UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Rule 14a-6(e)(2))
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/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPAR GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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SPAR GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 10, 2005
TO THE STOCKHOLDERS OF SPAR GROUP, INC.
The 2005 Annual Meeting of Stockholders (the "2005 Annual Meeting") of
SPAR GROUP, INC. ("SGRP", and together with its subsidiaries, the "SPAR Group"
or the "Company"), will be held at 10:00 a.m., Eastern Standard Time, on August
10, 2005, at 580 White Plains Road, Suite 600, Tarrytown, New York 10591, for
the following purposes:
1. To elect six Directors of SGRP to serve during the ensuing year and until
their successors are elected and qualified.
2. To ratify the appointment of Rehmann Robson as the Company's independent
auditors for the year ending December 31, 2005.
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record at the close
of business on June 16, 2005, will be entitled to notice of and to vote at the
2005 Annual Meeting or any adjournment or postponement thereof.
A copy of SGRP's Annual Report to Stockholders for the year ended
December 31, 2004, is being mailed with this Notice but is not to be considered
part of the proxy soliciting material.
By Order of the Board of Directors
Charles Cimitile
Secretary, Treasurer and Chief Financial Officer
July 7, 2005
Tarrytown, New York
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YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO
BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING. REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD
BE ADDRESSED TO MR. CHARLES CIMITILE, SECRETARY, TREASURER AND CHIEF FINANCIAL
OFFICER, AT THE OFFICES OF THE CORPORATION: SPAR GROUP, INC., 580 WHITE PLAINS
ROAD, SUITE 600, TARRYTOWN, NEW YORK 10591.
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SPAR GROUP, INC.
580 White Plains Road, Suite 600
Tarrytown, New York 10591
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PROXY STATEMENT
2005 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 10, 2005
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of SPAR GROUP, INC., a
Delaware corporation ("SGRP"), for use at the 2005 Annual Meeting of
Stockholders (the "2005 Annual Meeting") to be held on Wednesday, August 10,
2005, at 10:00 a.m., Eastern Standard Time, at the principal office of SGRP
located at 580 White Plains Road, Suite 600, Tarrytown, New York 10591, and any
adjournment or postponement thereof. This Proxy Statement and the form of proxy
to be utilized at the 2005 Annual Meeting were mailed or delivered to the
stockholders of SGRP on or about July 7, 2005.
MATTERS TO BE CONSIDERED
The 2005 Annual Meeting has been called to (1) elect six Directors of
SGRP to serve during the ensuing year and until their successors are elected and
qualified, (2) ratify the appointment by SGRP's Audit Committee of Rehmann
Robson as the independent auditors of SGRP and its direct and indirect
subsidiaries (collectively, the "Company") for the year ending December 31,
2005, and (3) transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on June 16, 2005, as the
record date (the "Record Date") for the determination of stockholders entitled
to vote at the 2005 Annual Meeting and any adjournment or postponement thereof.
As of the Record Date, there were 18,881,397 shares outstanding of SGRP's common
stock, $.01 par value (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock entitled to vote at the 2005 Annual Meeting will constitute a quorum for
the transaction of business at the 2005 Annual Meeting. As to all matters, each
stockholder is entitled to one vote for each share of Common Stock held. Under
Delaware law, shares not voted by brokers (called "broker non-votes") are
considered not entitled to vote. However, abstentions and broker non-votes are
counted as present for purposes of determining the presence or absence of a
quorum for the transaction of business.
A plurality of votes cast (which means the most votes, even though less
than a majority) at the 2005 Annual Meeting in person or by proxy is required
for the election of each nominee to serve as a director. In a field of more than
six nominees, the six nominees receiving the most votes would be elected as
directors. The affirmative vote of a majority of votes cast at the 2005 Annual
Meeting in person or by proxy is required to ratify the selection of Rehmann
Robson as the Company's independent auditors for the year ending December 31,
2005. Votes withheld, in the case of the election of directors, and abstentions
and any broker non-votes with respect to the ratification of independent
auditors, are not considered votes cast with respect to that matter and,
consequently, will have no effect on the vote on that matter, but, as noted
above, are counted in determining a quorum. Brokers who are members of the New
York Stock Exchange have discretion to vote the shares of their clients that the
broker holds of record (in "street name") for its customers
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with respect to non-contested elections of directors and certain other matters.
Stockholders are not entitled to cumulate votes. Votes against a candidate and
votes withheld have no legal effect.
All proxies that are properly completed, signed and returned prior to
the 2005 Annual Meeting will be voted in accordance with the specifications made
thereon or, in the absence of specification: (a) for the election of all
nominees named herein to serve as directors, and (b) in favor of the proposal to
ratify the appointment of Rehmann Robson as the Company's independent auditors.
Management does not intend to bring before the 2005 Annual Meeting any matters
other than those specifically described above and knows of no other matters to
come before the 2005 Annual Meeting. If any other matters or motions come before
the 2005 Annual Meeting, it is the intention of the persons named in the
accompanying form of Proxy to vote Proxies in accordance with their judgment on
those matters or motions, including any matter dealing with the conduct of the
2005 Annual Meeting. Proxies may be revoked at any time prior to their exercise
(1) by written notification to the Secretary of SGRP at SGRP's principal
executive offices located at 580 White Plains Road, Suite 600, Tarrytown, New
York 10591, (2) by delivering a duly executed proxy bearing a later date, or (3)
by the stockholder attending the 2005 Annual Meeting and voting his or her
shares in person.
PROPOSAL 1--ELECTION OF DIRECTORS
Six Directors are to be elected at the 2005 Annual Meeting to serve on
SGRP's Board of Directors (the "Board") until the next annual meeting of
Stockholders and until their respective successors have been elected and
qualified. The nominees for election are Mr. Robert G. Brown, Mr. William H.
Bartels, Mr. Robert O. Aders, Mr. Jack W. Partridge, Mr. Jerry B. Gilbert, and
Mr. Lorrence T. Kellar, all of whom are currently Directors of SGRP. The age,
principal occupation and certain other information respecting each nominee are
stated on pages 4 and 5, below. The nominees were approved and recommended by
the Governance Committee on pages 8 and 9, below and nominated by the Board at a
meeting on May 12, 2005.
In the absence of instructions to the contrary, proxies covering shares
of Common Stock will be voted in favor of the election of each of those
nominees.
Each nominee has consented to being named in this Proxy Statement as a
nominee for Director and has agreed to serve as a Director of SGRP if elected.
In the event that any nominee for election as Director should become unavailable
to serve, it is intended that votes will be cast, pursuant to the enclosed
proxy, for such substitute nominee as may be nominated by SGRP. Management has
no present knowledge that any of the persons named will be unavailable to serve.
The Board has fixed the number of Directors at six for the term commencing with
the 2005 Annual Meeting. Each Director is elected to hold office until the next
annual meeting of stockholders and until his respective successor is elected and
qualified.
No arrangement or understanding exists between any nominee and any
other person or persons pursuant to which any nominee was or is to be selected
as a Director or nominee. None of the nominees has any family relationship to
any other nominee or to any executive officer of the Company. However, Messrs.
Brown and Bartels are executive officers and significant stockholders of the
Company.
THE BOARD OF DIRECTORS AND THE GOVERNANCE COMMITTEE EACH UNANIMOUSLY
RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES IDENTIFIED ABOVE.
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF
REHMANN ROBSON AS INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board has appointed Rehmann Robson
("Rehmann") as independent public accountants to audit the financial statements
of the Company for its year ending December 31, 2005, subject to the Audit
Committee's review of the final terms of Rehmann's engagement and plans for
their audit. A resolution will be submitted to stockholders at the 2005 Annual
Meeting for the ratification of such appointment. Since May of 2003, all audit
and permitted non-audit services to be performed by the Company's auditor have
required approval by SGRP's Audit Committee. Shareholder ratification of the
appointment of Rehmann or anyone else for non-audit services is not required and
will not be sought.
Rehmann served as the Company's independent accountants for its year
ended December 31, 2004. On October 4, 2004, Ernst & Young LLP ("E&Y") resigned
as the independent registered public accounting
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firm for the Company and its subsidiaries. The resignation was effective upon
completion of E&Y's review of the interim financial information for the
Company's third fiscal quarter ended September 30, 2004, and the filing of the
Company's quarterly report on Form 10-Q for such period.
In January 2005, the Company, with the approval of SGRP's Audit
Committee, appointed Rehmann as its independent registered public accounting
firm to audit the financial statements of the Company for its fiscal year ending
December 31, 2004.
AUDIT FEES
During the Company's year ended December 31, 2004, fees billed by
Rehmann for all audit services rendered to the Company were $130,225. Fees
billed by E&Y for all audit services rendered to the Company for the years ended
December 31, 2004 and 2003 were $100,203 and $179,362 respectively. Audit
services principally include fees for the Company's audits and 10-K and 10-Q
filing reviews. Since 2003, as required by applicable law, including Nasdaq
Rules, SEC Rules and Sarbanes-Oxley (as such terms are defined below), the
choice of the Company's auditor and the audit services and permitted non-audit
services to be performed by it have been approved in advance by SGRP's Audit
Committee.
NON-AUDIT SERVICES AND FEES
The Company and its subsidiaries did not engage Rehmann or E&Y to
provide advice regarding financial information systems design or implementation,
but did engage E&Y for tax consulting services related to the PHI/SPGI ESOP in
2003 (for which E&Y was paid $3,778), due diligence services for the IMS
acquisition during 2003 (for which E&Y was paid $14,334) and for tax services in
2003 (for which E&Y was paid $2,295). No other non-audit services were performed
by Rehmann or E&Y in 2004 or 2003. Since 2003, as required by applicable law,
each non-audit service performed by the Company's auditor either (i) was
approved in advance on a case-by-case basis by SGRP's Audit Committee, or (ii)
fit within a pre-approved "basket" of non-audit services of limited amount,
scope and duration established in advance by SGRP's Audit Committee. In
connection with the standards for independence of the Company's independent
public accountants promulgated by the Securities and Exchange Commission, the
Audit Committee considers (among other things) whether the provision of such
non-audit services would be compatible with maintaining the independence of
Rehmann or E&Y.
ANTICIPATED ATTENDANCE BY REHMANN ROBSON AT THE 2005 ANNUAL MEETING
Rehmann has indicated to the Company that it intends to have a
representative available during the 2005 Annual Meeting who will respond to
appropriate questions. This representative will have the opportunity to make a
statement during the meeting if he or she so desires.
REQUIRED VOTE
A resolution will be submitted to stockholders at the 2005 Annual
Meeting for the ratification of the Audit Committee's appointment of Rehmann as
the independent auditors to audit the Company's financial statements for the
year ending December 31, 2005. The affirmative vote of a majority of the votes
cast at the 2005 Annual Meeting in person or by proxy will be required to adopt
this resolution. Proxies solicited by the Board will be voted in favor of
ratification unless stockholders specify otherwise. Abstentions and broker
non-votes will have no effect on the outcome of the vote on this proposal.
If the resolution selecting Rehmann as independent public accountants
is adopted by stockholders, the Audit Committee and Board nevertheless retain
the discretion to select different auditors should they then deem it in the
Company's best interests. Any such future selection need not be submitted to a
vote of stockholders.
If the stockholders do not ratify the appointment of Rehmann, or if
Rehmann should decline to act or otherwise become incapable of acting, or if
Rehmann's employment is discontinued, SGRP's Audit Committee will appoint
independent public accountants for the year ending December 31, 2005 (which may
nevertheless be Rehmann should they then deem it in the Company's best
interests).
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THE BOARD OF DIRECTORS AND AUDIT COMMITTEE EACH BELIEVE THAT THE APPOINTMENT OF
REHMANN ROBSON AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR YEAR ENDING DECEMBER
31, 2005, IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND EACH
UNANIMOUSLY RECOMMEND A VOTE "FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED FOR
THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
THE BOARD OF DIRECTORS OF THE CORPORATION
The Board of Directors (the "Board") is responsible for the management
and direction of SGRP and establishing its corporate policies. The current
members of the Board are set forth below, and each is a nominee for election at
the 2005 Annual Meeting:
NAME AGE POSITION WITH SPAR GROUP, INC.
Robert G. Brown........... 62 Chairman, Chief Executive Officer,
President and Director
William H. Bartels........ 61 Vice Chairman and Director
Robert O. Aders (1)....... 78 Director, Chairman - Governance
Committee
Jack W. Partridge (1)..... 59 Director, Chairman - Compensation
Committee
Jerry B. Gilbert (1)...... 71 Director
Lorrence T. Kellar (1).... 68 Director, Chairman - Audit Committee
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(1) Member of the Governance, Compensation and Audit Committees
ROBERT G. BROWN serves as the Chairman, Chief Executive Officer,
President and a Director of SGRP and has held such positions since July 8, 1999,
the effective date of the merger of the SPAR Marketing Companies with PIA
Merchandising Services, Inc. (the "Merger"). Mr. Brown served as the Chairman,
President and Chief Executive Officer of the SPAR Marketing Companies
(SPAR/Burgoyne Retail Services, Inc. ("SBRS") since 1994, SPAR, Inc. ("SINC")
since 1979, SPAR Marketing, Inc. ("SMNEV") since November 1993, and SPAR
Marketing Force, Inc. ("SMF") since 1996).
WILLIAM H. BARTELS serves as the Vice Chairman and a Director of SGRP
and has held such positions since July 8, 1999 (the effective date of the
Merger). Mr. Bartels served as the Vice Chairman, Secretary, Treasurer and
Senior Vice President of the SPAR Marketing Companies (SBRS since 1994, SINC
since 1979, SMNEV since November 1993 and SMF since 1996).
ROBERT O. ADERS serves as a Director of SGRP and has done so since July
8, 1999. He has served as the Chairman of the Governance Committee since May 9,
2003. Mr. Aders has served as Chairman of The Advisory Board, Inc., an
international consulting organization since 1993, and also as President Emeritus
of the Food Marketing Institute ("FMI") since 1993. Immediately prior to his
election to the Presidency of FMI in 1976, Mr. Aders was Acting Secretary of
Labor in the Ford Administration. Mr. Aders was the Chief Executive Officer of
FMI from 1976 to 1993. He also served in The Kroger Co., in various executive
positions from 1957 to 1974 and was Chairman of the Board from 1970 to 1974. Mr.
Aders also serves as a Director of Sure Beam Corporation and Telepanel Systems,
Inc.
JACK W. PARTRIDGE serves as a Director of SGRP and has done so since
January 29, 2001. He has served as the Chairman of the Compensation Committee of
SGRP since May 9, 2003. Mr. Partridge is President of Jack W. Partridge &
Associates. He previously served as Vice Chairman of the Board of The Grand
Union Company from 1998 to 2000. Mr. Partridge's service with Grand Union
followed a distinguished 23-year career with The Kroger Company, where he served
as Group Vice President, Corporate Affairs, and as a member of the Senior
Executive Committee, as well as various other executive
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positions. Mr. Partridge has been a leader in industry and community affairs for
three decades. He has served as Chairman of the Food Marketing Institute's
Government Relations Committee, the Food and Agriculture Policy Task Force, and
as Chairman of the Board of The Ohio Retail Association. He currently serves as
a member of the board of Checkpoint Systems, Inc.
JERRY B. GILBERT serves as a Director of SGRP and has done so since
June 4, 2001. Mr. Gilbert served as Vice President of Customer Relations for
Johnson & Johnson's Consumer and Personal Care Group of Companies from 1989 to
1997. Mr. Gilbert joined Johnson & Johnson in 1958 and from 1958 to 1989 held
various executive positions. Mr. Gilbert also served on the Advisory Boards of
the Food Marketing Institute, the National Association of Chain Drug Stores and
the General Merchandise Distributors Council (GMDC) where he was elected the
first President of the GMDC Educational Foundation. He was honored with lifetime
achievement awards from GMDC, Chain Drug Review, Drug Store News and the Food
Marketing Institute. He is the recipient of the prestigious National Association
of Chain Drug Stores (NACDS) Begley Award, as well as the National Wholesale
Druggists Association (NWDA) Tim Barry Award. In June 1997, Mr. Gilbert received
an Honorary Doctor of Letters Degree from Long Island University.
LORRENCE T. KELLAR serves as a Director and the Chairman of the Audit
Committee of SGRP and has done so since April 2, 2003. Mr. Kellar had a 31-year
career with The Kroger Co., where he served in various financial capacities,
including Group Vice President for real estate and finance, and earlier, as
Corporate Treasurer. He was responsible for all of Kroger's real estate
activities, as well as facility engineering, which coordinated all store
openings and remodels. Mr. Kellar subsequently served as Vice President, real
estate, for Kmart. He currently is Vice President of Continental Properties
Company, Inc. Mr. Kellar also serves on the boards of Frisch's Restaurants and
Multi-Color Corporation and is a trustee of the Acadia Realty Trust. He also is
a major patron of the arts and has served as Chairman of the Board of the
Cincinnati Ballet.
The Board meets regularly to receive and discuss operating and
financial reports presented by management of SGRP and its advisors. During the
year ended December 31, 2004, the Board held four meetings in person, one
meeting by telephone and took various actions by written consent. Each Director
attended all meetings of the Board in person.
COMMITTEES
From time to time the Board establishes permanent standing committees
and temporary special committees to assist the Board in carrying out its
responsibilities. Certain committees from time to time also may be required by
the Nasdaq Stock Market, Inc., or National Association of Securities Dealers
(collectively, "Nasdaq"), the Securities and Exchange Commission (the "SEC"), or
applicable law, all of which currently require SGRP to have an audit committee.
While SGRP is not similarly required to have either a Compensation Committee or
Governance Committee, certain responsibilities assigned to them in their
respective charters are required to be fulfilled by independent directors,
whether by Nasdaq, the SEC or otherwise.
The standing committees of the Board are the Audit Committee of the
Board (the "Audit Committee"), the Compensation Committee of the Board (the
"Compensation Committee"), and the Governance Committee of the Board (the
"Governance Committee"), as provided in SGRP's Restated By-Laws (see -
"Limitation of Liability and Indemnification Matters", below).
AUDIT COMMITTEE
The Audit Committee of the Board (the "Audit Committee") assists the
Board in fulfilling its oversight responsibilities respecting the accounting,
auditing and financial reporting and disclosure principles, policies, practices
and controls of SGRP and its direct and indirect subsidiaries (together with
SGRP, collectively, the "Company"), the integrity of the Company's financial
statements, the audits of the financial statements of the Company and the
Company's compliance with legal and regulatory requirements and disclosure, and
has done so since June of 2000. The specific functions and responsibilities of
the Audit Committee are set forth in the written Amended and Restated Charter of
the Audit Committee of the Board of Directors of SPAR Group, Inc., Dated (as of)
May 18, 2004 (the "Audit Charter"), approved and recommended by the Audit
Committee and Governance Committee and adopted by the Board on May 18,
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2004. The Audit Committee also is given specific functions and responsibilities
by and is subject to the rules and regulations of Nasdaq ("Nasdaq Rules") and of
the SEC (the "SEC Rules"), the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") and
other applicable law, which are reflected in the Audit Charter. A current copy
of the Audit Charter is posted and available to stockholders and the public on
the Company's web site (www.SPARinc.com). The Audit Committee reviews and
reassesses the Audit Charter annually and recommends any needed changes to the
Board for approval. The Audit Charter was amended and restated to reflect the
recent evolution of the Audit Committee's expanding responsibilities, the recent
adoption of Sarbanes-Oxley, and recent changes in Nasdaq Rules, SEC Rules,
securities laws and other applicable law pertaining to audit committees.
The Audit Committee (among other things and as more fully provided in
its Charter):
(a) Serves as an independent and objective party to monitor the Company's
financial reporting process and internal accounting and disclosure
control system and their adequacy and effectiveness;
(b) Is directly responsible for the appointment, compensation, retention
and oversight of the work of any registered public accounting firm
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company
(hereinafter referred to as the "Company's Independent Accountants");
(c) Resolves disagreements between the Company's senior management and the
Company's Independent Accountants regarding financial reporting;
(d) Communicates directly with the Company's Independent Accountants;
(e) Reviews and appraises the audit efforts of the Company's Independent
Accountants, including the plans for and scope of the audit, the audit
procedures to be utilized and results of the audit;
(f) Provides an open avenue of communication among the Company's
Independent Accountants, the Company's financial and senior management
and the Board;
(g) Reviews and approves, in advance, all non-audit services to be
performed by the Company's Independent Accountants, either individually
or through policies and procedures for particular types of services to
be performed within specified periods;
(h) Reviews the performance, qualifications and independence of the
Company's Independent Accountants;
(i) Reviews the financial reports and other financial information provided
by SGRP to any governmental body or the public;
(j) Encourages continuous improvement of, and fosters adherence to, the
Company's accounting, disclosure and similar control policies,
procedures and practices at all levels; and
(k) Reviews and approves the overall fairness of all material related-party
transactions.
The Audit Committee currently consists of Messrs. Kellar (its
Chairman), Aders, Gilbert and Partridge, each of whom has been determined by the
Governance Committee and the Board to meet the independence requirements for
audit committee members under Nasdaq Rule 4200(a)(14). In connection with his
re-nomination as a Director, the Governance Committee and the Board have
re-determined that Mr. Kellar was qualified to be the "audit committee financial
expert" required by applicable law and the SEC Rules.
During the year ended December 31, 2004, the Audit Committee met four
times in person and six times by telephone.
See "Report of the Audit Committee of the Board of Directors", below.
COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Compensation Committee")
assists the Board in fulfilling its oversight responsibilities respecting the
performance and compensation of the executives and the other compensation,
equity incentive and related policies of the Company, through which the Company
endeavors to attract, motivate and retain the executive talent needed to
optimize stockholder value in a
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competitive environment while facilitating the business strategies and
long-range plans of the Company. The specific functions and responsibilities of
the Compensation Committee are set forth in the written Charter of the
Compensation Committee of the Board of Directors of SPAR Group, Inc., Dated (as
of) May 18, 2004 (the "Compensation Charter"), approved and recommended by the
Compensation Committee and Governance Committee and adopted by the Board on May
18, 2004. The Compensation Committee also is given specific functions and
responsibilities by and is subject to the Nasdaq Rules and SEC Rules,
Sarbanes-Oxley and other applicable law. A current copy of the Compensation
Charter is posted and available to stockholders and the public on the Company's
web site (www.SPARinc.com). The Compensation Committee reviews and reassesses
the Compensation Charter annually and recommends any needed changes to the Board
for approval. The Compensation Charter was adopted to reflect the recent
evolution of the Compensation Committee's informal responsibilities, the recent
adoption of Sarbanes-Oxley, and recent changes in Nasdaq Rules, SEC Rules,
securities laws and other applicable law pertaining to Compensation committees.
The Compensation Committee (among other things and as more fully
provided in its Charter):
(a) Oversees the existing and proposed compensation plans, policies and
practices of the Company, and reviews and recommends to the Board any
necessary or desirable changes or additions to any such plan, policy or
practice, all in order to (i) attract and retain quality directors,
executives and employees, (ii) provide total compensation competitive
with similar companies, (iii) reward and reinforce the attainment of
the Company's performance objectives, and (iv) align the interests of
SGRP's directors and the Company's executives and employees with those
of SGRP's stockholders (the "Company's Compensation Objectives");
(b) Reviews the Company's existing and proposed Compensation Objectives
from time to time and recommends to the Board any necessary or
desirable changes or additions to such objectives;
(c) Reviews the performance of and establishes the compensation for the
Company's senior executives; and
(d) Oversees the Company's stock option, stock purchase and other benefit
plans and severance policies, and reviews and recommends to the Board
any necessary or desirable changes or additions to any such plan,
policy or practice.
The Compensation Committee currently consists of Messrs. Partridge (its
Chairman), Aders, Gilbert and Kellar, all of whom are non-employees of the
Company and have been determined by the Governance Committee and the Board to be
independent directors in accordance with Nasdaq Rule 4200(a)(14).
During the year ended December 31, 2004, the Compensation Committee met
four times in person.
See "Report of the Compensation Committee of the Board of Directors",
below.
GOVERNANCE COMMITTEE
The Governance Committee of the Board (the "Governance Committee")
assists the Board in fulfilling its oversight responsibilities respecting the
nomination of directors and committee members for the Board and the corporate
governance policies and practices of the Company. The specific functions and
responsibilities of the Governance Committee are set forth in the written
Charter of the Governance Committee of the Board of Directors of SPAR Group,
Inc., Dated (as of) May 18, 2004 (the "Governance Charter"), approved and
recommended by the Governance Committee and adopted by the Board on May 18,
2004. The Governance Committee also is given specific functions and
responsibilities by and is subject to the Nasdaq Rules, SEC Rules,
Sarbanes-Oxley and other applicable law, which are reflected in the Governance
Charter. A current copy of the Governance Charter is posted and available to
stockholders and the public on the Company's web site (www.SPARinc.com). The
Governance Committee reviews and reassesses the Governance Charter and
Nomination Policy (as defined below) annually and recommends any needed changes
to the Board for approval. The Governance Charter was adopted to reflect the
recent evolution of the Governance Committee's informal responsibilities, the
recent adoption of Sarbanes-Oxley, and recent changes in Nasdaq Rules, SEC
Rules, securities laws and other applicable law pertaining to Governance
committees.
-7-
The Governance Committee (among other things and as more fully provided
in its Charter):
(a) Oversees the identification, vetting and nomination of candidates for
directors of SGRP and the selection of committee members, reviews their
qualifications (including outside director independence) and recommends
any proposed nominees to the Board;
(b) Oversees SGRP's organizational documents and policies and practices on
corporate governance and recommends any proposed changes to the Board
for approval; and
(c) Oversees the Company's codes of ethics and other internal policies and
guidelines and monitors the Company's enforcement of them and
incorporation of them into the Company's culture and business
practices.
The Governance Committee currently consists of Messrs. Aders (its
Chairman), Gilbert, Partridge and Kellar, all of whom are non-employees of the
Company and have been determined by the Governance Committee and the Board to be
independent directors in accordance with Nasdaq Rule 4200(a)(14).
During the year ended December 31, 2004, the Governance Committee met
four times in person.
DIRECTOR NOMINATIONS
The Governance Committee oversees the identification, vetting and
nomination of candidates for directors and the selection of committee members,
the review of their qualifications (including outside director independence),
and recommends any proposed nominees to the Board in accordance with the
Governance Charter and with the SPAR Group, Inc. Statement of Policy Regarding
Director Qualifications and Nominations dated as of May 18, 2004 (the
"Nomination Policy"), as approved and recommended by the Governance Committee
and adopted by the Board on May 18, 2004. A current copy of this policy is
posted and available to stockholders and the public on the Company's web site
(www.SPARinc.com).
The Nomination Policy requires that a majority of the directors of the
Board and all members of its Audit Committee, Compensation Committee and
Governance Committee satisfy the independence requirements applicable to Audit
Committee members under the applicable Nasdaq Rules. Each of the Audit Charter,
Compensation Charter and Governance Charter also contain the same requirements
that all of their respective members satisfy such independence requirements.
The Nomination Policy identifies numerous characteristics believed
important by the Board for any nominee for director and provides that each
nominee for director should possess as many of them as practicable. These
desirable characteristics include (among other things) the highest professional
and personal ethics and integrity, sufficient time and attention to devote to
Board and Committee duties and responsibilities, strong relevant business and
industry knowledge and contacts, and business and financial sophistication,
common sense and wisdom, and the ability to make informed judgments on a wide
range of issues, the ability and willingness to exercise and express independent
judgments, and the apparent ability and willingness to meet or exceed the
Board's performance expectations.
Performance expectations for each director have also been established
by the Board in the Nomination Policy, including (among other things) the
director's regular preparation for, attendance at and participation in all
meetings (including appropriate questioning), support and advice to management
in his areas of expertise, maintenance of focus on the Board's agenda,
understanding the business, finances, plans and strategies of Company,
professional and collegial interaction, acting in the best interests of the
Company and the stockholders, compliance with the Company's applicable ethics
codes.
The Governance Committee generally will consider recommending the
re-nomination of incumbent directors in accordance with the Nomination Policy,
provided that they continue to satisfy the applicable personal characteristic
criteria and performance expectations. The Nomination Policy reflects the
Board's belief that qualified incumbent directors are generally uniquely
positioned to provide stockholders the benefit of continuity of leadership and
seasoned judgment gained through experience as a director of SGRP, and that the
value of these benefits may outweigh many other factors. However, the Governance
Committee is not required to recommend to the Board the nomination of any
eligible incumbent director for re-election.
In considering the potential director nominee slate (including
incumbent directors) to recommend to the Board, the Nomination Policy directs
the Governance Committee to take into account: (i) the benefits of
-8-
incumbency, as noted above; (ii) any perceived needs of Board, any Committee or
the Company at the time for business contacts, skills or experience or other
particular desirable personal characteristics; (iii) the collegiality of Board
members; (iv) the need for independent directors or financial experts under that
Policy or applicable law for the Board or its Committees; (v) any other
requirements of applicable law; and (vi) the desirability of ethnic, racial,
gender and geographic diversity. The Governance Committee will consider proposed
nominees from any source, including those properly submitted by stockholders
(see - "STOCKHOLDER COMMUNICATIONS - Submission of Stockholder Proposals and
Director Nominations", below).
Each potential nominee for director is required to complete and submit
an officers' and directors' questionnaire as part of the process for making
director nominations and preparation of SGRP's annual report and proxy
statement. With new nominees, the process also may include interviews and
background checks.
The six nominees for director were reviewed, approved and recommended
by the Governance Committee, were nominated by the Board and are all incumbents.
Based on their respective officers' and directors' questionnaires, the
Governance Committee and Board each determined that Mr. Robert O. Aders, Mr.
Jack W. Partridge, Mr. Jerry B. Gilbert, and Mr. Lorrence T. Kellar are
independent directors under Nasdaq Rules, as required by the Nominations Policy
and the committee charters, and Mr. Lorrence T. Kellar is an "audit committee
financial expert" under SEC Rules, as required by such rules and the Audit
Charter.
ETHICS CODES
The Company has adopted codes of ethical conduct applicable to all of
its directors, officers and employees, as approved and recommended by the Audit
Committee and Governance Committee and adopted by the Board on May 3, 2004, in
accordance with Nasdaq Rules. These codes of conduct consist of: (1) the SPAR
Group Code of Ethical Conduct for its Directors, Senior Executives and Employees
Dated (as of) May 1, 2004; and (2) the SPAR Group Statement of Policy Regarding
Personal Securities Transaction in SGRP Stock and Non-Public Information Dated,
Amended and Restated as of May 1, 2004, which amends, restates and completely
replaces its existing similar statement of policy. Both Committees were involved
because authority over ethics codes shifted from the Audit Committee to the
Governance Committee with the adoption of the committee charters on May 18,
2004. Copies of these codes and policies are posted and available to
stockholders and the public on the Company's web site (www.SPARinc.com).
AUDIT AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Board's Audit, Compensation or Governance Committee
was at any time during the year ended December 31, 2004, or at any other time an
officer or employee of the Company. No executive officer of the Company or Board
member serves as a member of the board of directors, audit, compensation or
governance committee of any other entity that has one or more executive officers
serving as a member of SGRP's Board, Audit Committee, Compensation Committee or
Governance Committee, except for the positions of Messrs. Brown and Bartels as
directors and officers of the Company (including each of its subsidiaries) and
as directors and officers of each of its affiliates, including SMS, SMSI and SIT
(see - Certain Relationships and Related Transactions, below).
COMPENSATION OF DIRECTORS
The Compensation Committee administers the compensation plan for its
outside Directors as well as the compensation for its executives. Each member of
the Company's Board who is not otherwise an employee or officer of the Company
or any subsidiary or affiliate of the Company (each, an "Eligible Director") is
eligible to receive the compensation contemplated under such plan.
The Compensation Committee administers the compensation of directors
pursuant to SGRP's Director Compensation Plan for its outside Directors, as
approved and amended by the Board (the "Directors Compensation Plan"), as well
as the compensation for SGRP's executives.
In May 2004, the Compensation Committee approved and recommended and
the Board adopted a change in the Directors Compensation Plan to issue stock
options for the purchase of common stock with an exercise price equal to 100% of
the fair market value of SGRP's common stock at the end of each quarter.
-9-
The number of option shares to be issued will be equal to three times the
quotient of the amount of compensation to be paid in stock options divided by
the closing stock price at the end of each quarter. Each member of SGRP's Board
who is not otherwise an employee or officer of SGRP or any subsidiary or
affiliate of SGRP (each, a "Non-Employee Director") is eligible to receive
director's fees of $30,000 per annum (plus an additional $5,000 per annum for
the Audit Committee Chairman), payable quarterly. The Compensation Committee and
the Board determined that this revised policy more fairly compensated the
Non-Employee Directors. Prior to May 2004, each quarterly installment of such
director's fees ($7,500 plus an additional $1,250 for the Audit Committee
Chairman) was paid half in cash and half in stock options to purchase shares of
SGRP's common stock. SGRP issued such stock options with an exercise price of
$0.01 per share. The number of option shares issued was calculated by dividing
the amount of compensation to be paid in stock options by the closing stock
price at the end of each quarter.
In addition upon acceptance of the directorship, each Non-Employee
Director receives options to purchase 10,000 shares of SGRP's common stock with
an exercise price equal to 100% of the fair market value of SGRP's common stock
at the date of grant, options to purchase 10,000 additional shares of SGRP's
common stock with an exercise price equal to 100% of the fair market value of
SGRP's common stock at the date of grant after one year of service and options
to purchase 10,000 additional shares of SGRP's common stock with an exercise
price equal to 100% of the fair market value of SGRP's common stock at the date
of grant for each additional year of service thereafter.
All of those options to Non-Employee Directors have been and will be
granted under the 2000 Plan described below, under which each member of the
Board is eligible to participate. Non-Employee Directors will be reimbursed for
all reasonable expenses incurred during the course of their duties. There is no
additional compensation for committee participation, phone meetings, or other
Board activities.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
SGRP's Certificate of Incorporation limits the liability of all
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a company will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
SGRP's Restated By-Laws provide that SGRP shall indemnify each of its
directors and senior executives and may indemnify the other officers, employees
and other agents of the Company to the fullest extent permitted by law. SGRP's
Restated By-Laws also permit it to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the Restated By-Laws would
permit indemnification. These indemnification provisions were first approved and
recommended by the Governance Committee and adopted by the Board in November of
2003, in order to conform to the current practices of most public companies and
to attract and maintain quality candidates for the Company's management and
Board, and were later incorporated into the Amended and Restated By-Laws of SPAR
Group, Inc., Dated as of May 18, 2004 (the "Restated By-Laws"), approved and
recommended by the Governance Committee and adopted by the Board on May 18,
2004. A current copy of the Restated By-Laws is posted and available to
stockholders and the public on the Company's web site (www.SPARinc.com). The
Company maintains director and officer liability insurance.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company in which indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
-10-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of SGRP's Common Stock as of June 16, 2005, by: (i) each person (or
group of affiliated persons) who is known by SGRP to own beneficially more than
5% of SGRP's Common Stock; (ii) each of SGRP's directors; (iii) each of the
executive officers named in the Summary Compensation Table; and (iv) SGRP's
directors and executive officers as a group. Except as indicated in the
footnotes to this table, the persons named in the table, based on information
provided by such persons, have sole voting and sole investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
NUMBER OF SHARES
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
-------------- ------------------------------------ ------------------ ----------
Common Shares Robert G. Brown (1) 8,635,389 (2) 45.5%
Common Shares William H. Bartels (1) 5,565,831 (3) 29.4%
Common Shares Robert O. Aders (1) 158,110 (4) *
Common Shares Jack W. Partridge (1) 92,200 (5) *
Common Shares Jerry B. Gilbert (1) 95,541 (6) *
Common Shares Lorrence T. Kellar (1) 84,430 (7) *
Common Shares Charles Cimitile (1) 107,500 (8) *
Common Shares Kori G. Belzer (1) 102,951 (9) *
Common Shares Patricia Franco (1) 144,497 (10) *
Common Shares Richard J. Riordan (11)
300 South Grand Avenue, Suite 2900
Los Angeles, California 90071 1,209,922 6.4%
Common Shares Heartland Advisors, Inc. (12)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 1,300,000 6.9%
Common Shares Executive Officers and Directors 14,986,449 79.4%
* Less than 1%
(1) The address of such owners is c/o SPAR Group, Inc. 580 White Plains
Road, Suite 600, Tarrytown, New York 10591.
(2) Includes 1,800,000 shares held by a grantor trust for the benefit of
certain family members of Robert G. Brown over which Robert G. Brown,
James R. Brown, Sr. and William H. Bartels are trustees. Includes
95,747 shares issuable upon exercise of options.
(3) Excludes 1,800,000 shares held by a grantor trust for the benefit of
certain family members of Robert G. Brown over which Robert G. Brown,
James R. Brown, Sr. and William H. Bartels are trustees, beneficial
ownership of which are disclaimed by Mr. Bartels. Includes 58,999
shares issuable upon exercise of options.
(4) Includes 86,456 shares issuable upon exercise of options.
(5) Includes 81,232 shares issuable upon exercise of options.
(6) Includes 95,541 shares issuable upon exercise of options.
(7) Includes 78,282 shares issuable upon exercise of options.
(8) Includes 107,500 shares issuable upon exercise of options.
(9) Includes 101,000 shares issuable upon exercise of options.
(10) Includes 91,000 shares issuable upon exercise of options.
(11) Share ownership was confirmed with SGRP's transfer agent.
(12) All information regarding share ownership is taken from and furnished
in reliance upon the Schedule 13G (Amendment No. 9), filed by Heartland
Advisors, Inc. with the Securities and Exchange Commission on December
31, 2004.
-11-
EQUITY COMPENSATION PLANS
The following table contains a summary of the number of shares of
Common Stock of the Company to be issued upon the exercise of options, warrants
and rights outstanding at December 31, 2004, the weighted-average exercise price
of those outstanding options, warrants and rights, and the number of additional
shares of Common Stock remaining available for future issuance under the plans
as at December 31, 2004.
EQUITY COMPENSATION PLAN INFORMATION
----------------------------- -------------------------- ------------------------- -------------------------
Number of securities to Weighted average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance of
warrants and rights warrants and rights ($) options, warrants and
Plan category rights
----------------------------- -------------------------- ------------------------- -------------------------
----------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans 1,291,258 1.66 1,618,719
approved by security
holders
----------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans
not approved by security
holders - - -
----------------------------- -------------------------- ------------------------- -------------------------
Total 1,291,258 1.66 1,618,719
----------------------------- -------------------------- ------------------------- -------------------------
CERTAIN RELATIONSHIPS AND RELATED 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,
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").
SMS and SMSI provided approximately 99% of the Company's field
representatives (through its independent contractor field force) and
approximately 92% of the Company's field management at a total cost of
approximately $24.0 million, $36.0 million, and $30.5 million for 2004, 2003,
and 2002, respectively. Pursuant to the terms of the Amended and Restated Field
Service Agreement dated as of January 1, 2004, SMS provides the services of
SMS's field force of approximately 6,300 independent contractors to the Company.
Pursuant to the terms of the Amended and Restated Field Management Agreement
dated as of January 1, 2004, SMSI provides approximately 50 full-time national,
regional and district managers to the Company. For those services, the Company
has agreed to reimburse SMS and SMSI for all of their costs of providing those
services and to pay SMS and SMSI each a premium equal to 4% of their respective
costs, except that for 2004 SMSI agreed to concessions that reduced the premium
paid by approximately $640,000 for 2004. Total net premiums (4% of SMS and SMSI
costs less 2004 concessions) paid to SMS and SMSI for services rendered were
approximately $320,000, $1,350,000, and $1,100,000 for 2004, 2003, and 2002,
respectively. The Company has been advised that Messrs. Brown and Bartels are
not paid any salaries as officers of SMS or SMSI so there were no salary
reimbursements for them included in such costs or premium. However, since SMS
and SMSI are "Subchapter S" corporations, Messrs. Brown and Bartels benefit from
any income of such companies allocated to them.
SIT provided substantially all of the Internet computer programming
services to the Company at a total cost of approximately $1,170,000, $1,610,000,
and $1,630,000 for 2004, 2003, and 2002, respectively. SIT provided
approximately 34,000, 47,000, and 46,000 hours of Internet computer programming
services to the Company for 2004, 2003, and 2002, respectively. Pursuant to the
Amended and Restated Programming and Support Agreement dated as of January 1,
2004, SIT continues to provide programming services to the Company 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. The average hourly billing rate was $34.71, $34.24, and $35.10
for 2004, 2003, and 2002, respectively. The Company has been advised that no
hourly charges or business expenses for Messrs. Brown and Bartels were charged
to the Company by SIT for 2004. However, since SIT is a "Subchapter S"
corporation, Messrs. Brown and Bartels benefit from any income of such company
allocated to them.
-12-
In November 2004 and January 2005, the Company entered into separate
operating lease agreements between SMS and the Company's wholly owned
subsidiaries, SPAR Marketing Force, Inc. ("SMF") and SPAR Canada Company ("SPAR
Canada"). In May 2005, the Company and SMS amended the lease agreements reducing
the total monthly payment. Each lease, as amended, has a 36 month term and
representations, covenants and defaults customary for the leasing industry. The
SMF lease is for handheld computers to be used by field merchandisers in the
performance of various merchandising services in the United States and has a
monthly payment of $17,891. These handheld computers had an original purchase
price of $632,200. The SPAR Canada lease is also for handheld computers to be
used by field merchandisers in the performance of various merchandising services
in Canada and has a monthly payment of $2,972. These handheld computers had an
original purchase price of $105,000. The monthly payments, as amended, are based
upon a lease factor of 2.83%.
In March 2005, SMF entered into an additional 36 month lease with SMS
for handheld computers. The lease factor is 2.83% and the monthly payment is
$2,341. These handheld computers had an original purchase price of $82,727.
The Company's agreements with SMS, SMSI and SIT are periodically
reviewed by SGRP's Audit Committee, which includes an examination of the overall
fairness of the arrangements. In February 2004, the Audit Committee approved
separate amended and restated agreements with each of SMS, SMSI and SIT,
effective as of January 1, 2004. The restated agreements extend the contract
maturities for four years, strengthened various contractual provisions in each
agreement and continued the basic economic terms of the existing agreements,
except that the restated agreement with SMSI provides for temporary concessions
to the Company by SMSI totaling approximately $640,000 for 2004. In February and
May of 2005, the Audit Committee approved the separate handheld computer leases
and amendments.
The Company owed the following amounts to SMS for the above services as
at December 31, 2004 (in thousands):
December 31,
2004 2003
------------------------------------
Balance due to affiliates included in accrued liabilities:
SPAR Marketing Services, Inc. $ 987 $ 1,091
In July 1999, SMF, SMS and SIT entered into a Software Ownership
Agreement with respect to Internet job scheduling software jointly developed by
such parties. In addition, SPAR Trademarks, Inc. ("STM"), SMS and SIT entered
into trademark licensing agreements whereby STM has granted non-exclusive
royalty-free licenses to SIT, SMS and SMSI for their continued use of the name
"SPAR" and certain other trademarks and related rights transferred to STM, a
wholly owned subsidiary of the Company.
Messrs. Brown and Bartels also collectively own, through SMSI, a
minority (less than 5%) equity interest in Affinity Insurance Ltd., which
provides certain insurance to the Company.
In the event of any material dispute in the business relationships
between the Company and SMS, SMSI, or SIT, it is possible that Messrs. Brown or
Bartels may have one or more conflicts of interest with respect to these
relationships and such dispute could have a material adverse effect on the
Company.
-13-
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages and current offices
held by all executive officers of SGRP. For biographical information regarding
Robert G. Brown and William H. Bartels, see Current Members of the Board of
Directors, above.
NAME AGE POSITION WITH SPAR GROUP, INC.
------------------- ------- ----------------------------------------------
Robert G. Brown 62 Chairman, Chief Executive Officer, President
and Director
William H. Bartels 61 Vice Chairman and Director
Charles Cimitile 50 Chief Financial Officer, Secretary and
Treasurer
Kori G. Belzer 39 Chief Operating Officer
Patricia Franco 44 Chief Information Officer and President of the
International Division
James R. Segreto 56 Vice President, Controller
Charles Cimitile serves as the Chief Financial Officer, Secretary and
Treasurer of SGRP. Mr. Cimitile has served as Chief Financial Officer and
Secretary since November 24, 1999 and Treasurer since August 7, 2003. Mr.
Cimitile served as Chief Financial Officer for GT Bicycles from 1996 to 1999 and
Cruise Phone, Inc. from 1995 through 1996. Prior to 1995, he served as the Vice
President Finance, Secretary and Treasurer of American Recreation Company
Holdings, Inc. and its predecessor company.
Kori G. Belzer serves as the Chief Operating Officer of SGRP and has
done so since January 1, 2004. Ms. Belzer also serves as Chief Operating Officer
of SPAR Management Services, Inc. ("SMSI"), and SPAR Marketing Services, Inc.
("SMS"), each an affiliate of SGRP (see - Certain Relationships and Related
Transactions, above), and has done so since 2000. The Audit Committee determined
that Ms. Belzer also served during 2003 as the de facto chief operating officer
of SGRP through her position as Chief Operating Officer of SMSI and SMS. Prior
to 2000, Ms. Belzer served as Vice President Operations of SMS from 1997 to
2000, and as Regional Director of SMS from 1995 to 1997. Prior to 1995, she
served as Client Services Manager for SPAR/Servco, Inc.
Patricia Franco serves as the Chief Information Officer of SGRP and
President of the SPAR International Merchandising Services Division and has done
so since January 1, 2004. Ms. Franco also serves as Senior Vice President of
SPAR Infotech, Inc. ("SIT"), an affiliate of SGRP (see - Certain Relationships
and Related Transactions, above), and has done so since January 1, 2003. The
Audit Committee determined that Ms. Franco also served during 2003 as the de
facto chief information officer of SGRP, as well as the de facto President of
the SPAR International Merchandising Services Division, through her position as
Senior Vice President of SIT. Prior to 2003, Ms. Franco served in various
management capacities with SIT, SMS and their affiliates.
James R. Segreto serves as Vice President, Controller of SGRP and has
done so since July 8, 1999, the effective date of the Merger. From 1997 through
the Merger, he served in the same capacity for SMS. Mr. Segreto served as Chief
Financial Officer for Supermarket Communications Systems, Inc. from 1992 to 1997
and LM Capital, LLP from 1990 to 1992. Prior to 1992, he served as Controller of
Dorman Roth Foods, Inc.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company in all capacities for the years ended December 31, 2004,
2003, and 2002 (except for amounts paid to SMS, SMSI and SIT, see - Certain
Relationships and Related Transactions, above) (i) by the Company's Chief
Executive Officer, and (ii) each of the other four most highly compensated
executive officers of the Company and its affiliates who were serving as
executive officers of the Company or performing equivalent functions for the
Company through an affiliate, at December 31, 2004 (collectively, the "Named
Executive Officers").
-14-
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ ------------------------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) OPTIONS (#)(1) ($)(2)
---------------------------- ------- ----------- ----------- --------------- -------------
Robert G. Brown 2004 114,000 (3) -- -- 1,800
Chief Executive Officer, Chairman of the 2003 180,000 (3) -- -- 2,200
Board, President, and Director 2002 164,340 (3) -- -- 2,040
William H. Bartels 2004 114,000 (3) -- -- 1,620
Vice Chairman and Director 2003 180,000 (3) -- -- 2,007
2002 164,340 (3) -- -- 2,040
Charles Cimitile 2004 220,000 -- 25,000 1,800
Chief Financial Officer, Treasurer and 2003 221,700 20,000 20,000 2,200
Secretary 2002 215,564 15,000 20,000 2,040
Kori G. Belzer 2004 147,990 -- 25,000 1,495
Chief Operating Officer 2003 147,067 19,000 26,750 1,843
Patricia Franco 2004 147,900 10,000 25,000 1,493
Chief Information Officer 2003 145,875 20,000 37,500 1,718
------------------------
(1) In June 2004, Mr. Brown and Mr. Bartels voluntarily surrendered for
cancellation their options for the purchase of the following shares of
common stock under the 2000 Plan: 382,986 and 235,996, respectively. In
September 2004, Mr. Cimitile, Ms. Belzer and Ms. Franco voluntarily
surrendered for cancellation their options for the purchase of the
following shares of common stock under the 2000 Plan: 55,000, 76,140
and 87,500 respectively. Also in September 2004, Ms. Franco voluntarily
surrendered for cancellation her options for the purchase 10,000 shares
of common stock under the 1995 Plan.
(2) Other compensation represents the Company's 401k contribution.
(3) Does not include amounts paid to SMS, SMSI, SIT and Affinity Insurance
Ltd. (see - Certain Relationships and Related Transactions, above)
CHANGE IN CONTROL SEVERANCE AGREEMENTS
The Company has entered into a Change of Control Severance Agreement
with each of Patricia Franco, the Company's Chief Information Officer, and Kori
G. Belzer, the Company's Chief Operating Officer, each providing for a lump sum
severance payment and other accommodations from the Company to the employee
under certain circumstances if, pending or following a change in control, the
employee leaves for good reason or is terminated other than in a termination for
cause. The payment is equal to the sum of the employee's monthly salary times a
multiple equal to 24 months less the number of months by which the termination
of employment followed the change in control plus the maximum bonus that would
have been paid to the employee (not to exceed 25% of the employee's annual
salary).
-15-
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each grant of stock
options made during the year ended December 31, 2004, to each of the Named
Executive Officers. No stock appreciation rights ("SAR's") were granted during
such period to such person.
INDIVIDUAL GRANTS
----------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO POTENTIAL REALIZABLE VALUE AT
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ASSUMED ANNUAL RATES OF STOCK
NAME GRANTED(2) (#) PERIOD (%) PRICE ($/SH) DATE PRICE APPRECIATION FOR OPTION(1)
---- -------------------------------------------------------------------------------------------
5% ($) 10% ($)
-------------------------------------------------------------------------------------------
Charles Cimitile 25,000 16.1 2.39 3/31/14 37,596 95,226
Kori G. Belzer 25,000 16.1 2.39 3/31/14 37,596 95,226
Patricia Franco 25,000 16.1 2.39 3/31/14 37,596 95,226
------------
(1) The potential realizable value is calculated based upon the term of the
option at its time of grant. It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual
rate, compounded annually for the entire term of the option.
(2) These options vest over four-year periods at a rate of 25% per year,
beginning on the first anniversary of the date of grant.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth the number of shares of Common Stock of
the Company purchased by each of the Named Executive Officers in the exercise of
stock options during the year ended December 31, 2004, the value realized in the
purchase of such shares (the market value at the time of exercise less the
exercise price to purchase such shares), and the number of shares that may be
purchased and value of the exercisable and unexercisable options held by each of
the Named Executive Officers at December 31, 2004.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END (#) FISCAL YEAR-END ($)
--------------------------------- -------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ ---------------- ---------------- --------------- -------------- ---------------
Robert G. Brown -- -- -- 95,746 -- --
William H. Bartels -- -- -- 58,999 -- --
Charles Cimitile -- -- 25,000 85,000 10,625 --
Kori G. Belzer -- -- 11,500 94,500 4,513 88
Patricia Franco -- -- 11,500 79,500 4,513 88
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the Compensation Committee's report submitted to the
Board addressing the compensation of SGRP's executive officers for 2004:
COMPENSATION POLICY
The Company's executive compensation policy is (i) designed to
establish an appropriate relationship between executive pay and the Company's
annual performance, its long-term growth objectives and its ability to attract
and retain qualified executive officers; and (ii) based on the belief that the
interests of the executives should be closely aligned with SGRP's stockholders.
The Compensation Committee attempts to
-16-
achieve these goals by integrating competitive annual base salaries with (i)
annual incentive bonuses based on corporate performance and individual
contribution, and (ii) stock options through the Company's 2000 stock option
plan (described below). The Compensation Committee believes that cash
compensation in the form of salary and performance-based incentive bonuses
provides Company executives with short term rewards for success in operations,
and that long-term compensation through the award of stock options encourages
growth in management stock ownership which leads to expansion of management's
stake in the long-term performance and success of the Company. The Compensation
Committee considers all elements of compensation and the compensation policy
when determining individual components of pay.
EXECUTIVE COMPENSATION COMPONENTS
As discussed below, the Company's executive compensation package is
primarily comprised of three components: base salary, annual incentive bonuses
and stock options.
BASE SALARY
In establishing base salary levels for executive officer positions, the
Committee and Robert G. Brown, the Company's Chief Executive Officer, consider
levels of compensation at comparable companies, levels of responsibility and
internal issues of consistency and fairness. In determining the base salary of a
particular executive, the Committee and Mr. Brown consider individual
performance, including the accomplishment of short-term and long-term
objectives, and various subjective criteria including initiative, contribution
to overall corporate performance and leadership ability. The Compensation
Committee reviews executive officer salaries annually and exercises its judgment
based on all the factors described above. No specific formula is applied to
determine the weight of each criteria.
ANNUAL INCENTIVE BONUSES
The Company's executive officers are eligible for annual bonuses upon
recommendations made by Mr. Brown (as to the other executive officers), and the
Compensation Committee (as to Mr. Brown), based upon their individual
performance and the Company's achievements of certain operating results. Amounts
of individual awards are based principally upon the results of the Company's
financial performance during the prior year. The amount of awards for senior
officers are within guidelines established by the Committee and Mr. Brown as a
result of their review of total compensation for senior management of peer
companies. The actual amount awarded, within these guidelines, will be
determined principally by the Committee and Mr. Brown's assessment of the
individual's contribution to the Company's overall financial performance.
Consideration is also given to such factors such as the individual's successful
completion of a special project, any significant increase or decrease in the
level of the participant's ability to discharge the responsibilities of his
position.
STOCK OPTIONS AND PURCHASE PLANS
The Company has four stock option plans: the 2000 Stock Option Plan
("2000 Plan"), the Amended and Restated 1995 Stock Option Plan ("1995 Plan"),
the 1995 Director's Plan ("Director's Plan"), and the Special Purpose Stock
Option Plan (the "Special Purpose Plan").
On December 4, 2000, the Company adopted the 2000 Plan, as the
successor to the 1995 Plan and the Director's Plan with respect to all new
options issued. The 2000 Plan provides for the granting of either incentive or
nonqualified stock options to specified employees, consultants, and directors of
the Company for the purchase of up to 3,600,000 (less those options still
outstanding under the 1995 Plan or exercised after December 4, 2000 under the
1995 Plan). The options have a term of ten years, except in the case of
incentive stock options granted to greater than 10% stockholders for whom the
term is five years. The exercise price of nonqualified stock options must be
equal to at least 85% of the fair market value of the Company's common stock at
the date of grant (although typically the options are issued at 100% of the fair
market value), and the exercise price of incentive stock options must be equal
to at least the fair market value of the Company's common stock at the date of
grant. During 2004, options to purchase 476,417 shares of the Company's common
stock were granted, options to purchase 53,302 shares of the Company's common
stock were exercised and options to purchase 1,345,542 shares of the Company's
stock were voluntarily surrendered and cancelled under this plan. At December
31, 2004, options to purchase 1,251,383 shares of the Company's common stock
remain outstanding under this plan and options to purchase 1,618,719 shares of
the Company's common stock were available for grant under this plan.
-17-
The 1995 Plan provided for the granting of either incentive or
nonqualified stock options to specific employees, consultants, and directors of
the Company for the purchase of up to 3,500,000 shares of the Company's common
stock. The options had a term of ten years from the date of issuance, except in
the case of incentive stock options granted to greater than 10% stockholders for
which the term was five years. The exercise price of nonqualified stock options
must have been equal to at least 85% of the fair market value of the Company's
common stock at the date of grant. Since 2000, the Company has not granted any
new options under this plan. During 2004, 1,500 options to purchase shares of
the Company's common stock were exercised and options to purchase 26,625 shares
of the Company's stock were cancelled under this plan. At December 31, 2004,
options to purchase 15,125 shares of the Company's common stock remain
outstanding under this plan. The 1995 Plan was superseded by the 2000 Plan with
respect to all new options issued.
The Director's Plan was a stock option plan for non-employee directors
and provided for the purchase of up to 120,000 shares of the Company's common
stock. Since 2000, the Company has not granted any new options under this plan.
During 2004, no options to purchase shares of the Company's common stock were
exercised under this plan. At December 31, 2004, 20,000 options to purchase
shares of the Company's common stock remained outstanding under this plan. The
Director's Plan has been replaced by the 2000 Plan with respect to all new
options issued.
On July 8, 1999, in connection with the merger, the Company established
the Special Purpose Plan of PIA Merchandising Services, Inc. to provide for the
issuance of substitute options to the holders of outstanding options granted by
SPAR Acquisition, Inc. There were 134,114 options granted at $0.01 per share.
Since July 8, 1999, the Company has not granted any new options under this plan.
During 2004, 21,000 options to purchase shares of the Company's common stock
were exercised under this plan. At December 31, 2004, options to purchase 4,750
shares of the Company's common stock remain outstanding under this plan.
In 2001, SGRP adopted its 2001 Employee Stock Purchase Plan (the "ESP
Plan"), which replaced its earlier existing plan, and its 2001 Consultant Stock
Purchase Plan (the "CSP Plan"). These plans were each effective as of June 1,
2001. The ESP Plan allows employees of the Company, and the CSP Plan allows
employees of the affiliates of the Company (see - Certain Relationships and
Related Transactions, above), to purchase SGRP's Common Stock from SGRP without
having to pay any brokerage commissions. On August 8, 2002, SGRP's Board
approved a 15% discount for employee purchases of Common Stock under the ESP
Plan and recommended that its affiliates pay a 15% cash bonus for affiliate
consultant purchases of Common Stock under the CSP Plan.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) of the Internal Revenue Code (the "Code"), the
amount of compensation paid to certain executives that is deductible with
respect to the Company's corporate taxes is limited to $1,000,000 annually. It
is the current policy of the Compensation Committee to maximize, to the extent
reasonably possible, the Company's ability to obtain a corporate tax deduction
for compensation paid to executive officers of the Company to the extent
consistent with the best interests of SGRP and its stockholders.
COMPENSATION COMMITTEE
(for the period ending December 31, 2004)
Jack W. Partridge, Robert O. Aders, Jerry B. Gilbert
and Lorrence T. Kellar
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the Audit Committee's report submitted to the Board.
REPORT
The Committee has reviewed and discussed with management of the Company
and Rehmann Robson ("Rehmann"), the independent auditing firm of the Company,
the audited financial statements of the
-18-
Company as of December 31, 2004, for each of the two years in the period ended
December 31, 2004 (the "Audited Financial Statements").
In addition, the Committee has discussed with Rehmann the matters
required by Codification of Statements on Auditing Standards No. 61, as amended
by Statement on Auditing Standards No. 90.
The Committee expects to receive and review the written disclosures and
the letter from Rehmann required by Independence Standards Board Standard No. 1
prior to the 2005 Annual Meeting. The Committee has discussed Rehmann's
independence from the Company with Rehmann. The Committee also discussed with
management of the Company and the auditing firm such other matters and received
such assurances from them, as the Committee deemed appropriate.
Management is responsible for the Company's internal controls and the
financial reporting process. Rehmann is responsible for performing an
independent audit of the Company's financial statements in accordance with
generally accepted auditing standards and issuing a report thereon. The
Committee's responsibility is to monitor and oversee these processes.
Based on the foregoing review and discussions and a review of the
report of Rehmann with respect to the Audited Financial Statements, and relying
thereon, the Committee has recommended to the Company's Board of Directors the
inclusion of the Audited Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2004.
AUDIT COMMITTEE
(for the period ending December 31, 2004)
Lorrence T. Kellar, Robert O. Aders, Jack W. Partridge
and Jerry B. Gilbert
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The management of the Company is responsible for the integrity and
objectivity of the consolidated financial statements and other related financial
Information included in this report. These financial statements were prepared in
accordance with generally accepted accounting principles, as appropriate under
the circumstances and consistently applied. Some of the amounts included in the
financial statements are necessarily based on management's best estimates and
judgment.
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.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls during the
twelve months covered by this report or from the end of the reporting period to
the date of this Proxy Statement.
The Company has established a plan and has begun to document and test
its internal controls over financial reporting required by Section 404 of the
Sarbanes-Oxley Act of 2002.
-19-
COMPANY'S FINANCIAL STATEMENTS
The Audit Committee of the Board is responsible for reviewing and
monitoring the Company's financial statements and practices to ascertain that
they are appropriate in the circumstances. The Audit Committee currently
consists of four independent directors and consisted of four independent
directors during 2004. It meets at least four times a year with representatives
of financial management and the independent accountants, both together and
separately, to review and discuss audit and financial reporting matters. The
independent accountants have direct access to the Audit Committee to review the
results of their audit. In addition, at the regular meetings of the Board of
Directors, management and the Board discuss, among other things, financial and
related matters, as appropriate. See Audit Committee Report on pages 18 and 19,
above.
The Company's financial statements have been audited by Rehmann Robson,
independent accountants, as stated in their report. The independent accountants
are appointed annually by the Audit Committee, commencing with 2004 (and by the
Board in prior years). Their audit of the Company's consolidated financial
statements was made in accordance with generally accepted auditing standards,
and such audit included a study and evaluation of the Company's system of
internal accounting controls they considered necessary to determine the nature,
timing, and extent of the auditing procedures required for expressing an opinion
on the Company's financial statements.
ROBERT G. BROWN CHARLES CIMITILE
Chairman of the Board, Chief Financial Officer,
Chief Executive Officer and President Secretary and Treasurer
-20-
CORPORATION PERFORMANCE
The following graph shows a comparison of cumulative total returns for
SGRP's Common Stock, the Nasdaq Stock Market (U.S. Companies) Index and the
Nasdaq Stocks (SIC 7380-7389 U.S. Companies) Miscellaneous Business Services
Index, Russell 2000 and S&P Advertising for the period during which SGRP's
Common Stock has been registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The graph assumes that the value of an
investment in Common Stock and in each such index was $100 on January 1, 1999,
and that all dividends have been reinvested.
The comparison in the graph below is based on historical data and is
not intended to forecast the possible future performance of SGRP's Common Stock.
COMPARISON OF 6 YEAR CUMULATIVE TOTAL RETURN*
AMONG SPAR GROUP, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE RUSSELL 2000 INDEX, THE S & P ADVERTISING INDEX AND A PEER GROUP
[GRAPH OMITTED]
* $100 invested on 1/1/99 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31.
Copyright(c) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
1/99 7/99 12/99 12/00 12/01 12/02 12/03 12/04
------ ------ ------ ------ ------ ------ ------ ------
SPAR GROUP, INC. 100.00 200.00 135.00 32.52 71.60 126.80 128.00 41.96
NASDAQ STOCK MARKET (U.S.) 100.00 163.32 246.17 147.91 111.86 64.88 94.90 100.61
RUSSELL 2000 100.00 109.28 121.26 117.59 120.52 95.83 141.11 166.98
S & P ADVERTISING 100.00 122.91 158.92 126.43 110.26 63.73 83.24 78.49
PEER GROUP 100.00 118.41 170.21 21.72 16.13 9.17 12.47 14.66
-21-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires SGRP's
directors and certain of its officers and persons who own more than 10% of
SGRP's Common Stock (collectively, "Insiders"), to file reports of ownership and
changes in their ownership of SGRP's Common Stock with the Commission. Insiders
are required by Commission regulations to furnish SGRP with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
for the year ended December 31, 2004, or written representations from certain
reporting persons for such year, SGRP believes that its Insiders complied with
all applicable Section 16(a) filing requirements for such year, with the
exception that Robert G. Brown, William H. Bartels, Jack W. Partridge and Robert
O. Aders untimely filed certain Statements of Changes in Beneficial Ownership on
Form 4. Kori Belzer and Patricia Franco became filers in March of 2004. All such
Section 16(a) filing requirements have since been completed by each of the
aforementioned individuals.
OTHER BUSINESS
SGRP is not aware of any other business to be presented at the 2005
Annual Meeting. All shares represented by SGRP proxies will be voted in favor of
the proposals of SGRP described herein unless otherwise indicated on the form of
proxy. If any other matters properly come before the meeting, SGRP proxy holders
will vote thereon according to their best judgment.
STOCKHOLDER COMMUNICATIONS
COMMUNICATIONS WITH SGRP AND THE DIRECTORS
Generally, a stockholder who has a question or concern regarding the
business or affairs of SGRP should contact the Chief Financial Officer of SGRP.
However, if a stockholder would like to address any such question directly to
the Board, to a particular Committee, or to any individual director(s), the
stockholder may do so by sending his or her question(s) in writing addressed to
such group or person(s), c/o SPAR Group, Inc., 580 White Plains Road, Tarrytown,
Suite 600, New York, 10591, and marked "Stockholder Communication".
SGRP has a policy of generally responding in writing to each bona fide,
non-frivolous, written communication from an individual stockholder. This policy
is reflected in the SPAR Group, Inc. Statement of Policy Respecting Stockholder
Communications with Directors dated as of May 18, 2004, approved and recommended
by the Governance Committee and adopted by the Board on May 18, 2004. A current
copy of this policy is posted and available to stockholders and the public on
the Company's web site (www.SPARinc.com).
In addition, questions may be asked of any director at SGRP's annual
stockholders' meeting. SGRP schedules its annual stockholders' meeting on the
same day as a regularly scheduled quarterly Board meeting, so all directors
generally attend. All of SGRP's directors attended its 2004 annual stockholders'
meeting.
SUBMISSION OF STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
For any business, nominee or proposal to be properly brought before an
Annual Meeting by a stockholder (acting in his or her capacity as stockholder),
the By-Laws require that such stockholder must give timely written notice
thereof by physical delivery to the Secretary of SGRP. Any stockholder who
wishes to present any business, nominee or proposal for action at the 2006
annual meeting of stockholders of SGRP must notify SGRP by no later than March
3, 2006. Such stockholder's notice shall be in the form and contain the
substance required under the Restated By-Laws and the rules and regulations
promulgated by the Securities and Exchange Commission. Accordingly, notices of
stockholder proposals and nominations submitted after March 3, 2006, or that do
not conform to the requirements of the Restated By-Laws or Rule 14a-18 of the
Securities Exchange Act of 1934 (relating to proposals to be presented at the
meeting but not included in the Company's proxy statement and form of proxy)
will be considered untimely or incomplete, respectively, and thus such matters
will not be brought before the 2006 Annual Meeting of stockholders.
-22-
The Restated By-Laws provide that a stockholder's notice to the
Secretary must set forth as to each matter the stockholder proposes to bring
before the Annual Meeting (i) a brief description of the business, nominee or
proposal desired to be brought before the Annual Meeting and the reasons for
considering the same at the Annual Meeting, (ii) the name and address, as they
appear on SGRP's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (iii) the
class and number of shares of SGRP's stock which are beneficially owned by the
stockholder on the date of such stockholder notice and by any other stockholders
known by such stockholder to be supporting such proposal on the date of such
stockholder notice, and (iv) any financial interest of such stockholder (or any
affiliate or family member of such stockholder), whether current or at any time
within the past three years, in such business, nominee or proposal. In addition,
if the notice is a nomination of a candidate for director, the stockholder's
notice also must contain (A) the proposed nominee's name and qualifications,
including five year employment history with employer names and a description of
the employer's business, whether such individual can read and understand basic
financial statements, and board memberships (if any), (B) the reason for such
recommendation, (C) the number of shares of stock of SGRP that are beneficially
owned by such nominee, (D) a description of any business or other relationship,
whether current or at any time within the past three years, between such nominee
(or any affiliate or family member of such nominee) and either the Company, any
of its directors or officers, its auditor, or any of its customers or vendors,
and (E) a description of any financial or other relationship, whether current or
at any time within the past three years, between the stockholder (or any
affiliate or family member of such stockholder) and such nominee (or any
affiliate or family member of such nominee).
If it is determined by the Governance Committee or the presiding
officer of the Annual Meeting that a stockholder proposal was not made in
accordance with the terms of the Restated By-Laws or the applicable SEC Rules or
is not under the circumstances required to be considered thereunder, such
proposal will not be acted upon at the Annual Meeting.
ANNUAL REPORTS
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31,
2004, IS BEING MAILED TO EACH STOCKHOLDER OF RECORD TOGETHER WITH THIS PROXY
STATEMENT.
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004. A COPY OF THIS
REPORT IS INCLUDED IN THE COMPANY'S ANNUAL REPORT (EXCEPT AS OTHERWISE
REPORTED). THE ANNUAL REPORT AND FORM 10-K ARE NOT PART OF THE COMPANY'S
SOLICITING MATERIAL.
PROXIES AND SOLICITATION
The proxy accompanying this Proxy Statement is solicited on behalf of
the Company's Board of Directors. Proxies for the 2005 Annual Meeting are being
solicited by mail directly and through brokerage and banking institutions. The
Company will pay all expenses in connection with the solicitation of proxies. In
addition to the use of mails, proxies may be solicited by Directors, officers
and regular employees of the Company (who will not be specifically compensated
for such services) personally or by telephone. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
Charles Cimitile
Tarrytown, New York Secretary, Treasurer and Chief Financial Officer
July 7, 2005
-23-
ANNEX I
PROXY
SPAR GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
MEETING OF STOCKHOLDERS ON WEDNESDAY, AUGUST 10, 2005
The undersigned hereby appoints Robert G. Brown and William H. Bartels,
and each of them, with full power of substitution, as the undersigned's proxy
and attorney-in-fact to vote all shares of Common Stock of SPAR Group, Inc. (the
"Company"), held of record by the undersigned as of June 16, 2005, the record
date with respect to this solicitation, at the Annual Meeting of Stockholders of
the Company to be held at 580 White Plains Road, Suite 600, Tarrytown, New York
10591, beginning at 10:00 a.m., Eastern Standard Time, on Wednesday, August 10,
2005, and at any postponements and adjournments thereof (the "2005 Annual
Meeting"), upon the following matters:
1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
FOLLOWING NOMINEES FOR DIRECTOR:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY listed
(except as noted below) to vote for all nominees
(INSTRUCTIONS: To withhold authority to vote for any nominee, draw a line
through or otherwise strike out the nominee's name below.)
Robert G. Brown
William H. Bartels
Robert O. Aders
Jack W. Partridge
Jerry B. Gilbert
Lorrence T. Kellar
2. RATIFICATION OF THE APPOINTMENT OF REHMANN ROBSON AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2005
THE BOARD OF DIRECTORS AND THE AUDIT COMMITTEE EACH UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THIS PROPOSAL
|_| FOR |_| AGAINST |_| ABSTAIN
3. OTHER MATTERS
In their discretion, Robert G. Brown and William H. Bartels, and each
of them, are authorized to consider such other business as may properly come
before the 2005 Annual Meeting and to vote either for or against such other
business (in whole or in part) as he may determine in his sole discretion.
THIS PROXY (WHEN PROPERLY EXECUTED AND DELIVERED) WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE NOMINEES NAMED IN PROPOSAL 1 ABOVE, FOR PROPOSAL 2 ABOVE, AND EITHER FOR
OR AGAINST ANY OTHER MATTER IN THE DISCRETION OF THE PERSON NAMED AS PROXY. IF
ANY NOMINEE DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSON NAMED
AS PROXY SHALL HAVE FULL DISCRETION TO VOTE FOR OR AGAINST ANY OTHER PERSON
DESIGNATED BY THE BOARD OF DIRECTORS.
Dated _________________, 2005
___________________________
(Signature)
___________________________
(Signature)
Please sign exactly as your name appears
hereon. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee, guardian or corporate officer,
please give full title as such.
The signer hereby revokes all proxies
heretofore given by the signer to vote at the
2005 Annual Meeting, including any
adjournments thereof.