similar program or script; (F) the viability, integrity,
robustness, fitness or adequacy of any encryption, firewall or other security
measures used by a Party or any of its affiliates; (G) any eData of a Party sent
or received through or stored on the Web Site or other eSystem of the other
Party or any of its affiliates or the security or retention thereof; (H) any
failure to act on any request or other eData (1) not actually received by the
appropriate the representative, (2) that appears to be unauthorized, incomplete
or inaccurate in any respect; or (3) pending receipt from the sender of any
resubmission, clarification, confirmation or verification of any eData requested
by a Party; or (I) without limiting any applicable force majeure, (1) any error,
poor transmission or other casualty to, loss of or delay or failure in sending
or receiving any eData, or (2) any failure of any ISP or other eSystem provider.
Section 13. No Waiver by Action, Etc. Any waiver or consent
from either Party respecting any provision of this Agreement or any related
document shall be effective only in the specific instance for which given and
shall not be deemed, regardless of frequency given, to be a further or
continuing waiver or consent. The failure or delay of any Party at any time to
require performance of, or to exercise or enforce its rights or remedies with
respect to, any provision of this Agreement shall not affect such Party's right
at a later time to exercise or enforce any such provision. No notice to or
demand on any Party shall entitle such Party to any other notice or demand in
similar or other circumstances. Any acceptance by or on behalf of a Party of (A)
any partial or late payment, reimbursement or performance shall not constitute a
satisfaction or waiver of the obligation then due or the resulting default, or
(B) any payment, reimbursement or performance of any obligation during the
continuance of any default shall not constitute a waiver or cure thereof, and
the Party or its designee may accept or reject any such payment, reimbursement
or performance without affecting any obligation or any of the Party's rights,
powers, privileges, remedies and other interests under this Agreement, any
related document or applicable law. All rights, powers, privileges, remedies and
other interests of each Party hereunder are cumulative and not alternatives, and
they are in addition to (and shall not limit) any other right, power, privilege,
remedy or other interest of such Party under this Agreement, any related
document or applicable law.
Section 14. Successors and Assigns; Assignment; Intended
Beneficiaries. This Agreement and each related document shall be binding upon
and inure to the benefit of the successors, permitted assigns and legal
representatives of each Party (including, without limitation, any assignee of
substantially all of the business or assets of any Party or any successor by
merger). Neither Party may assign any of its rights or obligations under this
Agreement or any related document to any other person without the consent of the
other Party; provided, however, that (i) either Party may assign its rights and
obligations hereunder in whole or in part to any of its affiliates (without,
however, relieving the assignor of any of its obligations hereunder) by giving
the other Party a copy of such assignment, (ii) SMSI acknowledges and
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agrees that the Company may request (for its account hereunder) that SMSI
provide services for affiliates of the Company without the need to formally
assign any rights or obligations of the Company to such affiliates to the extent
the Company remains liable for any and all payments hereunder with respect
thereto, and (iii) nothing in this Section is intended, or shall be deemed or
construed, to in any way limit the use of independent contractors as field
representatives or managers by SMSI. Without limiting the generality of the
foregoing, SMSI acknowledges and agrees that the Company may pledge this
Agreement and all accounts, payment intangibles, general intangibles and other
rights and interest arising hereunder to one or more lender(s), such lender(s)
shall be entitled upon default to enforce any and all of the rights, powers,
privileges, remedies and interests of the Company as so assigned in accordance
with this Agreement, the applicable loan documents and applicable law, and such
lender(s) shall not be responsible or liable for any of the acts, omissions,
duties, liabilities or obligations of the Company or any of its affiliates under
this Agreement or otherwise. Except as otherwise provided in this Agreement, the
representations, agreements and other provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and no other person (including, without
limitation, any creditor of a Party) shall have any right or claim against any
Party by reason of any of those provisions or be entitled to enforce any of
those provisions against any Party.
Section 15. Counterparts, Governing Law, Amendments, Etc. This
Agreement shall be effective on the date as of which this Agreement shall be
executed and delivered by the Parties hereto. This Agreement or any related
document may be executed in two or more counterpart copies of the entire
document or of signature pages to the document, each of which may be executed by
one or more of the Parties hereto and may be sent by fax, but all of which, when
taken together, shall constitute a single agreement binding upon all of the
Parties hereto. This Agreement and all related documents shall be governed by
and construed in accordance with the applicable laws pertaining, in the State of
New York (other than those conflict of law rules that would defer to the
substantive laws of another jurisdiction). The headings contained in this
Agreement or any related document are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement or any related document.
Each and every supplement or modification to or amendment or restatement of this
Agreement or any related document shall be in writing and signed by all of the
Parties hereto, and each and every waiver of, or consent to any departure from,
any term or provision of this Agreement or any related document shall be in
writing and signed by each affected Party hereto.
Section 16. Waiver of Jury Trial; All Waivers Intentional,
Etc. In any action, suit or proceeding in any jurisdiction brought against SMSI
by the Company, or vice versa, each Party hereby absolutely, unconditionally,
irrevocably and expressly waives forever trial by jury. This waiver of jury
trial by each Party, and each other waiver, release, relinquishment or similar
surrender of rights (however expressed) made by a Party in this Agreement, has
been absolutely, unconditionally, irrevocably, knowingly and intentionally made
by such Party.
Section 17. Entire Agreement. No Party or any of its
representatives has made, accepted or acknowledged any representation, warranty,
promise, assurance, agreement, obligation or understanding (oral or otherwise)
to, with or for the benefit of the other Party or any of its representatives
other than as expressly set forth in this Agreement. This Agreement contains the
entire agreement of the Parties, amends, restates and completely replaces the
Existing Service Agreement (as and to the extent SMSI provided services
thereunder or was otherwise an assignee or beneficiary thereof), and supersedes
and completely replaces all prior and other communications, discussions and
other representations, warranties, promises, assurances, agreements and
understandings (oral, implied or otherwise) between the Parties, with respect to
the matters contained in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement
effective as of the day and year first written above.
SPAR Management Services, Inc., SPAR Marketing Force, Inc.,
a Nevada corporation a Nevada corporation
By: By:
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EXHIBIT 10.3
AMENDED AND RESTATED PROGRAMMING AND SUPPORT AGREEMENT
This Amended and Restated Programming and Support Agreement
dated and effective as of January 1, 2004 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
herein, this "Agreement"), is by and between SPAR InfoTech, Inc., a Nevada
corporation ("SIT"), and SPAR Marketing Force, Inc., a Nevada corporation (the
"Company"). SIT and the Company may be referred to individually as a "Party" and
collectively as the "Parties".
Recitals
SIT and the Company are parties to a Contract for Hourly
System and Managerial Support dated as of October 1, 1998 (as the same may have
been supplemented, modified, amended, restated or replaced from time to time in
the manner provided therein, the "Existing Support Agreement"), pursuant to
which SIT has provided and currently provides certain programming, management
and other technology services on an hourly basis to the Company and (through the
Company) SPAR Group, Inc., and its subsidiaries (together with the Company, each
a "SPAR Company" and collectively the "SPAR Companies"). The Company and SIT
desire to update the terms and conditions on which SIT will continue to provide,
on a nonexclusive basis, such programming, management and other technology
services to the SPAR Companies as from time to time may be requested by any SPAR
Company, all upon the terms and provisions and subject to the conditions
hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties hereto hereby agree as follows:
Section 1. Term. This Agreement shall commence upon the date
hereof, and shall continue through December 31, 2007, and shall be automatically
renewed and continue for additional one year periods thereafter (the "Term"),
unless and until (a) either Party gives the other written notice at least sixty
days prior to December 31 of any year (commencing in 2007) of its desire to not
renew this Agreement, or (b) this Agreement is sooner terminated pursuant to
Section 5 hereof.
Section 2. Programming, Management, Support and other
Technology Services. During the Term, SIT shall provide (a) such programming,
management, support and other technology services as the Company and the
Company's affiliates may from time to time request, and (b) all related services
(collectively, the "Services"). The Company and SIT shall in good faith
establish and implement mutually acceptable procedures for the scheduling and
coordination of the performance of the Services.
Section 3. Hourly Compensation and Expenses. (a) The Company
shall compensate SIT for the performance of the Services to the Company and its
affiliates on an hourly basis at the rates for the classes of personnel set
forth in the "Rate Schedule" annexed hereto (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "Rate Schedule"). SIT may amend and restate the Rate Schedule at
any time and from time to time by providing notice and a copy thereof to the
Company, which restated Rate Schedule shall automatically take effect the later
of (i) thirty (30) days after receipt thereof by the Company or (ii) such
effective date as may be specified therein; provided that the Company may
terminate this Agreement by written notice to SIT at any time within ten (10)
days after its receipt of such restated Rate Schedule if the Company does not
accept such restated Rate Schedule.
(b) The Company shall reimburse SIT for (or, at the Company's
option, directly pay) all business travel and other similar out-of-pocket
business expenses reasonably incurred by SIT's personnel in the performance of
the Services hereunder in accordance with the policies of the SPAR Companies.
All reimbursable expenses shall be appropriately documented in reasonable detail
by SIT's personnel upon submission of any request for reimbursement, and in a
format and manner consistent with the SPAR Companies' expense reporting policy,
as well as applicable federal and state tax record keeping requirements.
Section 4. Payments. The Company shall pay to SIT the full
amount invoiced within ten (10) days after receiving such invoice from SIT;
provided that the Company shall have the right to contest and withhold from such
payment any hourly charge or any out of pocket expense that the Company
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has determined in good faith to be excessive or not authorized by the Company or
any of its public-company affiliates. The Company shall have the right at its
own cost and expense to audit such hourly charges from time to time upon
reasonable notice to SIT, provided that the audit shall be conducted in a manner
that is not unreasonably disruptive of SIT's business.
Section 5. Early Termination. Notwithstanding any provision to
the contrary contained herein, either Party shall have the right to terminate
this Agreement: (a) at any time for any reason or no reason upon thirty (30)
days months prior written notice to the other Party; (b) upon ten (10) business
days prior written notice to the other Party in the event such other Party
material breaches this Agreement and fails to cure such breach within thirty
(30) days after notice of such breach from the terminating Party; or (c) upon
ten (10) business days prior written notice from the terminating Party to the
other Party in the event of (i) any voluntary or involuntary filing or
submission of any petition or other document for relief, bankruptcy, insolvency,
receivership or other remedy by or with respect to such other Party, or (ii) the
existence of any case, action, suit, or proceeding by or with respect to such
other Party, whether voluntary or involuntary, under the United States
Bankruptcy Code, as amended, or any other present or future federal, state,
provincial or foreign applicable law respecting bankruptcy, reorganization,
insolvency, readjustment of debts, relief of debtors, dissolution or
liquidation.
Section 6. Force Majeure. Notwithstanding any other term or
provision of this Agreement, no Party shall be responsible for or be in breach
of or default under this Agreement for any performance delay or failure that is
the result of any and all acts of God and other acts, events, circumstances,
impediments or occurrences beyond the control of the delayed person (each a
"Force Majeure"), including (without limitation) any (i) accident or mishap not
caused by the delayed person, (ii) assault, attack, battle, blockade, bombing,
embargo, police action, siege or other act of defense, offense, terrorism or war
(whether or not declared), in each case whether civilian, militia, military or
otherwise and whether domestic or foreign, (iii) governmental regulation or
decree or other act or failure to act of any governmental authority or other
regulatory body, in each case whether civil, military or otherwise and whether
domestic or foreign, (iv) earthquake, explosion, fire, flood, hurricane or other
natural or man-made calamity or disaster, (v) epidemic, environmental
contamination or other natural or man-made pestilence or toxic exposure (whether
biological, chemical, radiological or otherwise), or any quarantine or other
restriction arising therefrom, (vi) failure of, interruption in or impairment of
any delivery, internet, mail, monetary, power, telecommunication, transmission,
transportation or utility system or any other service, product or equipment
provided or maintained by a third party, (vii) lockout, strike or similar labor
interruptions, (viii) insurrection, riot or other civil disturbance, (ix)
hacking or other unauthorized access, spamming, virus, trojan or other
unauthorized program, or other computer or technological tampering or attack, or
(x) sabotage or other criminal or intentionally disruptive third party act, in
each case together with any and all consequential disruptions, delays, effects
or other acts, events, circumstances, impediments or occurrences and
irrespective of how localized or widespread. Upon prompt notice to the other
Party, the Party affected by any Force Majeure shall be excused from performance
hereunder to the extent and for so long as its performance hereunder is
prevented or restricted by a Force Majeure (and the other Party shall likewise
be excused from performance of its obligations hereunder relating to such
delayed or failed performance to the same extent and for the same duration);
provided that the Party so affected shall use reasonable efforts (without
increased cost) to avoid, mitigate or remove such Force Majeure and to minimize
the consequences thereof, and both Parties shall resume performance hereunder
with the utmost dispatch whenever such non-performance causes are removed.
Section 7. General Representations of the Parties. Each Party
represents and warrants to the other Party that, as of the date hereof and as of
the date of each extension, modification or amendment of this Agreement, and
covenants and agrees with the other Party that for so long as products and
services are being provided by SIT to the Company or any of its affiliates under
this Agreement: (a) such Party is and will continue to be a corporation or other
entity duly organized, validly existing and in good standing under the laws of
its state of organization and maintains its chief executive office at the
address(es) set forth for it either on the signature page to this Agreement or
in the introduction thereto, or as otherwise set forth in a written notice to
the other Party; (b) such Party has and will maintain the legal capacity, power,
authority and unrestricted right to execute and deliver this Agreement and to
perform all of its obligations hereunder; (c) the execution and delivery by such
Party of this Agreement and the performance by such Party of all of its
obligations hereunder will not violate or be in conflict with any term or
provision of (i) any applicable law, (ii) any judgment, order, writ, injunction,
decree or consent of any court or other judicial authority applicable to such
Party or any material part of such Party's assets and properties, (iii) any of
the organizational or governing documents of such Party, or (iv) any material
agreement, document or obligation to which it is a Party, and such Party will
not adopt any such conflicting organizational or governing document or enter
into any such conflicting agreement, document or obligation; (d) no consent,
approval or authorization of, or registration, declaration or filing with, any
governmental authority or other person is
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required as a condition precedent, concurrent or subsequent to or in connection
with the due and valid execution, delivery and performance by such Party of this
Agreement or the legality, validity, binding effect or enforceability of any of
the terms and provisions of this Agreement; (e) this Agreement is a legal, valid
and binding obligation of such Party, enforceable against such Party in
accordance with their respective terms and provisions; (f) the Services will not
be requested, provided or used for any illicit or illegal business or scheme;
(g) the financial information (if any) respecting the Customer furnished to SPAR
is complete, accurate and fairly presents the financial condition of the
Customer; (h) the information furnished or to be furnished by or on behalf of a
Party to the other Party does not and will not contain a misstatement of a
material fact or omit to state a material fact required to be stated therein in
order to make it, in the light of the circumstances under which made, not
misleading; and (i) each Party has independently and fully reviewed and
evaluated this Agreement and all related documents, the contemplated obligations
and transactions and the potential effects of such obligations and transactions
on the assets, business, cash flow, expenses, income, liabilities, operations,
properties, prospects, reputation, taxation or condition (financial or
otherwise) of such Party and its affiliates, which review and evaluation was
made together with the officers, directors and other representatives of such
Party, its legal counsel and (to the extent deemed prudent by such Party) other
legal counsel and financial and other advisors to such Party, and such Party
hereby absolutely, unconditionally, irrevocably, expressly and forever assumes
any and all attendant risks and waives any and all rights, claims, defenses or
objections with respect thereto.
Section 8. Independent Contractor, Non-exclusive Status, Etc.
The Parties each acknowledge and agree that SIT's sole relationship with the
Company is that of independent contractor, and that no term or provision of this
Agreement or any related document is intended to create, nor shall any such term
or provision be deemed or construed to have created, any joint venture,
partnership, trust, agency or other fiduciary relationship between the Parties
or any of their respective affiliates. No term or provision of this Agreement or
any related document is intended, or shall be deemed or construed, to in any way
(a) limit the power, authority or discretion of SIT to conduct its business in
such manner as it may choose, or (b) confer upon the Company any right, power or
privilege to control, direct, approve or otherwise affect any manner chosen by
SIT or any of its affiliates to conduct its business, irrespective of whether
any of the Services may be involved in or affected by any such conduct. Without
limiting the generality of the foregoing, SIT shall have full and exclusive
power, authority and discretion at any time and from time to time (i) to hire,
direct and discharge from time to time any and all officers, employees, agents,
brokers and other representatives of SIT (including, without limitation, the its
stockholders), (ii) to engage such independent contractors, affiliates and other
subcontractors as it may deem necessary or appropriate in the performance of the
Services, (iii) to exercise or otherwise enforce any of its rights, powers,
privileges, remedies or interests in whole or in part, (iv) to delay, refrain
from or discontinue any such exercise or other enforcement, (v) to perform the
same or similar services for others and pursue any and all other continuing, new
or other business opportunities of any nature or description, which may include
(without limitation,) one or more of the business activities engaged in by the
Company or its affiliates or aspects thereof, whether independently or for or
with other persons, and irrespective of location, and (vi) to allocate the time
and attention and the other resources of SIT among the Services and its various
other activities, provided that such allocation does not adversely affect the
performance of SIT hereunder in any material respect, in each case without
notice to the Company (except as otherwise expressly required hereunder), for
any reason or no reason whatsoever and whether intentionally or otherwise. The
Company shall not be required to use SIT exclusively for the provision of
Services in any Stores or otherwise at any time and may purchase Services from
any affiliate or other person without limitation or restriction of any kind.
Section 9. No Other Warranties, Waiver of Set-Off, Special
Damages, Etc. Except as otherwise expressly provided in this Agreement, the
Company (on behalf of itself and each other SPAR Company) acknowledges and
agrees that: (a) SIT makes no representation or warranty of any kind or nature
whatsoever with respect to any product or service provided under this Agreement,
whether express or implied (either in fact, by operation of law or otherwise),
including (without limitation) no warranty as to merchantability, fitness or
usefulness for a particular purpose, title, interference, infringement or
conformance to any specifications; (b) SIT shall not be liable or responsible
for any claim, liability, loss or expense of any SPAR Company or any other
person on account of or directly or indirectly arising from the use of any
product or service furnished by or through SIT; all of which are hereby
expressly disclaimed by SIT and all of which are hereby irrevocably,
unconditionally, expressly and forever waived and released by the Company (on
behalf of itself, each other SPAR Company and all those using or receiving such
products and services through any SPAR Company); (c) none of the SPAR Companies
will seek, recover or retain any, and the Company (on behalf of itself and each
other SPAR Company) hereby irrevocably, unconditionally, expressly and forever
waives any and all, special, exemplary, punitive, statutory and/or consequential
damages (whether through action, suit, counterclaim or otherwise and whether in
contract, tort, strict liability or otherwise) to the extent waiver is not
limited under applicable law; and (d) the Company will not exercise or enforce,
and the Company (on behalf of itself and each other SPAR Company) hereby
-3-
irrevocably, unconditionally, expressly and forever waives, any right of setoff,
recoupment, abatement or reduction that may now or hereafter be accorded to it
(whether under this Agreement, applicable law or otherwise) against or in
respect of any payment due (whether as scheduled or required, upon demand or as
sought in any action, suit or proceeding) to or for the benefit of SIT or any
SIT Affiliate under this Agreement or applicable law, except to the extent
required as a compulsory counterclaim in any related ongoing proceeding, and the
Company will pursue separate exercise and enforcement thereof.
Section 10. Indemnification. (a) The Company, its affiliates
and their respective officers, employees, independent contractors, agents,
brokers and other representatives (a "MF Indemnified Person") shall not incur
any liability for any acts or omissions (and the other Party hereby absolutely,
unconditionally, irrevocably and expressly waives and releases forever any and
all related claims and actions against each MF Indemnified Person), and each
shall be indemnified, reimbursed and held harmless by SIT upon demand, and
defended at the expense of SIT with counsel selected by SIT (and reasonably
acceptable to the Company), from and against, any and all claims, liabilities,
expenses (including, without limitation, the disbursements, expenses and
reasonable fees of their respective attorneys) and other losses that may be
imposed upon, incurred by or asserted against any MF Indemnified Person
resulting from, arising out of or directly or indirectly related to (i) any
Service or other activity performed by SIT or any of its representatives or (ii)
any misrepresentation, omission, breach, default or wrongdoing by SIT or any of
its representatives; in each case (A) other than to the extent occasioned by the
acts or omissions of any MF Indemnified Person materially breaching this
Agreement or any duty owed to the other Party hereunder and amounting to gross
negligence, willful misconduct or material breach of this Agreement as finally
determined pursuant to applicable law by a governmental authority having
jurisdiction, and (B) subject to the limitations, waivers and other terms and
provisions of Sections 9 and 12 hereof (which are intended to limit this
subsection).
(b) SIT, its affiliates and their respective officers,
employees, independent contractors, agents, brokers and other representatives (a
"SIT Indemnified Person") shall not incur any liability for any acts or
omissions (and the other Party hereby absolutely, unconditionally, irrevocably
and expressly waives and releases forever any and all related claims and actions
against each SIT Indemnified Person), and each shall be indemnified, reimbursed
and held harmless by the Company upon demand, and defended at the expense of the
Company with counsel selected by the Company (and reasonably acceptable to SIT),
from and against, any and all claims, liabilities, expenses (including, without
limitation, the disbursements, expenses and reasonable fees of their respective
attorneys) and other losses that may be imposed upon, incurred by or asserted
against any SIT Indemnified Person resulting from, arising out of or directly or
indirectly related to (i) any Service or other activity performed substantially
in accordance with the directions of the Company or any of its representatives,
(ii) any product defect in or other condition of any merchandise or equipment
provided the Company, its affiliate, its customer, any Store or any of their
respective representatives or (iii) any misrepresentation, omission, breach,
default or wrongdoing by the Company or any of its representatives, but
excluding any Indemnified Amounts; in each case (A) other than to the extent
occasioned by the acts or omissions of any SIT Indemnified Person materially
breaching this Agreement or any duty owed to the other Party hereunder and
amounting to gross negligence, willful misconduct or material breach of this
Agreement as finally determined pursuant to applicable law by a governmental
authority having jurisdiction, and (B) subject to the limitations, waivers and
other terms and provisions of Sections 9 and 12 hereof (which are intended to
limit this subsection).
(c) The preceding general exculpations and indemnifications
are not intended (and shall not be deemed or construed) to in any way qualify,
condition, diminish, restrict, limit or otherwise affect any (and is in addition
to each) other release, waiver, consent, acknowledgment, agreement or other term
or provision of this Agreement or any related document.
Section 11. Notice. Any notice, request, demand or other
communication permitted or required to be given to a Party under this Agreement
shall be in writing and shall be sent to the addressee at the address set forth
above (or at such other address as shall be designated by notice to the other
Party and Persons receiving copies), effective upon actual receipt (or refusal
to accept delivery) by the addressee on any business day or the first business
day following receipt after the close of normal business hours or on any
non-business day, by (a) FedEx (or other equivalent national or international
overnight courier) or United States Express Mail, (b) certified, registered,
priority or express United States mail, return receipt requested, (c) telecopy
or (d) messenger, by hand or any other means of actual delivery.
Section 12. Use of Electronic Systems, Responsibilities and
Waiver of Liability. The Parties desire to send and receive applications, calls,
data, emails, invoices, orders and other documents and information ("eData")
among themselves and their respective representatives by any one or more of the
following means (each an "eSystem"): (a) email or other internet communication;
(b) any internet site, whether maintained by or on behalf of a Party or
otherwise (each a "Web Site"); (c) telecopy; (d) cellular or
-4-
other wireless communication; or (e) other electronic communication; in each
case whether or not open, guarded, scrambled or encrypted. Each Party hereby
authorizes and directs the other Party to send and receive eData through any
eSystem and to act upon any request or other content of any eData received or
obtained through any eSystem by the receiving Party, any of its affiliates or
any of their respective representatives purporting to be from or on behalf of
the sending Party or its representatives, and the sending Party acknowledges and
agrees that the receiving Party or person may in good faith rely upon as
accurate, authentic and duly authorized. Each Party acknowledges and agrees that
the other Party, its affiliates and their respective representatives shall not
under any circumstance be or become responsible or liable in any way for, and
each Party hereby irrevocably, unconditionally, expressly and forever waives and
releases any and all related claims and actions against each of the other Party,
its affiliates and their respective representatives respecting, any claim, cost,
expense, loss, or liability whatsoever directly or indirectly arising from: (A)
any transmission, receipt or use of or reliance upon any eData or use of any
eSystem; (B) any unauthorized Person's use of or access to any eData, any Web
Site or any other eSystem; (C) any access, misuse or appropriation a Party's
eData or any failed, forged, altered, deciphered, intercepted, incomplete or
inaccurate transmission of any eData; (D) any eSystems, anti-virus firewalls and
security measures, their use or operation or their compatibility with any Web
Site or other eSystem of the other Party or any of its affiliates; (E) any
virus, macro or similar program or script; (F) the viability, integrity,
robustness, fitness or adequacy of any encryption, firewall or other security
measures used by a Party or any of its affiliates; (G) any eData of a Party sent
or received through or stored on the Web Site or other eSystem of the other
Party or any of its affiliates or the security or retention thereof; (H) any
failure to act on any request or other eData (1) not actually received by the
appropriate the representative, (2) that appears to be unauthorized, incomplete
or inaccurate in any respect; or (3) pending receipt from the sender of any
resubmission, clarification, confirmation or verification of any eData requested
by a Party; or (I) without limiting any applicable force majeure, (1) any error,
poor transmission or other casualty to, loss of or delay or failure in sending
or receiving any eData, or (2) any failure of any ISP or other eSystem provider.
Section 13. No Waiver by Action, Etc. Any waiver or consent
from either Party respecting any provision of this Agreement or any related
document shall be effective only in the specific instance for which given and
shall not be deemed, regardless of frequency given, to be a further or
continuing waiver or consent. The failure or delay of any Party at any time to
require performance of, or to exercise or enforce its rights or remedies with
respect to, any provision of this Agreement shall not affect such Party's right
at a later time to exercise or enforce any such provision. No notice to or
demand on any Party shall entitle such Party to any other notice or demand in
similar or other circumstances. Any acceptance by or on behalf of a Party of (A)
any partial or late payment, reimbursement or performance shall not constitute a
satisfaction or waiver of the obligation then due or the resulting default, or
(B) any payment, reimbursement or performance of any obligation during the
continuance of any default shall not constitute a waiver or cure thereof, and
the Party or its designee may accept or reject any such payment, reimbursement
or performance without affecting any obligation or any of the Party's rights,
powers, privileges, remedies and other interests under this Agreement, any
related document or applicable law. All rights, powers, privileges, remedies and
other interests of each Party hereunder are cumulative and not alternatives, and
they are in addition to (and shall not limit) any other right, power, privilege,
remedy or other interest of such Party under this Agreement, any related
document or applicable law.
Section 14. Successors and Assigns; Assignment; Intended
Beneficiaries. This Agreement and each related document shall be binding upon
and inure to the benefit of the successors, permitted assigns and legal
representatives of each Party (including, without limitation, any assignee of
substantially all of the business or assets of any Party or any successor by
merger). Neither Party may assign any of its rights or obligations under this
Agreement or any related document to any other person without the consent of the
other Party; provided, however, that (i) either Party may assign its rights and
obligations hereunder in whole or in part to any of its affiliates (without,
however, relieving the assignor of any of its obligations hereunder) by giving
the other Party a copy of such assignment, (ii) SIT acknowledges and agrees that
the Company may request (for its account hereunder) that SIT provide services
for affiliates of the Company without the need to formally assign any rights or
obligations of the Company to such affiliates to the extent the Company remains
liable for any and all payments hereunder with respect thereto, and (iii)
nothing in this Section is intended, or shall be deemed or construed, to in any
way limit the use of independent contractors as field representatives or
managers by SIT. Without limiting the generality of the foregoing, SIT
acknowledges and agrees that the Company may pledge this Agreement and all
accounts, payment intangibles, general intangibles and other rights and interest
arising hereunder to one or more lender(s), such lender(s) shall be entitled
upon default to enforce any and all of the rights, powers, privileges, remedies
and interests of the Company as so assigned in accordance with this Agreement,
the applicable loan documents and applicable law, and such lender(s) shall not
be responsible or liable for any of the acts, omissions, duties, liabilities or
obligations of the Company or any of its affiliates under this Agreement or
otherwise. Except as otherwise provided in this Agreement, the representations,
agreements and other
-5-
provisions of this Agreement are for the exclusive benefit of the Parties
hereto, and no other person (including, without limitation, any creditor of a
Party) shall have any right or claim against any Party by reason of any of those
provisions or be entitled to enforce any of those provisions against any Party.
Section 15. Counterparts, Governing Law, Amendments, Etc. This
Agreement shall be effective on the date as of which this Agreement shall be
executed and delivered by the Parties hereto. This Agreement or any related
document may be executed in two or more counterpart copies of the entire
document or of signature pages to the document, each of which may be executed by
one or more of the Parties hereto and may be sent by fax, but all of which, when
taken together, shall constitute a single agreement binding upon all of the
Parties hereto. This Agreement and all related documents shall be governed by
and construed in accordance with the applicable laws pertaining, in the State of
New York (other than those conflict of law rules that would defer to the
substantive laws of another jurisdiction). The headings contained in this
Agreement or any related document are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement or any related document.
Each and every supplement or modification to or amendment or restatement of this
Agreement or any related document shall be in writing and signed by all of the
Parties hereto, and each and every waiver of, or consent to any departure from,
any term or provision of this Agreement or any related document shall be in
writing and signed by each affected Party hereto.
Section 16. Waiver of Jury Trial; All Waivers Intentional,
Etc. In any action, suit or proceeding in any jurisdiction brought against SIT
by the Company, or vice versa, each Party hereby absolutely, unconditionally,
irrevocably and expressly waives forever trial by jury. This waiver of jury
trial by each Party, and each other waiver, release, relinquishment or similar
surrender of rights (however expressed) made by a Party in this Agreement, has
been absolutely, unconditionally, irrevocably, knowingly and intentionally made
by such Party.
Section 17. Entire Agreement. No Party or any of its
representatives has made, accepted or acknowledged any representation, warranty,
promise, assurance, agreement, obligation or understanding (oral or otherwise)
to, with or for the benefit of the other Party or any of its representatives
other than as expressly set forth in this Agreement. This Agreement contains the
entire agreement of the Parties, amends, restates and completely replaces the
Existing Support Agreement, and supersedes and completely replaces all prior and
other communications, discussions and other representations, warranties,
promises, assurances, agreements and understandings (oral, implied or otherwise)
between the Parties, with respect to the matters contained in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement
effective as of the day and year first written above.
SPAR InfoTech, Inc., SPAR Marketing Force, Inc.,
a Nevada corporation a Nevada corporation
By: By:
-6-
RATE SCHEDULE
to
Amended and Restated Programming And Support AgreemeNT
Dated as of January 1, 2004
------------------------------------
Hourly Rates Effective as of January 1, 2004
----------------------------------- ---------------- -------------------
Person or Group Hourly Rate
----------------------------------- ---------------- -------------------
Patricia Franco $80
----------------------------------- ---------------- -------------------
Panos Mastrogiannis $60
----------------------------------- ---------------- -------------------
Administrative Support $20
----------------------------------- ---------------- -------------------
Programming and Other - Domestic $40
----------------------------------- ---------------- -------------------
Programming and Other - India $15
----------------------------------- ---------------- -------------------
-7-
SPAR Group, Inc.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Brown, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the three-month period
ended March 31, 2004 (this "report"), of SPAR Group, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 18, 2004 /s/ Robert G. Brown
-------------------
Robert G. Brown, Chairman, President and
Chief Executive Officer
Ex-1
SPAR Group, Inc.
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Charles Cimitile, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the three-month period
ended March 31, 2004 (this "report"), of SPAR Group, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 18, 2004 /s/ Charles Cimitile
--------------------
Charles Cimitile, Chief Financial Officer,
Treasurer and Secretary
Ex-2
SPAR Group, Inc.
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report on Form 10-Q for the three month period
ended March 31, 2004 (this "report"), of SPAR Group, Inc. (the "registrant"),
the undersigned hereby certifies that, to his knowledge:
1. The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and
2. The information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the registrant.
/s/ Robert G. Brown
-----------------------------------------------
Robert G. Brown
Chairman, President and Chief Executive Officer
May 18, 2004
A signed original of this written statement required by Section 906 has been
provided to SPAR Group, Inc. and will be retained by SPAR Group, Inc., and
furnished to the Securities and Exchange Commission or its staff upon request.
Ex-3
SPAR Group, Inc.
EXHIBIT 32.2
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report on Form 10-Q for the three month period
ended March 31, 2004 (this "report"), of SPAR Group, Inc. (the "registrant"),
the undersigned hereby certifies that, to his knowledge:
1. The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and
2. The information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the registrant.
/s/ Charles Cimitile
------------------------------------------------
Charles Cimitile
Chief Financial Officer, Treasurer and Secretary
May 18, 2004
A signed original of this written statement required by Section 906 has been
provided to SPAR Group, Inc. and will be retained by SPAR Group, Inc., and
furnished to the Securities and Exchange Commission or its staff upon request.
Ex-4