UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to
☐
Commission file number 0-27408
SPAR GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
1910 Opdyke Court, Auburn Hills, Michigan
(Address of principal executive offices)
33-0684451
(I.R.S. Employer Identification No.)
48326
(Zip Code)
Registrant's telephone number, including area code: (248) 364-7727
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Trading Symbol(s)
SGRP
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer", "accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.). (Check one):
Large Accelerated Filer ☐
Non-Accelerated Filer ☒
Emerging Growth Company ☐
Accelerated Filer ☐
Smaller reporting company ☒
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant on December 31, 2023, based on the closing price of the Common Stock of $1.01 per
share as reported by the Nasdaq Capital Market on such date, was approximately $7,145,820.
The number of shares of the Registrant's Common Stock outstanding as of March 15, 2024, was 24,215,959 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement on Schedule 14A for the registrant's 2024 Annual Meeting of Stockholders, are incorporated by reference into Part III of this Form 10-K.
SPAR GROUP, INC.
ANNUAL REPORT ON FORM 10-K
INDEX
PART I
PART II
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
PART IV
Item 1
Item 1A
Item 1B
Item 1C
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Page
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NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the year ended December 31, 2023 (this "Annual Report"), contains forward-looking statements within the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. ("SGRP" or the
"Corporation") and its subsidiaries (and SGRP together with its subsidiaries may be referred to as "SPAR Group", the "Company" "SPAR", "We", or
"Our"). There also are "forward-looking statements" contained in SGRP's definitive Proxy Statement respecting its 2024 Annual Meeting of
Stockholders (the "Proxy Statement"), which SGRP expects to file on or about April 26, 2024, with the Securities and Exchange Commission (the
"SEC"), and SGRP's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and statements as and when filed with the
SEC (including this Annual Report, the Proxy Statement and such Current Reports, each a "SEC Report").
Readers can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as "may," "will,"
"expect," "intend," "believe," "estimate," "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also
identify forward-looking statements. Forward-looking statements made by the Company in this Annual Report may include (without limitation)
statements regarding: risks, uncertainties, cautions, circumstances and other factors ("Risks"); the potential continuing negative effects of the COVID-
19 pandemic on the Company's business; the Company's potential non-compliance with applicable Nasdaq director independence; bid price or other
rules; the Company's cash flow or financial condition; and plans, intentions, expectations, guidance or other information respecting the pursuit or
achievement of the Company's corporate objectives. The Company's forward-looking statements also include (without limitation) those made in this
Annual Report in "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Directors, Executive Officers and Corporate Governance," "Executive Compensation," "Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters," and "Certain Relationships and Related Transactions, and Director Independence."
You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties)
and other information made, contained or noted in or incorporated by reference into this Annual Report, but you should not place undue reliance on
any of them. The results, actions, levels of activity, performance, achievements or condition of the Company (including its affiliates, assets, business,
clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance,
prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) and other events and circumstances planned, intended,
anticipated, estimated or otherwise expected by the Company (collectively, "Expectations"), and our forward-looking statements (including all Risks)
and other information reflect the Company's current views about future events and circumstances. Although the Company believes those Expectations
and views are reasonable, the results, actions, levels of activity, performance, achievements or condition of the Company or other events and
circumstances may differ materially from our Expectations and views, and they cannot be assured or guaranteed by the Company, since they are
subject to Risks and other assumptions, changes in circumstances and unpredictable events (many of which are beyond the Company's control). In
addition, new Risks arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company.
Accordingly, the Company cannot assure you that its Expectations will be achieved in whole or in part, that it has identified all potential Risks, or that
it can successfully avoid or mitigate such Risks in whole or in part, any of which could be significant and materially adverse to the Company and the
value of your investment in the Company's Common Stock.
These forward-looking statements reflect the Company's Expectations, views, Risks and assumptions only as of the date of this Annual Report, and the
Company does not intend, assume any obligation, or promise to publicly update or revise any forward-looking statements (including any Risks or
Expectations) or other information (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed
circumstances, future events, recognition, or otherwise.
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Item 1. Business
OUR COMPANY
PART I
SPAR Group, Inc., a Delaware corporation ("SGRP" or the "Corporation"), and its subsidiaries (together with SGRP, "SPAR Group" or the "Company"), is
a leading global merchandising and brand marketing services company, providing a broad range of sales enhancing services to retailers across most classes
of trade and consumer goods manufacturers and distributors around the world. Our goal is to be the most creative, energizing and effective global services
company that drives sales, margins and operating efficiency for our clients.
As of December 31, 2023, we operated in eight countries including the United States, Canada, Mexico, Brazil, South Africa, China, Japan and India. Across
all of these countries, we successfully execute programs through our multi-lingual logistics, reporting and communication technology, which provides
clients value through real-time insight on store / product conditions.
With more than 50 years of experience, a focus on excellence and industry leadership, we continue to grow our long-term relationships with some of the
world's leading businesses. Our unique combination of resource scale, deep expertise, advanced technology and unwavering commitment to excellence,
separates us from the competition.
Our focus is services. Our team works closely with clients to determine their key objectives to execute globally, focusing on enhancing their sales and
profit. At retail, our merchandising brand marketing specialists perform a wide range of programs to maximize product sell-through to consumers. Some of
these programs include launching new products, installing displays, assembling product fixtures, and ensuring shelves are fully stocked and reordering
when they are not. We also assist with sales and customer service. As retailers adapt to changes and new opportunities, our team engages in the total
renovations and transformation of stores, as well as preparing new locations for grand openings. Our distribution associates work in retail and consumer
goods distribution centers to prepare the centers to open, testing systems, putting away, picking product and providing peak staffing services for our
clients.
We provide the "last two feet" of retail and consumer goods product merchandising and marketing. Our clients make great products. We ensure these
products are presented in a compelling and exciting way exactly when and where they need to be to drive sales and margin. Our technology adds to these
services by providing clients with detailed insight across all aspects of individual stores.
Our commitment to excellence comes from our people and organizational culture. We are passionate about talent and building a culture of ideas and
innovation. We know that attracting, supporting and encouraging our people to do great things for clients results in excellent work. This great work begets
more work and creates an energy and enthusiasm for our people and the Company as a partner. We are proud of our people and their dedication to clients
and our company success.
We are also a results-driven organization that holds itself to a high standard of execution. We believe that our ability to meet or exceed our commitments to
clients and the marketplace are part of how we define success. This is true if we are growing our core business, innovating with technology or testing new
services. We aspire to be exceptional.
OUR INDUSTRY
The merchandising and marketing outsourced services industry plays an important role in the growth and performance of some of the world’s most
successful product and retail companies. Merchandising services includes placing orders, retail shelf maintenance, merchandising display setup,
reconfiguring products on store shelves and replenishing product inventory. Additional marketing services include, but are not limited to, new store sets and
remodels, audits, sales assistance, installation and assembly, product demos/sampling, promotion and more. The Company believes that merchandising and
marketing services add value to retailers, manufacturers and other businesses by making a product more visible and more available to consumers.
Historically, retailers staffed their stores to ensure the store was well merchandised and product was properly featured and placed. However, in an effort to
control costs and improve margins, most retailers have reduced store payroll and increased their reliance on manufacturers to set up their own products and
merchandise the shelves on behalf of the retailer. To begin, manufacturers utilized their own sales representatives to do this work. Over time, this resulted
in competing manufacturer representatives working in the same stores. This often led to the best presentation of merchandise resulting from the last
manufacturer representative physically in the store. As a result, retailers began looking for third parties who could manage the merchandising process and
ensure that the store, in total, was ready for the consumer. The result was the growth of the merchandising and marketing services industry.
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We believe this industry will continue to grow and is more important today than ever before. With the acceleration of digital and online retailing, the
pressure on the physical store to remain relevant, efficient and compelling has never been higher. In addition, product manufacturers are constantly trying
to grab the consumer’s attention and make sure they are everywhere the consumer wants to shop. These are exactly the issues merchandising and marketing
services companies solve.
Merchandising and marketing services companies work to ensure the store is exceptionally merchandised and products thoughtfully featured while
enabling the retailer to maintain margins and leverage payroll. As the industry evolves, these services will continue to be a significant part of retailer and
manufacturer success.
SPAR Group is one of the leading providers of these merchandising and marketing services to companies across the globe. With more than 50 years of
history, the Company has established itself as a strategic partner to many of the world’s most exciting product manufacturers and retailers.
OUR GROWTH STRATEGY
As the need for flexibility and efficiency in merchandising and marketing services continues to increase, both in the United States and internationally, brand
owners, consumer goods companies, manufacturers and retailers will continue to rely on third-party providers for these services. SPAR Group is uniquely
able to meet these needs because of our global reach, more than 50-year track record, access to over 25,000 merchandisers, breadth of capability,
unwavering focus on excellence and deep expertise. We combine great people, an understanding of what is needed and unique technologies, enabling us to
offer enhanced service in-country and across geographies.
To capitalize on the growing demand, the Company’s business strategy is focused on three (3) priorities: 1) Grow the Core Business; 2) Introduce or
Acquire New Services; and 3) Invest in Technology. The result of this strategic framework will be top-line growth, expanded margins, more value for
clients and higher levels of free cash flow to allow us to invest for more growth.
Grow the Core Business
The Company is constantly pursuing new core business services while working to earn more business from current clients. We have a significant number of
long-tenured clients that, in order to ensure we understand their businesses, SPAR Group invests resources in people, technology and time, and thus we are
well-positioned to meet their needs in the future. This includes expanding the services we offer to existing clients. At the same time, we pursue and solicit
requests for proposals ("RFPs"), we actively market our services, we participate in industry events and we continuously look for opportunities to grow our
business. We believe our history, relationships, expertise, technology and scale are all competitive advantages for us.
Introduce or Acquire New Services
The Company believes in testing new ideas and services and applying its considerable existing expertise in new ways to increase revenues and expand
client relationships. The changing retail landscape and need for enhanced digital, e-commerce and fulfillment capability shapes our thinking. Our objective
is to identify and introduce new or complimentary capabilities that we believe the market and our clients need now and in the future. To accomplish this,
we pursue business partnerships, look for acquisitions and joint ventures and explore ideas based on market trends and our own unique client experiences.
Our market positioning provides us with an unparalleled window into changes and opportunities in the markets we serve. We carefully measure the results
of these tests and look for new services that can have a material impact on our financial and operational performance.
Invest in Technology
We believe our current SPARView technology provides us a competitive advantage in the marketplace and is a core competitive strength. Our technology
enables us to communicate, plan, track, analyze and optimize our merchandising and marketing services work. However, we recognize that technology and
our opportunity to successfully leverage technology continues to change. As a result, we are constantly adapting and innovating. We explore relationships
within and across geographies and businesses with solution providers, while simultaneously making investments in our own solutions, with a focus to
provide clients with better results, through our broader capability. This will facilitate our ability to offer higher value services over time. Our objective is to
provide technology to field merchandisers, our client partners and our management to make smarter decisions that yield better Company results.
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OUR BUSINESS DIVISIONS
The Company operates through three divisions: Americas, Asia Pacific (APAC), and Europe, Middle East and Africa (EMEA). The Americas division
encompasses the United States, Canada, Mexico, and Brazil. The APAC division includes Japan, China, Australia, and India. As detailed in Note 10
(Related Party Transactions), the company divested its stake in the Australian joint venture (JV), effective December 31, 2023. The financial results for the
full years of 2023 and 2022 incorporate the Australian operations, which will be excluded from the financial results after 2023. The EMEA division
consists of South Africa.
The total business is led and operated from our global headquarters in Auburn Hills, Michigan. Each country also has regional leadership and offices in the
respective market.
Our approach to the international marketplace has historically been to establish joint ventures. We believe this approach enables us to bring the breadth of
our global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources.
The following table provides details of the structure of our Domestic and International businesses:
Primary Territory
Americas
United States of America
Canada
Mexico
Brazil
Asia- Pacific
Japan
India
China
Europe, Middle East, Africa
(EMEA)
South Africa
Entity Name
SGRP Percentage
Ownership
Principal Office Location
SPAR Marketing Force, Inc.
SPAR Assembly and Installation, Inc.
Resource Plus of North Florida, Inc. ("RPI")
SPAR Canada Inc,
SPAR TODOPROMO, SAPI, de CV
SPAR Brasil Serviços de Merchandising e
Tecnologia S.A. and its subsidiaries
SPAR FM Japan, Inc.
SPAR KROGNOS Marketing Private Limited
Preceptor Marketing Services Private Limited
SPAR (Shanghai) Marketing Management
Company Ltd.
100% Auburn Hills, Michigan
100% Auburn Hills, Michigan
51% Jacksonville, Florida
100% Vaughan, Ontario, Canada
51% Mexico City, Mexico
51% Sao Paulo, Brazil
100% Tokyo, Japan
51% New Delhi, India
51% New Delhi, India
51% Shanghai, China
SGRP Meridian (PTY), Ltd. and its
subsidiaries
51% Durban, South Africa
The Company tracks and reports certain financial information separately for the individual countries using the same metrics. The primary measurement
utilized by management is operating profit, historically the key indicator of long-term growth and profitability, as the Company is focused primarily on
reinvesting the operating profits of each of its international subsidiaries back into local markets in an effort to improve its market share and continued
expansion efforts. Certain financial information regarding each of the Company's divisions, which includes their respective net revenues and operating
income for each of the years ended December 31, 2023 and 2022, and their respective assets as of December 31, 2023 and 2022, is provided in Note 12 to
the Company's Consolidated Financial Statements – Segment Information, below.
OUR SERVICES
The Company currently provides six (6) principal types of services: Merchandising and Marketing, Category Management and Setup, Remodel and Retail
Transformation, Assembly and Installation, Business Analytics and Insights, Fulfilment and Distribution.
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Merchandising and Marketing
Merchandising and Marketing services are pivotal in ensuring that retail environments are optimally organized, products are well-presented, and
promotions are effectively implemented to drive sales and enhance customer engagement. This category encompasses a broad range of activities tailored to
maintain and elevate the retail experience, including: (i) resets and cut-ins, which involve the strategic rearrangement or introduction of products within the
retail space to keep the store layout fresh and aligned with current marketing strategies or consumer trends, (ii) price and inventory audits, which ensures
that pricing is accurate and inventory levels are properly maintained, providing valuable insights for inventory management and pricing strategies, (iii)
stock replenishment and rotation services, which are essential for keeping shelves well-stocked and products fresh, especially for perishable goods, thereby
enhancing customer satisfaction and minimizing waste, (iv) out of stock management, which focuses on minimizing the occurrence of stockouts and
efficiently addressing them when they happen, thus reducing lost sales opportunities and maintaining customer trust, (v) promotional event setup, which
entails the planning and execution of in-store events or displays to highlight specific products or sales promotions, creating an engaging shopping
experience, and (vi) display management, which includes the design, setup, and maintenance of product displays to attract customer attention and promote
featured items effectively. Together, these Merchandising & Marketing services are crucial for retail success, ensuring products are visible, accessible, and
appealing to customers.
Category Management and Setup
Category Management and Setup is a comprehensive suite of services aimed at optimizing retail space and product presentation for enhanced customer
experience and sales performance. This service category includes a variety of tasks such as (i) category and product resets, which involve reorganizing and
refreshing product arrangements and categories in-store to maintain relevance and appeal; (ii) planogram maintenance, which ensures that the layout of
products on shelves aligns with a strategic plan to optimize retail space and product visibility; (iii) display and shelf services, which focuses on the
maintenance and arrangement of shelves and displays to ensure products are presented attractively; (iv) POP (Point of Purchase) installation and
management, which involves setting up and managing marketing materials at the point of purchase to capture customer attention and encourage sales;
and (v) display setup, which includes the assembly and arrangement of product displays to highlight new products or promotions, creating an engaging
shopping environment. Together, these services work to maintain a coherent and appealing retail environment that enhances product visibility and shopper
engagement.
Remodel and Retail Transformation
Remodel & Retail Transformation encompasses a range of strategic services designed to update and revitalize retail environments, ensuring they meet
contemporary shopping expectations and trends. This category includes (i) store remodels, where retail spaces undergo comprehensive renovations to
enhance aesthetics, functionality, and shopper experience, (ii) store department resets which involve the reorganization and updating of specific sections
within a store to improve navigation and product presentation, (iii) fixture and banner installations, which contribute to refreshing the store's visual appeal
and marketing communication, (iv) pop-up store services which offer temporary retail setups that can test new markets, products, or concepts in an agile
and cost-effective manner and (v) store closings, managed with a focus on efficiency and minimal disruption, ensuring that transitions are smooth for both
the retailer and its customers. Through these services, Remodel & Retail Transformation aims to keep retail environments dynamic, engaging, and aligned
with brand identity and consumer expectations.
Assembly and Installation
Assembly and Installation services play a crucial role in enhancing the retail and consumer experience by ensuring that products are properly assembled
and set up, whether in-store, in the office, or within the consumer's home. This category covers a broad spectrum of tasks that facilitate the ready-to-use
delivery of products, improving convenience and satisfaction for both retailers and end-users. Services include (i) the assembly of merchandise in stores,
such as furniture and desks, enabling customers to visualize the final product and making the shopping experience more engaging and efficient; (ii) in-store
services, which extend to the maintenance of these products, ensuring they remain in optimal condition for display and use; (iii) office setup/down-sizing
services, which cater to businesses undergoing changes in their physical workspace, providing expert assembly and installation support for a seamless
transition; (iv) National In-Home Furniture Assembly services, which offer consumers the convenience of having furniture professionally assembled in
their homes, eliminating the hassle and time commitment typically associated with DIY assembly; and (v) the assembly and installation of fitness
equipment, whether it's in a commercial gym setting or a home fitness space, ensures that equipment is set up safely and correctly, maximizing
functionality and user safety. Overall, Assembly and Installation services address a vital need in the post-purchase experience, ensuring products are fully
functional and ready for use, thereby enhancing customer satisfaction and loyalty.
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Business Analytics and Insights
Business Analytics and Insights services provide a critical foundation for informed decision-making and strategic planning in retail and merchandising
environments. This suite of services leverages data analysis and visualization tools to deliver actionable insights that drive efficiency, sales, and customer
satisfaction, including: (i) product dashboards, which offer a comprehensive view of product performance, inventory levels, and sales trends, enabling
quick adjustments to product strategy and stock management, (ii) stock out reporting, which identifies and analyzes instances where products are
unavailable on the shelves, allowing for rapid response to restock items and prevent lost sales opportunities, (iii) visit reporting, which tracks and evaluates
the effectiveness and outcomes of merchandising visits, providing insights into operational efficiency and areas for improvement, (iv) real-time service
insights, which delivers immediate feedback on the execution of merchandising and marketing initiatives, enabling dynamic adjustments to enhance in-
store experiences and promotional effectiveness, (v) share of shelf analytics, which assesses the visibility and presence of products on the retail shelf
compared to competitors, crucial for strategic positioning and market share growth, and (vi) photo analysis, which uses visual data to evaluate the
compliance and appeal of product displays, ensuring that merchandising standards are met and that displays are engaging to customers. Together, these
Business Analytics & Insights services empower businesses with the knowledge to optimize operations, tailor marketing efforts, and ultimately drive better
business outcomes through data-driven strategies.
Fulfillment and Distribution
Fulfillment & Distribution is a critical service offering that encompasses a range of services including (i) Distribution Center Staffing, which provides the
necessary workforce for the effective operation of distribution centers, including handling and sorting,(ii) POP (Point of Purchase) Fulfillment Services
focus on the storage, assembly, and delivery of marketing and promotional materials directly to retail locations, ensuring that displays are ready and
available for immediate use, (iii) Kiosk Prep, which involves preparing and equipping kiosks with the necessary products and promotional materials,
tailored for specific marketing or sales campaigns, (iv) returns processing, which manages the flow of returned goods, ensuring they are efficiently
processed, restocked, or disposed of according to the retailer's policies, (v) picking and packing services, which are crucial for order fulfillment, involving
the selection of the correct products from inventory and packing them for shipment to the customer or retail outlet, and (vi) inventory services which
provide comprehensive management of stock levels, including tracking, auditing, and reporting, to ensure inventory accuracy and availability. Together,
these Fulfillment & Distribution services play an essential role in optimizing our customers' supply chain, enhancing their customers' satisfaction, and
maintaining seamless operations from warehouse to consumer.
OUR CUSTOMERS
The Company currently represents numerous manufacturers and/or retail clients in a wide range of retail segments and stores worldwide, and its customers
(which it refers to as "clients") include the following markets:
Retail segments served include:
● Mass Merchandisers
● Grocery
● HBA
● Pharmacies
● Discount
● Dollar
● Convenience
● Cash and Carry
● Home Improvement
● Consumer Electronics
● Automotive
● Office Supply
● Independents
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Manufacturer segments served include:
● Personal Technology
● Consumer Electronics
● Beverage
● Household Products
● Consumables
● Financial Products
● Automotive Aftermarket
It is important to note that we also work across all channels: retail and online. Our services make it possible for clients to ensure the online orders can be
filled from stores and that the pricing is competitive in individual markets.
We are proud to serve some of the world’s most exciting brands and leading retail businesses. In many cases, our clients cross over geographical boundaries
and we provide services to support their business around the world.
The Company did not have any clients that represented 10% or more of the Company's net revenue for the years ended December 31, 2023 and 2022.
TRADEMARKS AND TECHNOLOGY LICENSING
The Company has numerous registered trademarks. Certain of the Company's "SPAR" trademarks (the "Licensed Marks") are licensed: (i) for use by
affiliated companies in the United States royalty free and in perpetuity pursuant to license agreements that commenced in 1999 (ii) for use by its wholly-
owned subsidiaries worldwide royalty free and in perpetuity pursuant to informal license arrangements; (iii) for use by joint venture subsidiaries in their
respective jurisdictions pursuant to license agreements for limited terms (executed contemporaneously with their respective joint venture agreements); and
(iv) for use by the Independent Field Vendor and Independent Field Administrator respectively providing Field Administrators through December 2022 and
providing Field Specialists to the Company domestically in the United States for limited terms and modest royalties pursuant to license agreements with
(each as defined below). Portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software (the "Co-Owned
Software") currently included in the Company's technology are co-owned by the Company, SPAR Business Services, Inc. ("SBS") and SPAR InfoTech, Inc.
("Infotech"). The Company's global technology systems (including the Co-Owned Software) were maintained and further developed and improved by the
Company at its own expense at a cost of $1.0 million in 2023 and $1.5 million in 2022, respectively. Except for SBS and Infotech (they do not need such
software licenses because of their co-ownership), each subsidiary and field vendor trademark license and arrangement also licenses the Co-Owned
Software to the licensee.
OUR LABOR FORCE
Worldwide, the Company utilized a labor force in 2023 of up to approximately 24,288 people depending on seasonality, including the services of Field
Specialists and Field Administrators provided by independent third parties.
The Company executes and administers its field services in the USA through the services of field merchandising, auditing, assembly and other field
personnel (each a "Field Specialist"), substantially all of whom are provided to the Company and engaged by independent third parties and located,
scheduled, deployed and administered domestically through the services of local, regional, district and other personnel (each a "Field
Administrator"). Substantially all of its Field Administrators in the USA were in turn employed by other independent third parties through December 2022
and by the Company thereafter.
As of December 31, 2023, the Company's labor force in the Americas totaled approximately 17,032 including the services of Field Specialists and Field
Administrators furnished by independent third parties. The Company employed in Americas a labor force of 462 full-time employees and 79 part-time
employees engaged in operations. In the Company's Americas Division, the Company's merchandising, audit, assembly and other services for its clients are
performed by Field Specialists, and the services of a significant portion of them (approximately 16,491) were supplied to the Company by an independent
vendor (the "Independent Field Vendor"). The services of a significant portion of the Field Administrators who supervise the Field Specialists
(approximately 60) were provided to the Company in the USA by an independent vendor (the "Independent Field Administrator") through December
2023 and by the Company thereafter.
10
As of December 31, 2023, the Company's Asia-Pacific Division's labor force totaled approximately 2,001 including the services of field personnel and
others furnished by independent third parties. Foreign subsidiaries employed 209 full-time and part-time employees. The Company's Asia-Pacific Division's
field force consisted of approximately 1,660 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations.
As of December 31, 2023, the Company's EMEA Division's labor force totaled approximately 5,255 including the services of field personnel and others
furnished by independent third parties. Foreign subsidiaries employed 713 full-time and part-time employees. The Company's EMEA Division's field force
consisted of approximately 4,400 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations.
The Company continues to evaluate its business model of using third-party independent contractors as Field Specialists (whether or not provided by others)
in light of changing client requirements and legal and regulatory environments.
The Company considers its relations with its own employees and independent vendors to be generally good.
OUR COMPETITION
The marketing services industry is highly competitive. The Company's competition in all-markets arise from a number of large enterprises. The Company
also competes with a large number of relatively small enterprises with specific client, channel or geographic coverage, as well as with the internal
marketing and merchandising operations of its existing and prospective clients. The Company believes that the principal competitive factors within its
industry include breadth and quality of client services, cost, development and deployment of technology, the ability to execute specific client priorities
rapidly and consistently over a wide geographic area, and the ability to ideate and operate as a business partner delivering value above basic services. The
Company believes that its current structure favorably addresses these factors and establishes it as a leader in many retailer and manufacturer verticals. The
Company also believes it has the ability to execute major national and international initiatives and develop and administer national and international
manufacturer programs.
CORPORATE WEBSITE
The Company's website can be found at: http://www.sparinc.com, and the Company's SEC filings are available on that website under the Investors
Relations section.
Item 1A. Risk Factors
Investing in SGRP's common stock ("SGRP Common Stock") is subject to a number of Risks that could cause the Company's actual results to differ
materially from those projected or otherwise expected in any forward-looking statements or other information (see Forward-Looking Statements
immediately preceding Part I, above).
You should carefully review and consider the following Risks, but you should not place undue reliance on any of them. All forward-looking statements and
other information attributable to the Company or persons acting on its behalf are expressly subject to and qualified by all such Risks.
Those Risks reflect our expectations, views and assumptions only as of the date of this Annual Report, and the Company does not intend, assume any
obligation, or promise to publicly update or revise any such Risk or information (in whole or in part), whether as a result of new information, new or
worsening Risks or uncertainties, changed circumstances, future events, recognition, or otherwise.
The markets we operate in are cyclical and subject to the effects of economic downturns.
The markets in which the Company operates are cyclical and subject to the effects of economic downturns. The current political, social and economic
conditions, including the impact of terrorism and COVID-19 on consumer and business behavior, make it difficult for the Company, its vendors and its
clients to accurately forecast and plan future business activities. Substantially all of the Company's key clients are either retailers, manufacturers or those
seeking to do product merchandising at retailers. Should the retail or manufacturing industries experience a significant economic downturn, the resultant
reduction in product sales could decrease the Company's revenues. The Company also has risks associated with its clients changing their business plans
and/or reducing their third-party services' budgets in response to economic conditions, which could also decrease the Company's revenues. Such revenue
decreases could have a material adverse effect on the Company or its performance or condition.
11
We can be adversely affected if governments pass legislation that mandates an increase in wages, changes labor laws or otherwise drives market
behavior that negatively impacts the business or operations of SPAR Group or our clients.
The Company has operations in nine distinct countries and relies on independent contractors as well as other third-party providers to perform work. There is
risk that any government legislation that restricts travel, changes labor laws, impacts wages or otherwise incentivizes behavior that negatively impacts our
business or our clients could impact our business.
The Company continues to analyze various aspects of potential business impact driven by any legislation in all of the countries we operate. While we do
not foresee any material impact in the short-term, the Company will continue to monitor and manage the business accordingly.
Our business depends on variable client projects that can shift from period to period, be delayed, be canceled or otherwise require us to assume higher
costs to perform the work.
The Company has experienced and, in the future, may experience fluctuations in quarterly operating results and cash flow. Factors that may cause the
Company's quarterly operating results and cash flow to vary from time to time and may result in reduced revenue and profits include: (i) the number of
active client projects; (ii) seasonality of client products; (iii) client delays, changes and cancellations in projects; (iv) staffing requirements,
indemnifications, risk allocations, primary insurance coverages, intellectual property claims and other contractual provisions and concessions demanded by
clients that are unilateral, unreasonable and very time consuming to review and attempt to negotiate; (v) the timing requirements of client projects; (vi) the
completion of major client projects; (vii) the timing of new engagements; (viii) the timing of personnel cost increases; (ix) service locations and conditions
with higher than contemplated personnel costs (remote areas, weather and health closures, higher minimum wages, higher skill sets required, etc.); and (x)
the loss of major clients. In addition, the Company is subject to revenue or profit uncertainties resulting from factors such as unprofitable client work and
the failure of clients to pay. These revenue fluctuations could materially and adversely affect the Company or its performance or condition, whether actual
or as planned, intended, anticipated, estimated or otherwise expected.
Our business could be adversely affected if retailers and manufacturers elect to perform merchandising and marketing services with their own
resources or if they have less stores that need our services.
The business and growth of the Company depends in part on the continued outsourcing of merchandising and marketing services, which the Company
believes has increased from the consolidation of retailers and manufacturers, as well as the desire to seek outsourcing specialists to reduce fixed operation
expenses and concentrate internal staff on customer service and sales. There can be no assurance that this outsourcing will continue, as companies may
elect to perform such services internally.
In addition, retailers with physical store locations are facing increasing consolidation and competition from eCommerce/virtual stores. The Company's
business and growth depends in part on the continuing need for in-store merchandising of products and the continuing success of retailers with physical
store locations. There can be no assurance that the in-store merchandising of products will increase or even continue at current levels or that retailers with
physical store locations will continue to compete successfully in those stores, and some retailers are shifting their sales focus to their virtual online stores.
A significant decrease in such need for in-store merchandising or success of such physical stores could significantly decrease the Company's revenues and
such decreased revenues could have a material adverse effect on the Company or its performance or condition, whether actual or as planned, intended,
anticipated, estimated or otherwise expected.
We do work with furniture and other related assembly services at stores, in homes and in offices.
The Company's technicians assemble furniture and other products in the stores, homes and offices of customers. Working at a customer's store, home or
office could give rise to claims against the Company for errors, omissions or misconduct by those technicians, including (without limitation) objectional
behavior, harassment, personal injury, death, damage to or theft of customer property, or other civil or criminal misconduct by such technicians. Claims also
could be made against the Company as a result of its involvement in such assembly services due to (among other things) product assembly errors and
omissions, product defects, deficiencies, breakdowns or collapse, products that are not merchantable or fit for their particular purpose, products that do not
conform to published specifications or satisfy customer expectations, or products that cause personal injury, death or property damage, in each case whether
actual, alleged or perceived by customers, and irrespective of how much time may have passed since such assembly. If such claims are asserted and
adversely determined against the Company, then to the extent such claims are not covered by indemnification from the product's seller or manufacturer or
by insurance, they could have a material adverse effect on the Company or its performance or condition.
12
We depend upon third-party independent contractors and the services they provide.
The success of the Company's business in the USA is dependent upon the successful execution and administration of its domestic field services through the
services of Field Specialists, and a significant portion of them are provided to the Company and are engaged by the Independent Field Vendor and located,
scheduled, deployed and administered domestically through the services of Field Administrators (who were provided by an independent vendor through
December 2022 and by the Company thereafter). The inability to identify, engage and successfully administer its domestic field services through qualified
Field Specialists and Field Administrators could have a material adverse effect on the Company or its performance or condition.
A significant portion of the services of the Field Specialists provided to the Company are supplied by the Independent Field Vendor. It is possible that the
appropriateness of the treatment of those Field Specialists as independent contractors by the Independent Field Vendor will be periodically subject to legal
review or challenge by various states and others. The Company, in its discretion, may review and decide each request by its Independent Field Vendor for
reimbursement of its legal defense expenses on a case-by-case basis, including the relative costs and benefits to the Company of doing so, but the Company
has no obligation to do so.
To the Company's knowledge, its Independent Field Vendor is not involved in any material proceeding involving the misclassification of its independent
contractors. However: (i) if the Company approves its reimbursement of any material legal defense costs of the Independent Field Vendor; (ii) if the
Company somehow becomes liable for any legal expenses incurred by the Independent Field Vendor, any related party or any third party in defending any
claim or satisfying any judgment against such parties; (iii) if the Company somehow becomes liable through any judicial determination for any judgment
against the Independent Field Vendor, or any related party or other vendor or service provider (in whole or in part); or (iv) if any such proceeding or matter
causes: (A) any decrease in the Independent Field Vendor's performance (quality or otherwise); (B) any inability by the Independent Field Vendor to
execute the services for the Company or to continue with its present business model; or (C) any increase in the Company's use of employees (rather than
independent contractors) as its domestic Field Specialists; then any of the foregoing, in whole or in part, could have a material adverse effect on the
Company or its performance or condition.
There can be no assurance that plaintiffs or someone else will not claim that the Company is liable (under applicable law, through reimbursement or
indemnification, or otherwise) for any judgment or similar amount imposed against any provider of Field Specialists or Field Administrators to the
Company, which the Company would defend vigorously if pursued. There can be no assurance that the Company would be able to successfully defend any
such claim. Any imposition of liability on the Company for any such judgment or amount could have a material adverse effect on the Company or its
performance or condition.
Additionally, the Company believes that its business model of executing a significant portion of its services domestically (other than in California and in
performing its non-merchandising services elsewhere), where the Company is using its own employees) through independent contractors provided by
others is equally effective but inherently less costly than doing so with employees, both under applicable tax and employment laws and
otherwise. However, the Company continues to reevaluate its business model of using third party independent contractors as Field Specialists in performing
merchandising services outside of California in light of changing client requirements and legal and regulatory environments.
We rely on our systems and third-party vendors.
The Company relies on its proprietary systems for (among other things) the scheduling, tracking, coordination and reporting of its merchandising and
marketing services. In addition to proprietary software and applications of the Company, the systems use and rely upon software (including operating
system, office, exchange, data base and server programs) licensed and hardware purchased or leased from third parties and telecommunication services
provided by third parties, which third-party software, hardware and telecommunication services may not continue to be available at all or (if available) with
the necessary access, uptime, speeds or bandwidth, at reasonable prices or on commercially reasonable terms. Any defect, error or other performance
failure in such third-party software, hardware or service also could result in a defect, error or performance failure in our client services. Systems can
experience excess traffic and related inefficiencies, from increased demand or otherwise, as well as increased cyberattacks by hackers and other
saboteurs. To the extent that systems experience increased demands on current capacity and for additional capacity from (among other things) an increase
in the numbers of users, frequency or duration of use, bandwidth requirements of software, applications and users (including the increasing demand from
the Company's clients for data-intensive as-serviced pictures from the Field Specialists), or cyberattacks, there can be no assurance that the Company's
technological systems and third-party software, hardware and telecommunication providers will continue to be able to support the demands placed on them
by such increased demand or negative events.
13
The Company relies on third-party vendors to provide its telecommunication network access and other services used in its business, and the Company has
no control over such third-party providers. Additionally, a cybersecurity breach that results in unauthorized access to sensitive consumer or corporate
information contained in these systems may adversely affect the Company's reputation and lead to claims against it. Such claims could include identity
theft or other similar fraud-related claims and claims related to violations of applicable data privacy laws. Any system failure, accident or security breach
could result in disruptions to the Company's operations. To the extent that any disruption or security breach results in a loss or damage to the Company's
data, or results in inappropriate disclosure of confidential information, it could cause significant damage to the Company's reputation, affect its
relationships with its customers, lead to claims against it and ultimately harm its business. In addition, the Company may be required to incur significant
costs to protect against damage caused by these disruptions or security breaches in the future.
Any such software, hardware or service unavailability or unreasonable pricing or terms, defect, error or other performance failure in such third-party
software, hardware or service, increased capacity demands, disruption in services, security breach or protective measures could increase the Company's
costs of operation and reduce its efficiency and performance, which could have a material adverse effect on the Company or its performance or condition,
whether actual or as planned, intended, anticipated, estimated or otherwise expected.
Our stock is subject to volatility and general market risk.
The market price of SGRP Common Stock has historically experienced and may continue to experience significant volatility. During the year ended
December 31, 2023, the sale price of SGRP Common Stock fluctuated from $0.70 to $1.40 per share. The Company believes that its Common Stock is
subject to wide price fluctuations due to (among other things) the following:
● The relatively small public float and corresponding thin trading market for SGRP Common Stock, attributable to (among other things) the large
block of voting shares beneficially owned by the Company's Majority Stockholders (as defined below) and generally low trading volumes, and
that thin trading market may cause small trades to have significant impacts on SGRP Common Stock price.
● The substantial beneficial ownership of the Company's voting stock and potential control by Mr. Robert G. Brown and Mr. William H. Bartels
and related parties (the "Majority Stockholders"). See Our significant stockholders may take actions, subject to the restrictions of the Change of
Control, Voting and Restricted Stock Agreement ("CIC Agreement”) and our By-Laws, Item 3 -- Legal Proceedings, below, Note 6 to the
Company's Consolidated Financial Statements - Commitments and Contingencies, and Note 10 to the Company's Consolidated Financial
Statements - Related Party Transactions - (including Change of Control, Voting and Restricted Stock Agreement), below.
● Any announcement, estimate or disclosure by the Company, or any projection or other claim or pronouncement by any of the Company's
competitors or any financial analyst, commentator, blogger or other person, respecting: (i) any new service created or improved, significant
contract, business acquisition or relationship, or other publicized development by the Company or any of its competitors; or (ii) any change,
fluctuation or other development in the Company's actual, estimated or desired affiliates, assets, business, clients, capital, cash flow, credit,
expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or
other achievement, results or condition or in those of any of the Company's competitors, in each case irrespective of accuracy or validity and
whether or not adverse or material.
● The general volatility of stock markets, consumer and investor confidence, and the general state of the economy (which often affect the prices of
stock issued by the Corporation and many others without regard to financial results or condition).
If the Corporation issues (other than at fair market value for cash) or the Majority Stockholders sell a large number of shares of SGRP Common Stock, or if
the market perceives such an issuance or sale is likely or imminent, the market price of SGRP Common Stock could decline.
The Corporation had in place a 2022 Stock Repurchase Program (as defined and described in Item 5 - Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities, below), which ended in May 24, 2023. Repurchases by the Corporation could adversely
affect the market liquidity of the SGRP Common Stock.
In addition, the volatility in the market price of SGRP Common Stock could lead to class action securities litigation that could in turn impose substantial
costs on the Company, divert management's attention and resources from the day-to-day operations of the Company's business and harm the Corporation's
stock price, the Company or its performance or condition.
14
As a small company with stock price volatility, our stock may be de-listed from NASDAQ.
There can be no assurance that the Corporation will be able to comply in the future with Nasdaq's Board Independence Rule, Audit Committee
Composition Rule, Bid Price Rule or other Nasdaq continued listing requirements. See Our significant stockholders may take actions, subject to the
restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement") and our By-Laws, below. If the Corporation fails to
satisfy the applicable continued listing requirement again in the future, Nasdaq may commence delisting procedures against the Corporation (during which
the Corporation may have additional time of up to six (6) months to appeal and correct its non-compliance). If the SGRP Common Stock shares were
ultimately delisted by Nasdaq, trading of the SGRP Common Stock could be limited to "over-the-counter" trades and the market liquidity of the SGRP
Common Stock could be adversely affected, which could result in a decrease in the market price of the SGRP Common Stock due to (among other things)
the potential for increased spreads between bids and asks, lower trading volumes and reporting delays in over-the-counter trades and the negative
implications and perceptions that could arise from such a delisting
In addition to the foregoing, if the SGRP Common Stock is delisted from Nasdaq and is traded on the over-the-counter market, the "penny stock" rules, if
applicable, could adversely affect the market price of the SGRP Common Stock and increase the transaction costs to sell those shares. The SEC has
adopted specific rules regulating "penny stock", including additional risk disclosure requirements by broker dealers. If applicable in the future, the penny
stock rules may also restrict the ability of broker-dealers to sell the SGRP Common Stock and may adversely affect the ability of investors to sell their
shares.
We have inherent risk of failure to maintain effective internal controls.
Establishing and maintaining effective internal control over financial reporting and disclosures are necessary for the Company to provide reliable financial
and other reporting in accordance with accounting principles generally accepted and applicable securities and other laws in the United States and all other
countries in which we operate. Because of its inherent limitations, internal controls over financial and other reporting are not intended to provide absolute
assurance that the Company could prevent or detect a misstatement of its financial statements or other reports or any misconduct or fraud. Any failure to
maintain an effective system of internal control over financial and disclosure reporting could limit the Company's ability to report its financial results and
file its other reports accurately and timely or to detect and prevent misconduct or fraud. A significant financial or disclosure reporting failure or material
weakness in internal control over financial or other reporting could cause a loss of investor confidence and a decline in the market price of the SGRP
Common Stock. The Company's management is responsible for establishing and maintaining adequate internal controls over its financial reporting, as
defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act.
Our business is dependent on client payments, business performance and broad economic shifts, and we may be at risk of liquidity constraints and not
satisfying all of our credit facility covenants.
Our business and cash flow can be adversely affected by adverse changes in our client payments, our business performance and broad economic
shifts. There can be no assurances that in the future the Company will not violate covenants of its current or future credit facilities; and if it does violate
them, that the Company's lenders will waive any violations of such covenants affecting the Company's ability to maintain adequate lines of credit or
sufficient availability under its lines of credit. Accordingly, minimal profitability by the Company, additional one-time charges and changes in the
composition and quality of its borrowing base, as well as any failure to maintain sufficient availability or lines of credit from the Company's lenders (which
may involve their subjective judgment), could have a material adverse effect on the Company or its performance or condition, whether actual or as planned,
intended, anticipated, estimated or otherwise expected.
15
Our business and stock liquidity and market value could be adversely affected if we settle outstanding litigation by making payments or issuing stock.
The timing, size and success of litigation settlement efforts and any associated capital commitments cannot be readily predicted. Future litigation
settlements may be financed by issuing shares of the SGRP Common Stock (directly or through convertible securities), cash or a combination thereof. If
the SGRP Common Stock does not maintain a sufficient market value, or if potential litigants are otherwise unwilling to accept the SGRP Common Stock
as part of the consideration for the settlement of their litigation, the Company may be required to obtain additional capital through debt or equity
financings. To the extent the SGRP Common Stock is used for all or a portion of the consideration to be paid for legal settlements, dilution may be
experienced by existing stockholders. In addition, there can be no assurance that the Company will be able to obtain the additional financing it may need
for litigation settlements on terms that the Company deems acceptable. Failure to obtain such capital would materially and adversely affect the Company or
its performance or condition. There also can be no assurance that the other parties in any settlement will abide by the terms or any settlement or any related
releases. See Item 3 -- Legal Proceedings, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Overview, and
Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions (including Change of Control, Voting and Restricted Stock
Agreement), below.
Our business performance is connected to the experience and retention of key executives.
The business strategy, client relationships and operating knowledge are critical to the Company’s long-term success. We believe we have attracted and
developed the most experienced and proven executive leadership team in the industry. However, we work in a competitive industry where talent is visible
and other companies may approach and attract our key executives. We continuously review the terms and incentives for our executives to retain them and
competitively compensate them to deliver industry leading results on behalf of all shareholders.
Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC
Agreement") and our By-Laws.
The Company's co-founders, Mr. Robert G. Brown and Mr. William H. Bartels, are significant stockholders ("Significant Stockholders”) and Directors of
SGRP and together with certain related parties (collectively, the "Majority Stockholders") beneficially own approximately 62.75% of the SGRP Common
Stock and could acquire more. That amount was calculated using their respective individual beneficial ownership, on December 31, 2023, which includes
the amounts they represented in the CIC Agreement and subsequent Form 4 filings, the total outstanding ownership (23,446,444 shares) of the SGRP
Common Stock on a non-diluted basis as of December 31, 2023. See Security Ownership of Certain Beneficial Owners and Management, in Part III
below, Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, and Note 10 to the
Company's Consolidated Financial Statements- Related Party Transactions, below.
As significant stockholders, the Majority Stockholders can have an impact on the nomination and election of directors and the passage of other shareholder
meeting proposals.
There is inherent business risk for a joint venture business structure.
The Company's growth strategy for the international markets has been to join forces with local investors having merchandising service expertise, and
combine their knowledge of the local market with the Company's proprietary software and expertise in the merchandising business through joint venture
business structure. Currently, of the 8 countries the Company is conducting businesses in, 5 are under a joint venture business structure (Brazil, South
Africa, Mexico, China, and India). The Company also has begun to use the model in the United States in recent years and formed or acquired two joint
ventures, National Merchandising Services, LLC (NMS), and Resource Plus Inc. (RPI), domestically. On December 22, 2023, entered into an agreement
with National Retail Remodel Services (the buyer) to sell its 51 percent interest in National Merchandising Services (NMS). See Note 10 to the Company's
Consolidated Financial Statements Related Party Transactions
The Company owns 51% of these joint ventures in all cases; the principal of our local minority investors generally is the Chief Executive Officer, and each
joint venture is governed by a Board comprised of directors from both parties. SGRP designates half of the directors for the local boards of its joint venture
subsidiaries (other than Brazil where it is 60%), and significant actions require local board agreement. All joint ventures are also governed under the
Company’s policies and guidelines.
The Company believes its relationship with the joint venture partners are strong. However, there can be no assurance that the Company can successfully
manage through inherent business risk due to significant misalignment of business objectives. Any cancellation, nonperformance or material changes of the
joint venture could have a material adverse effect of the Company.
16
We have inherent risks operating international businesses.
The Company operates in 8 countries around the world. There can be no assurances that the respective business environments will remain favorable. In the
future, the Company's International operations and sales may be affected by the following risks, which may adversely affect United States companies doing
business in foreign countries:
● Political and economic risks, including terrorist attacks and political instability;
● Various forms of protectionist trade legislation that currently exist or have been proposed;
● Expenses associated with customizing services and technology;
● Local laws and business practices that favor local competition;
● Dependence on local vendors and potential for undisclosed related party transactions;
● Multiple conflicting and changing governmental laws, regulations and enforcement;
● Potentially adverse tax and employment law consequences;
● Local accounting principles, practices and procedures;
● Local legal principles, practices and procedures, local contract review and negotiation, and limited familiarity with contract issues (excessive
warranties, extra-territoriality, sweeping intellectual property claims and the like);
● Limited familiarity or an unwillingness to comply with, or wrongly believing the inapplicability of, generally accepted accounting principles in
the USA ("GAAP"), applicable corporate controls and policies of the Company (including its ethics code), or applicable law in the USA
(including Nasdaq rules, securities laws, anti-terrorism law, Sarbanes Oxley and the Foreign Corrupt Practices Act) by Local Investors;
● Foreign currency exchange rate fluctuations and limits on the export of funds;
● Substantial communication barriers, including those arising from language, culture, custom and time zones; and
● Supervisory challenges arising from local board deadlocks, agreements, distance, physical absences and such communication barriers.
If any developments should occur with respect to any of those international risks and materially and adversely affect the Company's applicable international
subsidiary, such developments could have a material adverse effect on the Company or its performance or condition.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
SPAR Group Inc. recognizes the increased global cybersecurity threats and sophisticated, targeted computer crime and the risk it poses to our operations.
We rely on information technology and data to operate our business and develop, market and deliver our products and services to our customers.
Our cybersecurity risk management program is led by our Chief Information Officer (“CIO”), who is directly responsible for establishing cybersecurity
strategies and structures and managing ongoing cybersecurity risk management activities. Our CIO is part of the executive management team, and updates
our CEO and executive management on a monthly, or even more frequent, basis on cybersecurity enhancement and the development and implementation of
our roadmap.
We have strategically embedded cybersecurity risk management within an enterprise-wide framework, ensuring that it permeates across various facets of
our operations. This integrated approach encompasses administrative protocols, operational strategies, organizational structures, physical safeguards, and
technical measures, all tailored to align with the scope and nature of our business.
17
Cybersecurity Risk Management and Strategy
We believe this integrated approach allows cybersecurity considerations to be an integral part of our decision-making processes. Our day-to-day
cybersecurity work is led by our CIO and Head of Infrastructure. Both are highly experienced professionals. This group works closely with our executive
management to continuously evaluate and address cybersecurity risks in alignment with our business and operational needs.
Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a combination of
third-party assessments, internal audit, IT security, governance, risk and compliance reviews. To defend, detect and respond to cybersecurity incidents, we,
among other things:
● Proactively review threat intelligence and other information obtained from governmental, public or private sources
● Perform network vulnerability scans, cyber-hygiene assessments, and continually evaluate and address perceived gaps.
● Conduct companywide cyber awareness training and on-going new employee cyber training.
● Deploy a wide array of industry leading 3rd party solutions to continuously monitor network and endpoints.
● On-going testing and evaluation of backup processes.
● Perform disaster recovery tabletop exercises to assess readiness for possible events.
As noted, to operate our business, we utilize certain third-party service providers to perform a variety of functions and provide certain security-related
services, such as outsourced business critical functions, professional services, SaaS platforms, managed services, cloud-based infrastructure, data center
facilities, content delivery to customers, encryption and authentication technology, corporate productivity services, and other functions; as well as third
parties that assist us to identify, assess and manage cybersecurity risks, including professional services firms, threat intelligence service providers,
cybersecurity software providers, penetration testing firms and other vendors that help to identify, assess or manage cybersecurity risks.
In addition, we have implemented an incident response and breach management plan which has four overarching and interconnected stages:
● Detection of a security incident,
● Identification and containment,
● Response, eradication and recovery,
● Post-incident analysis and future preparations.
The plan also provides the process and workflow of communication for escalation of incidents to executive leadership to determine incident classification,
impact severity, and if and what further actions are warranted. Incident responses are overseen by leaders from our Software, Infrastructure Engineering,
and Executive team.
Cybersecurity Governance
Cybersecurity holds a significant role within our risk management procedures and remains a focal point for our Board and management. Under the Board's
oversight of general risk identification and management activities, the Audit Committee specifically monitors cybersecurity risks. Committee members
engage in comprehensive discussions with management regarding these risks, as well as the measures taken to safeguard the company's information
systems and security, along with reviewing management's steps towards data privacy protection. Additionally, the Audit Committee receives annual
cybersecurity updates from senior management, covering both existing and emerging risks, management's responses and mitigation efforts, any
cybersecurity or data privacy incidents, and the status of key information security initiatives. Furthermore, our Board members regularly hold informal
discussions with management about cybersecurity news events and any updates to our cybersecurity risk management and strategy programs.
The leadership of our cybersecurity risk management and strategy is guided by experts from our Software, Infrastructure Engineering, and Executive
teams. With backgrounds spanning: information technology, security, systems, programming, and corporate strategy, these individuals are equipped to
oversee prevention, detection, mitigation, and remediation of cybersecurity incidents. They actively engage in managing our cybersecurity risk processes,
including executing our incident response plan, and regularly report relevant matters to the executive management and the Audit Committee.
We carry insurance that provides protection against the potential losses arising from a cybersecurity incident. However, there is no assurance that our
insurance coverage will cover, or be sufficient to cover, all losses or claims that may result from a cybersecurity incident.
18
Last year
During the last fiscal year, 2023, the Company did not encounter any material cybersecurity incidents, nor did it incur any notable expenses as a result.
Item 2. Properties
The Company does not own any real property. The Company leases certain office space and storage facilities for its corporate headquarters, and
subsidiaries under various operating leases. These leases generally require the Company to pay rents at market rates, subject to periodic adjustments, plus
other charges, including utilities, real estate taxes and common area maintenance. The Company believes its relationships with its landlords to be generally
good. However, as these leased facilities generally are used for offices and storage, the Company believes that other leased spaces could be readily found
and utilized on similar terms should the need arise.
The Company relocated its corporate headquarters from New York to its existing operations office in Auburn Hills, Michigan, in September of 2020. The
Company also maintains its data processing center in Southfield, Michigan and its warehouse in Auburn Hills, Michigan, under an extended operating lease
expiring October 31, 2025.
The following is a list of the headquarter locations for the Company and its domestic and international subsidiaries:
DOMESTIC:
Auburn Hills, Michigan (Corporate Headquarters)
Southfield, Michigan (Data Center)
Jacksonville, Florida (Resource Plus)
INTERNATIONAL:
Vaughan, Ontario, Canada Tokyo, Japan
New Delhi, India
Shanghai, China
Sao Paulo, Brazil
Item 3. Legal Proceedings
Durban, South Africa
Mexico City, Mexico
The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of Company's
management, resolution of these matters is not anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets,
business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations,
prospects, sales, strategies, taxation or other achievement, results or condition.
All previous open and potential claims between the Significant Stockholders and the Company have been released mutually upon execution of the Change
of Control, Voting and Restricted Stock Agreement ("CIC Agreement"), as of January 28, 2022. See Note 10 to the Company's Consolidated Financial
Statements - Related Party Transactions, below. The matters resolved in the CIC Agreement included all previous claims of the Majority Stockholders that
the Company was somehow liable for claims and judgments by or against them or their respective companies, as well as all legal bills and other expense
and amounts.
Item 4. Mine Safety Disclosures
Not applicable.
19
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's Capital Stock Generally
PART II
SGRP's Certificate of Incorporation authorizes it to issue 47,000,000 shares of SGRP Common Stock ("SGRP Shares") with a par value of $0.01 per share,
which all have the same voting, dividend and liquidation rights. SGRP Common Stock is traded on the Nasdaq Capital Market under the symbol
"SGRP." On December 31, 2023, there were 23,446,444 shares of SGRP Common Stock outstanding in the aggregate (which does not include Treasury
Shares), and there were 7,075,069 shares (or approximately 30%) of SGRP Common Stock beneficially owned by non-affiliates of the Company in the
aggregate on a non-diluted basis (i.e., SGRP's public float). See Item IA - Risk Factors - Our significant stockholders may take actions, subject to the
restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement") and our By-Laws, Security Ownership of Certain
Beneficial Owners and Management, in Part III below, and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions,
below.
SGRP's Certificate of Incorporation also authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share (the "SGRP Preferred
Stock"), which may have such preferences and priorities over the SGRP Common Stock and other rights, powers and privileges as SGRP's Board of
Directors may establish in its discretion from time to time.
On January 25, 2022, the Corporation filed a Certificate of Elimination for its "Certificate of Designation of Series "A" Preferred Stock of SPAR Group,
Inc.” (the "Certificate of Elimination"). Pursuant to the Certificate of Elimination, the previous Series A Preferred Stock designation was cancelled and
withdrawn. As a result, all 3,000,000 shares the previously authorized Series A Preferred Stock were returned to the Corporation’s authorized "blank
check" preferred stock. There were no shares of Series A Preferred Stock outstanding at the time of the cancellation.
Subsequent to filing the Certificate of Elimination, on January 25, 2022, the Corporation filed a "Certificate of Designation of Series "B" Preferred Stock of
SPAR Group, Inc.” (the "Preferred Designation") with the Secretary of State of Delaware, which designation had been approved by the Board on January
25, 2022. The Preferred Designation created a series of 2,000,000 shares of Preferred Stock designated as "Series B Preferred Stock” with a par value of
$.01 per share (the "Preferred Stock"). The Preferred Stock shares do not carry any voting or dividend rights and automatically convert on vesting into the
SGRP Common Stock on a 1 for 1.5 basis. See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions Domestic
Related Party Services (including Change of Control, Voting and Restricted Stock Agreement), below. However, the holders of the Series B Preferred Stock
have a liquidation preference over the SGRP Common Stock and vote together for matters pertaining only to the Series B Preferred Stock (such as
amending SGRP's Certificate of Designation of Series B Preferred Stock) where only the holders of the Series B Preferred Stock are entitled to vote. The
holders of outstanding Series A Preferred Stock do not have the right to vote for directors or other matters submitted to the holders of the SGRP Common
Stock.
On January 28, 2022, pursuant to the CIC Agreement, the Company issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred
Stock, which have all vested and automatically converted into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the Preferred
Designation and the CIC Agreement. See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions (including Change of
Control, Voting and Restricted Stock Agreement), below.
During the year ended December 31, 2023, all of the remaining 854,753 shares of Series B convertible preferred stock vested and automatically became
convertible into 1,282,129 shares of the Corporation’s common stock of which 307,129 shares of the Corporation’s Common Stock were issued prior to
December 31, 2023.
Since there are no more shares of Series B Preferred Stock outstanding, SGRP may change or cancel the authorized Series B Preferred Stock, and to the
extent it reduces such authorization without issuance, it can create other series of Preferred Stock with potentially different dividends, preferences and other
terms.
Market Information
SGRP's Common Stock is traded on the Nasdaq Capital Market under the symbol "SGRP". As of December 31, 2023, there were approximately 2,360
stockholders of record.
20
Dividends
The Corporation has never declared or paid any cash dividends on its Common Stock and does not currently anticipate paying cash dividends on its
Common Stock in the foreseeable future. No dividends are payable on the Series B Preferred Stock. The Company historically has retained earnings to
finance its operations and fund future growth of the business. Any payment of future dividends will be at the discretion of the Board of Directors of the
Corporation and will depend upon, among other things, the Company's earnings, financial condition, capital requirements, cash flow, level of indebtedness,
contractual restrictions in respect to the payment of dividends and other factors that the Corporation Board of Directors deems relevant.
Equity Compensation
Information regarding the Company's equity compensation plans may be found in Item 11 of this Annual Report, which is hereby incorporated by
reference.
Stock Repurchase Program
On May 24, 2022, the Board of Directors of SGRP (the "Board"), authorized SGRP to repurchase up to 500,000 shares of its SGRP Shares pursuant to the
2022 Stock Repurchase Program (the "2022 Stock Repurchase Program"), which repurchases were made from time to time over the one-year period that
ended May 24, 2023 in the open market and through privately-negotiated transactions. Those repurchases were made subject to cash availability and
general market and other conditions. Through December 31, 2023, 151,156 shares of SGRP Common Stock were repurchased under the 2022 program and
became Treasury Shares.
SGRP Common Stock Issuances
During 2023, the Corporation issued 387,306 SGRP Shares (including Treasury Shares and new shares of SGRP Common Stock) in support of its
requirement to satisfy the conversion of vested and surrendered Series B Preferred Stock (see above), benefit awards and stock purchase plans, including
employee Restricted Stock Units that vested and settled with stock, and the exercise of vested employee stock options. However, that share total does not
include the 975,000 shares of SGRP Common Stock that were in the process of being issued and the remaining shares of Series B Preferred Stock were in
the process of being returned and cancelled on December 31, 2023. See The Company's Capital Stock Generally, in Item 5 above, and Note 11 to the
Company's Consolidated Financial Statements – Share Based Compensation, below.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K (this " Annual Report ") contains "forward-looking statements" within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. (" SGRP " or the "Corporation") and its subsidiaries (together
with SGRP, " SPAR " , the " SPAR Group " or the " Company "). "Forward-looking statements" are defined in Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the " Exchange Act "), and other
applicable federal and state securities laws, rules and regulations, as amended (together with the Securities Act and Exchange Act, the " Securities
Laws ").
Readers can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as "may," "will,"
"expect," "intend," "believe," "estimate," "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also
identify forward-looking statements. Forward-looking statements made by the Company in this Annual Report may include (without limitation)
statements regarding: risks, uncertainties, cautions, circumstances and other factors (" Risks "); the potential continuing negative effects of the
COVID-19 pandemic on the Company's business; the Company's potential non-compliance with applicable Nasdaq director independence; bid price or
other rules; the Company's cash flow or financial condition; and plans, intentions, expectations, guidance or other information respecting the pursuit
or achievement of the Company's corporate objectives. The Company's forward-looking statements also include (without limitation) those made in this
Annual Report in "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Directors, Executive Officers and Corporate Governance," "Executive Compensation," "Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters," and "Certain Relationships and Related Transactions, and Director Independence."
21
You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties)
and other information made, contained or noted in or incorporated by reference into this Quarterly Report, the Annual Report, the Proxy Statement,
the First Special Meeting Proxy/Information Statement and the First Special Meeting Report and the other applicable SEC Reports, but you should not
place undue reliance on any of them. The results, actions, levels of activity, performance, achievements or condition of the Company (including its
affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations,
performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) and other events and circumstances
planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, " Expectations "), and our forward-looking statements
(including all Risks) and other information reflect the Company's current views about future events and circumstances. Although the Company
believes those Expectations and views are reasonable, the results, actions, levels of activity, performance, achievements or condition of the Company or
other events and circumstances may differ materially from our Expectations and views, and they cannot be assured or guaranteed by the Company,
since they are subject to Risks and other assumptions, changes in circumstances and unpredictable events (many of which are beyond the Company's
control). In addition, new Risks arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect
the Company. Accordingly, the Company cannot assure you that its Expectations will be achieved in whole or in part, that it has identified all potential
Risks, or that it can successfully avoid or mitigate such Risks in whole or in part, any of which could be significant and materially adverse to the
Company and the value of your investment in the Company's Common Stock.
These forward-looking statements reflect the Company ' s Expectations, views, Risks and assumptions only as of the date of this Quarterly Report, and
the Company does not intend, assume any obligation, or promise to publicly update or revise any forward-looking statements (including any Risks or
Expectations) or other information (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed
circumstances, future events, recognition, or otherwise.
Overview of Our Business
SPAR Group is a leading global merchandising and brand marketing services company, providing a broad range of sales enhancing services to retailers
across most classes of trade and consumer goods manufacturers and distributors around the world. The Company’s goal is to be the most creative,
energizing and effective global services company that drives sales, margins and operating efficiency for our clients.
As of December 31, 2023, the Company operated in eight countries: the United States, Canada, Mexico, Brazil, South Africa, China, Japan
and India. Across all of these countries, the Company executes programs through its multi-lingual logistics, reporting and communication technology,
which provides clients value through real-time insight on store/product conditions.
With more than 50 years of experience and a diverse network of merchandising specialists around the world, the Company continues to grow its
relationships with some of the world’s leading businesses. The combination of resource scale, deep expertise, advanced technology and unwavering
commitment to excellence, separates the Company from the competition.
The Company is dedicated to delivering a spectrum of specialized services tailored to enhance retail operations and profitability across the globe. Our team
collaborates closely with clients to identify their primary goals, ensuring the execution of strategies that boost sales and profit margins. With a focus on
merchandising and brand marketing, our specialists deploy a variety of programs aimed at maximizing product sell-through to consumers. These initiatives
range from launching new products and setting up promotional displays to assembling fixtures and ensuring consistent stock availability, thus facilitating
efficient reordering processes. Furthermore, we extend our expertise to sales enhancement and customer service improvement. As the retail landscape
evolves, our team is adept at undertaking comprehensive store renovations and preparing new locations for their grand openings, ensuring they meet the
modern consumer's expectations. Additionally, our distribution associates play a pivotal role in retail and consumer goods distribution centers, preparing
these facilities for operation, optimizing system functionality, managing product logistics, and providing essential staffing solutions to meet our clients'
needs effectively.
The Company’s business is led and operated from its global headquarters in Auburn Hills, Michigan, with local leadership and offices in each country.
22
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of
financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of
America ("US GAAP"). Adjusted EBITDA is defined as net (loss) income before (i) depreciation and amortization of long-lived assets, (ii) interest
expense (iii) income tax expense, (iv) Board of Directors incremental compensation expense, (v) restructuring, (vi) impairment, (vii) nonrecurring legal
settlement costs and associated legal expenses unrelated to the Company's core operations, (viii) and special items as determined by management. This
metric is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with, US GAAP.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a
consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. You are encouraged to evaluate these
adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the
future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA. Our presentation of
Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. There can be no
assurance that we will not modify the presentation of Adjusted EBITDA in future periods, and any such modification may be material. In addition,
Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
Our management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can
differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital
investments. We also use Adjusted to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies and
to make budgeting decisions.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported
under US GAAP. Some of these limitations include:
● Adjusted EBITDA does not reflect our cash expenditure or future requirements for capital expenditures or contractual commitments;
● Adjusted EBITDA does not reflect changes in our cash requirements for our working capital needs;
● Adjusted EBITDA does not reflect the interest expense and the cash requirements necessary to service interest or principal payments on our
debt;
● Adjusted EBITDA does not reflect cash requirements for replacement of assets that are being depreciated and amortized;
● Adjusted EBITDA does not reflect non-cash compensation, which is a key element of our overall long-term compensation;
● Adjusted EBITDA does not reflect the impact of certain cash charges or cash receipts resulting from matters we do not find indicative of our
ongoing operations; and
● Other companies in our industry may calculate Adjusted EBITDA differently than we do.
Our Consolidated EBITDA was approximately $11.4 million and $7.4 million for the years ended December 31, 2023 and 2022, respectively. The
following is a reconciliation of our net income to Adjusted EBITDA for the periods presented:
(in thousands)
Consolidated Net Income
Depreciation and amortization
Interest expense
Income tax expense
Other (income), loss
Subtotal of Adjustments to Consolidated Net Income
Consolidated EBITDA
Costs and other relating to CIC
Review of Strategic Alternatives
Goodwill impairment
Loss on sale of businesses
Restructuring costs
Legal costs / Settlements - non-recurring
Share Based Compensation
Board of Directors incremental compensation
Consolidated Adjusted EBITDA
Adjusted EBITDA attributable to non-controlling interest
Adjusted EBITDA attributable to SPAR Group, Inc.
Year Ended December 31,
2023
2022
$ 4,776
2,001
1,919
2,357
346
6,623
$ 11,399
-
544
-
408
28
289
297
-
$ 12,965
(3,022)
9,943
$ 2,126
2,033
965
2,777
(482)
5,294
$ 7,420
(32)
540
2,458
-
-
-
-
394
$ 10,780
(4,637)
6,143
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Results of Operations
The following table sets forth selected financial data for the years indicated (dollars in millions):
Net revenues
Related Party - Cost of revenues
Cost of revenues
Selling, general and administrative expense
Impairment of Goodwill
Loss on sale of business
Depreciation and amortization
Interest expense
Other expense (income), net
Income before income taxes
Income tax expense
Net income
Net income attributable to non-controlling interest
Net income attributable to SPAR Group, Inc.
Year Ended December 31,
2023
$ 262.7
5.2
202.1
43.7
-
0.4
2.0
1.9
0.3
7.1
2.4
4.8
(0.9)
$ 3.9
%
100%
2.0
76.9
16.6
-
0.2
0.8
0.7
0.1
2.7
0.9
1.8
(0.3)
1.5%
2022
%
$ 261.3
$ 8.8
201.5
41.1
2.5
-
2.0
1.0
(0.5)
4.9
2.8
2.1
(2.9)
$ (0.7)
100%
3.4
77.1
15.8
1.0
-
0.8
0.4
(0.2)
1.9
1.1
0.8
(1.1)
(0.3)%
Results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Net Revenues
Net revenues for the year ended December 31, 2023, were $262.7 million compared to $261.3 million for the year ended December 31, 2022, an increase
of $1.4 million or 1%. This increase in revenue was primarily driven by stronger performance in the Americas, particularly Canada, Brazil and US SPAR
owned business, partially offset by lower performance at Asia Pacific and EMEA and US Joint Ventures. Foreign Currency rates were also a negative
headwind in 2023.
The Americas net revenues totaled $203.7 million and $198.6 million for the years ended December 31, 2023 and 2022, respectively. The increase of
$5.1 million or 2.6% is the result of 51% growth in the Canadian business, 10% growth in our Brazil joint venture revenue and 3% growth in our US SPAR
owned business, partially offset by a 37% and 43% drop in our US Joint Ventures, Resource Plus and NMS respectively. These results reflect growth in our
core merchandising services business offset by delays in retail remodel projects to later in the year or early next year by our clients. Core merchandising
had a strong growth in the US SPAR owned business, in Brazil and in Canada.
The Asia-Pacific net revenues totaled $24.5 million and $26.0 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $1.5
million or 5.9% is primarily the result of negative foreign exchange rate movement as well as other extraneous conditions.
The EMEA net revenues totaled $34.6 million and $36.7 million for the years ended December 31, 2023 and 2022, respectively. The decrease of
$2.1 million or 5.8% is driven by unfavorable foreign exchange rates in South Africa, when compared to 2022 rates. South Africa local currency net
revenues increased 5% in 2023 compared to 2022.
Cost of Revenues
The Company's cost of revenues consists of its in-store labor and field management wages, related benefits, travel and other direct labor-related expenses
and was 78.9% of net revenue for the year ended December 31, 2023 compared to 80.5% of net revenues for the year ended December 31, 2022. We
delivered a (159)-basis point improvement in gross margins against the global pressure of recruiting and wages.
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The Americas cost of revenue as a percent of net revenue was 79.8% and 81.5% for the years ended December 31, 2023 and 2022, respectively. The
decrease in cost of 1.6% was the result of 2.5% lower costs in our owned U.S. business and U.S. joint ventures and 1.4% lower cost in Brazil, partially
offset by a 230-basis point increase in costs in Mexico. These results were achieved through our persistent emphasis on contract pricing, stabilization of
market wages, enhancement of our higher-margin service offerings, and diminution of travel expenditures associated with remodel projects.
The Asia-Pacific cost of revenue as a percent of net revenue was 74.7% and 77.3% for the years ended December 31, 2023 and 2022, respectively. This
improvement in cost of 2.6% was partially due to operating fully in China compared to the slow recovery from the zero-tolerance policy in 2022, which
inflated cost of revenue ratios in 2022.
The EMEA cost of revenue as a percent of net revenue was 76.3% and 77.4% for the years ended December 31, 2023 and 2022, respectively. The decrease
in cost of 1.1% was primarily the result of the service mix during the quarter and our ability to manage gross margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of the Company include its corporate overhead, project management, information technology, executive
compensation, human resources, legal and accounting expenses. Selling, general and administrative expenses were approximately $43.7 million, or 16.7%
of net revenue, and approximately $41.1 million, or 15.8% of net revenue for the years ended December 31, 2023 and 2022, respectively. Selling, general
and administrative expenses for the year-ended December 31, 2023 includes expenses of approximately $0.5 million related to our consideration of
strategic alternatives and higher salary and benefits cost, partially offset by lower bad debt expense as 2022 reflected the impending bankruptcy of a larger
client.
The Americas selling, general and administrative expenses totaled $32.2 million and $28.4 million for the years ended December 31, 2023 and 2022,
respectively. The increase of $3.7 million, or 13.1% is primarily the result of consulting and legal charges associated with the review of strategic
alternatives, higher compensation related expenses, and the annualization of our investment in recruiting and moving our technology to the cloud.
The Asia-Pacific selling, general and administrative expenses totaled $6.5 million and $7.4 million for the years ended December 31, 2023 and 2022,
respectively. The decrease of $0.9 million, or 12.0% is primarily attributable to reduction in China and Japan's SG&A's expenses as we carefully manage
these businesses in response to the broader economic trends.
The EMEA selling, general and administrative expenses totaled $5.0 million and $5.3 million for the years ended December 31, 2023 and 2022,
respectively. SG&A for EMEA was flat compared to 2022.
Depreciation and Amortization
Depreciation and amortization expense was approximately $2.0 million and $2.0 million for the years ended December 31, 2023 and 2022, respectively
Interest Expense
The Company's interest expense was $1.9 million and $1.0 million for the years ended December 31, 2023 and 2022, respectively.
The America interest expense was $1.4 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. The increase was a result
of higher interest rates.
The Asia-Pacific interest expense of $0.1 for the year ended December 31, 2023 versus $0.0 for the year ended December 31, 2022.
The EMEA incurred interest expense of $0.4 million versus $0.3 million for the years ended December 31, 2023 and 2022, respectively.
Other Expense (Income), Net
Other expense, net was $0.3 million versus income of $0.5 million for the years ended December 31, 2023 and 2022, respectively.
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Income Tax Expense
The Company had income tax expense of $2.4 million with an effective tax rate of 33.0% and $2.8 million with an effective rate of 56.6%, for the years
ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, our effective income tax rate of 33.0% varied from the U.S.
federal statutory rate of 21% primarily as a result of foreign rate differential, sale of membership interest disposition of National Merchandising Services,
LLC and permanent differences.
Net income attributable to non-controlling interest
Net income attributable to noncontrolling interest was $0.9 million and $2.9 million for the years ended December 31, 2023 and 2022, respectively.
Critical Accounting Policies and Estimates
The Company’s critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 2 to the Company’s
consolidated financial statements included elsewhere in this Annual Report on Form 10-K. These policies have been consistently applied in all material
respects and address matters such as impairment of long-lived assets, intangible assets, and goodwill, revenue recognition, allowance for credit losses, and
internal use software. While the estimates and judgments associated with the application of these policies may be affected by different assumptions or
conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate under the circumstances.
Impairment of Long-Lived Assets, Intangible Assets, and Goodwill
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company’s property and
equipment and may not be recoverable. When indicators of potential impairment exist, the Company assesses the recoverability of the assets by estimating
whether the Company will recover its carrying value through the undiscounted future cash flows generated by the use of the asset and its eventual
disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the asset, the Company records an
impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. If any assumptions, projections or estimates regarding any
asset change in the future, the Company may have to record an impairment to reduce the net book value of such individual asset.
When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, the Company assesses the
recoverability of the carrying value by preparing estimates of sales volume and the resulting profit and cash flows expected to result from the use of the
asset or asset group and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the
carrying amount, the Company recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount of the asset or
asset group exceeds the fair value. The Company uses a variety of methodologies to determine the fair value of these assets, including discounted cash flow
models, which are consistent with the assumptions hypothetical marketplace participants would use.
Goodwill is subject to annual impairment tests and interim impairment tests if impairment indicators are present. The Company performs the annual
impairment test during the third quarter each year. The impairment tests require the Company to first assess qualitative factors to determine whether it is
necessary to perform a quantitative goodwill impairment test. The Company is not required to calculate the fair value of a reporting unit unless it
determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. If it is determined that it is
more likely than not, or if the Company elects not to perform a qualitative assessment, the Company proceeds with the quantitative assessment. Under the
quantitative test, if the fair value of a reporting unit exceeds its carrying amount, then goodwill of the reporting unit is considered to not be impaired. If the
carrying amount of the reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess, up to the value of the
goodwill.
26
Revenue Recognition
The Company generates its revenues by providing merchandising services to its clients. Revenues are recognized when the Company satisfies a
performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that the Company
expects to receive in exchange for those services. Performance obligations in the Company’s contracts represent distinct or separate services that we
provide to the Company’s customers; generally, the Company’s contracts have a single performance obligation. If, at the outset of an arrangement, the
Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable
contract are met.
The Company’s merchandising services are provided over time, generally on a daily, weekly, or monthly basis, and transaction price is based on the
contractually-specified rate-per-driver metric (i.e., rate per hour, rate per store visit, or rate per unit stocked). The Company recognizes revenues for its
contracts based on the contractually-specified rate-per-driver metric(s) utilizing the right-to-invoice practical expedient because the Company has a right to
consideration for merchandising services completed to date. All of the Company’s contracts have a duration of one year or less and over 90% of the
Company’s contracts are completed in less than 30 days.
Customer deposits, which are considered advances on future work, are deferred and recorded as revenue in the period in which the services are provided.
Allowance for Credit Losses
The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition.
Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the bad debt
allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amount that
management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and
a credit to bad debt allowance based in part on management’s assessment of the current status of individual accounts.
Based on management’s assessment, the Company established an allowance for credit losses of $1.5 million and $1.6 million at December 31, 2023, and
2022, respectively. Bad debt expense was $0.3 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively.
Internal Use Software
The Company capitalizes certain costs associated with its internally developed software. The Company capitalizes the costs of materials and services
incurred in developing or obtaining internal use software and such costs include, but are not limited to: the cost to purchase software, the cost to write
program code, and payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to the
Company’s software development projects. Capitalization of such costs begins during the application development stage once the preliminary project stage
is complete, management authorizes and commits to funding the project, and it is probable that the project will be completed and that the software will be
used to perform the function intended. Capitalization ceases when the project is substantially complete and ready for its intended purpose. Costs incurred
during preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are
incurred.
The Company capitalized approximately $1.0 million and $1.5 million of costs related to software developed for internal use in 2023 and 2022,
respectively, and recognized approximately $1.3 million of amortization of capitalized software for the years ended December 31, 2023 and 2022.
Recent Accounting Pronouncements
See the sections titled "Summary of Significant Accounting Policies—Recent Accounting Pronouncements” and "—Recently issued accounting
pronouncements not yet adopted” in Note 2 to the Company's Consolidated Financial Statements, Summary of Significant Accounting Policies, included
elsewhere in this Annual Report on Form 10‑K.
27
Liquidity and Capital Resources
Funding Requirements
Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment
requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and
sufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company's major clients, a
significant reduction in business from such clients, or a negative economic downturn could have a material adverse effect on the Company's business, cash
resources and ongoing ability to fund operations.
The Company is a party to various domestic and international credit facilities. These various domestic and international credit facilities require compliance
with their respective financial covenants. For the year ended December 31, 2023, the Company was in compliance with all financial covenants under these
arrangements. See Note 4 to the Company's Consolidated Financial Statements, Debt, included elsewhere in this Annual Report on Form 10-K.
Cash Flows for the Years Ended December 31, 2023 and 2022
Net cash provided by operating activities was $6.8 million for the year ended December 31, 2023 and net cash used in operating activities was $5.0 million
for the year ended December 31, 2022. The year-over-year increase in net cash provided by operating activities was primarily due to improved working
capital management.
Net cash used in investing activities for the years ended December 31, 2023 and 2022, was $2.3 million and $1.8 million, respectively. The net cash used in
investing activities was primarily attributable to capitalization of internal use software.
Net cash used in financing activities for the year ended December 31, 2023 was approximately $3.0 million compared to $3.5 million provided in 2022.
The year-over-year decrease in net cash provided by financing activities during 2023 was primarily due to repayment of lines of credit.
For the year ended December 31, 2023, the company experienced a net increase in cash and cash equivalents amounting to approximately $1.4 million.
This positive change reflects foreign exchange rate fluctuations, which contributed a decrease of $0.2 million. In contrast, the prior fiscal year ending
December 31, 2022, recorded a net decrease in cash and cash equivalents of $4.1 million, inclusive of a $0.8 million impact due to foreign exchange rate
variations. These figures highlight the significant turnaround in our liquidity position, driven by both improved operational outcomes and favorable
exchange rate movements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under
this item.
Item 8. Financial Statements and Supplementary Data
See Item 15 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
28
Item 9A. Controls and Procedures
Management's Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) are designed to ensure that information
required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated
and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief
Executive Officer and the Chief Financial Officer, as our principal financial and accounting officer, have reviewed the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Annual Report on Form 10-K and, based on their evaluation, have concluded that the
disclosure controls and procedures were effective as of such date.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Also, projections of any evaluation of
the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management utilized the criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) to conduct an assessment of the effectiveness of our internal control over financial reporting as of December 31,
2023. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Remediation of previous year Material Weakness in Internal Control Over Financial Reporting
In the fiscal year ending December 31, 2022, Management identified a material weakness within our internal control over financial reporting, specifically
relating to non-recurring transactions with international components. Although this deficiency did not directly lead to any material misstatements in our
financial statements for that year or interim periods, it raised the possibility that such misstatements could remain undetected.
In response, during 2023, we implemented our previously disclosed remediation plan that included the appointment of a new Chief Financial Officer, a new
Vice President Controller, the creation of a Director of Accounting position and the engagement of an external consultant specializing in SOX compliance.
Additionally, we implemented a review process and controls with more precise levels of review for non-recurring transactions with international
components including policies and procedures to ensure documentary evidence is maintained, particularly for management review controls.
These controls were in place as of December 31, 2023, and based on management’s evaluation, the previously identified material weakness has been
remediated.
Changes in Internal Controls Over Financial Reporting
Except for the changes in connection with our implementation of the remediation plan discussed above, there was no changes in the Company's internal
controls over financial reporting that occurred during the Company's quarter ended December 31, 2023, that materially affected, or are reasonably likely to
materially affect, the Company's internal controls over financial reporting.
29
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Reference is made below to SGRP’s definitive Proxy Statement respecting its 2024 Annual Meeting of Stockholders currently scheduled to be held in April
of 2024, as and when filed with the SEC, which SGRP plans to file pursuant to Regulation 14A in April of 2024, but not later than 120 days after the end of
the Company’s 2024 fiscal year (the "2024 Proxy Statement”), For clarity (and without limitation), information appearing in the sections in such 2024
Proxy Statement entitled "PROPOSAL 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION”, "PROPOSAL 4 – ADVISORY VOTE ON THE
FREQUENCY THAT THE CORPORATION HOLDS THE ADVISORY VOTE ON EXECUTIVE COMPENSATION”, and "REPORT OF THE AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS” shall not be deemed to be incorporated by reference in this Annual Report.
Item 10. Directors, Executive Officers and Corporate Governance
Reference is made to the information set forth under the captions "The Board of Directors of the Corporation”, "Executives and Officers of the
Corporation”, "Security Ownership of Certain Beneficial Owners and Management” and "Corporate Governance” in the 2024 Proxy Statement.
Item 11. Executive Compensation
Reference is made to the information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management”, "Executive
Compensation, Directors and Other Information”, "Executive Compensation, Equity Awards and Options” and "Compensation Plans” in the 2024 Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Reference is made to the information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management”, "Executive
Compensation, Equity Awards and Options” and "Compensation Plans” in the 2024 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Reference is made to the information set forth under the caption "Transactions with Related Persons, Promoters and Certain Control Persons” in the
2024 Proxy Statement.
Item 14. Principal Accountant Fees and Services
Reference is made to the information set forth under the caption "PROPOSAL 2 – RATIFICATION, ON AN ADVISORY BASIS, OF THE
APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S PRINCIPAL INDEPENDENT ACCOUNTANTS” in the 2024 Proxy Statement.
30
Item 15. Exhibits and Financial Statement Schedules
F. Index to Financial Statements filed as part of this report:
PART IV
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Troy, Michigan; PCAOB ID#243)
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2023
and 2022
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Stockholders' Equity for the years ended December 31, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
Notes to Consolidated Financial Statements
3. Exhibits
40
42
43
44
45
46
Exhibit
Number
3.1
3.2
3.3
3.4
3.5
3.6
Description
Certificate of Incorporation of SPAR Group, Inc. (referred to therein under its former name of PIA Merchandising Services, Inc.), as
amended, incorporated by reference to the Corporation’s Registration Statement on Form S-1 (Registration No. 33-80429), as filed
with the SEC on December 14, 1995, and the Certificate of Amendment filed with the Secretary of State of the State of Delaware on
July 8, 1999 (which, among other things, changes the Corporation’s name to SPAR Group, Inc.), (incorporated by reference to Exhibit
4.1 to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-80429) as filed with the SEC on April 2, 2021).
Certificate of Elimination of the Certificate of Designation of Series "A" Preferred Stock of SPAR Group, Inc., adopted as of January
25, 2022 (incorporated by reference to Exhibit 3.1 to SGRP's Current Report on Form 8-K, as filed with the SEC on January 28,
2022).
Certificate of Designation of Series "B” Convertible Preferred Stock of SPAR Group, Inc., adopted January 25, 2022 (incorporated by
reference to Exhibit 3.2 to SGRP's Current Report on Form 8-K, as filed with the SEC on January 28, 2022).
Amended and Restated By-Laws of SPAR Group, Inc., as adopted, restated, effective and dated January 18, 2019 and as further
amended through January 25, 2022 (incorporated by reference to Exhibit 3.3 to SGRP's Current Report on Form 8-K, as filed with the
SEC on January 28, 2022).
Amended and Restated Charter of the Audit Committee of the Board of Directors of SPAR Group, Inc., adopted, restated, effective
and dated August 12, 2020, (incorporated by reference to Exhibit 3.4 to the First Amendment to SGRP's Annual Report on Form 10-
K/A for the fiscal year ended December 31, 2020, as filed with the SEC on April, 29, 2021 ("SGRP's 2020 Annual Report
Amendment").
Charter of the Compensation Committee of the Board of Directors of SPAR Group, Inc., Amended, Restated and Dated (as of) August
11, 2020, (incorporated by reference to Exhibit 3.5 to the First Amendment to SGRP's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2020, as filed with the SEC on April, 29, 2021 ("SGRP's 2020 Annual Report Amendment").
31
3.7
Charter of the Governance Committee of the Board of Directors of SPAR Group, Inc., Dated (as of) April 23, 2020 and As Amended
through March 18, 2021 (incorporated by reference to Exhibit 3.6 to the First Amendment to SGRP's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2020, as filed with the SEC on April, 29, 2021 ("SGRP's 2020 Annual Report Amendment").
3.08
SPAR Group, Inc. Statement of Policy Respecting Stockholder Communications with Directors, adopted on May 18, 2004
(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.9
SPAR Group, Inc. Statement of Policy Regarding Director Qualifications and Nominations, adopted on May 18, 2004 (incorporated
by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.10
SPAR Group, Inc. Statement of Policy Respecting Complaints and Communications by Employees and Others as Amended and
Restated as of August 13, 2015 (also known as the Whistleblower Policy) (incorporated by reference to SGRP's Annual Report on
Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC on April 2, 2018).
3.11
SGRP 2022 Stock Repurchase Program as approved by SGRP's Audit Committee and adopted by its Board of Directors on May 12,
2022 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 24, 2022).
4.1
4.2
4.3
Form of SGRP's Common Stock Certificate (incorporated by reference to SGRP's Pre-Effective Amendment No. 1 to its Registration
Statement on Form S-3 (Registration No. 333-162657) as filed with the SEC on February 7, 2011).
Form of SGRP's Series B Preferred Stock Certificate (incorporated by reference to SGRP’s Annual Report on Form 10-K, as filed
with the SEC on April 17, 2023).
Registration Rights Agreement entered into as of January 21, 1992, by and between SGRP (as successor to, by merger in 1996 with,
PIA Holding Corporation, f/k/a RVM Holding Corporation, the California Limited Partnership, The Riordan Foundation and
Creditanstalt-Bankverine (incorporated by reference to the Form S-1).
4.4
Summary Description and Prospectus dated August 24, 2009, respecting the SPAR Group, Inc. 2008 Stock Compensation Plan, as
amended (incorporated by reference to Exhibit 99(a)(1)(G) to SGRP's SC TO-I).
10.1
2021 Stock Compensation Plan of SPAR Group, Inc., effective as of August 12, 2021 (incorporated by reference to Appendix A to the
Corporation’s Definitive Proxy Statement filed with the SEC on July 13, 2021).
10.2
2020 Stock Compensation Plan of SPAR Group, Inc., effective as of January 19, 2021 (incorporated by reference to Annex B to the
Corporation’s Definitive Proxy Statement filed with the SEC on December 10, 2020).
10.3
2018 Stock Compensation Plan of SGRP, effective as of May 2, 2018 (incorporated by reference to Annex A to SGRP's Definitive
Proxy Statement filed with the SEC on April 18, 2018).
10.4
2008 Stock Compensation Plan, effective as of May 29, 2008, and as amended through May 28, 2009 (the "SGRP 2008 Plan")
(incorporated by reference to SGRP's Current Report on Form 8-K dated June 4, 2009, as filed with the SEC on June 4, 2009).
10.5
2000 Stock Option Plan, as amended through May 16, 2006 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2006, as filed with the SEC on November 14, 2006).
10.6
Phantom Stock Unit Grant and Agreement entered into and is effective as of April 3, 2023, between SGRP and Kori G. Belzer (as
filed herewith).
10.7
Phantom Stock Unit Grant and Agreement entered into and is effective as of March 24, 2022, between SGRP and Kori G. Belzer (as
filed herewith).
32
10.8
Phantom Stock Unit Grant and Agreement entered into and is effective as of April 3, 2023, between SGRP and Antonio Calisto Pato
(as filed herewith).
10.9
Phantom Stock Unit Grant and Agreement entered into and is effective as of April 3, 2023, between SGRP and William Linnane (as
filed herewith).
10.10
Phantom Stock Unit Grant and Agreement entered into and is effective as of March 24, 2022, between SGRP and William Linnane (as
filed herewith).
10.11
Phantom Stock Unit Grant and Agreement entered into and is effective as of April 3, 2023, between SGRP and Ron Lutz (as filed
herewith).
10.12
Phantom Stock Unit Grant and Agreement entered into and is effective as of March 24, 2022, between SGRP and Ron Lutz (as filed
herewith).
10.13
Phantom Stock Unit Grant and Agreement entered into and is effective as of April 3, 2023, between SGRP and Mike Matacunas (as
filed herewith).
10.14
10.15
Inducement RSU Contract between SPAR Group, Inc. and Antonio Calisto Pato dated March 10, 2023 (as filed herewith).
Inducement RSU Contract, between SPAR Group, Inc. and William Linnane, dated August 2, 2021 (incorporated by reference to
Exhibit 10.6 to the Corporation’s Annual Report on Form 10-K as filed with the SEC on April 15, 2022).
10.16
Inducement RSU Contract, between SPAR Group, Inc. and Ron Lutz, dated August 2, 2021 (incorporated by reference to Exhibit 10.7
to the Corporation’s Annual Report on Form 10-K as filed with the SEC on April 15, 2022).
10.17
Inducement Nonqualified Stock Option Contract, between SPAR Group, Inc. and Mike Matacunas, dated February 22, 2021
(incorporated by reference to Exhibit 4.5 to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-80429) as
filed with the SEC on April 2, 2021).
10.18
Inducement RSU Contract, between SPAR Group, Inc. and Mike Matacunas, dated February 22, 2021 (incorporated by reference to
Exhibit 10.9 to the Corporation’s Annual Report on Form 10-K as filed with the SEC on April 15, 2022).
10.19
Inducement Nonqualified Stock Option Contract, between SPAR Group, Inc. and Fay DeVriese, dated August 31, 2020 (incorporated
by reference to Exhibit 4.4 to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-80429) as filed with the
SEC on April 2, 2021).
10.20
2001 Employee Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's annual stockholders meeting
held on August 2, 2001, as filed with the SEC on July 12, 2001).
10.21
2001 Consultant Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's Annual meeting held on
August 2, 2001, as filed with the SEC on July 12, 2001).
10.22
10.23
10.24
Consulting Agreement dated January 27, 2022, effective February 1, 2022, between SGRP and Thenablers, Ltd., which is wholly
owned by and will provide certain consulting services from Panagiotis ("Panos") N. Lazaretos (who retired as a SGRP director
effective January 25, 2022) to SGRP regarding global sales and new markets’ expansion (incorporated by reference to Exhibit 10.3 to
SGRP's Current Report on Form 8-K, as filed with the SEC on January 28, 2022).
Consulting Agreement dated January 25, 2022, and effective January 26, 2022, between SGRP and James R. Brown, Sr. (who retired
as a SGRP director effective January 25, 2022) (incorporated by reference to Exhibit 10.2 to SGRP's Current Report on Form 8-K, as
filed with the SEC on January 28, 2022).
Change of Control, Voting and Restricted Stock Agreement, effective January 28, 2022, by and among SGRP, Robert G. Brown,
William H. Bartels, SPAR Administrative Services, Inc., a Nevada corporation, and SPAR Business Services, Inc., a Nevada
corporation (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 8-K, as filed with the SEC on January 28,
2022).
33
10.25
10.26
10.27
Change of Control Severance Agreement between SGRP and Antonio Calisto Pato dated as of February 28, 2023 (as filed herewith).
Corrective Global Amendment to Change of Control Severance Agreements between SGRP, Fay DeVriese, William Linnane and Ron
Lutz made and entered into and effective as of August 10, 2022 (as filed herewith).
Amended and Restated Change of Control Severance Agreement (the "CICSA”) between SPAR Group, Inc. ("SGRP”) and Fay
DeVriese made and entered into effective as of August 13, 2021 (incorporated by reference to Exhibit 10.1 to SGRP's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2021, as filed with the SEC on November 15, 2021).
10.28
Change of Control Severance Agreement between SGRP and William Linnane dated as of July 12, 2021 (incorporated by reference to
Exhibit 10.18 to the Corporation’s Annual Report on Form 10-K as filed with the SEC on April 15, 2022.
10.29
Change of Control Severance Agreement between SGRP and Ron Lutz dated as of July 12, 2021 (incorporated by reference to Exhibit
10.19 to the Corporation’s Annual Report on Form 10-K as filed with the SEC on April 15, 2022).
10.30
Change of Control Severance Agreement by and among SPAR Group, Inc., SPAR Marketing Force, Inc. and Mike Matacunas dated
as of January 26, 2021 (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 8-K, as filed with the SEC on
February 16, 2021).
10.31
Amended and Restated Change of Control Severance Agreement between Kori G. Belzer and SGRP, dated as of August 10, 2022
(incorporated by reference to Exhibit 10.2 to SGRP's Quarterly Report on Form 10-Q, as filed with the SEC on August 15, 2022).
10.32
10.33
10.34
10.35
10.36
10.37
Amended and Restated Change of Control Severance Agreement between Lawrence David Swift and SGRP dated as of August 10,
2022 (incorporated by reference to Exhibit 10.3 to SGRP's Current Report on Form 8-K, as filed with the SEC on August 14, 2022).
Trademark License Agreement dated as of July 8, 1999, by and between SPAR InfoTech, Inc., and SPAR Trademarks, Inc.
(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the
SEC on March 31, 2003).
Trademark License Agreement dated as of July 8, 1999, by and between SPAR Marketing Services, Inc., and SPAR Trademarks, Inc.
(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the
SEC on March 31, 2003).
Business Manager Agreement (re joint ownership of certain software) dated as of July 8, 1999, among SPAR Business Services, Inc.
(f/k/a SPAR Marketing Services, Inc.), SPAR InfoTech, Inc., and SPAR Marketing Force, Inc.(incorporated by reference to SGRP's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 1999, as filed with the SEC on May 1, 2000).
Joint Venture Agreement dated as of September 13, 2016, by and between JK Consultoria Empresarial Ltda.-ME, a limitada formed
under the laws of Brazil, Earth Investments, LLC, a Nevada limited liability company, and SGRP Brasil Participações Ltda., a
limitada formed under the laws of Brazil (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended
December 31, 2017, as filed with the SEC on April 2, 2018).
Joint Venture Contract dated July 4, 2014, among SPAR China Inc., established and existing under the laws of Hong Kong, Wedone
Shanghai, Co., Ltd., organized and existing under the laws of P.R. China, Shanghai Gold Pack Investment Management Co., Ltd.,
organized and existing under the laws of P.R. China, and XU Gang, an Australian citizen (incorporated by reference to SGRP's
Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on April 17, 2017).
34
10.38
10.39
10.40
10.41
10.42
Joint Venture Agreement dated as of September 3, 2012, by and between Combined Manufacturers National (Pty) Ltd and SGRP
Meridian (Pty) Ltd, respecting SGRP's additional consolidated subsidiary in South Africa (incorporated by reference to SGRP's
Annual Report on Form 10-K, as filed with the SEC on April 2, 2013).
Joint Venture Agreement dated as of August 30, 2012, by and between National Merchandising of America, Inc., a Georgia
corporation, SPAR NMS Holdings, Inc., a Nevada corporation and consolidated subsidiary of SGRP, and National Merchandising
Services, LLC, a Nevada limited liability company and consolidated subsidiary of SGRP (incorporated by reference to SGRP's
Quarterly Report on Form 10-Q, as filed with the SEC on November 9, 2012).
Joint Venture Agreement dated as of August 2, 2011, by and among Todopromo, S.A. de C.V., Sepeme, S.A. de C.V., Top
Promoservicios, S.A. de C.V., Conapad, S.C., Mr. Juan Francisco Medina Domenzain, Mr. Juan Francisco Medina Staines, Mr. Jorge
Carlos Medina Staines, Mr. Julio Cesar Hernandez Vanegas, and SPAR Group International, Inc., respecting SGRP's consolidated
subsidiary in Mexico (incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on April 2, 2013).
Joint Venture Agreement dated as of March 29, 2006, by and between FACE AND COSMETIC TRADING SERVICES PTY
LIMITED and SPAR International Ltd., respecting the Company's subsidiary in Australia (incorporated by reference to SGRP's
Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on April 2, 2007).
Joint Venture Shareholders Agreement between Friedshelf 401 (Proprietary) Limited, SPAR Group International, Inc., Derek O'Brien,
Brian Mason, SMD Meridian CC, Meridian Sales & Merchandising (Western Cape) CC, Retail Consumer Marketing CC, Merhold
Holding Trust in respect of SGRP Meridian (Proprietary) Limited, dated as of June 25, 2004, respecting SGRP's consolidated
subsidiary in South Africa (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31,
2004, as filed with the SEC on April 12, 2005).
10.43
$100,000.00 secured Promissory Note from SMF to Richard Justus dated as of January 1, 2018 (the "Resource Justus Note")
(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.44
Securities Pledge and Escrow Agreement securing the Resource Justus Note between SMF and Richard Justus dated as of January 1,
2018 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
35
10.45
Executive Officer Employment Terms and Severance Agreement between RPI and Richard Justus dated as of January 1, 2018
(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.46
Stock Purchase Agreement as of October 13, 2017, by and between SMF, as buyer, and Richard Justus, as seller (the "Resource Justus
SPA") (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.47
Guaranty of the Resource Paulk Note by SPAR Group, Inc. ("SGRP"), in favor of Joseph L. Paulk dated as of January 1, 2018
(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.48
$2,600,000.00 secured promissory note from SMF to Joseph L. Paulk dated as of January 1, 2018 (the "Resource Paulk Note")
(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.49
Securities Pledge and Escrow Agreement securing the Resource Paulk Note between SMF and Joseph L. Paulk dated as of January 1,
2018 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018).
10.50
10.51
10.52
Stock Purchase Agreement as of October 13, 2017, by and between the SPAR Marketing Force, Inc. ("SMF"), as buyer and Joseph L.
Paulk, as seller (the "Resource Paulk SPA") (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC
on January 16, 2018).
Collateral Assignment (Security Agreement) (Trademarks) effective: April 10, 2019, from SPAR Trademarks, Inc., to North Mill,
(incorporated by reference to SGRP's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, as filed with the
SEC on April 24, 2019).
Collateral Pledge Agreement dated as of April 10, 2019, by SGRP, the US NM Borrower and SPAR Acquisition, Inc., in favor of
North Mill, (incorporated by reference to SGRP's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, as
filed with the SEC on April 24, 2019).
10.53
Corporate Guaranty dated as of April 10, 2019, from the NM Guarantors to North Mill, (incorporated by reference to SGRP's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 2018, as filed with the SEC on April 24, 2019).
10.54
10.55
Loan and Security Agreement entered into as of April 10, 2019, by and among North Mill Capital LLC, a Delaware limited liability
company ("North Mill"), SPAR Marketing Force, Inc., a Nevada corporation (the "US NM Borrower"), SPAR Canada Company, an
unlimited company organized under the laws of Nova Scotia (the "Canadian NM Borrower"), and each of SPAR Group, Inc., a
Delaware corporation ("SGRP"), and SPAR Acquisition, Inc., SPAR Canada, Inc., SPAR Trademarks, Inc., and SPAR Assembly &
Installation, Inc., each a Nevada corporation (including SGRP, each as a "NM Guarantor"), (incorporated by reference to SGRP's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, as filed with the SEC on April 24, 2019).
Waiver and Modification Agreement entered in as of January 4, 2021, and effective as of December 31, 2020 (the "Modification
Agreement"), among North Mill Capital, LLC ("NM"), SPAR Group, Inc. ("SGRP") and certain of its direct and indirect subsidiaries
in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada Company ("SCC"), and SPAR
Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a
"NM Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a "NM Loan Party" and collectively,
the "NM Loan Parties" (incorporated by reference to Exhibit 99.1 to SGRP's Current Report on Form 8-K as filed with the SEC on
January 11, 2021).
36
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
Second Modification Agreement dated as of March 22, 2021, and effective as of April 1, 2021 (the "Second Modification
Agreement"), among North Mill Capital, LLC ("NM"), d/b/a SLR Business Credit, SPAR Group, Inc. ("SGRP") and certain of its
direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada
Company ("SCC"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks,
Inc. (together with SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a
"NM Loan Party" and collectively, the "NM Loan Parties") (incorporated by reference to Exhibit 99.1 to SGRP’s Current Report on
Form 8-K as filed with the SEC on March 29, 2021).
Third Modification Agreement dated as of December 16, 2021, and effective as of December 1, 2021 (the "Third Modification
Agreement"), among North Mill Capital, LLC ("NM"), d/b/a SLR Business Credit, SPAR Group, Inc. ("SGRP") and certain of its
direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada
Company ("SCC"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks,
Inc. (together with SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a
"NM Loan Party" and collectively, the "NM Loan Parties") (as filed herewith).
Fourth Modification Agreement dated as of July 1, 2022, and effective as of June 30, 2022 (the "Fourth Modification Agreement"),
among North Mill Capital, LLC ("NM"), d/b/a SLR Business Credit, SPAR Group, Inc. ("SGRP") and certain of its direct and indirect
subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada Company ("SCC"),
and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with
SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a "NM Loan Party" and
collectively, the "NM Loan Parties") (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 10-Q for the
quarter ended June 30, 2022, as filed with the SEC on August 15, 2022).
Fifth Modification Agreement entered into as of August 9, 2022 (the "Fifth Modification Agreement"), among North Mill Capital,
LLC ("NM"), d/b/a SLR Business Credit, SPAR Group, Inc. ("SGRP") and certain of its direct and indirect subsidiaries in the United
States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada Company ("SCC"), and SPAR Canada, Inc.,
SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "NM
Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a "NM Loan Party" and collectively, the
"NM Loan Parties") (as filed herewith).
Sixth Modification Agreement entered into as of February 1, 2023 (the "Sixth Modification Agreement"), among North Mill Capital,
LLC ("NM"), d/b/a SLR Business Credit, SPAR Group, Inc. ("SGRP") and certain of its direct and indirect subsidiaries in the United
States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada Company ("SCC"), and SPAR Canada, Inc.,
SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "NM
Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each a "NM Loan Party" and collectively, the
"NM Loan Parties") (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 8-K as filed with the SEC on
March 2, 2023).
US$28 million Fourth Amended and Restated Revolving Credit Master Promissory Note executed and delivered by SMF to NM and
dated as of February 1, 2023 (incorporated by reference to Exhibit 10.2 to SGRP’s Current Report on Form 8-K as filed with the SEC
on March 2, 2023).
CDN$2 million Fourth Amended and Restated Revolving Credit Master Promissory Note executed and delivered by SCC to NM and
dated as of February 1, 2023 (incorporated by reference to Exhibit 10.3 to SGRP’s Current Report on Form 8-K as filed with the SEC
on March 2, 2023).
Letter of Offer dated September 29, 2011, and General Business Factoring Agreement (undated) between Oxford Funding Pty Ltd and
SPARFACTS Pty Ltd (incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on April 2, 2013).
Limited Mutual Release Agreement, dated as of January 18, 2019, among Robert G. Brown, William H. Bartels, Christiaan Olivier,
Lorrence T. Kellar, Jack W. Partridge, Arthur B. Drogue and R. Eric McCarthey (incorporated by reference to Exhibit 10.1 to SGRP's
Current Report on Form 8-K, as filed with the SEC on January 25, 2019).
37
10.65
Stipulation of Dismissal, dated as of January 18, 2019 (incorporated by reference to Exhibit 10.2 to SGRP's Current Report on Form
8-K, as filed with the SEC on January 25, 2019).
10.66
Text of Letter to SPAR Group, Inc. ("SGRP"), from the Nasdaq Stock Market, Inc. ("Nasdaq"), dated July 16, 2021 (incorporated by
reference to Exhibit 99.1 to SGRP’s Current Report on Form 8-K, as filed with the SEC on July 30, 2021).
10.67
14.1
14.2
21.1
23.1
31.1
31.2
32.1
32.2
Text of Letter to SPAR Group, Inc. ("SGRP"), from the Nasdaq Stock Market, Inc. ("Nasdaq"), dated June 15, 2021, stating that
SGRP no longer complies with Nasdaq's majority independent director and audit committee requirements as set forth in Nasdaq
Listing Rule 5605 (incorporated by reference to Exhibit 17.1 to SGRP’s Current Report on Form 8-K, as filed with the SEC on June
22, 2021).
SPAR Group Code of Ethical Conduct for its Directors, Executives, Officers, Employees, Consultants and other Representatives
Amended and Restated (as of) March 15, 2018 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year
ended December 31, 2017, as filed with the SEC on April 2, 2018).
Statement of Policy Regarding Personal Securities Transactions in SGRP Stock and Non-Public Information, as adopted, restated,
effective and dated as of May 1, 2004, and as further amended through March 10, 2011 (incorporated by reference to SGRP's Annual
Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 15, 2011).
List of Subsidiaries (as filed herewith).
Consent of BDO USA, P.C. (as filed herewith).
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith).
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith).
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith).
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith).
101.INS*
Inline XBRL Instance
101.SCH*
Inline XBRL Taxonomy Extension Schema
101.CAL*
Inline XBRL Taxonomy Extension Calculation
101.DEF*
Inline XBRL Taxonomy Extension Definition
101.LAB*
Inline XBRL Taxonomy Extension Labels
101.PRE*
Inline XBRL Taxonomy Extension Presentation
104
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
* XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of
1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to
liability under these sections.
Item 16. Form 10-K Summary
None.
38
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SPAR Group, Inc.
By: /s/ Michael R. Matacunas
Michael R. Matacunas
President and Chief Executive Officer
Dated as of: April [ ], 2024
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Antonio Calisto
Pato and Michael R. Matacunas and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for each of them in any
and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities indicated.
SIGNATURE
TITLE
/s/ Michael R. Matacunas
Michael R. Matacunas
Dated as of: April 1st, 2024
/s/ James R. Gillis
James R. Gillis
Dated as of: April 1st, 2024
/s/ John Bode
John Bode
Dated as of: April 1st, 2024
/s/ Linda Houston
Linda Houston
Dated as of: April 1st, 2024
/s/ William H. Bartels
William H. Bartels
Dated as of: April 1st, 2024
/s/ Antonio Calisto Pato
Antonio Calisto Pato
Dated as of: April 1st, 2024
President, Chief Executive Officer and Director,
(Principal Executive Officer)
Director
Director
Director
Director
Chief Financial Officer,
Treasurer and Secretary (Principal Financial and Accounting Officer)
39
Report of Independent Registered Public Accounting Firm
Shareholders and Board of the Directors
SPAR Group, Inc. and Subsidiaries
Auburn Hills, Michigan
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of SPAR Group, Inc. and subsidiaries (the “Company”) as of December 31, 2023, and
2022, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for the years then ended, and
the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
40
Revenue Recognition
As indicated in Note 2 to the consolidated financial statements, the Company generates revenues by providing merchandising services to its customers,
generally on a daily, weekly, or monthly basis. The Company recognizes revenues as the services are performed based on the contractually-specified rate-
per-driver metric(s) (i.e., rate per hour, rate per store visit or rate per unit stocked). For the year ended December 31, 2023, the Company’s net revenues
were $262.7 million.
We identified revenue recognition from merchandising services as a critical audit matter due to the large volume of customer contracts and transactions.
The principal consideration for our determination is the increased extent of auditor effort involved in performing procedures and evaluating audit evidence
related to the Company’s revenue recognition.
The primary procedures we performed to address this critical audit matter included:
● Testing the accuracy and existence of revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents
such as customer contracts, invoices, cash receipts, and other documents for each applicable per-driver metric (i.e., hours worked, store
visits, or units stocked).
● Testing the cut off of revenue recognized for a sample of revenue transactions prior to and subsequent to December 31, 2023.
● Performing analytical procedures to evaluate trends in the Company’s recognized revenues.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2013.
Troy, Michigan USA
April 1, 2024
41
SPAR Group, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share data)
Net revenues
Related Party - Cost of revenues
Cost of revenues
Gross profit
Selling, general and administrative expense
Loss on sale of business
Depreciation and amortization
Impairment of goodwill
Operating income
Interest expense
Other expense (income), net
Income before income tax expense
Income tax expense
Net income
Net income attributable to non-controlling interest
Net Income (loss) attributable to SPAR Group, Inc.
Basic earnings (loss) per common share attributable to SPAR Group, Inc.
Diluted earnings (loss) per common share attributable to SPAR Group, Inc.
Weighted average common shares – basic
Weighted average common shares – diluted
Net income
Other comprehensive (loss):
Foreign currency translation adjustments
Comprehensive income
Comprehensive income attributable to non-controlling interest
Comprehensive income (loss) attributable to SPAR Group, Inc.
See accompanying notes to the Company's consolidated financial statements.
42
Year Ended December 31,
2022
2023
262,747 $
5,197
202,070
55,480
43,673
408
2,001
-
9,398
1,919
346
7,133
2,357
4,776
(874)
3,902 $
0.17 $
0.16 $
23,333
24,455
261,268
8,804
201,452
51,012
41,135
-
2,033
2,458
5,386
965
(482)
4,903
2,777
2,126
(2,858)
(732)
(0.03)
(0.03)
22,110
22,110
4,776 $
2,126
1,283
6,059
(317)
5,742 $
(391)
1,735
(2,380)
(645)
$
$
$
$
$
$
SPAR Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31, 2023 December 31, 2022
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Deferred income taxes
Other assets
Total assets
Liabilities and equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Due to affiliates
Customer incentives and deposits
Lines of credit and short-term loans
Current portion of operating lease liabilities
Total current liabilities
Operating lease liabilities, less current portion
Long-term debt
Total liabilities
Commitments and contingencies – See Note 6
Equity:
SPAR Group, Inc. equity
Preferred stock, Series - A, $.01 par value:
Authorized and available shares– 2,445,598 Issued and outstanding shares– None
Preferred stock, Series - B. $.01 par value:
Authorized and available shares– 2,000,000 Issued and outstanding shares– 650,000 at December 31, 2023 and
854,753 at December 31, 2022
Common stock, $.01 par value:
Authorized shares – 47,000,000 Issued and outstanding shares – 23,446,444 at December 31, 2023 and 23,055,633
at December 31, 2022
Treasury stock, at cost 205,485 shares at December 31, 2023 and 205,485 Shares at December 31, 2022
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total SPAR Group, Inc. equity
Non-controlling interest
Total equity
Total liabilities and equity
See accompanying notes to the Company's consolidated financial statements.
43
$
$
$
$
10,719 $
59,776
5,614
76,109
2,871
2,323
1,382
1,180
4,687
1,729
90,281 $
9,488 $
15,274
3,205
1,905
17,530
1,163
48,565
1,160
310
50,035
–
7
232
(285)
21,004
(3,341)
10,609
28,226
12,020
40,246
90,281 $
9,345
63,714
7,861
80,920
3,261
969
1,708
2,040
3,766
1,934
94,598
10,588
20,261
2,964
2,399
17,980
363
54,555
606
1,376
56,537
–
9
229
(285)
20,708
(4,941)
6,707
22,427
15,634
38,061
94,598
SPAR Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands)
Common Stock
Series B Preferred
Stock
Treasury Stock
Additional
Paid-In
Shares
Amount
Shares
Amount Shares
Amount
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Non-
Controlling
Interest
Total
Equity
Balance at January 1, 2022
21,320
$
213
-
$
Share-based compensation
Exercise of stock options
Majority shareholder agreement
Conversion of Series B convertible
preferred stock
Control change of NCI
Distribution to non-controlling
investors
Repurchases of common stock
Retirement of shares
Other comprehensive income (loss),
net of tax
Net (loss) income
Balance at December 31, 2022
Share-based compensation
Conversion of Series B convertible
preferred stock
Retirement of Shares
Payments to Acquire NCI
Sale of Joint Ventures
Distribution to non-controlling
investors
Other comprehensive income (loss),
net of tax
Net income
Balance at December 31, 2023
–
74
–
1,718
–
–
–
(151)
–
–
–
16
–
–
–
–
–
–
22,961
$
–
–
229
–
307
(27)
–
–
–
–
3
–
–
–
–
–
–
23,241
$
–
–
232
$
–
–
2,000
(1,145)
–
–
–
–
–
–
855
–
$
(205)
–
–
–
–
–
–
650
$
-
–
–
20
(11)
–
–
–
–
–
–
9
–
(2)
–
–
–
–
–
–
7
54
$
(104) $
17,231
$
(5,028) $
7,439
$
17,597
$ 37,348
–
–
–
–
–
–
151
–
–
–
205
–
–
–
–
–
–
–
–
–
–
–
–
(181)
–
346
(118)
3,249
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,558)
(1,785)
–
–
346
(118)
3,269
5
(2,558)
(1,785)
(181)
–
–
–
(285) $
–
–
20,708
$
$
87
–
(4,941) $
–
(732)
6,707
$
(478)
2,858
15,634
(391)
2,126
$ 38,061
–
–
–
–
–
–
297
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(460)
(694)
297
–
–
(460)
(694)
(3,017)
(3,017)
–
–
205
$
–
–
(285) $
–
–
21,004
$
1,600
–
(3,341)
–
3,902
10,609
$
(317)
874
12,020
1,283
4,776
$ 40,246
See accompanying notes to the Company's consolidated financial statements.
44
Consolidated Statements of Cash Flows
SPAR Group, Inc. and Subsidiaries
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Impairment of goodwill
Amortization of operating lease assets
Provision for expected credit losses
Deferred income tax expense
Share based compensation
Loss on disposal of business
Changes in operating assets and liabilities, net of business disposals:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Operating lease liabilities
Accrued expenses, other current liabilities and customer incentives and deposits
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Cash transferred in sale of business
Purchases of property and equipment and capitalized software
Other investing
Net cash used in investing activities
Cash flows from financing activities:
Borrowings under lines of credit
Repayments under lines of credit
Proceeds from stock options exercised
Repurchase of common stock
Distribution to non-controlling investors
Payments to acquire noncontrolling interests
Proceeds from term debt
Payments on term debt
Net cash used in financing activities
Effect of foreign exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flows information
Interest paid
Income taxes paid
Non-cash Majority Stockholders Agreement
See accompanying notes to the Company's consolidated financial statements.
45
Year Ended December 31,
2022
2023
$
4,776 $
2,001
-
875
88
921
297
408
3,232
2,082
(2,960)
(875)
(4,024)
6,821
(1,111)
(1,242)
84
(2,269)
103,742
(104,845)
–
-
(1,673)
(473)
930
(701)
(3,020)
(158)
1,374
9,345
10,719 $
2,331 $
1,585 $
- $
$
$
$
$
2,126
2,033
2,458
646
1,092
994
346
-
(11,237)
(3,285)
1,718
(744)
(1,191)
(5,044)
-
(1,797)
-
(1,797)
30,467
(25,648)
118
(181)
(1,785)
(2,558)
3,530
(454)
3,489
(776)
(4,128)
13,473
9,345
1,200
2,287
3,270
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Nature of the Business
SPAR Group, Inc. ("SGRP" or the "Corporation"), and its subsidiaries (and SGRP together with its subsidiaries may be referred to as "SPAR Group", the
"Company", "SPAR", "We", or "Our") is a global merchandising and brand marketing services company, providing a broad range of services to retailers,
consumer goods manufacturers and distributors around the world.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company consolidates its 100%-owned subsidiaries and all of the 51%-owned joint ventures in which the Company has a controlling financial interest.
All significant intercompany transactions have been eliminated in the consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States ("US GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the amounts disclosed for contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting year.
Significant balances subject to such estimates and assumptions include carrying amounts of property and equipment and intangible assets, valuation
allowances for receivables, carrying amounts for deferred tax assets and liabilities, and liabilities incurred from operations and customer incentives. Actual
results could differ from those estimates.
Segment Reporting
Reportable segments are components of the Company for which separate financial information is available that is evaluated on a regular basis by the Chief
Operating Decision Maker ("CODM”) in deciding how to allocate resources and in assessing performance. The Company's CODM is the Chief Executive
Officer.
The Company provides similar merchandising, marketing and business services throughout the world and has three reportable regional segments: (i)
Americas, which is comprised of United States, Canada, Brazil and Mexico; (ii) Asia-Pacific ("APAC”), which is comprised of Japan, China, and India;
and (iii) Europe, Middle East and Africa ("EMEA”), which is comprised of South Africa. Certain corporate expenses have been allocated to segments
based on each segment’s revenue as a percentage of total company revenue.
Variable Interest Entities
The Company consolidates all entities where a controlling financial interest exists. The Company has considered its relationships with its 51%-owned joint
ventures to determine whether the Company has a variable interest in these entities, and if so, whether the Company is the primary beneficiary of the
relationship. US GAAP requires variable interest entities ("VIEs”) to be consolidated if an entity’s interest in the VIE is a controlling financial interest.
Under the variable model, a controlling financial interest is determined based on which entity, if any, has (i) the power to direct the activities of the VIE that
most significantly impacts the VIE’s economic performance and (ii) the obligations to absorb losses that could potentially be significant to the VIE or the
right to receive benefits from the VIE that could potentially be significant to the VIE.
Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will
cause the consolidation conclusion to change. The consolidation status of a VIE may change as a result of such reassessments. Changes in consolidation
status are applied prospectively in accordance with US GAAP.
46
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Cash Equivalents
The Company considers all short-term, highly liquid investments with original maturities of three months or less at the date of purchase to be cash
equivalents. Cash equivalents are stated at cost, which approximates fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company
maintains cash balances with high quality financial institutions and periodically evaluates the creditworthiness of such institutions. At times, the Company’s
cash and cash equivalents balances with individual banking institutions are in excess of insured limits. The Company does not believe it is exposed to
significant credit risk and the Company has not experienced any losses related to its cash and cash equivalents balances. No customer accounted for more
than 10% of the Company’s net revenue for the years ended December 31, 2023 and December 31, 2022. No customer accounted for more than 10% of the
Company’s accounts receivable, net as of December 31, 2023 and December 31, 2022.
Revenue Recognition
The Company generates its revenues by providing merchandising services to its clients. Revenues are recognized when the Company satisfies a
performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that the Company
expects to receive in exchange for those services. Performance obligations in the Company’s contracts represent distinct or separate services that we
provide to the Company’s customers; generally, the Company’s contracts have a single performance obligation. If, at the outset of an arrangement, the
Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable
contract are met.
The Company’s merchandising services are provided over time, generally on a daily, weekly, or monthly basis, and transaction price is based on the
contractually-specified rate-per-driver metric (i.e., rate per hour, rate per store visit, or rate per unit stocked). The Company recognizes revenues for its
contracts based on the contractually-specified rate-per-driver metric(s) utilizing the right-to-invoice practical expedient because the Company has a right to
consideration for merchandising services completed to date. In general, (i) Standard Merchandising Service Contracts have a duration of 1 to 3 years with
indexed rate increases while individual brand projects can be added with less than 6 months duration. (ii) Retail Remodel Contracts typically auto-renew
with annual project SOWs, with regional awards typically granted 6 to 12 months in advance and individual projects assigned quarterly/monthly. (iii)
Fulfillment Contracts are typically an annual award and selected projects can be less than 6 months. (iv) Standard Assembly Service Agreements are 1 to 3
years in duration with indexed rates increases. Customer deposits, which are considered advances on future work, are deferred and recorded as revenue in
the period in which the services are provided.
Unbilled Accounts Receivable
Unbilled accounts receivable represents services performed but not billed and are included as accounts receivable.
Allowance for Credit Losses
The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition.
Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the
allowance for credit losses and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the
amount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to
earnings and a credit to allowance for credit losses based in part on management’s assessment of the current status of individual accounts. Based on
management’s assessment, the Company established an allowance for credit losses of $1.5 million and $1.6 million at December 31, 2023, and 2022,
respectively. Credit loss expense was $0.3 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively.
47
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Leases
The Company determines if a contract contains a lease at inception. The Company’s material operating leases consist of office space and equipment. The
Company recognizes a right-of-use ("ROU”) asset and lease liability for operating leases with a term of greater than one year. The ROU asset is measured
as the sum of (1) the present value of all remaining fixed and in-substance fixed payments using the rate implicit in the lease whenever that is readily
determinable or the Company’s incremental borrowing rate, (2) any lease payments made at or before the commencement date (less any lease incentives
received) and (3) any initial direct costs incurred. The lease liability is measured similarly to the ROU asset, but excludes any payments made before the
commencement date and initial direct costs incurred. Lease terms include options to extend or terminate the lease if it is reasonably certain the Company
will exercise these options. Expense for operating leases and leases with a term of one year or less is recognized on a straight-line basis over the term of the
lease, unless another systematic and rational basis is more representative of the derivation of benefit from use of the leased property. Variable lease
payments are recognized in the period in which the related obligation is incurred and consist primarily of payments for insurance and property taxes.
Operating lease expense and variable lease payments are recorded in selling, general and administrative expense in the consolidated statements of
operations and comprehensive income (loss).
Property and Equipment, Net
Property and equipment, including leasehold improvements, are stated at cost, net of accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets, which range from three to seven years for equipment, three to seven years for
furniture and fixtures, and three to five years for capitalized software costs. Leasehold improvements are depreciated over the shorter of their estimated
useful lives or the related lease terms, which range from three to fifteen years. Maintenance and minor repairs are expensed as incurred.
Internal Use Software
The Company capitalizes certain costs associated with its internally developed software. The Company capitalizes the costs of materials and services
incurred in developing or obtaining internal use software and such costs include, but are not limited to: the cost to purchase software, the cost to write
program code, and payroll and related benefits for those employees who are directly involved with and who devote time to the Company’s software
development projects. Capitalization of such costs begins during the application development stage once the preliminary project stage is complete,
management authorizes and commits to funding the project, and it is probable that the project will be completed and that the software will be used to
perform the function intended. Capitalization ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during
preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are
incurred.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company’s property and
equipment and may not be recoverable. When indicators of potential impairment exist, the Company assesses the recoverability of the assets by estimating
whether the Company will recover its carrying value through the undiscounted future cash flows generated by the use of the asset and its eventual
disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the asset, the Company records an
impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. If any assumptions, projections or estimates regarding any
asset change in the future, the Company may have to record an impairment to reduce the net book value of such individual asset.
Intangible Assets, Net
Intangible assets consist primarily of customer contracts and lists, trade names, patents and non-compete agreements, all of which have a finite useful
life. Intangible assets are amortized based on the pattern in which the economic benefits of the intangible assets are estimated to be realized. When facts
and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, the Company assesses the recoverability of the
carrying value by preparing estimates of sales volume and the resulting profit and cash flows expected to result from the use of the asset or asset group and
its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, the
Company recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds
the fair value.
48
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Goodwill
Goodwill may result from business acquisitions. Goodwill is assigned to reporting units based on the expected benefit from the synergies arising from each
business combination, determined by using certain financial metrics, including the forecast discounted cash flows associated with each reporting unit. The
goodwill acquired in a business combination is allocated to the appropriate reporting unit as of the acquisition date. Goodwill is subject to annual
impairment tests and interim impairment tests if impairment indicators are present. The Company performs the annual impairment test as of October
31st each year. The impairment tests require the Company to first assess qualitative factors to determine whether it is necessary to perform a quantitative
goodwill impairment test. The Company is not required to calculate the fair value of a reporting unit unless it determines, based on a qualitative
assessment, that it is more likely than not that its fair value is less than its carrying amount. If it is determined that it is more likely than not, or if the
Company elects not to perform a qualitative assessment, the Company proceeds with the quantitative assessment. Under the quantitative test, if the fair
value of a reporting unit exceeds its carrying amount, then goodwill of the reporting unit is considered to not be impaired. If the carrying amount of the
reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess, up to the value of the goodwill.
Treasury Stock
The Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. The Company’s
accounting policy upon the formal retirement of treasury stock is to deduct the par value from the Company’s common stock and to reflect any excess of
cost over par value as a reduction to additional paid-in capital (to the extent created by previous issuances of the shares).
Noncontrolling Interest
The Company recognizes noncontrolling interest related to VIEs, in which the Company is the primary beneficiary, as equity in the consolidated financial
statements separate from the parent entity’s equity. The amount of net income or loss attributable to noncontrolling interests is included in consolidated net
income on the face of the consolidated statements of operations and comprehensive loss. Changes in the parent entity’s ownership interest in a subsidiary
that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. In addition, when a
subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary will be initially measured at fair value and the
difference between the carrying value and fair value of the retained interest will be recorded as a gain or loss. Because these transactions take place
between entities under common control, any gains or losses attributable to these transactions are required to be included within additional paid-in-capital on
the consolidated balance sheets.
Advertising and Promotional Expenses
Advertising and promotional expenses are included in selling, general and administrative expenses within the consolidated statements of operations and
comprehensive loss and are expensed when incurred. Advertising and promotional expenses were $9,466 and $19,549 during the years ended December
31, 2023 and 2022, respectively.
Share-Based Compensation
The Company measures all share-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes
compensation expense for those awards, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line
basis for the entire award. The fair value of stock options is estimated on the date of grant using the Black-Scholes option-pricing model, which requires
inputs based on certain subjective assumptions, including the fair market value of the Company’s common stock, expected stock price volatility, the
expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend
yield.
49
2. Summary of Significant Accounting Policies (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive (loss) income in the same
manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. The Company made a
policy election to estimate the number of share-based compensation awards that are expected to vest to determine the amount of compensation expense
recognized in earnings. Forfeiture estimates are revised if subsequent information indicates that the actual number of forfeitures is likely to differ from
previous estimates.
Excess tax benefits are realized from the exercise of stock options and are reported as a financing cash inflow in the consolidated statement of cash flows.
Fair Value Measurements
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The US GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and
disclosed in one of the following three categories:
● Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
● Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not
active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
● Level 3 – Prices or valuation techniques where little or no market data is available that requires inputs significant to the fair value measurement
and unobservable.
If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is
significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted
market prices, the Company uses independent sources and data to determine fair value.
Due to their short-term nature, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses
approximated the fair values (Level 1) as of December 31, 2023 and 2022. The carrying value of the Company’s long-term debt with variable interest rates
approximates fair value based on instruments with similar terms (Level 2).
Income Taxes
Income tax provisions and benefits are made for taxes currently payable or refundable, and for deferred income taxes arising from future tax consequences
of events that were recognized in the Company’s financial statements or tax returns and tax credit carry forwards. The effects of income taxes are measured
based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. If necessary, a valuation allowance is established
to reduce deferred income tax assets to an amount that will more likely than not be realized.
The calculation of income taxes involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for
uncertain tax positions based on a two-step process. The first step involves evaluating the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step involves estimating and measuring the tax benefit as the largest amount that is more than 50% likely to be realized upon
ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible
outcomes. The Company’s evaluation of uncertain tax positions is based on factors including, but not limited to, changes in facts or circumstances, changes
in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a
tax benefit or an additional charge to the tax provision.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments ("ASU No. 2016-13”), which replaced the incurred loss impairment model with an expected credit loss model. The Company adopted ASU
No. 2016-13 on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or
disclosures for the year ended December 31, 2023.
50
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2023, the FASB issued ASU No. 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805):Recognition and Initial
Measurement, which will require joint ventures to recognize and initially measure its assets and liabilities at fair value upon formation. The guidance will
be effective for the Company prospectively for all joint venture formations on or after January 1, 2025. Early adoption and retrospective application is
permitted. The Company does not believe adoption will have a material effect on its consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280):Improvements to Reportable Segment Disclosures, which will
require Companies to report additional segment information, including certain significant segment expenses, and permit the disclosure of additional
measures of a segment’s profit or loss. The guidance will be effective for the Company’s fiscal year beginning January 1, 2024 and for interim periods
thereafter. The Company is currently evaluating the impact adoption will have on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740):Improvements to Income Tax Disclosures, which will require
Companies to report specific categories of rate-reconciliation, certain details of income taxes paid and of certain information by tax jurisdictions. The
guidance will be effective for the Company’s fiscal year beginning January 1, 2025. The Company is currently evaluating the impact adoption will have
on its consolidated financial statements and related disclosures.
3. Supplemental Balance Sheet Information
Accounts receivable, net, consists of the following:
(in thousands)
Trade
Unbilled
Non-trade
Gross Accounts Receivable
Less allowance for credit losses
Accounts Receivable, net
Activity in allowance for credit losses
(in thousands)
Beginning balance in allowance for credit losses
Current provision for expected credit losses
Allowances associated with businesses sold
Write-offs charged against the allowance
Recoveries of amounts previously written off
Ending balance in allowance for credit losses
Property and equipment consist of the following:
(in thousands)
Equipment
Furniture and fixtures
Leasehold improvements
Capitalized software development costs
Less accumulated depreciation and amortization
Property and equipment, net
December 31,
2023
2022
53,658
10,436
1,274
65,368
(1,654)
63,714
51,567 $
6,537
3,133
61,237
(1,461)
59,776 $
564
1,269
-
(179)
-
1,654
December 31,
2023
2022
5,062 $
2,330
366
18,336
26,094
(23,223)
2,871 $
5,109
2,319
352
17,298
25,078
(21,817)
3,261
$
$
December 31,
2023
2022
1,654 $
261
(281)
(126)
(47)
1,461 $
$
$
$
$
51
3. Supplemental Balance Sheet Information (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Depreciation expense (including amortization of internal use software and intangible assets as described below) was $2.0 million and $2.0 million for the
years ended December 31, 2023 and 2022, respectively. The Company capitalized $1.0 million and $1.5 million of costs related to internal use software in
the years ended December 31, 2023 and 2022, respectively. The Company recognized approximately $1.1 million and $1.2 million of amortization expense
related to internal use software for the years ended December 31, 2023 and 2022, respectively.
Goodwill
(in thousands)
Balance at January 1, 2022
Aggregate goodwill acquired
Accumulated impairment losses
Balance at December 31, 2022
Change in goodwill due to impact of foreign currency
Sale of business
Balance at December 31, 2023
Americas
Asia-Pacific
EMEA
Total
$
$
$
$
$
3,728 $
(2,458) $
1,270 $
7 $
(333)
944 $
- $
- $
- $
-
–
- $
438 $
- $
438 $
$
–
438 $
4,166
(2,458)
1,708
7
(333)
1,382
Goodwill is generally deductible for tax purposes, except for the portion related to purchase accounting step-up goodwill. For the years ended December
31, 2023 and 2022, impairment losses of goodwill were $0 million and $2.5 million, respectively.
Goodwill Impairment of Resource Plus of North Florida, Inc.
The Company acquired Resource Plus of North Florida, Inc. ("Resource Plus”) in 2018 as a joint venture partnership and owns 51% of the Resource Plus
business. At the time of the acquisition, the Company recorded $2.0 million of goodwill. Due to the loss of a significant customer, during the year ended
December 31, 2022, Resource Plus did not meet original forecast and reduced forecasts. The Company tested recorded goodwill for impairment using a
combination of discounted cash flow and guideline public company methodologies.
Key assumptions include management's estimates of forecasted revenue and forecasted cash flows. Fair value determinations require considerable
judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units
requires the Company to make assumptions and estimates regarding its future plans, as well as industry, economic, and regulatory conditions. These
assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, and other market factors.
The Company’s expectations also include certain assumptions that could be negatively impacted if the Company is unable to meet its cost expectations in
relation to inflation. If current expectations of future growth rates and margins are not met, if market factors outside of the Company’s control, such as
discount rates, income tax rates, foreign currency exchange rates, inflation, or any other factors, change, or if management’s expectations or plans
otherwise change, including updates to the Company’s long-term operating plans, then one or more of our reporting units might become impaired in the
future.
The impairment test indicated the goodwill of Resource Plus was fully impaired and the Company recorded an impairment loss of $2.0 million during the
year ended December 31, 2022.
Goodwill Impairment ofSPAR TODOPROMO, SAPI, de CV
The Company acquired SPAR TODOPROMO, SAPI, de CV ("SPAR Mexico”) in 2011 as a joint venture partnership and currently owns 51% of the SPAR
Mexico business. At time of acquisition, the Company recorded $0.5 million of goodwill. During year ended December 31, 2022, SPAR Mexico
did not meet original forecasts due to labor law changes in Mexico. The Company tested recorded goodwill for impairment using a combination of
discounted cash flow and guideline public company methodologies. The impairment test indicated that the goodwill of SPAR Mexico was fully impaired
and the Company recorded an impairment loss of $0.5 million during the year ended December 31, 2022.
52
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Supplemental Balance Sheet Information (continued)
Intangible Assets
Intangible assets consist of the following:
(in thousands)
Customer contracts and lists
Trade names
Patents
Non-compete
Less accumulated amortization
Intangible assets, net
December 31,
2023
2022
$
$
3,011 $
900
870
-
4,781
(3,601)
1,180 $
3,543
900
870
520
5,833
(3,793)
2,040
The decline in gross intangible assets of $1.1 million is due to the sale of NMS and Australia. Please see note 10. Related Party Transactions for more
information.
The Company is amortizing its intangible assets over lives ranging from 5 to 25 years. Amortization expense for the years ended December 31, 2023 and
2022 was approximately $0.4 and $0.4, respectively.
The annual amortization for each of the following years succeeding December 31, 2023 is summarized as follows (in thousands):
(in thousands)
Year
2024
2025
2026
2027
2028
Thereafter
Total
Accrued expenses and other current liabilities:
(in thousands)
Taxes payable
Accrued salaries and wages
Accrued accounting and legal expenses
Accrued third party labor
Other
Accrued expenses and other current liabilities
Amount
172
188
188
91
36
504
1,180
December 31,
2023
2022
1,598 $
9,206
1,018
1,477
1,975
15,274 $
2,660
9,327
2,186
2,411
3,677
20,261
$
$
$
$
53
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Debt
North Mill Capital Credit Facility
The Company, through SPAR Marketing Force, Inc. ("SMF") and SPAR Canada Company ULC ("SCC", and collectively with SMF, the “NM
Borrowers”), has a secured revolving credit facility in the United States (the "US Revolving Credit Facility") and Canada (the "Canada Revolving Credit
Facility", and collectively with the US Revolving Credit Facility, the "NM Credit Facility") with North Mill Capital, LLC, d/b/a SLR Business Credit
("NM").In order to obtain, document and govern the NM Credit Facility, SMF, SCC, SGRP and certain of SGRP's direct and indirect subsidiaries in the
United States and Canada (including SMF and SCC as borrowers and SGRP as a guarantor, collectively, the "NM Loan Parties") entered into a Loan and
Security Agreement with NM dated as of April 10, 2019, which, as amended from time to time (as amended, the "NM Loan Agreement"), governs the NM
Credit Facility. Pursuant to the NM Loan Agreement, the NM Borrowers agreed to reimburse NM for legal and documentation fees incurred in connection
with the NM Loan Agreement and such amendments.
On July 1, 2022, the NM Loan Parties and NM executed and delivered a Fourth Modification Agreement, effective as of June 30, 2022 (the "Fourth
Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from October 10, 2023, to October 10,
2024, and increased the amount of the US Revolving Credit Facility to $17.5 million while the Canada Revolving Credit Facility remained at CDN$1.5
million. In addition, the Fourth Modification Agreement permanently increased SMF's borrowing base availability for billed receivables to up to 90% from
85%, and unbilled receivables to up to 80% from 70%, and increased the cap on unbilled accounts for SMF to $6.5 million from $5.5 million.
On August 9, 2022, the NM Loan Parties and NM executed and delivered a Fifth Modification Agreement, effective immediately (the "Fifth Modification
Agreement"), pursuant to which the NM Loan Parties and NM agreed to temporarily increase the borrowing base availability under the NM Credit Facility,
and the NM Borrowers agreed to pay certain additional fees.
On February 1, 2023, the NM Loan Parties and NM executed and delivered a Sixth Modification Agreement, effective immediately (the "Sixth
Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to increase the amount of the US Revolving Credit Facility to $28.0
million and increase the Canada Revolving Credit Facility to CDN$2.0 million. In addition, the Sixth Modification Agreement increased the cap on
unbilled accounts in the borrowing base for SMF to $7.0 million from $6.5 million.
On March 27, 2024, the NM Loan Parties and NM executed and delivered a Seventh Modification Agreement, effective immediately (the "Seventh
Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from October 10, 2024 to October 10,
2025.
The Restated US Note and Restated Canadian Note (together, the "NM Notes") and the NM Loan Agreement together require the NM Borrowers to pay
interest on the loans thereunder equal to: (i) the Prime Rate designated from time to time by Wells Fargo Bank; plus (ii) one and nine-tenths percentage
points (1.90%) or an aggregate minimum of 6.75% per annum. In addition, the NM Borrowers are paying a facility fee to NM in an amount equal to: (i) for
the year commencing on October 10, 2022, approximately $0.1 million plus 0.80% of the amount of any advances other than under the US Revolving
Credit Facility plus an additional facility fee of $15,000 for every incremental $1.0 million of loan balance in excess of $21.0 million, and (ii) for the year
commencing on October 10, 2023, approximately $0.2 million plus 0.80% of the amount of any advances other than under the US Revolving Credit
Facility plus an additional facility fee of $15,000 for every incremental $1.0 million of loan balance in excess of $21.0 million. For the Sixth Modification
Agreement, the NM Borrowers paid NM a fee of approximately $28,000 for the US and $3,000 for Canada.
As of December 31, 2023, the aggregate interest rate was 10.40% per annum and the aggregate outstanding loan balance was approximately $12.5 million,
which is included within lines of credit and short-term loans in the condensed consolidated balance sheets. The aggregate outstanding loan balance is
divided between the US Revolving Credit Facility and the Canada Revolving Credit Facility as follows: (i) the outstanding loan balance under the US
Revolving Credit Facility was approximately $11.9 million; and (ii) the outstanding loan balance under the Canada Revolving Credit Facility was
approximately $0.6 million.
54
4. Debt (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including
maintaining a positive trailing EBITDA for each the NM Borrowers (i.e., SMF and SCC) and imposes limits on all of the NM Loan Parties (including
SGRP) on non-ordinary course payments and transactions, incurring or guaranteeing indebtedness, increases in executive, officer or director compensation,
capital expenditures and certain other investments. The NM Loan Parties were in compliance with such covenants as of December 31, 2023. The
obligations of the NM Borrowers are secured by the receivables and other assets of the NM Borrowers and substantially all of the assets of the other NM
Loan Parties, however, the obligations are not secured by any equity in, financial asset respecting or asset of any Excluded Subsidiary (as such term is
defined in the NM Loan Agreement). Pursuant to the NM Loan Agreement, Excluded Subsidiary means each of the following direct or indirect subsidiaries
of SGRP: (i) Resource Plus of North Florida, Inc. (“Resource Plus”), Mobex of North Florida, Inc., and Leasex, LLC, and their respective subsidiaries; (ii)
NMS Retail Services ULC, which is an inactive Nova Scotia ULC; (iii) SPAR Group International, Inc.; (iv) SPAR FM Japan, Inc.; (v) SPAR International,
Ltd.; (vi) each other subsidiary formed outside of the United States or Canada; and (vii) any other entity in which any such subsidiary is a partner, joint
venture or other equity investor.
Resource Plus – Seller Notes
Effective with the closing of the Company's acquisition of Resource Plus in 2018, the Company issued into promissory notes with the sellers of
$2.7 million. As of December 31, 2023, the annual interest rate was 1.85% and the balance outstanding under the promissory notes was approximately
$1.1 million, payable in January 2024, which is included in lines of credit and short-term loans in the consolidated balance sheets.
International Credit Facilities
In December 2020, SPAR China secured a loan with Industrial Bank for 2.0 million Chinese Yuan. The loan was renewed in December 22 2023, with an
expiration date in December 2024.
In December 2021, SPAR China secured a loan with Industrial and Commercial Bank of China for 2.0 million Chinese Yuan. The loan was paid in July
2023 and a new loan was secured in November 2023 for 2.0 million Chinese Yuan with expiration date of November 2024.
In March 2022, SGRP Meridian (Pty), Ltd. secured loans with Investec Bank Ltd, for 105 million South African Rand which expires July 2025. This loan
is secured by the company's available cash and Accounts Receivable and is being repaid in monthly installments commensurate with an amortization
schedule. The interest rate of 11.75% is calculated based on the South African Prime rate. As part of the agreement, SGRP Meridian is subject to covenant
restrictions that mandate minimum levels of Debt to EBITDA, Asset and Accounts Receivable balances, and coverage ratios.
SGRP Meridian is in compliance with these covenants as of December 31, 2023
Summary of the Company’s lines of credit and short-term loans (in thousands):
USA - North Mill Capital
USA - Resource Plus Sellers
Australia - National Australia Bank
South Africa - Investec Bank Ltd.
China- Industrial Bank
China- Industrial and Commercial Bank of China
Total
Interest Rate
as of
December 31,
2023
Balance as of
December 31,
2023
Interest Rate
as of
December 31,
2022
Balance as of
December 31,
2022
10.40% $
1.85%
N/A
11.75%
3.56%
4.00%
$
12,475
1,120
-
3,369
283
283
17,530
5.25% $
1.85%
10.60%
10.50%
4.00%
4.15%
$
14,399
1,000
156
1,700
435
290
17,980
55
4. Debt (continued)
Summary of Unused Company Credit and Other Debt Facilities (in thousands):
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Unused Availability:
United States
Mexico
Australia
South Africa
Total Unused Availability
Summary of the Company’s Long- term debt (dollars in thousands):
December 31, 2023 December 31, 2022
$
$
6,525 $
–
–
2,064
8,589 $
4,601
1
390
454
5,446
Interest Rate
as of
December 31,
2023
Balance
Outstanding
December 31,
2023
Interest Rate
as of
December 21,
2022
Balance
Outstanding
December 31,
2022
11.75% $
$
310
310
10.50% $
$
1,376
1,376
South Africa - Investec Bank Ltd.
Total
5. Income Taxes
Beginning in 2018, the Tax Cuts and Jobs Act (the "Act”) included two (2) new U.S. corporate tax provisions, the global intangible low-taxed income
regime ("GILTI”) and the base-erosion and anti-abuse tax ("BEAT”). The GILTI provision requires the Company to include in its U.S. income tax return
non-U.S. subsidiary earnings in excess of an allowable return on the non-U.S. subsidiary’s tangible assets. The Company has elected to treat GILTI as a
period cost. The Company evaluated the GILTI provision resulting in a financial statement impact of approximately $0 and $0.3 million for the year ended
December 31, 2023 and December 31, 2022 respectively. The Company is below the three-year average gross receipts threshold for BEAT to apply.
Income (loss) before income taxes is summarized as follows (in thousands):
Domestic
Foreign
Total:
The income tax expense (benefit) is summarized as follows (in thousands):
Current:
Federal
Foreign
State
Deferred:
Federal
Foreign
State
Net expense
Year Ended December 31,
2022
2023
(2,134) $
9,267
7,133 $
(4,079)
8,982
4,903
Year Ended December 31,
2022
2023
(54) $
2,311
150
(145)
91
4
2,357 $
24
2,705
66
(128)
317
(207)
2,777
$
$
$
$
56
5. Income Taxes (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income
taxes. The items causing this difference are as follows (dollars in thousands):
Provision for income taxes at federal statutory rate
State income taxes, net of federal benefit
Permanent differences
Goodwill adjustment
Section 162(m) adjustment
Return to provision adjustment
Foreign tax rate differential
GILTI tax
Sale of membership interest
Change in valuation allowance
Other
Net expense
2023
Year Ended December 31,
Rate
2022
Rate
$
$
1,498
123
282
-
55
(339)
877
-
149
(268)
(20)
2,357
21.0% $
1.7%
4.0%
-
0.8%
(4.8)%
12.3%
-
2.1%
(3.8)%
(0.3)%
33.0% $
1,030
(125)
(19)
517
-
(223)
1,016
323
-
308
(50)
2,777
21.0%
(2.5)%
(0.4)%
10.5%
-
(4.5)%
20.7%
6.6%
-
6.3%
(1.1)%
56.6%
In 2023, our effective income tax rate of 33.0% varied from the U.S. federal statutory rate of 21% primarily as a result of foreign rate differential, sale of
membership interest disposition of National Merchandising Services, LLC, and permanent differences.
Deferred taxes consist of the following (in thousands):
December 31,
2023
2022
Deferred tax assets:
Net operating loss carry forwards
Capital loss carry forwards
Federal Research and Development Credit
Foreign withholding tax
Deferred revenue
Accrued payroll
Outside basis in domestic partnership
Allowance for credit losses and other receivable
Share-based compensation expense
Business interest limitation
Operating lease liability
Capitalized software development costs
Other
Total deferred tax assets, gross
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Goodwill & Intangible assets of subsidiaries
Capitalized software development costs
Right to Use Asset
Depreciation
Total deferred tax liabilities
Net deferred income taxes
$
$
57
2,270 $
58
240
316
–
155
–
63
253
519
504
63
1,371
5,812
(242)
5,570
324
-
504
55
883
4,687 $
2,627
-
240
-
86
270
16
327
326
340
134
-
739
5,105
(611)
4,494
376
135
134
83
728
3,766
5. Income Taxes (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
As of December 31, 2023, the Company’s deferred tax assets were primarily the result of U.S. Net Operating Loss ("NOL”) and Brazil NOL. The
Company has gross U.S. Federal NOL carryforwards of $5.0 million and tax effected amount of $1.1 million. Of the $1.1 million U.S. Federal NOL
carryforward, approximately $0.6 million has no expiration date, and the remaining balance, if unused, will expire in years 2027 through 2031. The
Company has a U.S. State NOL deferred tax asset of $0.1 million of varying expiration dates from 2024 to 2041. The Company has gross $0.3 million of
US Capital Loss carryforwards with expiration date of 2028. The tax effected amount of US Capital Loss carryforward is $0.1 million. The Company has
$0.2 million US Research and Development credits with expiration dates ranging 2031 to 2035. The Company has additional gross NOL carryforwards of
$1.7 million in Brazil, all of which has no expiration date. The tax effected amount of the Brazil NOL carryforwards is $0.6 million. The Company has
additional gross NOL carryforwards of $1.0 million in China, and $1.1 million in Mexico with expiration dates beginning in 2028, and 2033,
respectively. The tax effected amounts of China, and Mexico NOL carryforwards are $0.2 million, and $0.3 million respectively.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing net
deferred tax assets. U.S.-based net deferred tax assets are approximately $2.3 million. Management continues to monitor its operating performance and
currently believes that the achievement of the required future taxable income necessary to realize these deferred assets is more likely than not. Key
considerations in this assessment include our expectation of continued improvements in U.S. operating results and the period of time available to generate
future taxable income. For Brazil, and Mexico losses it is expected to be more likely than not that there will be sufficient taxable income to utilize the
losses in future years. For China management does not expect its more likely than not deferred tax assets can be realized and therefore a full valuation
allowance is recorded with respect to these jurisdictions.
A reconciliation of the beginning and ending amount of uncertain tax position reserves is as follows (in thousands):
Beginning balance
Additions based on tax positions related to the current year
Removal for tax provisions of prior years
Ending balance
Year Ended December 31,
2022
2023
$
$
46 $
8
-
54 $
42
4
–
46
The provision for income taxes includes the impact of uncertain tax position reserves and changes to reserves that are considered appropriate. As of
December 31, 2023, included in the balance of uncertain tax position reserves are $0.05 million of reserves that, if recognized, would affect the effective
rate of income from continuing operations. Interest and penalties that the tax law requires to be paid on the underpayment of taxes should be accrued on the
difference between the amount claimed or expected to be claimed on the return and the tax benefit recognized in the financial statements. The Company's
policy is to record this interest and penalties as additional tax expense. We accrued penalties of $1 thousand and interest of $.4 thousand during 2023 and in
total, as of December 31, 2023 recognized a liability related to the uncertain tax position reserves noted above for penalties of $15 thousand and interest of
$17 thousand. During 2022, we accrued penalties of $.8 thousand and interest of $.3 thousand and in total, as of December 31, 2022, recognized a liability
of penalties of $14 thousand and interest of $16 thousand. Management does not expect in the next 12 months that the uncertain tax position reserves will
significantly increase or decrease. Consistent with that expectation, interest and penalties related to the uncertain tax position reserve should not
significantly increase.
Details of the Company's tax reserves at December 31, 2023 are outlined in the table below (in thousands):
Domestic
State
Federal
International
Total reserve
Taxes
Interest
Penalty
54 $
–
–
54 $
17 $
–
–
17 $
$
$
58
Total Tax
Liability
15 $
–
–
15 $
86
–
–
86
5. Income Taxes (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
In management's view, the Company's tax reserves at December 31, 2023 and 2022, for potential domestic state tax liabilities were sufficient. The
Company has evaluated the tax liabilities of its international subsidiaries and does not believe a reserve is necessary at this time.
SPAR and its subsidiaries file numerous consolidated, combined and separate company income tax returns in the U.S. Federal jurisdiction and in many U.S.
states and foreign jurisdictions. With few exceptions, SPAR is subject to U.S. Federal, state and local income tax examinations for the years 2020 through
the present. Foreign entities are subject to tax audits that vary based on jurisdiction. However, tax authorities have the ability to review years prior to the
position taken by the Company to the extent that SPAR utilized tax attributes carried forward from those prior years.
6. Commitments and Contingencies
Legal Matters
The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of Company's
management, resolution of these matters is not anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets,
business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations,
prospects, sales, strategies, taxation or other achievement, results or condition.
In the year ended December 31, 2022, prior open and potential claims between significant stockholders and the Company were released mutually upon
execution of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement"), as of January 28, 2022. See Note 10, Related Party
Transactions.
All prior litigations associated with the Company through SPAR Business Services, Inc., a corporation ("SBS") and its independent contractors have been
resolved, including the claims of SBS and the Company in the SBS bankruptcy and settlement, and all additional related claims raised later by SBS and
Robert G Brown were released by them in the CIC Agreement.
In the year ended December 31, 2022, final payment of the prior SBS Clothier litigation settlement was paid in full.
7. Common Stock
As of December 31, 2023, the Corporation's certificate of incorporation authorized the Corporation to issue 47,000,000 shares of common stock, par value
$0.01 per share. The voting, dividend and liquidation rights of the holders of the Corporation's common stock are subject to and qualified by the rights,
powers and preferences of the holders of the Corporation's Series B convertible preferred stock. Each share of the Corporation's common stock are entitled
to one vote on all matters submitted to a vote of the Corporation's stockholders. Holders of the Corporation's common stock are entitled to receive
dividends as may be declared by the Corporation's board of directors (the "Board"), if any, subject to the preferential dividend rights of the Corporation's
Series B convertible preferred stock. No cash dividends had been declared or paid during the periods presented.
In May 2022, the Board authorized the Corporation to repurchase up to 500,000 shares of the Corporation's common stock pursuant to the 2022 Stock
Repurchase Program (the "2022 Stock Repurchase Program"), which ended May 2023. During the year ended December 31, 2022, there were 151,156
shares of common stock repurchased for $187,427 under the 2022 Stock Repurchase Program. There were no share repurchases that were significantly in
excess of the current market price at time of repurchase.
59
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Preferred Stock
The Corporation’s certificate of incorporation authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share, which may have
such preferences and priorities over the Corporation’s common stock and other rights, powers and privileges as the Board of may establish in its discretion.
In January 2022, the Corporation filed a Certificate of Elimination for its "Certificate of Designation of Series "A” Preferred Stock of SPAR Group, Inc.”
(the "Certificate of Elimination”). Pursuant to the Certificate of Elimination, the previous Series A convertible preferred stock designation was cancelled
and withdrawn. As a result, all 3,000,000 shares of the previously authorized Series A convertible preferred stock were returned to the Corporation's
authorized "blank check” preferred stock. There were no shares of Series A convertible preferred stock outstanding at the time of the cancellation.
Subsequent to filing the Certificate of Elimination, in January 2022, the Corporation filed a "Certificate of Designation of Series "B” Preferred Stock of
SPAR Group, Inc.” (the "Preferred Designation”) with the Secretary of State of Delaware, which designation had been approved by the Board in January
2022. The Preferred Designation created a series of 2,000,000 shares of convertible preferred stock designated as "Series B” convertible preferred stock,
par value of $0.01 per share.
The Series B convertible preferred stock do not carry any voting or dividend rights and upon vesting converted into the Corporation's common stock at a
ratio of 1-to-1.5. See Note 10. The holders of the Series B convertible preferred stock had a liquidation preference over the Corporation's common stock
and voted together for matters pertaining only to the Series B convertible preferred stock where only the holders of the Series B convertible preferred stock
are entitled to vote. The holders of outstanding Series B Preferred Stock do not have the right to vote for directors or other matters submitted to the holders
of the Corporation's common stock.
In January 2022, 2,000,000 shares of Series B convertible preferred stock were issued to the majority stockholders and related parties pursuant to the
Change of Control, Voting and Restricted Stock Agreement. See Note 10.
During the year ended December 31, 2022, 1,145,247 shares of Series B convertible preferred stock converted to 1,717,870 shares of the
Corporation's common stock. As of the year ended December 31, 2022, 854,753 shares of Series B convertible preferred stock were outstanding, which
upon vesting would automatically convert into 1,282,129 shares of the Corporation's common stock.
During the year ended December 31, 2023, all of the remaining 854,753 shares of Series B convertible preferred stock vested and automatically became
convertible into 1,282,129 shares of the Corporation's common stock of which 307,129 shares of the Corporation's Common Stock were issued prior to
December 31, 2023. However, at December 31, 2023, 975,000 shares of SGRP Common Stock were in the process of being issued and the remaining
shares of Series B Preferred Stock were in the process of being returned and cancelled.
Once the shares of Series B Preferred Stock are fully retired, SGRP may change or cancel the authorized Series B Preferred Stock, and to the extent it
reduces such authorization without issuance, it can create other series of Preferred Stock with potentially different dividends, preferences and other terms.
9. Retirement Plans
The Company has a 401(k) Profit Sharing Plan covering substantially all eligible domestic employees. The Company made discretionary contributions of
$0.1 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively.
60
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related Party Transactions
Domestic Related Party Transactions
Change of Control, Voting and Restricted Stock Agreement
The Change of Control, Voting and Restricted Stock Agreement (the "CIC Agreement") became effective on January 28, 2022, when signed by the
Company and Robert G. Brown, ("Mr. Brown"), William H. Bartels, ("Mr. Bartels"), SPAR Administrative Services, Inc., a corporation ("SAS"), and
collectively with Mr. Brown, Mr. Bartels and SAS, the ("Majority Stockholders"). Mr. Bartels and Mr. Brown are Directors of the Corporation. Mr. Brown
was the Chairman of the Board of Directors of SGRP (the "Board"), but ceased holding that position when the 2022 By-Laws (as defined below) became
effective on January 25, 2022.
The execution of the CIC Agreement was conditional upon making the changes to and restatement of the Corporation's 2022 By-Laws, which were
approved by the Board and became effective on January 25, 2022 (the "2022 By-Laws").
The financial terms of the CIC Agreement to the Majority Stockholders, totaled $4,477,585, consisting of the following:
a.
b.
c.
The Corporation issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred Stock, which are
convertible into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the Preferred Designation
and the CIC Agreement, subject to adjustment for a forward or reverse share split, share dividend, or similar
transactions. These shares will vest over time upon execution of the CIC Agreement in 5 phases through November 10,
2023, assuming the Majority Stockholders' ongoing compliance with the terms and conditions of the CIC Agreement.
Series B Preferred Shares may only be transferred to affiliates and certain related parties of the Majority Stockholders if
those affiliates and certain related parties execute a joinder to the CIC Agreement. The Series B Preferred Stock shares
was valued at $3,690,000 in total, based on the SGRP stock price on December 31, 2021 of $1.23 per share for the
3,000,000 conversion SGRP shares
The Corporation made a $250,000 cash payment to Mr. Brown and agreed to reimburse up to $35,000 of the legal
expenses of the Majority Stockholders that were incurred after January 1, 2021, in connection with the negotiation and
execution of the CIC Agreement.
The Corporation assumed financial responsibility for, and paid directly to Affinity Insurance Company, Ltd., $502,585
to settle SAS obligations and the related claim for the 2014-2015 plan year.
James R. Brown, Sr. Advisor Agreement
On January 25, 2022, the Company entered into a consulting agreement with Mr. James R. Brown, Sr., effective January 26, 2022, following his retirement
as a director of SGRP on January 25, 2022, pursuant to which Mr. Brown will serve as a Board advisor to SGRP from time to time for a term of one (1)
year (the "Brown Advisor Agreement"). As compensation for his services, Mr. Brown was entitled to receive compensation at a rate of $55,000 for the term
of the Brown Advisor Agreement. Payments will be made in equal quarterly installments and will be pro-rated for partial quarters. The agreement expired
in the year ended December 31, 2022.
Panagiotis Lazaretos Consulting Agreement
On January 27, 2022, the Corporation entered into a consulting agreement with Thenablers, Ltd. effective February 1, 2022 (the " Lazaretos Consulting
Agreement"). Thenablers, Ltd. is wholly owned by Mr. Panagiotis Lazaretos, a retired director of the Corporation. Following Mr. Lazaretos' retirement as a
director on January 25, 2022, Thenablers, Ltd. agreed to provide the consulting services of Mr. Lazaretos to the Corporation regarding global sales and new
markets' expansion. The Lazaretos Consulting Agreement cannot be terminated by the consent of either party for the first twelve (12) months, and
automatically expires on January 31, 2024. As compensation for its services, Thenablers, Ltd. is entitled to receive: (i) base compensation at a rate of
$10,000 per month for the term of the Consulting Agreement; (ii) incentive based compensation as calculated in Exhibit A of the Lazaretos Consulting
Agreement; and (iii) the outstanding options granted to Mr. Panagiotis ("Panos") N. Lazaretos on February 4, 2022 will continue to be outstanding and vest
according to their terms under the agreement. As permitted by that agreement, on February 2, 2023, the Corporation gave notice that it was terminating that
agreement effective July 31, 2023.
61
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related Party Transactions (continued)
Other Domestic Related Party Transactions
Resource Plus, is a consolidated domestic subsidiary of the Company and is owned jointly by the Company and by Mr. Richard Justus. Mr. Justus has an
ownership interest in RJ Holdings which owns the buildings where Resource Plus is headquartered and operates. Both buildings are subleased to Resource
Plus.
On December 1, 2021, the Corporation entered into the Agreement for Marketing and Advertising Services (the "WB Agreement") with WB Marketing,
Inc. (the "Agent", and together with the Company, the "Parties"). The Agent is an entity owned and controlled by Mrs. Jean Matacunas who is the wife of
President and Chief Executive Officer, Michael R. Matacunas. Mr. Matacunas is also a minority owner of the Agent. The service fees paid to WB
Marketing for the years ended December 31, 2023 and 2022, were $103,000 and $189,000, respectively.
Prior to December 31, 2023, National Merchandising Services, LLC ("NMS"), was a consolidated domestic subsidiary of the Company owned jointly by
SGRP and by National Merchandising of America, Inc. ("NMA"). Mr. Edward Burdekin was the Chief Executive Officer and President and a director of
NMS and also an executive officer and director of NMA. Ms. Andrea Burdekin, Mr. Burdekin's wife, was the sole stockholder and also a director of both
NMA and NMS. NMA was a related party of the Company but is not under the control of or consolidated with the Company. Mr. Burdekin's wife also
owns National Remodel & Setup Services, LLC ("NRSS"). During the years ended December 31, 2022 and 2023, NRSS provided substantially all of the
domestic merchandising specialist field force used by NMS. For those services, NMS reimbursed NRSS certain costs for providing those services plus a
premium ranging from 4.0% to 10.0% of certain costs. NMS also leased office space from Mr. Burdekin's personal property. In December 2023, the
Company sold its ownership interest in NMS.
On December 22, 2023, the Company entered into an agreement with National Retail Remodel Services (the "Buyer") to sell its 51% ownership interest in
National Merchandising Services, LLC ("NMS") to the Buyer for total consideration of $1,441,004. The transaction closed on December 31, 2023. Per the
agreement, the purchase price is due from the Buyer as follows: (1) a payment of $700,000 due immediately to the escrow agent upon closing, releasable to
the Company in January 2024; (2) $523,000 in the form of the Buyer's promissory note due and payable on January 31, 2024; and (3) a payment of up to
$209,004 contingent upon collection of an outstanding receivable. The $700,000 and $523,000 portions of consideration for this transaction are recorded
in "Other Receivables" at December 31, 2023. The Company’s December 31, 2023 financial results include a loss on this sale of approximately
$427,000, primarily reflecting the write-off of remaining goodwill related to NMS. The Company has not included the contingent purchase price payment
in the determination of the amount of the loss as collection of that receivable is not known as of filing date.
International Related Party Services
The Company's principal Brazilian subsidiary, SPAR BSMT, is owned 51% by the Company. Mr. Jonathan Dagues Martins, ("JDM") is the Chief
Executive Officer and President of each SPAR Brazil subsidiary pursuant to a Management Agreement between JDM and SPAR BSMT dated September
13, 2016. JDM also is a director of SPAR BSMT. Accordingly, JDM is a related party of the Company. EILLC is owned by Mr. Peter W. Brown, a director
of SPAR BSMT and the Corporation.
Prior to December 31, 2023, SPARFACTS was a consolidated international subsidiary of the Company owned 51% by SGRP. Ms. Lydna Chapman was a
director of SPARFACTS. Her various companies provide office lease, accounting and consultant services to SPARFACTS. In December 2023, the
Company sold its ownership interest in SPARFACTS.
On December 22, 2023, the Company entered into an agreement with Sabizz Pty Ltd CAN (the buyer) to sell its 51 percent interest in SPARfacts Pty
Limited CAN for (1) one dollar; (2) assumption of all liabilities and obligations related to ownership of the shares; and (3) $75 thousand AUD for the rights
to use the SPARfacts brand and name for up to 6 months following the closing date. The transaction closed on December 31, 2023. The Company’s 2023
year end financial results include a $19,000 gain on the sale.
62
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related Party Transactions (continued)
Summary of Certain Related Party Transactions
The following costs of affiliates were charged to the Company (in thousands):
Services provided by affiliates:
National Remodel & Setup Services (NRSS) (1)
Consulting and administrative services (RJ Holdings) (2)
Office lease expenses (RJ Holdings) (2)
Consulting and administrative fees (SPARFACTS) (2)
Other (2)
Total services provided by affiliates
Due to affiliates consists of the following (in thousands):
Loans from local investors:(3)
China
Mexico
Australia
Resource Plus
Total due to affiliates
Year Ended December 31,
2022
2023
5,173 $
472
8
112
178
5,943 $
December 31,
2023
2022
2,316 $
623
-
266
3,205 $
8,565
477
248
431
157
9,878
1,382
623
693
266
2,964
$
$
$
$
(1) Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loans
have no payment terms and are due on demand.
(2) These expenses are reflected in "Selling, general, and administrative expense" expense in the consolidated statements of operations and
comprehensive (loss) income.
(3) Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loans
have no payment terms and are due on demand.
Bartels' Retirement and Director Compensation
William H. Bartels retired as an employee of the Company as of January 1, 2020. However, he continues to serve as a member of SPAR's Board. Mr.
Bartels is also one of the founders and a significant stockholder of SGRP.
Effective as of January 18, 2020, SPAR's Governance Committee proposed and unanimously approved retirement benefits for the five-year period
commencing January 1, 2020, and ending December 31, 2024 (the "Five-Year Period"), for Mr. Bartels. The aggregate value of benefits payable to Mr.
Bartels is approximately $220,558 per year and a total of $1,102,790 for the Five-Year Period. The Company recognized $700,000 of retirement benefits
during the year ended December 31, 2020, representing the present value of the future Retirement Compensation, Supplemental Fees and Medical Benefits
payments due Mr. Bartels. As of December 31, 2023 $200,923 of retirement benefits remains outstanding and is included within Accrued expenses and
other current liabilities on the consolidated balance sheets.
63
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related Party Transactions (continued)
2022 Deferred Compensation Agreement
The Corporation prepared a 2022 Stock Compensation Plan that would have included Awards for NQSOs and RSUs (as defined below), but that plan was
never submitted to its shareholders for approval. However, the Board had previously approved, for certain key executives, incentive stock based awards for
2022 using RSUs or cash. Since there were no plan based RSUs available, those executives instead received deferred compensation.
On and effective as of March 24, 2022, the Corporation issued an award of 111,111 Phantom Stock Units to each of its executives: Kori G. Belzer; William
Linnane; and Ron Lutz. Each Phantom Stock Unit represents the right of the grantee to receive cash payments based on the fair market value of SGRP's
Common Stock at the time of vesting. Vesting will occur in three tranches of one-third each over the three (3) year period following the Grant Date,
provided that (i) the Grantee is an employee of the Company at the time and (ii) the Corporation has achieved 90% of the agreed upon the applicable
financial target for the year commencing with 2022 (which was EBITDA for 2022), but tranches will rollover to the following year and be payable upon
achievement of 120% of the agreed upon the applicable financial target for such following year. The Phantom Stock Units do not possess the rights of
common stockholders of the Corporation, including any voting or dividend rights, and cannot be exercised or traded for the SGRP's Common Stock. Due to
the cash settlement feature, the Phantom Stock Units are classified as liabilities in accrued expenses and other current liabilities and other long-term
liabilities in the consolidated balance sheet. Accrued expenses and other current liabilities on the Consolidated Balance Sheet included $555 thousand and
$0 related to Phantom Stock Units as of December 31, 2023 and December 31, 2022, respectively.
Other Related Party Transactions and Arrangements
SPAR Business Services, Inc. ("SBS"), and SPAR InfoTech, Inc. ("Infotech"), are related parties and affiliates of SGRP, but are not under the control or
part of the consolidated Company. SBS is an affiliate and related party because it is owned by SBS LLC, which in turn is beneficially owned by Robert G.
Brown, Director and significant shareholder of SGRP. Infotech is an affiliate and related party because it is owned principally by Robert G. Brown. SPAR
Administrative Services, Inc. ("SAS"), is a related party and affiliate of SGRP, but is not under the control or part of the consolidated Company. SAS is an
affiliate and related party because it is beneficially owned by William H Bartels (a Director and significant stockholder of SGRP) and family members of
Robert G. Brown. See Change of Controls, Voting and Restricted Stock Agreement, above.
In July 1999 SMF, SBS and Infotech entered into a perpetual software ownership agreement providing that each party independently owned an undivided
share of, and has the right to unilaterally license and exploit, certain portions of the Company's proprietary scheduling, tracking, coordination, reporting and
expense software and each of SBS and Infotech entered into non-exclusive royalty-free licenses from the Company to use certain "SPAR" trademarks in the
United States. SAS uses the "SPAR name through the SBS License.
11. Share Based Compensation
As of December 31, 2023, the Company has outstanding stock options and unvested restricted stock units granted under its 2008 Stock Compensation Plan,
2018 Stock Compensation Plan, 2020 Stock Compensation Plan and 2021 Stock Compensation Plan, which generally permitted stock-based awards under
terms determined by the Company’s board of directors. Stock options and RSUs generally provided for vesting over service periods of one to four years,
with option exercise prices generally equal to fair market value on the date of grant. As of December 31, 2023, no further shares were available under these
plans for future awards. The Company also granted stock options and restricted stock units as inducements under contracts with selected executives.
64
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Share Based Compensation (continued)
Stock options
2008 Plan Summary
2008 Plan Stock option award activity for the years ended December 31, 2023 and 2022 is summarized below for the periods presented:
Option Awards
Outstanding at January 1, 2022
Granted
Exercised / cancelled
Forfeited or expired
Outstanding at December 31, 2022
Granted
Exercised / cancelled
Forfeited or expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(thousands)
691,162 $
–
(57,500)
(120,562)
513,100
–
–
(291,100)
222,000 $
222,000 $
$
1.53
–
1.07
–
1.63
–
–
2.10
1.01
1.01
2.60 $
–
–
–
2.16
3.27 $
3.27 $
72
–
10
–
68
12
12
The Company recognized no stock-based compensation expense relating to stock option awards during the years ended December 31, 2023 and 2022.
2018 Plan Summary
2018 Plan Stock option award activity for the years ended December 31, 2023 and 2022 are summarized below:
Weighted-
Option Awards
Outstanding at January 1, 2022
Granted
Exercised/cancelled
Forfeited or expired
Outstanding at December 31, 2022
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Average
Exercise
Price
$0.93
–
0.76
–
$0.94
–
–
–
$0.94
$0.94
Shares
160,000
–
(12,500)
(2,500)
145,000
–
–
–
145,000
145,000
65
Weighted-
Average
Remaining
Contractual
Term (Years)
6.82
–
–
–
5.79
Aggregate
Intrinsic
Value
(thousands)
$31
–
8
–
$52
4.79
4.79
$26
$26
11. Share Based Compensation (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
No stock options were granted in 2023 under the 2018 Plan. The total intrinsic value of stock options awards exercised during the year ended December
31, 2023 and 2022 was $0 and $8,000, respectively.
The Company recognized $1,000 and $6,000 in stock-based compensation expense relating to stock option awards during the years ended December 31,
2023 and 2022, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December
31, 2023 and 2022 was approximately $0 and $2,000, respectively.
As of December 31, 2023, there was no unrecognized stock-based compensation expense related to stock options granted under the 2018 Plan.
2020 Plan Summary
2020 Plan Stock option award activity for the years ended December 31, 2023 and 2022 are summarized below:
Option Awards
Outstanding at January 1, 2022
Granted
Exercised/cancelled
Forfeited or expired
Outstanding at December 31, 2022
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Weighted-
Average
Exercise
Shares
385,000
–
–
(10,000)
375,000
(20,000)
355,000
177,500
Price
$1.55
–
–
–
$1.55
–
$1.55
$1.55
Weighted-
Average
Remaining
Contractual
Term (Years)
4.10
–
–
–
3.10
–
2.10
2.10
Aggregate
Intrinsic
Value
(thousands)
$-
–
–
–
$-
–
–
–
$-
$-
No stock options were granted in 2023 under the 2020 Plan. The total intrinsic value of stock option awards exercised during the years ended December
31, 2023 and 2022 was $0.
The Company recognized $47,000 and $58,000 in stock-based compensation expense relating to stock option awards during the years ended December 31,
2023 and 2022, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December
31, 2023 and 2022 was approximately $12,000 and $15,000, respectively.
As of December 31, 2023, total unrecognized stock-based compensation expense related to stock options was $58,000. This expense is expected to be
recognized over a weighted average period of approximately 1.1 years.
66
11. Share Based Compensation (continued)
CFO Inducement Plan Summary
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
CFO Inducement Plan Stock option award activity for the years ended December 31, 2023 and 2022 are summarized below:
Option Awards
Outstanding at January 1, 2022
Granted
Exercised/cancelled
Forfeited or expired
Outstanding at December 31, 2022
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(thousands)
Shares
150,000
–
(50,000)
–
100,000 $
(100,000) $
- $
- $
$
$
0.85
–
0.85
–
0.85
0.85
- $
- $
8.67
–
–
–
7.67 $
–
- $
- $
57
–
–
–
45
–
-
-
No stock options were granted in 2023 under the CFO Inducement Plan. The total intrinsic value of stock option awards exercised during the years ended
December 31, 2023 and 2022 was $0 and $45,000.
The Company recognized a benefit of $6,000 and expense of $19,000 relating to stock option awards during the years ended December 31, 2023 and
2022, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31,
2023 and 2022 was approximately $0 and $5,000 respectively.
As of December 31, 2023, there was no unrecognized share-based compensation expense related to stock options granted under the CFO Inducement
Plan.
CEO Inducement Plan Summary
CEO Inducement Plan stock option award activity for the years ended December 31, 2023 and 2022 are summarized below:
Option Awards
Outstanding at January 1, 2022
Granted
Exercised/cancelled
Forfeited or expired
Outstanding at December 31, 2022
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
(thousands)
Shares
630,000 $
–
–
–
630,000 $
–
–
–
630,000 $
630,000 $
1.90
–
–
–
1.90
–
–
–
1.90
1.90
9.15 $
–
–
–
8.15 $
–
–
–
7.15 $
7.15 $
-
–
–
–
-
–
–
–
-
-
67
11. Share Based Compensation (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
No stock options were granted in 2023 under the CEO Inducement Plan. The total intrinsic value of stock option awards exercised during the years ended
December 31, 2023 and 2022 was $0.
The Company recognized $0 and $85,000 in stock-based compensation expense relating to stock option awards during the years ended December 31,
2023 and 2022, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December
31, 2023 and 2022, was $0 and $21,000, respectively.
As of December 31, 2023, there was no unrecognized share-based compensation expense related to stock options granted under the CEO Inducement Plan.
Restricted Stock Units
The following table summarizes the activity for Restricted Stock Unit (RSU) awards during the years ended December 31, 2023 and 2022
Unvested at January 1, 2022
Granted
Vested
Forfeited
Unvested at December 31, 2022
Granted
Vested
Forfeited
Unvested at December 31, 2023
Weighted-
Average
Grant Date
Fair Value
per Share
1.85
–
1.86
–
1.81
1.16
1.20
1.81
1.19
Shares
138,090 $
–
(99,415)
–
38,675 $
304,513
(100,337)
(16,575)
226,276 $
During the years ended December 31, 2023 and 2022, the Company recognized approximately $235,000 and $101,000, respectively, of stock-based
compensation expense related to RSUs. During the years ended December 31, 2023 and 2022, the total fair value of RSUs vested was $104,000 and
$120,000, respectively. As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested RSUs awards was $78,000,
which is expected to be recognized over a weighted average period of approximately 0.3 years.
Phantom Stock Awards
See Note 10, Related Party Transactions for a description of the Company’s phantom stock awards.
12. Segment Information
The Company reports net revenues from operating income by reportable segment. Reportable segments are components of the Company for which separate
financial information is available that is evaluated on a regular basis by the chief operating decisionmaker in deciding how to allocate resources and in
assessing performance.
The Company provides similar merchandising and marketing services throughout the world, operating within three reportable geographic segments. The
Company evaluates those segments to improve its administration and operational and strategic focuses, and it tracks and reports certain financial
information separately for each of those segments. The Company measures the performance of its segments and subsidiaries using the same metrics. The
primary measurement utilized by management is operating profits, historically the key indicator of long-term growth and profitability, as the Company may
reinvest the operating profits of each of its international subsidiaries in its local markets in an effort to improve market share and continue expansion
efforts.
68
12. Segment Information (continued)
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(in Thousands)
Net revenues
Americas
Asia - Pacific
EMEA
Total Net revenues
Operating Income (loss)
Americas
Asia - Pacific
EMEA
Total Operating Income (loss)
Interest expense
Americas
Asia - Pacific
EMEA
Total Interest expense
Other expense (income), net
Americas
Asia - Pacific
EMEA
Total Other expense (income), net
Income before income tax expense
Americas
Asia - Pacific
EMEA
Total Income before income tax expense
Income tax expense
Americas
Asia - Pacific
EMEA
Total Income tax expense
Net income
Americas
Asia - Pacific
EMEA
Total Net income
Net income (loss) attributable to non-controlling interest
Americas
Asia - Pacific
EMEA
Total Net income (loss) attributable to non-controlling interest
Net Income (loss) attributable to SPAR Group, Inc.
Americas
Asia - Pacific
EMEA
Total Net Income (loss) attributable to SPAR Group, Inc.
Depreciation and amortization:
Americas
Asia - Pacific
EMEA
Total Depreciation and amortization:
Impairment of goodwill
Americas
Asia - Pacific
EMEA
Total Impairment of goodwill
Capital expenditures:
Americas
Asia - Pacific
EMEA
Total Capital expenditures:
There were no inter-segment sales for 2023 or 2022.
69
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Year Ended December
31,
2023
2022
203,705
24,480
34,562
262,747
$
$
7,240
(599)
2,757
9,398
$
$
1,388
122
409
1,919
$
$
1,070
(759)
35
346
$
$
4,304
236
2,593
7,133
1,543
62
752
2,357
$
$
$
$
3,236
$
(24)
1,564
4,776
$
(492) $
33
1,333
874
$
3,729
$
(57)
230
3,902
$
1,737
94
170
2,001
-
-
-
-
1,077
71
101
1,249
$
$
$
$
$
$
198,581
26,009
36,678
261,268
4,103
(1,621)
2,904
5,386
675
39
251
965
(38)
(62)
(382)
(482)
3,466
(1,598)
3,035
4,903
1,949
(18)
846
2,777
1,517
(1,580)
2,189
2,126
1,857
(650)
1,651
2,858
(340)
(930)
538
(732)
1,821
104
108
2,033
2,458
-
-
2,458
1,805
20
100
1,925
12. Segment Information (continued)
Assets:
Americas
Asia - Pacific
EMEA
Total assets
Geographic Data (in thousands)
Net international revenue:
United States
Brazil
South Africa
Mexico
China
Japan
India
Canada
Australia
Total net international revenue
(in thousands)
Long lived assets:
Americas
Asia - Pacific
EMEA
Total long lived assets
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31,
2023
2022
$
$
71,372 $
13,361
5,548
90,281 $
75,440
5,952
13,206
94,598
Year Ended December 31,
2023
% of consolidated
net revenue
2022
% of consolidated
net revenue
$
$
104,647
74,873
34,562
11,691
10,167
6,256
6,148
12,494
1,909
262,747
43.0%
26.1%
14.0
3.7
4.2
2.7
2.4
3.2
0.6
100.0%
39.8% $
28.5
13.2
4.4
3.9
2.4
2.3
4.8
0.7
100.0% $
112,327
68,301
36,678
9,706
10,931
7,133
6,276
8,247
1,669
261,268
Year Ended
December 31,
2023
2022
4,585 $
1,015
745
6,345 $
4,605
1,244
315
6,164
$
$
70
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. Earnings Per Share
The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):
Numerator:
Net income attributable to SPAR Group, Inc.
Denominator:
Shares used in basic net income per share calculation
Effect of diluted securities:
Stock options and unvested restricted shares
Convertible Series B Preferred Stock
Shares used in diluted net income per share calculations
Basic net income (loss) per common share:
Diluted net income (loss) per common share:
Year Ended December 31,
2023
$
3,902 $
23,333
147
975
24,455
0.17 $
0.16 $
$
$
2022
(732)
22,110
–
–
22,110
(0.03)
(0.03)
The Company excluded 1,753,100 stock options, 38,675 RSUs and 854,753 shares of Series B convertible preferred stock, from the computation of diluted
net loss per share for the year ended December 31, 2022 because including them would have had an anti-dilutive effect.
14. Leases
The Company is a lessee under certain operating leases for office space and equipment.
The components of lease expenses consisted of the following for the periods presented (in thousands):
Lease Costs
Operating lease cost
Short-term lease cost
Variable costs (1)
Total lease cost
Classification
Selling, General and Administrative Expense
Selling, General and Administrative Expense
Selling, General and Administrative Expense
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
$
875 $
378
-
1,253 $
470
502
20
992
( 1) Variable lease costs consist primarily of property taxes, property insurance, and common area or other maintenance costs for the Company’s leases of
office space.
The following includes supplemental information for the periods presented (in thousands).
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for lease obligations
Operating leases
71
Year Ended
December 31, 2023
Year Ended
December 31,
2022
$
$
875 $
2,229 $
997
-
Balance sheet information related to leases consisted of the following as of the periods presented (in thousands):
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Leases
Assets:
Operating lease right-of-use assets
Liabilities:
Current portion of operating lease liabilities
Non-current portion of operating lease liabilities
Total operating lease liabilities
Weighted average remaining lease term - operating leases (in years)
Weighted average discount rate - operating leases
The following table summarizes the maturities of lease liabilities as of December 31, 2023 (in thousands):
For the Year Ended December 31,
2024
2025
2026
2027
2028
Thereafter
Total future operating lease liability
Less: present value discount
Present value of operating lease liabilities
December 31,
2023
December 31,
2022
969
363
606
969
2.04
6.4%
$
$
$
2,323
$
1,163
1,160
2,323
$
2.64
8.8%
Amount
1,315
838
188
155
112
5
$2,613
290
$2,323
15. Subsequent Events
Agreement to sell the Company’s ownership interest in its South African Joint Venture
On February 7, 2024, the Company entered into a Sale of Shares Agreement to sell its 51% ownership interest in SGRP Meridian Proprietary Limited to
Friedshelf 401 (Pty) Ltd., Lindicom Proprietary Limited, and Lindicom Empowerment Holdings Proprietary Limited for 180,700,000 South African Rand
(approximately $9.9 million using the exchange rates on December 31, 2023), 80% of which would be paid upon closing. Closing of the sale is dependent
upon a number of conditions (including the approval by the South African government), and closing is expected in the second quarter of 2024.
Agreement to sell the Company’s ownership interest in its Chinese Joint Venture
On February 23, 2024, the Company entered into an Equity Transfer Agreement to sell its 51% ownership interest in SPAR (Shanghai) Marketing
Management Co., Ltd. to Shanghai Jingbo Enterprise Consulting Co., Ltd. and Shanghai Wedone Marketing Management Co. Ltd. The total price to be
paid to the Company is $200,000. The sale is deemed completed when the transferred equity is registered in the name of the buyers with the Chinese
Market Supervision Administration.
Agreement to sell the Company’s Brazilian subsidiary that owns its interest in its Brazilian Joint Venture
On March 26, 2024, the Company signed a share purchase agreement with JK Consultoria Empresarial Ltda. ("JKC") for JKC to acquire the Company's
Brazilian holding company (which in turn owns the Company's 51 percent interest in its Brazilian joint venture subsidiary) for BRL 58.9 million or
approximately $11.8 million. Closing of the sale is dependent upon a number of conditions and is expected in the second quarter of 2024.
72
SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.6
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of April 3, 2023 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group, Inc., a Delaware
corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Kori G. Belzer, (the
"Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to individually as a
"Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are set
forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 181,818 Phantom
Stock Units (which correspond to the same number of SGRP Shares), effective as of April 3, 2023 (the "Grant Date"). For informational purposes only, if
then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $240,000 for the Grantee as of the Grant Date based on the Fair
Market Value of $1.32 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically adjusted to reflect
the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the Phantom Stock Units
granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present or future SGRP stock
compensation plan.
4. Vesting. (a) None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement, the
Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 70% or greater of the budgeted 2023 Global EBIT. If the first year criteria is achieved, the second and
third tranches will respectively vest on the second and third anniversary dates of the vesting of the first year’s tranche with no additional vesting criteria.
(b) The calculation of the achievement of the 2023 Global EBIT will be based on SGRP's audited financial statements and adjusted for each of
the following:
(i) Total Operating Income and Domestic Operating Income each shall exclude any and all applicable accruals, expenses, assumptions,
reimbursements, indemnifications, advancements and payments arising out of or related to any agreement or arrangement with related parties,
shareholders or directors endeavoring to resolve any debt, obligations, claims or governance issues with any of them.
(ii) Total Operating Income shall also shall exclude both the negative and positive effects (i.e., both upside and downside) of (A) any and all
domestic or foreign mergers and acquisitions (including new joint ventures), which effects include (without limitation) any and all applicable
accruals, revenues, expenses, income and payments arising out of or related to any such domestic or foreign merger or acquisition, (B) an
increase or decrease in Non-Executive Director Board Compensation; and (C) of normal and customary accounting adjustments required by an
outside auditor or third party.
(iii) In the discretion of management with the approval of the Board, Total Operating Income and Domestic Operating Income each may exclude
the negative and positive effects (i.e., both upside and downside) any and all applicable any income or expense item that was extraordinary,
non-operational, non-recurring or non-routine.
(c) The Grantee agrees that: (i) in the event RSUs are available for such exchange under an underlying shareholder approved stock-based plan,
the Corporation shall have the right, in its discretion, at any time and from time to time to exchange unvested RSUs for the Grantee’s Phantom Shares (on a
one for one basis) for some or all of the Phantom Shares in any tranche, subject to the same vesting criteria; and (ii) acknowledges that unvested RSUs may
be settled in cash or stock (or in combination).
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within ___ days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation or
in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any Change
in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement, in
the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement or
the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such a
Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding
or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
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(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent shall not deprive
any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily commence or participate
in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate
court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or
any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees that any
arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx
or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth
above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final
decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced
against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit
in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly
and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other
party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not assignable,
pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply
to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the
benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided
that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation
to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement reference is made to any
person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of
the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this Agreement shall inure to the
benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this Agreement (including injunctive relief
and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against
any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly,
irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be
deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short-term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6)
months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day
after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule,
but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
/s/
Michael R. Matacunas, Chief Executive Officer and
President
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: January 8, 2024
KORI G. BELZER:
/s/
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
111 Willits St #210
Birmingham, MI 48009
Dated as of: 1/8/2024
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I. Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
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"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
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"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.7
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of March 24, 2022 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group,
Inc., a Delaware corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Kori G.
Belzer, (the "Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to
individually as a "Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are
set forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 111,111
Phantom Stock Units (which correspond to the same number of SGRP Shares), effective as of March 24, 2022 (the "Grant Date"). For informational
purposes only, if then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $180,000 for the Grantee as of the Grant Date
based on the Fair Market Value of $1.35 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically
adjusted to reflect the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the
Phantom Stock Units granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present
or future SGRP stock compensation plan.
4. Vesting. None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement,
the Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 90% or greater of the 2022 budgeted global EBIT. "EBIT" shall mean the earnings of the Company (or
relevant segment or group) before interest, income, franchise and similar taxes, and amortization and depreciation for such computation period; in each
case based on SGRP's audited financial statements and adjusted for and excluding each income or expense item that was extraordinary, non-operational,
non-recurring or non-routine. Examples of such exclusions include (without limitation) gains or losses on foreign exchange, goodwill impairments, non-
operating income or losses, non-cash compensation, and CIC and other expenses related to stockholder claims, disputes and resolutions, If the 90% of such
2022 threshold is not met, the first tranche will remain unvested for one additional year. If the Company (or relevant segment or group) achieves 120% or
greater of the 2023 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT) the first tranche will vest along
with the second tranche scheduled for that year. If the 90% of such 2023 threshold is not met for the second year, the first tranche expires and the second
tranche remains unvested for the third year. If the Company achieves 120% or greater of the 2024 year budgeted compensation target (which may or may
not be SGRP's North American or global EBIT), the second tranche will vest along with the third tranche scheduled for that year. If the 90% of such 2024
threshold is not met for the third year, the second tranche expires and the third tranche remains unvested for the third year. If the Company achieves 120%
or greater of the 2025 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT), EBIT and its adjustments
shall be reasonably determined by SGRP's management and reasonably confirmed by the Compensation Committee (acting alone), provided, however, that
the Compensation Committee (acting alone) shall have the discretion to add such additional adjustments to EBIT so as to facilitate vesting.
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation
or in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in
this Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any
Change in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
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9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement,
in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement
or the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such
a Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
Securities Act.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
withholding or other taxes or charges which it is from time to time required to withhold.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the
FAA does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company. Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided,
however, that if JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other
applicable SGRP Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration
will take place at the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable
SGRP Company. Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by
another party. Each party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents
from third parties to the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant
such additional discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into
account the parties' mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at
www.jamsadr.com, and the AAA rules are available at www.adr.org.
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(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall
occur on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator;
provided, however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a
claim in the court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails
on a statutory claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for
attorneys' fees and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court
would apply under the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable
law, this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform
Commercial Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the
applicable law of the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction.
Without in any way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of
Michigan for the County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and
proper venue with respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent
shall not deprive any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily
commence or participate in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator
court to a proper appellate court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby
absolutely, unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on
the Party or any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees
that any arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail;
(ii) FedEx or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address
set forth above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a
final decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be
enforced against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity
from suit in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably,
expressly and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against
the other party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not
assignable, pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section
shall not apply to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the
Grantee for the benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only
partners; provided that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed
by the Corporation to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement
reference is made to any person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without
limiting the generality of the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this
Agreement shall inure to the benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this
Agreement (including injunctive relief and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as
otherwise expressly provided herein, no other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to
enforce any of those provisions against any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may
enforce any such provisions directly, irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the
Corporation shall have, or shall be deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been
negotiated, shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short- term deferral" rule set forth in
Treasury Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise
not exempt from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee"
(within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury
Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the
first six (6) months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months
and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and
issuance schedule, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the
shares under Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-
2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
KORI G. BELZER:
By:
[ ▲ Officer's Signature ▲]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: 2/15/2023
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
Dated as of: 2/15/2023
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I.
Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son- in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
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(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended. "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code. "Exchange Rules" shall mean the charter or other organizational or governance
document or listing or other requirements of the applicable national securities exchange or market on which SGRP's stock is listed or quoted (currently
Nasdaq), or any other applicable self-regulatory or governing body or organization, and the rules and regulations promulgated thereunder, as the same may
be adopted, supplemented, modified, amended or restated from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
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"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.8
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of April 3, 2023 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group, Inc., a Delaware
corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Antonio Calisto Pato, (the
"Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to individually as a
"Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are set
forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 75,758 Phantom
Stock Units (which correspond to the same number of SGRP Shares), effective as of April 3, 2023 (the "Grant Date"). For clarity, this Award is in addition
to the previous 150,000 RSU inducement award to Grantee and does not affect that previous award. For informational purposes only, if then vested those
Phantom Stock Units would have had an aggregate Fair Market Value of $100,000 for the Grantee as of the Grant Date based on the Fair Market Value of
$1.32 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically adjusted to reflect the specified
events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the Phantom Stock Units granted
hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present or future SGRP stock
compensation plan.
4. Vesting. (a) None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement, the
Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the one (1) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on April 3, 2024, which will be the applicable vesting date
subject to achievement of the criteria provided below. The vesting will be upon the achievement by the Company of 70% or greater of the budgeted 2023
Global EBIT.
(b) The calculation of the achievement of the 2023 Global EBIT will be based on SGRP's audited financial statements and adjusted for each of
the following:
(i) Total Operating Income and Domestic Operating Income each shall exclude any and all applicable accruals, expenses, assumptions,
reimbursements, indemnifications, advancements and payments arising out of or related to any agreement or arrangement with related parties,
shareholders or directors endeavoring to resolve any debt, obligations, claims or governance issues with any of them.
(ii) Total Operating Income shall also shall exclude both the negative and positive effects (i.e., both upside and downside) of (A) any and all
domestic or foreign mergers and acquisitions (including new joint ventures), which effects include (without limitation) any and all applicable
accruals, revenues, expenses, income and payments arising out of or related to any such domestic or foreign merger or acquisition, (B) an
increase or decrease in Non-Executive Director Board Compensation; and (C) of normal and customary accounting adjustments required by an
outside auditor or third party.
(iii) In the discretion of management with the approval of the Board, Total Operating Income and Domestic Operating Income each may exclude
the negative and positive effects (i.e., both upside and downside) any and all applicable any income or expense item that was extraordinary,
non-operational, non-recurring or non-routine.
(c) The Grantee agrees that: (i) in the event RSUs are available for such exchange under an underlying shareholder approved stock-based plan,
the Corporation shall have the right, in its discretion, at any time and from time to time to exchange unvested RSUs for the Grantee’s Phantom Shares (on a
one for one basis) for some or all of the Phantom Shares in any tranche, subject to the same vesting criteria; and (ii) acknowledges that unvested RSUs may
be settled in cash or stock (or in combination).
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within 15 days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation or
in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any Change
in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement, in
the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement or
the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such a
Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding
or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
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(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent shall not deprive
any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily commence or participate
in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate
court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or
any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees that any
arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx
or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth
above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final
decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced
against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit
in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly
and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other
party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not assignable,
pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply
to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the
benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided
that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation
to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement reference is made to any
person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of
the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this Agreement shall inure to the
benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this Agreement (including injunctive relief
and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against
any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly,
irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be
deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short-term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6)
months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day
after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule,
but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
/s/
ANTONIO CALISTO PATO:
/s/
Michael R. Matacunas, Chief Executive Officer and President
[ ▲ Grantee's Signature ▲ ]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: 1/11/2024
Employee's Current Address:
1207 Willow Oaks Trail
Weddington, NC 28104
Dated as of: 1/11/2024
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I. Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
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(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
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"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.9
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of April 3, 2023 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group, Inc., a Delaware
corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and William Linnane, (the
"Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to individually as a
"Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are set
forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 181,818 Phantom
Stock Units (which correspond to the same number of SGRP Shares), effective as of April 3, 2023 (the "Grant Date"). For informational purposes only, if
then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $240,000 for the Grantee as of the Grant Date based on the Fair
Market Value of $1.32 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically adjusted to reflect
the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the Phantom Stock Units
granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present or future SGRP stock
compensation plan.
4. Vesting. (a) None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement, the
Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 70% or greater of the budgeted 2023 Global EBIT. If the first year criteria is achieved, the second and
third tranches will respectively vest on the second and third anniversary dates of the vesting of the first year’s tranche with no additional vesting criteria.
(b) The calculation of the achievement of the 2023 Global EBIT will be based on SGRP's audited financial statements and adjusted for each of
the following:
(i) Total Operating Income and Domestic Operating Income each shall exclude any and all applicable accruals, expenses, assumptions,
reimbursements, indemnifications, advancements and payments arising out of or related to any agreement or arrangement with related parties,
shareholders or directors endeavoring to resolve any debt, obligations, claims or governance issues with any of them.
(ii) Total Operating Income shall also shall exclude both the negative and positive effects (i.e., both upside and downside) of (A) any and all
domestic or foreign mergers and acquisitions (including new joint ventures), which effects include (without limitation) any and all applicable
accruals, revenues, expenses, income and payments arising out of or related to any such domestic or foreign merger or acquisition, (B) an
increase or decrease in Non-Executive Director Board Compensation; and (C) of normal and customary accounting adjustments required by an
outside auditor or third party.
(iii) In the discretion of management with the approval of the Board, Total Operating Income and Domestic Operating Income each may exclude
the negative and positive effects (i.e., both upside and downside) any and all applicable any income or expense item that was extraordinary,
non-operational, non-recurring or non-routine.
(c) The Grantee agrees that: (i) in the event RSUs are available for such exchange under an underlying shareholder approved stock-based plan,
the Corporation shall have the right, in its discretion, at any time and from time to time to exchange unvested RSUs for the Grantee’s Phantom Shares (on a
one for one basis) for some or all of the Phantom Shares in any tranche, subject to the same vesting criteria; and (ii) acknowledges that unvested RSUs may
be settled in cash or stock (or in combination).
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within ___ days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation or
in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any Change
in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement, in
the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement or
the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such a
Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding
or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent shall not deprive
any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily commence or participate
in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate
court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or
any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees that any
arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx
or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth
above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final
decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced
against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit
in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly
and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other
party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not assignable,
pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply
to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the
benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided
that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation
to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement reference is made to any
person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of
the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this Agreement shall inure to the
benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this Agreement (including injunctive relief
and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against
any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly,
irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be
deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short-term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6)
months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day
after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule,
but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
/s/
WILLIAM LINNANE:
/s/
Michael R. Matacunas, Chief Executive Officer and President
[ ▲ Grantee's Signature ▲ ]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: January 8, 2024
Employee's Current Address:
22438 N Greenmeadow Dr
Kildeer, IL 60047
Dated as of: January 8th 2024
EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I. Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.10
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of March 24, 2022 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group,
Inc., a Delaware corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and William
Linnane, (the "Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to
individually as a "Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are
set forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 111,111
Phantom Stock Units (which correspond to the same number of SGRP Shares), effective as of March 24, 2022 (the "Grant Date"). For informational
purposes only, if then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $180,000 for the Grantee as of the Grant Date
based on the Fair Market Value of $1.35 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically
adjusted to reflect the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the
Phantom Stock Units granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present
or future SGRP stock compensation plan.
4. Vesting. None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement,
the Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 90% or greater of the 2022 budgeted global EBIT. "EBIT" shall mean the earnings of the Company (or
relevant segment or group) before interest, income, franchise and similar taxes, and amortization and depreciation for such computation period; in each
case based on SGRP's audited financial statements and adjusted for and excluding each income or expense item that was extraordinary, non-operational,
non-recurring or non-routine. Examples of such exclusions include (without limitation) gains or losses on foreign exchange, goodwill impairments, non-
operating income or losses, non-cash compensation, and CIC and other expenses related to stockholder claims, disputes and resolutions, If the 90% of such
2022 threshold is not met, the first tranche will remain unvested for one additional year. If the Company (or relevant segment or group) achieves 120% or
greater of the 2023 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT) the first tranche will vest along
with the second tranche scheduled for that year. If the 90% of such 2023 threshold is not met for the second year, the first tranche expires and the second
tranche remains unvested for the third year. If the Company achieves 120% or greater of the 2024 year budgeted compensation target (which may or may
not be SGRP's North American or global EBIT), the second tranche will vest along with the third tranche scheduled for that year. If the 90% of such 2024
threshold is not met for the third year, the second tranche expires and the third tranche remains unvested for the third year. If the Company achieves 120%
or greater of the 2025 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT), EBIT and its adjustments
shall be reasonably determined by SGRP's management and reasonably confirmed by the Compensation Committee (acting alone), provided, however, that
the Compensation Committee (acting alone) shall have the discretion to add such additional adjustments to EBIT so as to facilitate vesting.
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the
Corporation or in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or
commonly associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in
this Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any
Change in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement,
in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement
or the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such
a Registration Statement;
resale or distribution thereof.
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the
FAA does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company. Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided,
however, that if JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other
applicable SGRP Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration
will take place at the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable
SGRP Company. Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by
another party. Each party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents
from third parties to the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant
such additional discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into
account the parties' mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at
www.jamsadr.com, and the AAA rules are available at www.adr.org.
(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall
occur on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator;
provided, however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a
claim in the court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails
on a statutory claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for
attorneys' fees and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court
would apply under the law applicable to the claim(s) at issue.
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12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable
law, this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform
Commercial Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the
applicable law of the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction.
Without in any way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of
Michigan for the County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and
proper venue with respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent
shall not deprive any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily
commence or participate in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator
court to a proper appellate court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby
absolutely, unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on
the Party or any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees
that any arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail;
(ii) FedEx or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address
set forth above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a
final decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be
enforced against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity
from suit in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably,
expressly and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against
the other party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not
assignable, pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section
shall not apply to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the
Grantee for the benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only
partners; provided that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed
by the Corporation to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement
reference is made to any person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without
limiting the generality of the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this
Agreement shall inure to the benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this
Agreement (including injunctive relief and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as
otherwise expressly provided herein, no other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to
enforce any of those provisions against any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may
enforce any such provisions directly, irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the
Corporation shall have, or shall be deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been
negotiated, shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short- term deferral" rule set forth in
Treasury Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise
not exempt from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee"
(within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury
Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the
first six (6) months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months
and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and
issuance schedule, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the
shares under Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-
2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
[ ▲ Officer's Signature ▲]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: 2/15/2023
WILLIAM LINNANE:
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
Dated as of: 2/15/2023
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I.
Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son- in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
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"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or
other reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on
the preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended. "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code. "Exchange Rules" shall mean the charter or other organizational or governance
document or listing or other
requirements of the applicable national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable
self-regulatory or governing body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented,
modified, amended or restated from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
-8-
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.11
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of April 3, 2023 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group, Inc., a Delaware
corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Ron Lutz, (the "Grantee"),
whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to individually as a "Party"
and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are set
forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 181,818 Phantom
Stock Units (which correspond to the same number of SGRP Shares), effective as of April 3, 2023 (the "Grant Date"). For informational purposes only, if
then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $240,000 for the Grantee as of the Grant Date based on the Fair
Market Value of $1.32 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically adjusted to reflect
the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the Phantom Stock Units
granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present or future SGRP stock
compensation plan.
4. Vesting. (a) None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement, the
Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 70% or greater of the budgeted 2023 Global EBIT. If the first year criteria is achieved, the second and
third tranches will respectively vest on the second and third anniversary dates of the vesting of the first year’s tranche with no additional vesting criteria.
(b) The calculation of the achievement of the 2023 Global EBIT will be based on SGRP's audited financial statements and adjusted for each of
the following:
(i) Total Operating Income and Domestic Operating Income each shall exclude any and all applicable accruals, expenses, assumptions,
reimbursements, indemnifications, advancements and payments arising out of or related to any agreement or arrangement with related parties,
shareholders or directors endeavoring to resolve any debt, obligations, claims or governance issues with any of them.
(ii) Total Operating Income shall also shall exclude both the negative and positive effects (i.e., both upside and downside) of (A) any and all
domestic or foreign mergers and acquisitions (including new joint ventures), which effects include (without limitation) any and all applicable
accruals, revenues, expenses, income and payments arising out of or related to any such domestic or foreign merger or acquisition, (B) an
increase or decrease in Non-Executive Director Board Compensation; and (C) of normal and customary accounting adjustments required by an
outside auditor or third party.
(iii) In the discretion of management with the approval of the Board, Total Operating Income and Domestic Operating Income each may exclude
the negative and positive effects (i.e., both upside and downside) any and all applicable any income or expense item that was extraordinary,
non-operational, non-recurring or non-routine.
(c) The Grantee agrees that: (i) in the event RSUs are available for such exchange under an underlying shareholder approved stock-based plan,
the Corporation shall have the right, in its discretion, at any time and from time to time to exchange unvested RSUs for the Grantee’s Phantom Shares (on a
one for one basis) for some or all of the Phantom Shares in any tranche, subject to the same vesting criteria; and (ii) acknowledges that unvested RSUs may
be settled in cash or stock (or in combination).
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within ___ days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation or
in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any Change
in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement, in
the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement or
the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such a
Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding
or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
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(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent shall not deprive
any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily commence or participate
in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate
court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or
any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees that any
arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx
or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth
above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final
decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced
against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit
in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly
and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other
party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not assignable,
pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply
to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the
benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided
that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation
to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement reference is made to any
person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of
the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this Agreement shall inure to the
benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this Agreement (including injunctive relief
and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against
any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly,
irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be
deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short-term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6)
months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day
after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule,
but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
/s/
RON LUTZ:
/s/
Michael R. Matacunas, Chief Executive Officer and President
[ ▲ Grantee's Signature ▲ ]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: January 15, 2024
Employee's Current Address:
519 Running Bear Circle
Banner Elk, NC 28604
Dated as of: 01/12/2024
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I. Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
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"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
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"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.12
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of March 24, 2022 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group,
Inc., a Delaware corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Ron Lutz,
(the "Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to
individually as a "Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are
set forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 111,111
Phantom Stock Units (which correspond to the same number of SGRP Shares), effective as of March 24, 2022 (the "Grant Date"). For informational
purposes only, if then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $180,000 for the Grantee as of the Grant Date
based on the Fair Market Value of $1.35 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically
adjusted to reflect the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the
Phantom Stock Units granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present
or future SGRP stock compensation plan.
4. Vesting. None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement,
the Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the three (3) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on the applicable vesting date. The vesting for the first tranche
will be upon the achievement by the Company of 90% or greater of the 2022 budgeted global EBIT. "EBIT" shall mean the earnings of the Company (or
relevant segment or group) before interest, income, franchise and similar taxes, and amortization and depreciation for such computation period; in each
case based on SGRP's audited financial statements and adjusted for and excluding each income or expense item that was extraordinary, non-operational,
non-recurring or non-routine. Examples of such exclusions include (without limitation) gains or losses on foreign exchange, goodwill impairments, non-
operating income or losses, non-cash compensation, and CIC and other expenses related to stockholder claims, disputes and resolutions, If the 90% of such
2022 threshold is not met, the first tranche will remain unvested for one additional year. If the Company (or relevant segment or group) achieves 120% or
greater of the 2023 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT) the first tranche will vest along
with the second tranche scheduled for that year. If the 90% of such 2023 threshold is not met for the second year, the first tranche expires and the second
tranche remains unvested for the third year. If the Company achieves 120% or greater of the 2024 year budgeted compensation target (which may or may
not be SGRP's North American or global EBIT), the second tranche will vest along with the third tranche scheduled for that year. If the 90% of such 2024
threshold is not met for the third year, the second tranche expires and the third tranche remains unvested for the third year. If the Company achieves 120%
or greater of the 2025 year budgeted compensation target (which may or may not be SGRP's North American or global EBIT), EBIT and its adjustments
shall be reasonably determined by SGRP's management and reasonably confirmed by the Compensation Committee (acting alone), provided, however, that
the Compensation Committee (acting alone) shall have the discretion to add such additional adjustments to EBIT so as to facilitate vesting.
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the
Corporation or in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or
commonly associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in
this Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any
Change in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement,
in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement
or the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such
a Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
Securities Act.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
withholding or other taxes or charges which it is from time to time required to withhold.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the
FAA does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company. Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided,
however, that if JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other
applicable SGRP Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration
will take place at the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable
SGRP Company. Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by
another party. Each party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents
from third parties to the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant
such additional discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into
account the parties' mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at
www.jamsadr.com, and the AAA rules are available at www.adr.org.
(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall
occur on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
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(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator;
provided, however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a
claim in the court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails
on a statutory claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for
attorneys' fees and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court
would apply under the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable
law, this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform
Commercial Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the
applicable law of the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction.
Without in any way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of
Michigan for the County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and
proper venue with respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent
shall not deprive any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily
commence or participate in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator
court to a proper appellate court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby
absolutely, unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on
the Party or any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees
that any arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail;
(ii) FedEx or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address
set forth above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a
final decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be
enforced against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity
from suit in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably,
expressly and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against
the other party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not
assignable, pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section
shall not apply to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the
Grantee for the benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only
partners; provided that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed
by the Corporation to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement
reference is made to any person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without
limiting the generality of the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this
Agreement shall inure to the benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this
Agreement (including injunctive relief and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as
otherwise expressly provided herein, no other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to
enforce any of those provisions against any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may
enforce any such provisions directly, irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the
Corporation shall have, or shall be deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been
negotiated, shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short- term deferral" rule set forth in
Treasury Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise
not exempt from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee"
(within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury
Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the
first six (6) months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months
and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and
issuance schedule, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the
shares under Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-
2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
Ron Lutz:
By:
[ ▲ Officer's Signature ▲]
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: 2/15/2023
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
Dated as of: 2/15/2023
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I.
Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son- in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct
or indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or
substantially all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being
deemed a material subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
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"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or
other reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or
exchange offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place,
or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on
the preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended. "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code. "Exchange Rules" shall mean the charter or other organizational or governance
document or listing or other
requirements of the applicable national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable
self-regulatory or governing body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented,
modified, amended or restated from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
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"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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SPAR GROUP, INC.
Phantom Stock Grant and Agreement
Exhibit 10.13
This Restricted Stock Unit Grant and Agreement has been entered into and is effective as of April 3, 2023 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided herein, this "Agreement"), between the SPAR Group, Inc., a Delaware
corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Michael R. Matacunas, (the
"Grantee"), whose name and current address are set forth on the signature page below. The Grantee and the Corporation may be referred to individually as a
"Party" and collectively as the "Parties".
W I T N E S S E T H:
1. SGRP and Phantom Stock Awards Generally. The Corporation has listed its shares of Common Stock (the "SGRP Shares") for trading
through the Nasdaq Stock Market LLC ("Nasdaq") under the trading symbol "SGRP" and periodically files reports with the Securities and Exchange
Commission ("SEC"). The Corporation from time to time may grant incentive awards (each a "Phantom Stock Award") bases on phantom units of
individual SGRP Shares (each a "Phantom Stock Unit") providing for cash payments to key executives and employees in order to provide a monetary
reward where the award's value will follow the market price of the SGRP Shares and incentivize recipients to drive long-term success of the Corporation as
an element of SGRP's total compensation package. The Corporation is making the Phantom Stock Awards as a cash-based alternative in satisfaction and in
lieu of the comparable Restricted Stock Units (RSUs") approved by the Board of Directors of the Corporation (the "Board"), which the Board expressly
approved be potentially payable in stock or cash, but RSUs payable in stock cannot be delivered currently due to the lack of an underlying shareholder
approved stock-based plan permitting payments in stock.
2. Certain Mutual Definitions, Etc. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Agreement are set
forth in Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual
Interpretations"). Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual
Interpretations. The Mutual Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Agreement are part of and
incorporated by reference into this Agreement as if fully set forth herein.
3. Independent Grant; No Plan. The Corporation hereby irrevocably grants a Phantom Stock Award to the Grantee equal to 378788 Phantom
Stock Units (which correspond to the same number of SGRP Shares), effective as of April 3, 2023 (the "Grant Date"). For informational purposes only, if
then vested those Phantom Stock Units would have had an aggregate Fair Market Value of $500,000 for the Grantee as of the Grant Date based on the Fair
Market Value of $1.32 per SGRP Share as of the Grant Date. The number of the Grantee's Phantom Stock Units shall be automatically adjusted to reflect
the specified events respecting the SGRP Shares as provided in this Agreement. This Agreement, the Phantom Stock Award and the Phantom Stock Units
granted hereunder are an independent stand-alone grant and have not been granted under, subject to or governed by any past, present or future SGRP stock
compensation plan.
4. Vesting. (a) None of the Phantom Stock Units were vested as of the Grant Date. Except for any earlier vesting provided in this Agreement, the
Phantom Stock Units granted and issued hereunder to the Grantee shall vest over the one (1) year period following the Grant Date provided that the
Grantee is an employee of one of SGRP and its subsidiaries (collectively, the "Company") on April 3, 2024, which will be the applicable vesting date
subject to achievement of the criteria provided below. The vesting will be upon the achievement by the Company of 70% or greater of the budgeted 2023
Global EBIT.
(b) The calculation of the achievement of the 2023 Global EBIT will be based on SGRP's audited financial statements and adjusted for each of
the following:
(i) Total Operating Income and Domestic Operating Income each shall exclude any and all applicable accruals, expenses, assumptions,
reimbursements, indemnifications, advancements and payments arising out of or related to any agreement or arrangement with related parties,
shareholders or directors endeavoring to resolve any debt, obligations, claims or governance issues with any of them.
(ii) Total Operating Income shall also shall exclude both the negative and positive effects (i.e., both upside and downside) of (A) any and all
domestic or foreign mergers and acquisitions (including new joint ventures), which effects include (without limitation) any and all applicable
accruals, revenues, expenses, income and payments arising out of or related to any such domestic or foreign merger or acquisition, (B) an
increase or decrease in Non-Executive Director Board Compensation; and (C) of normal and customary accounting adjustments required by an
outside auditor or third party.
(iii) In the discretion of management with the approval of the Board, Total Operating Income and Domestic Operating Income each may exclude
the negative and positive effects (i.e., both upside and downside) any and all applicable any income or expense item that was extraordinary,
non-operational, non-recurring or non-routine.
(c) The Grantee agrees that: (i) in the event RSUs are available for such exchange under an underlying shareholder approved stock-based plan,
the Corporation shall have the right, in its discretion, at any time and from time to time to exchange unvested RSUs for the Grantee’s Phantom Shares (on a
one for one basis) for some or all of the Phantom Shares in any tranche, subject to the same vesting criteria; and (ii) acknowledges that unvested RSUs may
be settled in cash or stock (or in combination).
5. Payment on Vesting; Tax Withholdings. Immediately upon each vesting the Grantee is irrevocably entitled to receive and within 15 days
shall receive from the Corporation, without any payment by the Grantee to the Corporation, a cash payment equal to the product of: (i) the number of the
then vested Grantee's Phantom Stock Units on applicable vesting date, as and to the extent adjusted pursuant to Section 9, below; times (ii) the sum of (1)
Vesting Value of each SGRP Share on applicable vesting date; provided that the Corporation shall withhold from such payment and remit to the applicable
authorities all required tax withholding amounts. "Vesting Value" shall mean the greater of the applicable Fair Market Value or Change of Control Value.
6. No Employment Agreement and Other Agreements not Affected. Nothing in this Agreement shall confer any right on the Grantee to
become or continue as an employee of any SGRP Company, or shall in any way limit or restrict in any way with any right of any SGRP Company to
terminate the Grantee's employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other
separate agreements. This Agreement does not replace, amend or affect any other written stock option, offer of employment, severance, separation,
termination or other agreement of between the Grantee and the Corporation (each a "Separate Agreement") and no other agreement shall replace, amend or
affect this Agreement (unless specifically referencing this Agreement by name and date).
7. No Stock Rights or other Equity Interest. This Agreement does not create or convey any equity or ownership interest in the Corporation or
in or to any SGRP Shares or any right or entitlement to acquire or receive any such interest or shares, or any right or entitlement under or commonly
associated with any such interest or shares, including (without limitation) any dividend, voting, approval, inspection or appraisal right.
8. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Agreement or in any Separate Agreement:
(a) Change in Control. All of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest upon any Change
in Control notwithstanding any vesting schedule in the Agreement.
(b) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 4 above, all of the
Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting schedule in the Agreement.
(c) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's permanent Disability and prior to vesting
pursuant to 3 above, all of the Grantee's remaining unvested Phantom Stock Units shall immediately and automatically vest notwithstanding any vesting
schedule in the Agreement.
(d) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Agreement during such leave if the period of the leave does not exceed 180 days, or, if longer, so long as the individual's
right to re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP
Company has consented by policy or in writing to a longer absence. If the period of leave exceeds 180 days and the individual's right to re-employment is
not guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 181st day of such leave.
9. Adjustments upon Changes in Common Stock and Certain Other Events. (a) Notwithstanding any other provision of this Agreement, in
the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of
shares or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event (each an
"Adjustment Event"), in each case other than any Change in Control, the aggregate number and kind of shares subject to outstanding Phantom Stock Units
shall be automatically and immediately adjusted to preserve the inherent economic value of the Phantom Stock Award and the intent and purposes of this
Agreement, consistent (to the extent applicable) with the relevant provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA,
Securities Law, Exchange Rules, Accounting Standards and other Applicable Law. This mandatory adjustment and SGRP's determination of the mechanics
of its implementation shall be conclusive and binding on all Parties and take effect on the Corporation's written notice to the Grantee. Such adjustment may
provide for the elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next
whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would
cause this Agreement to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the
adoption of a plan requiring stockholder approval.
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10. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation
that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Agreement or
the Phantom Stock Units; and neither the Corporation nor any of its Representatives has ever promised or agreed to in any way ever prepare or file such a
Registration Statement;
(b) The Phantom Stock Units have been acquired by the Grantee for his own account, for investment only and not with a view to the
resale or distribution thereof.
(c) Nothing herein shall be construed as requiring the Corporation to register this Agreement, or the Phantom Stock Units under the
Securities Act.
(d) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the Phantom Stock Units acquired
hereunder, including without limitation, federal and state securities and "blue sky" laws.
(e) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding
or other taxes or charges which it is from time to time required to withhold.
(f) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
11. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Agreement or the Phantom Stock Units, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except
only for those Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither
the Grantee, nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and
the Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Agreement. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining
order or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii)
respecting any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Agreement prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
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(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Agreement providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
12. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Agreement; provided that the foregoing consent shall not deprive
any Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Agreement, or to voluntarily commence or participate
in any other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate
court located elsewhere. In any claim or dispute respecting this Agreement, no Party will raise, and each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely,
unconditionally, irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or
any authorized agent for service of the Party in any claim or dispute respecting this Agreement. Each Party hereby acknowledges and agrees that any
arbitration demand service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx
or other courier; (iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth
above or as such other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final
decision in any arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced
against the applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit
in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly
and forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other
party, each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
13. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Agreement, each of the
representations, agreements and obligations of the Parties contained in this Agreement (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Agreement; (c) shall remain and continue in full force and
effect in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or
(ii) any dispute involving any aspect of his or her employment or this Agreement.
14. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Agreement and the Phantom Stock Units are not assignable,
pledgable or otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply
to a gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the
benefit of the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided
that in all cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation
to be bound by all provisions of this Agreement. Without in any limiting the preceding restrictions, whenever in this Agreement reference is made to any
person, such reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of
the foregoing, all representations, warranties, covenants and other Agreements made by or on behalf of such Party in this Agreement shall inure to the
benefit of the successors and assigns of the other Party. The representations, Agreements and other provisions of this Agreement (including injunctive relief
and arbitration) are for the exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against
any Party. The provisions of this Agreement are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly,
irrespective of whether the Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be
deemed, interpreted or construed to have, any obligation or liability to the Grantee under this Agreement or otherwise.
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15. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Agreement have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement. In the event that any provision of this Agreement shall be
determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having
jurisdiction and venue because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have
the power, and is hereby requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so
that said provision shall be enforceable in such reduced form. In the event that any provision of this Agreement shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having
jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other
governmental authority of the remaining provision of this Agreement, which shall be enforced as if the unenforceable provision were deleted or limited to
the extent provided by such determination, in each case unless the deletion or limitation of the unenforceable provision would impair the practical
realization of the principal rights and benefits of the SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or
other governmental authority of any of the provisions of this Agreement.
16. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Agreement shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Agreement shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Agreement or applicable law.
17. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Agreement
has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
18. Mutual Counterparts; Amendments. This Agreement or any supplement, modification or amendment to this Agreement may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Agreement binding upon all of
its signing or approving parties. This Agreement: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
19. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of Phantom Stock
Units or the disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such
amount in cash promptly upon demand.
20. Compliance with Section 409A of the Code. This Agreement is intended to comply with the "short-term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Agreement fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6)
months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day
after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule,
but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
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21. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement, it has not directly or indirectly received or
acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Agreement, except for those expressly set forth in this Agreement. Except for
any Separate Agreement: this Agreement (including all exhibits and schedules) contains the entire Agreement and understanding of the Parties and
supersede and completely replace all prior and other representations, warranties, promises, assurances and other Agreements, understandings and
information, whether written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other
SGRP Company, with respect to the Phantom Stock Units and the related matters contained in this Agreement.
In Witness Whereof, and in consideration of the provisions set forth in this Agreement and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Agreement intending to be legally bound
by it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
/s/
Antonio Calisto Pato, Chief Financial Officer, Secretary and
Treasurer
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: 1/11/2024
MICHAEL R. MATACUNAS:
/s/
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
1468 Five Hill Trail
Virginia Beach, VA 23452
Dated as of: 1/11/2024
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Agreement
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Agreement.
I. Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Agreement) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Change in Control" shall mean any of the following:
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities;
(b) the consummation of a merger or consolidation of the Corporation (including a merger or consolidation of the Corporation or any direct or
indirect subsidiary of the Corporation) with any other corporation, other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50%of the combined voting power of the voting securities of the Corporation (or such
surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation;
(c) the stockholders of the Corporation approve a plan of complete [dissolution or] liquidation of the Corporation;
(d) the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation (including its interest in or substantially
all of the assets of any material subsidiary of the Corporation, with its U.S., Brazilian and South African subsidiaries each being deemed a material
subsidiary of the Corporation), or
(e) the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another entity); or
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(f) ""'individuals who, as of the date this Agreement (the "Agreement Date"), constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that any individual subsequent to the Agreement Date becoming a Super
Independent Director (as defined in SGRP's By-Laws on the Agreement Date) whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Incumbent Board.
"Change of Control Value" shall be equal to whichever of the following items is applicable to the Change of Control:
(a) the highest price per SGRP Share offered to or received by shareholders of the Corporation in any acquisition, merger, consolidation or other
reorganization, or
(b) the highest price per SGRP Share offered to or received by the applicable shareholders of the Corporation in any tender offer or exchange
offer or in any sale described in by clause (g) or (h) of the definition of a Change in Control, whereby a Change of Control takes place, or
(c) in the event that the consideration offered to shareholders of the Corporation in any transaction described in the definition of a Change in
Control consists of anything other than cash, the Corporation shall determine in good faith the fair cash equivalent of the portion of the
consideration offered that is other than cash, subject to the approval of the Super Independent Directors (as defined in the Corporation's Bylaws),
or
(d) in all other events, the closing price of a SGRP Share on the date of the Change of Control or if there were no trades on that date, then on the
preceding date on which a trade occurred.
"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
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"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Agreement or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Agreement or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in
any particular case or class of cases.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II. Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Agreement, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated
by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Agreement to dollars ($) shall mean
U.S. Dollars unless otherwise specified.
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Exhibit 10.14
SPAR GROUP, INC.
INDUCEMENT RSU GRANT AND CONTRACT
This Inducement Restricted Stock Unit Grant and Contract has been entered into and is effective as of March 10, 2023 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the manner provided herein, this "Contract"), between the SPAR Group, Inc.,
a Delaware corporation ("SGRP" or the "Corporation"), currently having an address at 1910 Opdyke Court, Auburn Hills, MI 48326, and Antonio Calisto
Pato (the "Grantee" or "Awardee"), currently having an address at 1207 Willow Oaks Trail, Matthews, NC 28104. The Grantee and the Corporation may be
referred to individually as a "Party" and collectively as the "Parties".
W I T N E S S E T H:
1. Inducement Restricted Stock Unit Grant, No Plan, and Certain Definitions. (a) The Corporation, in accordance with the resolution made
by the Board of Directors of the Corporation, hereby irrevocably grants the following inducement award of restricted stock units ("RSUs") to the Grantee,
with each RSU representing Grantee's right to be issued on a future date, to the extent then vested, one share of the Common Stock, $.01 par value per
share, issued by SGRP ("Common Stock"), or its cash equivalent at that time (at the Corporation's option as provided below):
117,188 RSUs, which on March 10, 2023 (the RSU issuance date) had an aggregate Fair Market Value of $150,000 and represented 117,188
shares of SGRP's Common Stock based on the market price of $1.28/share on that date.
(b) Those RSUs shall be effective and shall be recorded by the Corporation on its books and records on and as of such issuance date.
(c) This Contract and the RSUs granted hereunder are an inducement award and not granted under, subject to or governed by any past, present or
future SGRP stock compensation plan. Certain Mutual Definitions and Interpretations (and other provisions) applicable to this Contract are set forth in
Exhibit A hereto (as the same may thereafter be supplemented, modified, amended, restated or replaced from time to time, the "Mutual Interpretations").
Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the Mutual Interpretations. The Mutual
Interpretations and all other exhibits and schedules attached to or incorporated by reference into this Contract are part of and incorporated by reference into
this Contract as if fully set forth herein.
2. No Employment Agreement, No Stock Rights, and Other Agreements not Affected. (a) Nothing in this Contract shall confer any right on
the Grantee to become or continue as an employee of any SGRP Company, shall confer any voting, dividend or other stockholder right on the Grantee
under any share of Common Stock, or shall in any way limit or restrict in any way with any right of any SGRP Company to terminate the Grantee's
employment at any time for any reason whatsoever. The Grantee and the Corporation may enter or may have entered into other separate agreements,
including (without limitation) the Grantee's Change of Control Severance Agreement with SGRP made and entered into and effective as of February 28,
2023 (the "COCSA"). This Contract does not replace, amend or affect the COCSA or any other written stock option, offer of employment, severance,
separation, termination or other agreement of between the Grantee and the Corporation (together with the COCSA, each a "Separate Agreement") and no
other agreement shall replace, amend or affect this Contract (unless specifically referencing this Contract by name and date).
(b) The Grantee shall not have the rights of a stockholder with respect to such shares of Common Stock to be received hereunder until the date of
issuance (as elected by the Corporation) of a stock certificate to the Grantee for such shares or, in the case of uncertificated shares, until the date an entry is
made on the books of the Corporation's transfer agent representing such shares.
3. Vesting and Payment. Except for any earlier vesting provided in this Contract, RSUs granted and issued hereunder shall, provided that the
Grantee is then an employee of the Corporation, become fully vested on the first anniversary of the date these RSUs are issued (e.g. RSUs issued on March
10, 2023, will fully vest on March 10, 2024, and immediately upon vesting the Grantee is entitled to receive and shall receive from the Corporation,
without any payment by the Grantee to the Corporation (other than required tax withholding amounts), one share of Common Stock for each RSU or, in the
Corporation's sole discretion, an amount in cash equal to the product of multiplying: (i) the number of such shares of Common Stock represented by the
vested RSU; times (ii) the Fair Market Value per share on the date of vesting (such amount, the "RSU Value"); or a combination thereof. Payment to
Grantee hereunder shall be made in cash or shares of Common Stock, or such combination thereof, as determined by the Corporation. Any payment in
shares of Common Stock shall be affected in book entry or electronic form, provided that issuance and delivery in certificated form shall occur if the
Grantee so requests in writing or the Corporation so directs.
4. Dividends and Other Distributions. Until the RSUs are fully vested, the Grantee shall have no rights to dividends and other distributions
made in cash or property with respect to the RSUs other than shares of Common Stock that would have been paid with respect to the shares represented by
those RSUs if such shares were outstanding. If any deemed dividends or other distributions would be paid in shares of Common Stock with respect to the
RSUs, such shares shall be considered to increase Grantee's RSUs with respect to which they were declared based on one share equaling one RSU.
5. Early Vesting and Termination. Except to the extent more favorable treatment may otherwise be expressly accorded to the Grantee in this
Contract or in any Separate Agreement:
(a) Death. If the Grantee dies while the Grantee is an employee of any SGRP Company and before vesting pursuant to 3 above the RSUs granted
and issued to the Grantee under this Contract will become fully vested automatically and immediately notwithstanding any vesting schedule in the
Contract.
(b) Disability. If the Grantee is no longer employed by any SGRP Company due to the Grantee's Disability and prior to vesting pursuant to 3
above, the RSUs granted and issued to the Grantee under this Contract will become fully vested automatically and immediately notwithstanding any
vesting schedule in the Contract.
(c) Leave of Absence. An individual on military leave, sick leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of this Contract during such leave if the period of the leave does not exceed 90 days, or, if longer, so long as the individual's right to
re-employment with or re-engagement by such SGRP Company, as the case may be is guaranteed either by statute or by contract or such SGRP Company
has consented by policy or in writing to a longer absence. If the period of leave exceeds 90 days and the individual's right to re-employment is not
guaranteed by statute, contract, policy or consent, the employment relationship shall be deemed to have terminated on the 91st day of such leave.
(d) Change in Control. If a Change in Control (as defined in the COCSA, whether or not then in effect) occurs or has been agreed upon in
writing while the Grantee is an employee of any SGRP Company and before vesting pursuant to 3 above, the RSUs granted and issued to the Grantee under
this Contract will become fully vested automatically and immediately notwithstanding any vesting schedule in this Contract.
6. Adjustments upon Changes in Common Stock and Extraordinary Events. (a) Notwithstanding any other provision of this Contract, in the
event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, spin-off, split-up, combination or exchange of shares
or the like that results in a change in the number or kind of shares of Common Stock that were outstanding immediately prior to such event, the aggregate
number and kind of shares subject to outstanding RSUs shall be appropriately adjusted by SGRP (or by an outside accounting or financial services firm
chosen and used in SGRP's discretion) to preserve the inherent economic value of the Grant and the intent and purposes of this Contract, consistent with
this Contract and the applicable provisions of the Internal Revenue Code of 1986, as amended ("Code"), ERISA, Securities Law, Exchange Rules,
Accounting Standards and other Applicable Law, and this mandatory adjustment and SGRP's determination of the mechanics of its implementation shall be
presumptively correct absent manifest error and take effect on the Corporation's written notice to the Grantee. Such adjustment may provide for the
elimination of fractional shares that might otherwise be subject to the Award without payment therefore and for the rounding up to the next whole cent in
the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section if such adjustment: (i) would cause this
Contract to fail to comply with Section 409A of the Code or with Rule 16b-3 (if applicable to such Award); or (ii) would be considered as the adoption of a
plan requiring stockholder approval.
7. Grantee's Acknowledgments and Agreements. The Grantee acknowledges, represents and warrants to and agrees with the Corporation that:
(a) No Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), covers or will cover this Contract, the
RSUs, or any of the shares of Common Stock distributable hereunder; and neither the Corporation nor any of its Representatives has ever promised or
agreed to in any way ever prepare or file such a Registration Statement;
(b) The shares of Common Stock to be issued under the RSUs, if any, will be acquired by the Grantee for his own account, for investment
only and not with a view to the resale or distribution thereof. In any event, the Grantee shall notify the Corporation of any proposed resale of the shares of
Common Stock issued to him hereunder;
(c) Any subsequent resale or distribution of shares of Common Stock by the Grantee shall be made only pursuant to: (x) Rule 144; (y) a
Registration Statement under the Securities Act that is effective and current with respect to the sale of shares of Common Stock being sold; or (z) a specific
exemption from the registration requirements of the Securities Act, but in claiming such exemption, the Grantee shall, prior to any offer of sale or sale of
such shares of Common Stock, provide the Corporation (unless waived by the Corporation) with a favorable written opinion of counsel, in form and
substance satisfactory to the Corporation, as to the applicability of such exemption to the proposed sale or distribution.
(d) Nothing herein shall be construed as requiring the Corporation to register this Contract, the RSUs or the shares subject to the RSUs
under the Securities Act.
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(e) The Corporation may affix appropriate legends upon the certificates for shares of Common Stock issued hereunder and may issue such
"stop transfer" instructions to its transfer agent in respect of such shares as it determines, in its discretion, to be necessary or appropriate to: (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of the Securities Act; or (ii) or any other agreement between the Corporation
and the Grantee with respect to such shares of Common Stock.
(f) The Grantee will comply with all applicable laws relating to the grant, issuance and exercise of the RSUs and the disposition of the
shares of Common Stock acquired hereunder, including without limitation, federal and state securities and "blue sky" laws.
(g) The Corporation shall be entitled to withhold from amounts to be paid to the Grantee hereunder any federal, state or local withholding or
other taxes or charges which it is from time to time required to withhold.
(h) The Corporation shall be entitled to rely on an opinion of the independent tax, benefits or securities counsel selected and paid by the
Corporation (which may be regular counsel of the Corporation) if any question as to the need or availability of any such a Securities Law exemption or the
amount or requirement of any such withholding shall arise.
8. Mutual Agreement to Arbitrate. (a) Binding Arbitration: The Grantee and the Corporation (on behalf of itself and each other SGRP
Company) mutually consent and agree to the resolution by binding arbitration of any and all claims (whether under common law, statute, regulation or
otherwise), that the Grantee may have against the Corporation, any other SGRP Company, or any of their respective Representatives, and all successors and
assigns of any of them, or that the Corporation or other applicable SGRP Company might have against the Grantee, directly or indirectly arising under or
involving this Contract or the RSUs, in each case except for any Arbitration Exclusion as expressly provided (and defined) below. Except only for those
Arbitration Exclusions, binding arbitration shall replace going before any government agency or a court for a judge or jury trial, and neither the Grantee,
nor the Corporation nor any other applicable SGRP Company is permitted to bring any claim or action before any such entity. The Grantee and the
Corporation (on behalf of itself and each other applicable SGRP Company) each waive the right to have a court or jury trial on any arbitrable claim. For
clarity, the Corporation and at least one other applicable SGRP Company may (and sometimes will) all be involved in the same services or issues, and
Grantee therefore agrees that any disputes that Grantee has with the Corporation or other SGRP Company shall be subject to binding arbitration as set forth
in this Contract. "Arbitration Exclusion" shall mean any action, suit or other proceeding: (i) seeking any temporary or other injunction or restraining order
or similar equitable relief in any jurisdiction; (ii) seeking any enforcement of any arbitration or court award or judgment in any jurisdiction; (iii) respecting
any appeal of any lower court or arbitration decision; or (iv) any claim that as a matter of law is not arbitrable.
(b) Arbitration Law, Rules, Venue and Discovery: The Federal Arbitration Act ("FAA") shall govern this section, or if for any reason the FAA
does not apply, the arbitration law of the state in which the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Arbitration will be conducted pursuant to the applicable rules of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"); provided, however, that if
JAMS does not have an office within 200 miles of the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP
Company, then the arbitration will be conducted pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration will take place at
the JAMS (or AAA) office closest to the place where the Grantee last rendered labor or services to the Corporation or other applicable SGRP Company.
Each party to the arbitration shall have the right to take depositions of four (4) fact witnesses and any expert witness designated by another party. Each
party to the arbitration also shall have the right to make requests for production of documents to any party and to subpoena documents from third parties to
the extent allowed by law. Requests for additional depositions or discovery may be made to the arbitrator. The arbitrator may grant such additional
discovery if the arbitrator finds that the party has demonstrated that it needs that discovery to adequately arbitrate the claim, taking into account the parties'
mutual desire to have a speedy, less formal, cost-effective dispute-resolution mechanism. The JAMS rules are available at www.jamsadr.com, and the AAA
rules are available at www.adr.org.
(c) No Class or Collective Action; Government Complaints: Notwithstanding any provision of the JAMS (or AAA) rules, arbitration shall occur
on an individual basis only. The Grantee and the Corporation (on behalf of itself and each other SGRP Company) each waive the right to initiate,
participate in, or recover through, any class or collective action available to it. Nothing in this Contract prevents the Grantee, the Corporation or other
applicable SGRP Company from filing or recovering pursuant to a complaint, charge, or other communication with any federal, state or local governmental
or law enforcement agency.
(d) Arbitration Fees and Costs: The Corporation will be responsible for paying any filing fee and the fees and costs of the arbitrator; provided,
however, that if the Grantee is the arbitration party initiating the claim, the Grantee will contribute an amount equal to the filing fee to initiate a claim in the
court of general jurisdiction in the state in which the Grantee last rendered Services to the Corporation or other applicable SGRP Company. Each party to
the arbitration shall pay in the first instance its own arbitration and litigation costs and attorneys' fees, if any. However, if any party prevails on a statutory
claim that affords the prevailing party attorneys' fees and/or arbitration or litigation costs, or if there is a written Contract providing for attorneys' fees
and/or litigation costs, the arbitrator shall rule upon a motion for attorneys' fees and/or litigation costs under the same standards a court would apply under
the law applicable to the claim(s) at issue.
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9. Consent to Governing Law, Jurisdiction and Venue; Waiver of Personal Service, Etc. To the greatest extent permitted by applicable law,
this Contract shall be governed by and construed in accordance with the applicable federal law of the United States of America, the Uniform Commercial
Code and General Corporation Law of the State of Delaware, and to the extent not governed by such federal law or Delaware law, by the applicable law of
the State of Michigan, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. Without in any
way limiting the Parties agreement to binding arbitration, each Party hereby consents and agrees that the District Court of the State of Michigan for the
County of Oakland and the United States District Court for the Eastern District of Michigan each shall have personal jurisdiction and proper venue with
respect to any claim or dispute between the Grantee and the Corporation respecting this Contract; provided that the foregoing consent shall not deprive any
Party or beneficiary of the right in its discretion to demand binding arbitration as provided in this Contract, or to voluntarily commence or participate in any
other forum having jurisdiction and venue or deprive any Party of the right to appeal the decision of any such arbitrator court to a proper appellate court
located elsewhere. In any claim or dispute respecting this Contract, no Party will raise, and each Party hereby absolutely, unconditionally, irrevocably,
expressly and forever waives, any objection or defense to any such jurisdiction as an inconvenient forum. Each Party hereby absolutely, unconditionally,
irrevocably, expressly and forever waives personal service of any arbitration demand, summons, complaint or other process on the Party or any authorized
agent for service of the Party in any claim or dispute respecting this Contract. Each Party hereby acknowledges and agrees that any arbitration demand
service of process may be made upon the Party by or on behalf of the other Party by: (i) certified, registered or express mail; (ii) FedEx or other courier;
(iii) fax; (iv) hand delivery; or (v) any manner of service available under the applicable law, in each case at his or her address set forth above or as such
other address as may be designated by the Party in a written notice received by SGRP. Each Party acknowledges and agrees that a final decision in any
arbitration or any final judgment in any action, suit or proceeding shall be conclusive and binding upon the Parties and may be enforced against the
applicable Party by an action, suit or proceeding in such other jurisdiction. To the extent that the Grantee may be entitled to immunity from suit in any
jurisdiction, from the jurisdiction of any court or from any other legal process, each Party hereby absolutely, unconditionally, irrevocably, expressly and
forever waives such immunity. In any action, suit or proceeding, in any jurisdiction brought by either the Corporation or the Grantee against the other party,
each Party hereby absolutely, unconditionally, irrevocably, expressly and forever waives trial by jury.
10. Mutual Survival of Obligations and Agreements, Etc. Except as otherwise expressly provided in this Contract, each of the
representations, agreements and obligations of the Parties contained in this Contract (including Sections 7 through 18 and the Mutual Interpretations): (a)
shall be absolute and unconditional; and (b) shall survive the execution and delivery of this Contract; (c) shall remain and continue in full force and effect
in accordance with its terms without regard to: (i) the end of the Grantee's employment with the Corporation or other applicable SGRP Company; or (ii)
any dispute involving any aspect of his or her employment or this Contract.
11. Mutual Successors and Assigns; Assignment; Intended Beneficiaries. This Contract and the RSUs are not assignable, pledgable or
otherwise transferable by the Grantee other than by will or the laws of descent and distribution, provided, however, this Section shall not apply to a
gratuitous transfer to: (i) the Grantee's spouse, children or grandchildren (the "Family Members"); or (ii) a trust established by the Grantee for the benefit of
the Grantee or the Grantee's Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners; provided that in all
cases the Board of Directors or its delegate consents to such transfer and the transferee agrees in writing on a form prescribed by the Corporation to be
bound by all provisions of this Contract. Without in any limiting the preceding restrictions, whenever in this Contract reference is made to any person, such
reference shall be deemed to include the successors, assigns, and legal Representatives of such person, and, without limiting the generality of the foregoing,
all representations, warranties, covenants and other Contracts made by or on behalf of such Party in this Contract shall inure to the benefit of the successors
and assigns of the other Party. The representations, Contracts and other provisions of this Contract (including injunctive relief and arbitration) are for the
exclusive benefit of the Parties hereto and the other SGRP Companies, and, except as otherwise expressly provided herein, no other person shall have any
right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against any Party. The provisions of
this Contract are expressly intended to benefit each SGRP Company, which may enforce any such provisions directly, irrespective of whether the
Corporation participates in such enforcement. However, no SGRP Company other than the Corporation shall have, or shall be deemed, interpreted or
construed to have, any obligation or liability to the Grantee under this Contract or otherwise.
12. Interpretation, Headings, Severability, Reformation, Etc. The Parties agree that the provisions of this Contract have been negotiated,
shall be construed fairly as to all Parties, and shall not be construed in favor of or against any Party. The section headings in this Contract are for reference
purposes only and shall not affect the meaning or interpretation of this Contract. In the event that any provision of this Contract shall be determined to be
superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a court or other governmental authority having jurisdiction and venue
because of the scope or duration of any such provision, the Parties agree that such court or other governmental authority shall have the power, and is hereby
requested by the Parties, to reduce the scope or duration of such provision to the maximum permissible under applicable law so that said provision shall be
enforceable in such reduced form. In the event that any provision of this Contract shall be finally determined to be superseded, invalid, illegal or otherwise
unenforceable (in whole or in part) pursuant to applicable law by an court or other governmental authority having jurisdiction and venue, that determination
shall not impair or otherwise affect the validity, legality or enforceability: (a) by or before that court or other governmental authority of the remaining
provision of this Contract, which shall be enforced as if the unenforceable provision were deleted or limited to the extent provided by such determination,
in each case unless the deletion or limitation of the unenforceable provision would impair the practical realization of the principal rights and benefits of the
SGRP Companies hereunder (if and to the extent so limited); or (b) by or before any other court or other governmental authority of any of the provisions of
this Contract.
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13. Mutual Non-Waiver by Action, Cumulative Rights, Etc. Any waiver or consent from any Party or (as to its rights) any SGRP Company
respecting any provision of this Contract shall be effective only in the specific instance for which given and shall not be deemed, regardless of frequency
given, to be a further or continuing waiver or consent. The failure or delay of any Party at any time to require performance of, or to exercise or enforce its
rights or remedies with respect to, any provision of this Contract shall not affect the right of any Party at a later time to exercise or enforce any such
provision. No notice to or demand on any Party shall entitle such Party to any other or notice or demand in similar or other circumstances. All rights,
remedies and other interests of each Party hereunder are cumulative and not alternatives, and they are in addition to (and shall not limit) any other right,
remedy or other interest of any Party under this Contract or applicable law.
14. Mutual Waiver of Jury Trial, All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought against the
Grantee by the Corporation or any other SGRP Company, or vice versa, each Party and the Corporation each waive trial by jury. This waiver of jury trial by
each Party, and each other waiver, release, relinquishment or similar surrender of rights (however expressed) expressly made by a Party in this Contract has
been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.
15. Mutual Counterparts; Amendments. This Contract or any supplement, modification or amendment to this Contract may have been
executed in writing or approved electronically in counterpart copies of the document or of its signature page, each of which may have been delivered by
mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single Contract binding upon all of its
signing or approving parties. This Contract: (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or
terminated orally; (ii) may only be supplemented, modified or amended in a document executed in writing and/or approved electronically by all of the
Parties hereto specifically referencing this Contract by date, title, parties and provision(s) being amended; and (iii) may only be waived, released or
terminated in a document executed in writing and/or approved electronically by each Party or other person against whom enforcement thereof may be
sought.
16. Withholding. The Corporation may withhold cash and/or shares of Common Stock to be issued to the Grantee in the amount which the
Corporation determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or vesting of RSUs or the
disposition of the underlying shares of Common Stock. Alternatively, the Corporation may require the Grantee to pay the Corporation such amount in cash
promptly upon demand.
17. Compliance with Section 409A of the Code. This Contract is intended to comply with the "short- term deferral" rule set forth in Treasury
Regulation Section 1.409A-1(b)(4). However, if this Contract fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt
from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and if Grantee is a "Specified Employee" (within the
meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section
1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months
thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the date that is six (6) months and one day after
the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule, but if
and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on Grantee in respect of the shares under Section 409A
of the Code. Each installment of shares that vests is a "separate payment" for purposes of Treasury Regulation Section 1.409A-2(b)(2).
18. Entire Agreement. Each Party acknowledges and agrees that, in entering into this Contract, it has not directly or indirectly received or acted
or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral,
express, implied or otherwise) from or on behalf of the other Party, or (in the case of the Grantee) from any other SGRP Company, or any of their
respective Representatives, respecting any of the matters contained in this Contract, except for those expressly set forth in this Contract. Except for any
Separate Agreement: this Contract (including all exhibits and schedules) contains the entire Contract and understanding of the Parties and supersede and
completely replace all prior and other representations, warranties, promises, assurances and other Contracts, understandings and information, whether
written, electronic, oral, express, implied or otherwise, from a Party or between them, or (in the case of the Grantee) from any other SGRP Company, with
respect to the RSUs and the related matters contained in this Contract.
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In Witness Whereof, and in consideration of the provisions set forth in this Contract and other good and valuable consideration (the receipt and
adequacy of which is hereby acknowledged by each of them), the Parties hereto have executed and delivered this Contract intending to be legally bound by
it and for it to be effective as of the earliest of date first written above and the dates written below:
EMPLOYER:
SPAR Group, Inc.
By:
[ ▲ Officer's Signature ▲]
Mike Matacunas, CEO
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Dated as of: March 10, 2023
GRANTEE:
Antonio Calisto Pato
[ ▲ Grantee's Signature ▲ ]
Employee's Current Address:
1207 Willow Oaks Trail
Matthews, NC 28104
Dated as of: March 10, 2023
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EXHIBIT A – MUTUAL DEFINITIONS AND INTERPRETATIONS
The definitions, interpretations and other provisions of this Exhibit A shall apply to, and are hereby incorporated by reference into, this Contract
and each schedule and exhibit. Capitalized terms shall have the meanings assigned to them in this Exhibit, and terms not so defined shall have the meanings
assigned to them elsewhere in this Contract.
I.
Certain Defined Terms
"Affiliate" of a referenced person shall mean: (i) any direct or indirect subsidiary or parent of such person; (ii) any other person directly or
indirectly controlling, controlled by or under common control with the referenced person, whether through ownership, by contract, arrangement or
understanding or otherwise; (iii) any person (a "Significant Shareholder") that has more than ten (10) percent of the equity of, profits from or voting power
respecting a referenced person, whether beneficially or otherwise; (iv) any director, officer, partner, manager or other executive of a referenced person (an
"Officer"); (v) any member of the immediate family of any Significant Shareholder or Officer of the referenced person, including any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son- in-law, daughter-in-law, brother-in-law, or sister-in-law, wherever residing (each a
"Relative"); (vi) any other person in which a Significant Shareholder, Officer or Relative of the referenced person also is a Significant Shareholder or
Officer of such other person; or (vii) any other person that is, or is deemed to be, an affiliate, family member or other related party of the referenced person
under any Applicable Law. However, no Party shall (for the purposes of this Contract) be treated as or deemed to be an Affiliate or Representative of the
other Party. "Accounting Standards" shall mean the generally accepted accounting standards then in effect, as established, supplemented, modified,
amended, restated or replaced from time to time by the Financial Accounting Standards Board and other generally recognized U.S. accounting authorities.
"Applicable Law" shall mean, to the extent applicable: (i) any Exchange Rules; (ii) ERISA, the Code or other federal tax or similar law; (iii) the
Securities Law and other federal law of the United States of America; (iv) the DEGCL and the DEUCC; (v) to the extent that such federal law is not
dispositive and does not preempt local law, and the DEGCL and DEUCC are not applicable, the Applicable Law of the State of Michigan; and (vi) to the
extent the foregoing are inapplicable, any other applicable federal, state, territorial, provincial, county, municipal or other governmental or quasi-
governmental law, statute, ordinance, requirement or use or disposal classification or restriction; whether domestic or foreign; in each case: (A) including
(without limitation) any and all rules and regulations promulgated under any of the foregoing and then in effect; and (B) as the same may be adopted,
supplemented, modified, amended or restated from time to time or any corresponding or succeeding law or provision.
"Business Day" shall mean any day other than: (i) any Saturday or Sunday; or (ii) any day the Securities and Exchange Commission is closed.
"Cause" shall mean, in connection with the termination of an Awardee: (I) "cause", as such term (or any similar term, such as "with cause",
"Termination for Cause", or the like) is defined in any employment, consulting, severance, or other applicable agreement for services or termination
agreement between such Awardee and any SGRP Company or SGRP Consultant; or (II) in the absence of such an agreement, "cause" as such term is
defined in the Contract executed by the Corporation and such Awardee pursuant to Section 10; or (III) in the absence of both of the foregoing, any of the
following reasons: (other than where the applicable events are based upon or also constitute good reason for the Awardee's actions): (i) the Awardee's
willful, grossly negligent or repeated breach (whether through neglect, negligence or otherwise) in any material respect of, or the Awardee's willful, grossly
negligent or repeated nonperformance, misperformance or dereliction (whether through neglect, negligence or otherwise) in any material respect of any of
his or her duties and responsibilities to any SGRP Company or the Awardee's employer, whether under, any agreement or document with any SGRP
Company or the Awardee's employer, any of the directives, ethics or other codes, controls, policies or procedures of any SGRP Company or the Awardee's
employer adopted or implemented from time to time, or otherwise, in each case other than in connection with any excused absence or diminished capacity;
(ii) the gross or repeated disparagement by the Awardee of the business or affairs of the Corporation, any SGRP Company, Awardee's employer or any of
their Representatives that in the reasonable judgment of SGRP adversely affected or would be reasonably likely to adversely affect the operations or
reputation of any such person; (iii) any resume, application, report or other information furnished to any SGRP Company or Awardee's employer by or on
behalf of the Awardee shall be in any material respect untrue, incomplete or otherwise misleading when made or deemed made; (iv) the Awardee is indicted
for, charged with, admits or confesses to, pleads guilty or no contest to, adversely settles respecting or is convicted of: (A) any willful dishonesty or fraud
(whether or not related to any SGRP Company or Awardee's employer); (B) any material breach of any Applicable Law; (C) any assault or other violent
crime; (D) any theft, embezzlement or willful destruction by the Awardee of any asset or property of any SGRP Company or Awardee's employer or any of
their respective representatives, customers or vendors; (E) any other misdemeanor involving moral turpitude; or (F) any other felony; (v) alcohol or drug
abuse by the Awardee; or (vi) any other event or circumstance that constitutes cause for termination of an employee under Applicable Law and is not
described in another clause of this subsection; provided, however, that termination for Cause shall not be considered present unless the same has been
determined by the SGRP SGRP Compensation Committee in their sole and absolute discretion.
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"Charter" shall mean, as and to the extent applicable, the By-Laws of the Corporation, as amended, the charter of the SGRP Compensation
Committee or other applicable SGRP Committee, as amended, and all resolutions of the Board, SGRP Compensation Committee or such other committee
having continuing effect.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"DEGCL" shall mean the General Corporation Law of the State of Delaware, as amended.
"DEUCC" shall mean Article 8 of the Uniform Commercial Code of the State of Delaware, as amended.
"Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.
"Exchange Rules" shall mean the charter or other organizational or governance document or listing or other requirements of the applicable
national securities exchange or market on which SGRP's stock is listed or quoted (currently Nasdaq), or any other applicable self-regulatory or governing
body or organization, and the rules and regulations promulgated thereunder, as the same may be adopted, supplemented, modified, amended or restated
from time to time or any corresponding or succeeding rule, regulation or provision.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any and all rules and regulations promulgated
thereunder and then in effect.
"Fair Market Value" shall mean the fair market value of a share of Common Stock on any day that shall be: (i) if the principal market for the
Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a
consolidated tape reflecting transactions on such exchange; or (ii) if the principal market for the Common Stock is not a national securities exchange, the
average of the closing bid and asked prices per share for the Common Stock on such day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (i) and (ii) of this subsection are all inapplicable because the
Corporation's Common Stock is not publicly traded, or if no trades have been made or no quotes are available for such day, the fair market value of a share
of Common Stock shall be determined by the Administrators by any method consistent with the provisions of the Code, ERISA, Securities Law, Exchange
Rules and Accounting Standards applicable to the relevant Awards.
"Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated Awardee with respect to an Award.
"Representative" shall mean any shareholder, partner, member, director, executive, manager, officer, employee, contractor or subcontractor (in
each case excluding a Party in the case of the other Party and excluding both Parties in the case of a Third Party), attorney, agent or other representative of
the referenced person or any of its subsidiaries or other Affiliates. The Corporation's Representatives include (without limitation) the field administrators
and the independent field merchandisers, technicians and other specialists engaged by the Corporation or its Affiliates and utilized in the Services.
"Retires" and "Retirement" shall mean the voluntary termination by an Awardee of such person's status as a director (whether or not an employee),
officer (whether or not an employee), employee or consultant to any SGRP Company or SGRP Consultant, in each case so long as: (i) such person shall be
at least 65 years of age or such younger age as: (A) may be specifically provided for retirement in the applicable Contract or Awardee's written
employment, consulting, retirement or termination contract; or (B) the Administrators in their discretion may permit in any particular case or class of cases;
and (ii) such person shall not be employed full time by anyone else except as: (A) may be otherwise specifically permitted following retirement in the
applicable Contract or Awardee's written employment or consulting or termination contract; or (B) the Administrators in their discretion may permit in any
particular case or class of cases.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any and all rules and regulations promulgated thereunder and then in
effect.
"Securities Exchange Act" shall mean the Securities Act of 1934, as amended, and any and all rules and regulations promulgated thereunder and
then in effect.
"Securities Law" shall mean the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, any "blue sky" or
other applicable federal or state securities law, or any other comparable law of any applicable jurisdiction, as amended and any and all rules and regulations
promulgated thereunder and then in effect.
"SGRP Board" shall mean the Board of Directors of SGRP.
"SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP
Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified,
amended or restated from time to time in the manner provided therein.
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"SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance
Committee or any other committee of the SGRP Board established from time to time, as applicable.
"SGRP Compensation Committee" shall mean the SGRP Board's Compensation Committee.
"SGRP Company" shall mean SPAR Group, Inc., a Delaware corporation ("SGRP"), or any direct or indirect subsidiary of SGRP. The
subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities
and Exchange Commission (a copy of which can be viewed at the Corporation's website (www.sparinc.com) under the tab/sub-tab of Investor
Relations/SEC Filings).
II.
Singular and Plural Forms, Headings, No Third Party Beneficiaries, and other Interpretations.
In this Contract, the Parties expressly agree that: (a) the meaning of each capitalized term or other word or phrase defined in singular form also
shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof,
and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or
required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes
only and shall not affect the meaning or interpretation of this Contract; (c) the word "event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts; (d) this Contract includes each schedule and exhibit hereto and each SOW, all of which are hereby incorporated by
reference into this Contract, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Contract (including all
schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words
"include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the
provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so;
(f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g)
each reference to any financial or reporting control or governing document or policy of the Corporation shall include those of its ultimate parent, SGRP, or
any Nasdaq or SEC rule or other Applicable Law, whether generically or specifically, shall mean the same as then in effect; (h) each provision of this
Contract shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision; (i) the provisions of this Contract are for the
exclusive benefit of the Parties hereto, and except as otherwise expressly provided herein with respect to a Party's Affiliates and their Representatives (e.g.,
confidentiality, indemnification or the like), no other person (including any creditor), shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those provisions against any Party; (j) and (k) all references in this Contract to dollars ($) shall mean U.S.
Dollars unless otherwise specified.
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Exhibit 10.25
CHANGEOFCONTROLSEVERANCEAGREEMENT
This Change of Control Severance Agreement ("Agreement") between SPAR Group, Inc. a Delaware corporation (the "Corporation" or
"SGRP"), and Antonio Calisto Pato (the "Executive") is made and entered into effective as of February 28, 2023(the "Effective Date"). The Executive and
the Corporation may be referred to individually as a "Party" and collectively as the "Parties". Certain Tax Provisions applicable to this Agreement are set
forth in Annex A are part of and incorporated by reference into this Agreement as if fully set forth herein;
WHEREAS, the Executive has joined SGRP as its Chief Financial Officer, Secretary and Treasurer, and has become a key executive of the
Corporation, and the Executive reports to the Chief Executive Officer of the Corporation (the "CEO");
WHEREAS, the Corporation in its offer letter to the Executive agreed to provide the Executive with this Agreement;
WHEREAS, it is in the best interest of the Corporation and its stockholders if the Executive can approach material business decisions objectively
and without concern for his personal situation; and
WHEREAS, the Corporation recognizes that the possibility of a Change of Control (as defined below) of the Corporation may result in the early
departure of the Executive to the detriment of the Corporation and its stockholders;
WHEREAS, it is in the best interest of the Corporation and its stockholders that the Executive's Change of Control Severance Agreement
conform to those recently executed with other executives; and
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and
Executive agree as follows:
I.
Term of Agreement.
(a) The term of this Agreement ("Term") shall commence on the Effective Date and shall continue in effect through the third anniversary of
the Effective Date; provided, however, commencing on the first day following the Effective Date and on each day thereafter, the Term of this Agreement
shall automatically be extended for one additional day unless the Corporation shall give written notice to Executive that the Term shall cease to be so
extended in which event the Agreement shall terminate on the third anniversary of the date such notice is given.
(b) Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs during the Term of this Agreement, the Term
shall automatically be extended for the 12-month period following the date of the Change of Control.
(c) Termination of this Agreement shall not alter or impair any rights of Executive arising hereunder on or before such termination.
(d) Notwithstanding, and without in any way contradicting, limiting or modifying, the potential severance and other benefits under this
Agreement, the Executive acknowledges and agrees that the Executive's employment is "at will" and may be modified from time to time and terminated at
any time by the Corporation in its discretion, for any reason or no reason, and without notice or benefit of any kind, other than any benefit expressly
provided under the circumstances pursuant to this Agreement.
(e) For clarity, this Agreement does not replace, amend or affect his existing offer letter or Confidentiality Agreement, which each shall
continue in full force and effect in accordance with its terms.
2.
Certain Definitions.
(a)
"Bonus" shall mean an amount equal to the highest annual cash bonus paid or payable to Executive by the Corporation during the two-year period
prior to Executive's termination of employment.
(b)
"Cause" shall mean: (i) the willful and continued failure by Executive to substantially perform Executive's material duties with the Corporation
(other than any such failure resulting from Executive's incapacity due to physical or mental illness); (ii) Executive's commission of one or more
acts that constitute a felony; (iii) Executive willfully engages in gross misconduct materially and demonstrably injurious to the Corporation; or (iv)
one or more significant acts of dishonesty as regards the Corporation or any affiliate. The Corporation shall have the burden of proving Cause with
reasonable evidence and supporting documentation. No act, or failure to act, on Executive's part shall be deemed 'willful' (whether or not
continued) unless it can be reasonably established to have been done, or omitted to be done, by Executive both in bad faith and without reasonable
belief by Executive that Executive's act, or failure to act, was in the best interest of the Corporation. In any event, Executive shall be deemed to
have acted (or failed to act) in good faith and with reasonable belief that it was in the best interest of the Corporation if such action (or inaction)
was based on either (1) the approval of a majority of the Audit Committee, or (2) the written advice of Corporation's auditors, counsel or General
Counsel or the SEC (which advice may be that such action or inaction was permissible or not impermissible or improper irrespective of other
alternatives); provided that Corporation shall still have the burden of proving Cause, the Executive shall not be required to obtain any such
approval or advice, no inference may be drawn from any failure to do so, and Executive may act (or fail to act) based on any personal belief. The
determination of whether Cause exists must be made by the CEO or by a resolution duly adopted by the affirmative vote of not less than 75% of
the entire membership of the Board at a meeting of the Board that was called for the purpose of considering such termination (after reasonable
notice of such determination to Executive and an opportunity for Executive, together with Executive's counsel, to be heard before the CEO or
Board and, if possible, to cure the breach that was the alleged basis for Cause) and then finding that, in the good faith opinion of the CEO or
Board, the Corporation's burden of proof had been met, the Executive was guilty of misconduct constituting Cause and specifying the particulars
thereof in detail. The determination of Cause may be challenged by Executive in arbitration, in which the Corporation shall continue to have the
burden of proof as provided above.
(c)
(i)
Change of Control
"Change of Control" shall mean the occurrence of any of the following:
(A)
(B)
(C)
(D)
any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the Corporation's then outstanding securities;
the consummation of a merger or consolidation of the Corporation with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of
the combined voting power of the voting securities of the Corporation (or such surviving entity or parent entity, as the case may
be) outstanding immediately after such merger or consolidation;
the stockholders of the Corporation approve a plan of complete liquidation of the Corporation;
the departure of the then current Chief Executive Officer of SGRP, or the appointment of a new Chief Executive Officer of
SGRP, including any temporary authorization or appointment; or
(E)
the sale or disposition by the Corporation of all or substantially all of the assets of the Corporation.
(ii)
More than one Change in Control may occur hereunder, and if more than one Change in Control has occurred, any reference to Change in
Control shall mean the then most recent Change in Control preceding the Executive's Severance Date (as hereinafter defined).
(d)
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Antonio Calisto Pato -- COCSA
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SPAR Group, Inc.
(e)
(i)
(ii)
(iii)
(iv)
(v)
"Good Reason" shall mean:
(A) a Change in Control occurs and the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of
another entity); or (B) the departure of the then current Chief Executive Officer of SGRP, or the appointment of a new Chief Executive
Officer of SGRP, including any temporary authorization or appointment (whether or not any other events occur), provided, however, that
the circumstances described in this clause (i) shall not constitute Good Reason if both (1) the Executive has an agreement with SGRP to
remain the Chief Financial Officer of SGRP on substantially the same or better terms for at least one year and (2) either (X) the structure,
operations and business of SGRP and its subsidiaries remain substantially unchanged apart from a change in SGRP's ownership, or (Y)
the Change in Control resulted from an acquisition by a non-strategic buyer (i.e., a strategic buyer being one with similar or
complementary businesses); or
a reduction in Executive's authority, duties, titles, status or responsibilities or the assignment to Executive of duties or responsibilities
inconsistent in any respect from those of Executive, excluding his position or any of his duties as Secretary of SGRP, and excluding any
changes made by the CEO in the normal course of managing the Corporation, and excluding any action or omission by the Corporation
that is isolated, insubstantial and inadvertent and which was not taken in bad faith by the Corporation and is remedied by the Corporation
promptly after receipt of notice thereof given by Executive; or
any reduction in Executive's annual rate of base salary or any failure by the Corporation to continue in effect any material incentive
compensation plan or arrangement (unless replacement plans providing Executive with substantially similar benefits are adopted)•or the
taking of any action by the Corporation that would adversely affect Executive's participation in any such plan or arrangement or reduce
Executive's incentive compensation opportunities under such plan or arrangement, as the case may be; or
the Corporation fails to obtain a written agreement from any successor or assigns of the Corporation or its assets to assume and perform
this Agreement; or
the relocation of the Corporation's principal executive offices by more than 35 miles from where such offices were located immediately
prior to the Change of Control or the Corporation requires Executive, without Executive's written consent, to be based at any office other
than the Corporation's office at which the Executive was based prior to the Change in Control, except for travel reasonably required in the
performance of Executive's duties and reasonably consistent with Executive's travel prior to the Change of Control;
Unless Executive terminates his employment on or within 90 days following an act or omission to act by the Corporation constituting a Good
Reason hereunder, and coincident or prior to such termination give the Corporation written notice as to the nature of the Good Reason event,
Executive's continued employment after such 90th day shall constitute Executive's consent to, and a waiver of Executive's rights with respect to,
such act or failure to act. Executive's right to terminate Executive's employment for Good Reason shall not be affected by Executive's incapacity
due to physical or mental illness. Executive's determination that an act or failure to act constitutes Good Reason shall be presumed to be valid
unless such determination is deemed by an arbitrator to be unreasonable and not to have been made in good faith by Executive.
(f) "Protected Period" shall mean the Term or the 24-month period beginning on the effective date of a Change of Control, whichever is then
in effect.
(g) "Severance Date" shall mean the effective date on which the Executive's employment by the Corporation terminates.
(h) "Termination Base Salary" shall mean the Executive's annual base salary with the Corporation at the rate in effect immediately prior to the
Change of Control or, if a greater amount, the Executive's annual base salary at the rate in effect at any time thereafter.
Antonio Calisto Pato -- COCSA
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SPAR Group, Inc.
3.
Release, Confidentiality and Non-Solicitation and Resignations Agreement.
(a) As a condition precedent to the payment of any benefits under this Agreement in the event of a Severance Termination (as defined below),
the Corporation may in its discretion require (within the ten business day period described below) the execution and delivery by the Executive of any one
or more of a Release, Confidentiality Agreement (if not already executed and delivered) and Resignation (as such terms are defined below); provided,
however, that each Release, Confidentiality Agreement and Resignation shall expressly exclude and reserve, and shall not in any way affect, the
Executive's rights under this Agreement and any other severance agreement and rights to indemnification (including advancement and defense) under the
Corporation's By-Laws and insurance policies and under applicable law.
(b) No Release, Confidentiality Agreement or Resignation shall be required unless the Corporation gives (by hand or overnight delivery with
a copy by email) to the Executive the requested Release and/or Resignation signed by the Corporation within the ten-business day period following the date
of such Severance Termination (the "Severance Termination Date").
(c) "Release" shall mean a mutual release agreement between the Executive and the Corporation (on behalf of all of all SGRP Companies)
dated and effective as of the Severance Termination Date in form and substance mutually and reasonably acceptable to the Parties.
(d) "Confidentiality Agreement" shall mean the Existing Confidentiality Agreement between the Executive and the Corporation (with, among
other things, a five-year period of confidentiality and a three-year period of non-solicitation following termination, but without any non-compete), which
shall survive and continue in full force and effect following any Severance Termination.
(e) "Resignation" shall mean a confirmatory resignation letter from the Executive for each applicable Subsidiary of SGRP dated and effective
as of the date of the Severance Termination Date (as defined below) in form and substance mutually and reasonably acceptable (and the pa1iies agree that
the subsidiary forms used in previous departures are reasonably acceptable).
4.
Severance Benefits.
(a) Without in any way contradicting, limiting or modifying the "at will" nature of the Executive's employment, if (i) Executive terminates his
employment with the Corporation during the Term for a Good Reason event or (ii) the Corporation terminates Executive's employment during the Term
other than (A) for Cause or (B) due to Executive's inability to perform the primary duties of his position for at least 180 consecutive days due to a physical
or mental impairment (each of which will be referred to as a "Severance Termination"), the provisions of this Section shall apply and the benefits provided
by this Section shall be in lieu of any and all other severance or similar termination benefits that might otherwise apply (which other benefits are hereby
waived by the Executive in the event such Severance Termination benefits apply), subject to the Corporation's receipt of the documents required in Section
3 above, Executive shall receive the following compensation and benefits from the Corporation, subject to deferral as and to the extent provided in Annex
A hereto:
(b) Within twenty business days of the date of his Severance Termination the Corporation shall pay to Executive in a lump sum, in cash, an
amount equal to the Applicable Multiple times the sum of the Executive's (i) Termination Base Salary and (ii) Bonus. "Applicable Multiple" shall mean: (i)
one-half (0.50) if the Severance Termination occurs from the Effective Date and before the first anniversary of the Effective Date; and (ii) one (1.00) if the
Severance Termination occurs on or after the first anniversary of the Effective Date.
(c) Notwithstanding anything in any Corporation employee stock incentive plan or any grant agreement to the contrary, as of the date of
Executive's termination of employment (i) all granted restricted shares of Corporation stock and all restricted unit awards with respect to common units of
Corporation stock of Executive shall become 100% vested and all restrictions thereon shall lapse and the Corporation shall, subject to Annex A hereto,
promptly deliver to Executive unrestricted shares of Corporation stock and common units and (ii) each outstanding Corporation stock option of Executive
shall become 100% exercisable and shall remain exercisable for the remainder of such option's term or three years, whichever is less and (iii) all 401k
contributions shall become 100% vested and all restrictions thereon shall lapse.
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SPAR Group, Inc.
(d) For the 12-month period beginning on the date of his termination of employment (the "Continuation Period"), the Corporation shall
continue to provide Executive and Executive's eligible family members with medical, vision and dental health benefits at least equal to those which would
have been provided to Executive if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time
during such period and provided it can do so on a nontaxable basis under the Code; further provided Executive pays a monthly premium for such coverage
equal to the monthly premium charged to active employees in general for similar coverage. Notwithstanding the foregoing, if Executive becomes eligible to
receive medical, vision and dental benefits under another employer's group welfare plans during this Continuation Period, the Corporation's obligations
under this Section C shall be reduced to the extent comparable benefits are actually received by Executive during such period, and any such benefits
actually received by Executive shall be promptly reported by Executive to the Corporation. In the event the provision of Corporation medical, vision and
dental plans to Executive under this Section would be taxable under Code Section 105, then within twenty business days of the date of his termination of
employment the Corporation will provide Executive with a lump sum payment in such amount that, after all taxes on that amount, shall be equal to the cost
to Executive of Executive's obtaining such coverage from another source for Executive and Executive's eligible family members. The lump sum shall be
determined on a present value basis using the interest rate provided in Section 1274(b)(2)(B) of the Internal Revenue Code on the date of termination.
(e) If Executive's employment with the Corporation terminates prior to, but within six months of, the date on which a Change of Control
occurs, and it is reasonably demonstrated by Executive that such termination of employment was (i) by the Corporation in connection with or in
anticipation of the Change of Control or (ii) by Executive under circumstances which would have constituted Good Reason if the circumstances arose on or
after the Change of Control, then for all purposes of this Agreement the Change of Control shall be deemed to have occurred, and the Protected Period shall
be deemed to have commenced, on the date immediately prior to the date of such termination of Executive's employment.
(f) The Corporation may withhold from any amounts or benefits payable under this Agreement all such taxes as it shall be required to
withhold pursuant to any applicable law or regulation.
(g) Any payment not timely made by the Corporation under this Agreement shall bear interest at the highest non-usurious rate permitted by
applicable law.
5.
Tax Gross Up Provisions.
If any payment made, or benefit provided, to or on behalf of Executive pursuant to this Agreement ("Payments") results in Executive being subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code (or any successor or similar provision) ("4999 Excise Tax"), then, subject to Annex
A hereto, the Corporation shall pay the Executive an additional amount (the "4999 Gross-Up Payment") such that the net amount retained by the Executive
after deduction of the 4999 Excise Tax and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or
local income tax, or employment tax) on the Payments, and any federal, state and local income tax, employment tax, and excise tax upon the payment
provided for by this Section 4(a), shall be equal to the Payments as if the 4999 Excise Tax was not applicable to the Payments. The Corporation shall,
subject to Annex A hereto, pay the 4999 Gross-Up Payment, if any, no earlier than the first day of the seventh month following the month in which
Executive incurs a separation from service with the Corporation and no later than the end of the calendar year following the year in which the Executive
remits the Section 4999 Excise Tax to the Internal Revenue Service
6.
No Mitigation.
Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise
nor, except as provided in Sections 3C and D, shall the amount of any payment or benefit provided for in this Agreement be reduced as the result of
employment by another employer or self employment, by offset against any amount claimed to be owed by Executive to the Corporation or otherwise,
except that any severance payments or benefits that Executive is entitled to receive pursuant to a Corporation severance plan or program for employees in
general shall reduce the amount of payments and benefits otherwise payable or to be provided to Executive under this Agreement.
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SPAR Group, Inc.
7.
Successor Agreement.
The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Corporation to assume expressly in writing prior to the effective date of such succession and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would be required to perform if no succession had taken place. Failure of the
successor to so assume as provided herein shall constitute a breach of this Agreement and entitle Executive to the payments and benefits hereunder as if
triggered by a te1mination of Executive by the Corporation other than for Cause on the date of such succession.
8.
Indemnity.
In any situation where under applicable law the Corporation has the power to indemnify, advance expenses to and defend Executive in respect of
any judgments, fines, settlements, loss, cost or expense (including attorneys' fees) of any nature related to or arising out of Executive's activities as an
agent, employee, officer or director of the Corporation or in any other capacity on behalf of or at the request of the Corporation, then the Corporation shall
promptly on written request, fully indemnify Executive, advance expenses (including attorney's fees) to Executive and defend Executive to the fullest
extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the
Corporation may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification, advancement or defense. Such
agreement by the Corporation shall not be deemed to impair any other obligation of the Corporation respecting Executive's indemnification or defense
otherwise arising out of this or any other agreement or promise of the Corporation under any statute.
9.
Notices.
All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed, in either case, to the Corporation's headquarters or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee.
10.
Arbitration.
Any dispute about the validity, interpretation, effect or alleged violation of this Agreement (an "arbitrable dispute") must be submitted to
confidential arbitration in Auburn Hills, Michigan. Arbitration shall take place before an1experienced employment arbitrator licensed to practice law in
such state and selected in accordance with the Model Employment Arbitration Procedures of the American Arbitration Association. Arbitration shall be the
exclusive remedy of any arbitrable dispute. The Corporation shall bear all fees, costs and expenses of arbitration, including its own, those of the arbitrator
and those of Executive unless the arbitrator provides otherwise with respect to the fees, co ts and expenses of Executive; in no event shall Executive be
chargeable with the fees, costs and expenses of the Corporation or the arbitrator. Should any party to this Agreement pursue any arbitrable dispute by any
method other than arbitration, the other party shall be entitled to recover from the party initiating the use of such method all damages, costs, expenses and
attorneys' fees incurred as a result of the use of such method. Notwithstanding anything herein to the contrary, nothing in this Agreement shall purport to
waive or in any way limit the right of any party to seek to enforce any judgment or decision on an arbitrable dispute in a court of competent jurisdiction.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts in Oakland County, Michigan, for the purposes of any
proceeding arising out of this Agreement.
11.
Governing Law.
This Agreement will be governed by and construed in accordance with the laws of the State of Michigan without regard to conflicts of law
principles of Michigan that would defer to the law of any other jurisdiction.
12.
Entire Agreement.
This Agreement (including Annex A hereto) are an integration of the patties' agreement and no agreement or representatives, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. For clarity,
this Agreement amends, restates, replaces and supersedes his Existing CICSA, and his Existing CICSA shall have no further force or effect. However, this
Agreement does not replace, amend or affect his Existing Confidentiality Agreement, which shall continue in full force and effect in accordance with its
terms.
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SPAR Group, Inc.
13.
Severability.
The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
14.
Counterparts; Amendment and Waivers.
This Agreement or any supplement, modification or amendment to or restatement of this Agreement may have been executed in two or more
counterpart copies of the entire document or of signature pages to the document, each of which may have been executed by one or more of the signatories
hereto or thereto and delivered by mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a
single agreement binding upon all of its signatories. No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by Executive and such member of the Board as may be specifically authorized by the Board.
No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time.
In Witness Whereof, the Parties hereto have executed and delivered this Agreement intending to be legally bound by it and for it to be effective
as of the Effective Date.
EMPLOYER:
SPAR Group, Inc.
By
EXECUTIVE:
Mike Matacunas, Chief Executive Officer
Employer's Current Address:
1910 Opdyke Court, Auburn Hills, MI 48326
ATTN: Human Resources Department
Executive's Current Address:
1207 Willow Oaks Trail
Matthews, NC 28104
Signed as of: February 28, 2023
Signed as of: February 28, 2023
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SPAR Group, Inc.
Annex A
Certain Tax Provisions
ANNEX A TO CHANGE OF CONTROL SEVERANCE AGREEMENT BETWEEN SPAR GROUP, INC., AND
Antonio Calisto Pato
This Annex A is incorporated into, and is part of, the Change of Control Severance Agreement entered into between SPAR Group, Inc. and Ron
Lutz (the "Agreement"). Capitalized terms used and not otherwise defined in this Annex shall have the meanings respectively assigned to them in the
Agreement. The Agreement is subject to and shall be governed by the following:
1.
Tax Gross Up Provisions.
(a) 4999 Gross-Up. If any payment made, or benefit provided, to or on behalf of Executive pursuant to this Agreement ("Payments") results in
Executive being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (or any successor or similar provision) ("4999 Excise
Tax"), then the Corporation shall pay the Executive an additional amount (the "4999 Gross-Up Payment") such that the net amount retained by the
Executive after deduction of the 4999 Excise Tax and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal,
state or local income tax, or employment tax) on the Payments, and any federal, state and local income tax, employment tax, and excise tax upon the
payment provided for by this Section l(a), shall be equal to the Payments as if the 4999 Excise Tax was not applicable to the Payments. The Corporation
shall pay the 4999 Gross-Up Payment, if any, as soon as practicable after such 4999 Gross-Up Payment can be determined, if any, but no earlier than the
first day of the seventh month following the month in which Executive incurs a separation from service with the Corporation and no later than the end of
the calendar year following the year in which the Executive remits the Section 4999 Excise Tax to the Internal Revenue Service
(b) 409A Gross-Up. If any Payments (or any acceleration of any Payments) are determined to be subject to the interest charges and taxes imposed by
Section 409A(a)(l)(B) of the Code, or any interest charges or penalties with respect to such taxes (such taxes, together with any such interest charges and
penalties, are collectively referred to as the "Section 409A Tax"), then the Corporation shall pay Executive an additional amount (the "409A Gross-Up
Payment") such that the net amount retained by the Executive after deduction of the 409A Tax and any interest charges or penalties in respect of the
imposition of such excise tax (but not any federal, state or local income tax, or employment tax) on the Payments, and any federal, state and local income
tax, employment tax, and excise tax upon the payment provided for by this Section l(b), shall be equal to the Payments as if the 409A Tax was not
applicable to the Payments. The Corporation shall pay the 409A Gross-Up Payment, if any, as soon as practicable after such 409A Gross-Up Payment can
be determined, if any, but no earlier than the first day of the seventh month following the month in which Executive incurs a separation from service with
the Corporation, and no later than the end of the calendar year following the year in which the Executive remits the Section 409A Tax to the Internal
Revenue Service; further provided Executive must provide the Corporation with a written request for reimbursement thereof (accompanied by proof of
taxes owed or paid) in order to receive the 409A Gross-Up Payment.
(c) For purposes of determining the amount of the 4999 Gross-Up Payment and the 409A Gross-Up Payment pursuant to this Section l (and Section 5
in the Agreement), if any, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income
and employment taxation in the calendar year in which the applicable gross-up payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's domicile for income tax purposes on the date the applicable gross-up payment is made,
net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes, if any. All determinations
under this Section I shall be made by the Corporation's certified public accountants.
2.
Code Section 409A and Payment Timing.
Notwithstanding anything to the contrary herein or in the Agreement, the following additional rules shall apply to payments under the Agreement:
(a) Any payments made: (i) within 2-½ months of the end of the Corporation's taxable year containing the date of Executive's involuntary (or Good
Reason) termination; or (ii) within 2-½ months of Executive's taxable year containing the date of involuntary (or Good Reason) termination shall be exempt
from Code Section 409A. Payments subject to subparagraphs (i) or (ii) shall be treated and shall be deemed to be an entitlement to a separate payment
within the meaning of Code Section 409A and the regulations thereunder.
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SPAR Group, Inc.
(b) To the extent payments under the Agreement are not exempt from Code Section 409A under subparagraph (a) above, any payments made in the
first six months following Executive's termination of employment that are equal to or less than the lesser of the amounts described in Treasury Regulation
Section l.409A-l(b)(9)(iii)(A)(l) and (2) shall be exempt from Code Section 409A. Payments subject to this subparagraph (b) shall be treated and shall be
deemed to be an entitlement to a separate payment within the meaning of Code Section 409A and the regulations thereunder.
(c) To the extent payments under this Agreement are not exempt from Code Section 409A under subparagraphs (b) or (c) above, any payments made
equal to or less than the applicable dollar amount under Code Section 402(g)(l)(B) for the year of severance from employment shall be exempt from Code
Section 409A in accordance with Treasury Regulation Section 1.409A-l(b)(9)(v)(D). Payments subject to this subparagraph (c) shall be treated and shall be
deemed to be an entitlement to a separate payment within the meaning of Code Section 409A of the Code and the regulations thereunder.
(d) To the extent payments under this Agreement are not exempt from Code Section 409A under subparagraphs (a), (b), or (c) above, and to the extent
Executive is a "specified employee" (as defined below), amounts payable to Executive due to his severance from employment (as defined below) shall
begin no sooner than six months after Executive's severance from employment (other than for Death); provided, however, that any payments not made
during the six-month period described in this subsection due to the six-month delay period required under Treasury Regulation Section 1.409A-3(i)(2) shall
be made in a single lump sum as soon as administratively practicable after the expiration of such six-month period, and the balance of all other payments
required under this Agreement shall be made as otherwise scheduled in this Agreement.
(e) For purposes of this Annex A, Section 2, and the Agreement, any reference to severance of employment or termination of employment shall mean
a "separation from service" as defined in Treasury Regulation Section 1.409A-1(h). For purposes of the Agreement and this Annex, the term "specified
employee" shall have the meaning set forth in Treasury Regulation Section l.409A-l(i).
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SPAR Group, Inc.
Exhibit 10.26
CORRECTIVE AMENDMENTS TO CHANGE OF CONTROL SEVERANCE AGREEMENTS
This Corrective Global Amendment to Change of Control Severance Agreements ("Amendment") between SPAR Group, Inc. a Delaware
corporation (the "Corporation" or "SGRP"), and each of the undersigned Executives (each an "Executive") is made and entered into effective as of August
10, 2022 (the " Amendment Date"). The Executives and the Corporation may be referred to individually as a "Party" and collectively as the "Parties".
WHEREAS: (a) Ron Lutz ("Lutz" and one of the Executives) and SGRP are parties to an existing Change of Control Severance Agreement dated
as of July 12, 2021 (the "Existing Lutz COCSA" and one of the Existing COCSAs); (b) William Linnane ("Linnane" and one of the Executives) and
SGRP are parties to an existing Change of Control Severance Agreement dated as of July 12, 2021 (the "Existing Linnane COCSA" and one of the Existing
COCSAs); and (c) Fay DeVriese ("DeVriese" and one of the Executives) and SGRP are parties to an existing Amended and Restated Change of Control
Severance Agreement dated as of August 13, 2021(the "Existing DeVriese COCSA" and one of the Existing COCSAs);
WHEREAS, in the process of preparing an Amended and Restated Change of Control Severance Agreement for another executive, SGRP learned
that several provisions in the Existing Lutz COCSA, Existing Linnane COCSA, and Existing DeVriese COCSA (each an "Existing COCSA" and
collectively the "Existing COCSAs") did not appear to clearly work as the parties had intended: namely the burden of establishing "Cause" was to have
been clearly on SGRP and both "Change in Control" and "Good Reason" for leaving SGRP were to have clearly included departure of SGRP's CEO
(whether or not other events also occurred);
WHEREAS: the Corporation, as authorized from time to time by its Board of Directors and Compensation Committee, has entered into the
Existing COCSAs and similar agreements in order to help retain and motivate its executives (including the Executives) and to help ensure continuity of the
business; it is in the best interest of the Corporation and its stockholders if its executives (including the Executives) have essentially the same Change of
Control Severance Agreements apart from negotiated differences (length of severance and the like so that they can approach material business decisions
objectively and without concern for her personal situation; and the Corporation recognizes that the possibility of a change of control of the Corporation
may result in the early departure of its executives (including the Executives) to the detriment of the Corporation and its stockholders; and
WHEREAS, the Executives and SGRP want to correct each Existing COCSA as provided in this Amendment;
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation, and each
signing Executive agree with SGRP as follows:
1. Amendment of the Existing COCSAs. Each Existing COCSA is separately amended is follows effective as of the Amendment Date:
(a) "Agreement" in each Existing COCSA shall mean that Agreement as modified by this Amendment.
(b) The definition of "Cause" in each Existing COCSA is hereby deleted and amended, restated and replaced with the following:
"Cause" shall mean: (i) the willful and continued failure by Executive to substantially perform Executive's material duties with the
Corporation (other than any such failure resulting from Executive's incapacity due to physical or mental illness); (ii) Executive's commission of
one or more acts that constitute a felony; (iii) Executive willfully engages in gross misconduct materially and demonstrably injurious to the
Corporation; or (iv) one or more significant acts of dishonesty as regards the Corporation or any affiliate. The Corporation shall have the burden of
proving Cause with reasonable evidence and supporting documentation. No act, or failure to act, on Executive's part shall be deemed 'willful'
(whether or not continued) unless it can be reasonably established to have been done, or omitted to be done, by Executive both in bad faith and
without reasonable belief by Executive that Executive's act, or failure to act, was in the best interest of the Corporation. In any event, Executive
shall be deemed to have acted (or failed to act) in good faith and with reasonable belief that it was in the best interest of the Corporation if such
action (or inaction) was based on either (1) the approval of a majority of the Audit Committee, or (2) the written advice of Corporation's auditors,
counsel or General Counsel or the SEC (which advice may be that such action or inaction was permissible or not impermissible or improper
irrespective of other alternatives); provided that Corporation shall still have the burden of proving Cause, the Executive shall not be required to
obtain any such approval or advice, no inference may be drawn from any failure to do so, and Executive may act (or fail to act) based on any
personal belief. The determination of whether Cause exists must be made by the CEO or by a resolution duly adopted by the affirmative vote of
not less than 75% of the entire membership of the Board at a meeting of the Board that was called for the purpose of considering such termination
(after reasonable notice of such determination to Executive and an opportunity for Executive, together with Executive's counsel, to be heard before
the CEO or Board and, if possible, to cure the breach that was the alleged basis for Cause) and then finding that, in the good faith opinion of the
CEO or Board, the Corporation's burden of proof had been met, the Executive was guilty of misconduct constituting Cause and specifying the
particulars thereof in detail. The determination of Cause may be challenged by Executive in arbitration, in which the Corporation shall continue to
have the burden of proof as provided above.
1
(c) Clause (D) in the definition of "Change of Control" in each Existing COCSA is hereby deleted and amended, restated and replaced with
the following:
(D) the departure of the then current Chief Executive Officer of SGRP, or the appointment of a new Chief Executive Officer of
SGRP, including any temporary authorization or appointment; or
(d) Clause (i) in the definition of "Good Reason" is hereby deleted and amended, restated and replaced with the following:
(i) (A) a Change in Control occurs and the Corporation is no longer an independent company (i.e., it becomes a subsidiary or division of another
entity); or (B)the departure of the then current Chief Executive Officer of SGRP, or the appointment of a new Chief Executive Officer of SGRP,
including any temporary authorization or appointment (whether or not any other events occur); or
(e) In the definition of "Good Reason" in each Existing COCSA, an " or" is hereby inserted after the ";" at the end of clauses (ii), (iii), and
(iv).
2. Continuing Agreement, Binding upon Successors. Each Existing COCSA, as amended by this Amendment, shall remain and continue in
full force and effect after the Amendment Date. All provision made by or on behalf of SGRP and each Executive in this Amendment shall be binding upon
its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns, and legal representatives of such Party.
3. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically
(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement binding
upon all of the Parties. SGRP and the Executives are severally (but not jointly and severally) entering into a single Amendment for convenience. No
Executive is assuming any liability or responsibility for or making any agreement with any other Executive or receiving any right under or interest in any
other Existing COCSA. This Amendment shall be interpreted as if it were a separate amendment of the applicable Existing COCSA between the signing
Executive and SGRP irrespective of how many of the other Executives execute this Amendment. Any supplement, modification, amendment, restatement,
waiver, extension, discharge, release or termination of this Amendment must be in writing and signed by SGRP and the signing Executive and cannot be
given orally. Each individual signing below represents and warrants to each other Party that such individual has the authority to bind the Party on whose
behalf he or she has executed this Amendment.
4. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions
of the applicable Existing COCSA, which provisions are hereby incorporated herein by reference into this Amendment and shall be interpreted as if this
Amendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the applicable Existing COCSA together contain the
entire agreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises,
assurances and other agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements,
offers, requests, responses and proposals), whether written, electronic, oral, express, implied or otherwise, from the Parties to the applicable Existing
COCSA, respect to the matters contained in this Amendment and the applicable Existing COCSA.
In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories and intend to be
legally bound by this Amendment effective as of the Amendment Date.
EXECUTIVES:
RON LUTZ
WILLIAM LINNANE
FAY DEVRIESE
EMPLOYER: SPAR Group, Inc.
By:
Mike Matacunas, Chief Executive Officer
-2-
SPAR Group, Inc.
THIRD MODIFICATION AGREEMENT
THIS THIRD MODIFICATION AGREEMENT (this "Modification Agreement") is dated as of December [16], 2021 and will be effective as
of December 1, 2021, by and among NORTH MILL CAPITAL LLC, a Delaware limited liability company, d/b/a SLR Business Credit ("Lender"), with
a place of business at 821 Alexander Road, Suite 130, Princeton, New Jersey 08540, SPAR MARKETING FORCE, INC., a Nevada corporation ("US
Borrower"), with its chief executive office located at 1910 Opdyke Court, Auburn Hills, Michigan 48326, and SPAR CANADA COMPANY, an
unlimited company organized under the laws of Nova Scotia ("Canadian Borrower"), with its chief executive office located at 10 Planchet Road, Unit 21,
Vaughan, Ontario L4K 2C8.
Exhibit 10.57
RECITALS
WHEREAS, Lender, US Borrower and Canadian Borrower entered into a Loan and Security Agreement dated as of April 10, 2019 (as amended,
modified, supplemented, substituted, extended or renewed from time to time, the "Loan Agreement") which sets forth the terms and conditions of a US
Revolving Credit Facility by Lender to US Borrower and a Canadian Revolving Credit Facility by Lender to Canadian Borrower;
WHEREAS, Borrowers have applied to Lender for a temporary increase of (i) the advance rate on Eligible Accounts from eighty-five percent
(85)% to ninety percent (90%) and (ii) the advance rate on Eligible Unbilled Accounts from seventy percent (70)% to eighty-five percent (85%), in each
case for the period of December 1, 2021 through April 30, 2022; and
WHEREAS, Lender has approved the foregoing application of Borrowers on the terms and condition set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto adopt the above recitals and
agree as follows:
1. Definitions. Capitalized terms used herein, but not defined herein, shall have the same meanings ascribed to such terms in the Loan
Agreement. The term "Modification Agreement," as defined in the preamble to this Modification Agreement, is incorporated by reference into the Loan
Agreement.
2. Estoppel; Release. To induce Lender to enter into this Modification Agreement, each Borrower represents and warrants to Lender that it
has no defenses, offsets or counterclaims regarding its Obligations under the Loan Agreement and the other Loan Documents to which it is a party. To
induce Lender to enter into this Modification Agreement, each Borrower waives and releases and forever discharges Lender and its officers, directors,
investors, bank group members, attorneys, agents, and employees from any liability, damage, claim, loss or expense of any kind that it may have against
Lender or any of them arising out of or relating to the Obligations. Each Borrower further agrees to indemnify and hold Lender and its officers, directors,
investors, bank group members, attorneys, agents and employees harmless from any loss, damage, judgment, liability or expense (including reasonable
attorneys' fees) suffered by or rendered against Lender or any of them on account of any claims arising out of or relating to the Obligations, in each case,
except to the extent caused by the gross negligence or willful misconduct of the indemnitee or any of its representatives.
3. Specific Amendments to the Loan Agreement. Effective as of December 1, 2021, the Loan Agreement is amended in the following
particulars:
follows:
(a) The first sentence of Section 2.1(a) (Revolving Advances; Advance Limit) of the Loan Agreement is hereby modified to read as
Upon the request of US Borrower made at any time from and after the date hereof until the Termination Date, and so long as no Event of
Default has occurred and is continuing, Lender may, in its Good Faith discretion, make Advances in Dollars to US Borrower under a revolving
credit facility (the US Revolving Credit Facility) in an amount up to, so long as Dilution is less than three percent (3%), the sum of
(a) up to eighty-five percent (85%) (or, solely with respect to the period beginning on December 1, 2021 through April 30, 2022, ninety percent
(90%)) of the aggregate outstanding amount of Eligible Accounts of US Borrower plus (b) (i) up to seventy percent (70%) (or, solely with respect
to the period beginning on December 1, 2021 through April 30, 2022, eighty-five percent (85%)) of Eligible Unbilled Accounts of US Borrower
or (ii) Five Million Five Hundred Thousand Dollars ($5,500,000), whichever is less; provided, however, in no event at any time shall the
maximum aggregate principal amount outstanding under the US Revolving Credit Facility exceed Sixteen Million Five Hundred Thousand
Dollars ($16,500,000) (said Dollar limit being, the US Advance Limit).
(b) The first sentence of Section 2.1(b) (Revolving Advances; Advance Limit) of the Loan Agreement is hereby modified to read as
follows:
Upon the request of Canadian Borrower made at any time from and after the date hereof until the Termination Date, and so long as no
Event of Default has occurred and is continuing, Lender may, in its Good Faith discretion, make Advances in Canadian Dollars to Canadian
Borrower under a revolving credit facility (the Canadian Revolving Credit Facility) in an amount up to, so long as Dilution is less than three
percent (3%), the sum of (a) up to eighty-five percent (85%) (or, solely with respect to the period beginning on December 1, 2021 through April
30, 2022, ninety percent (90%)) of the aggregate outstanding amount of Eligible Accounts of Canadian Borrower plus (b) (i) up to seventy percent
(70%) (or, solely with respect to the period beginning on December 1, 2021 through April 30, 2022, eighty-five percent (85%)) of Eligible
Unbilled Accounts of Canadian Borrower or (ii) Six Hundred Thousand Dollars ($600,000), whichever is less; provided, however, in no event at
any time shall the maximum aggregate principal amount outstanding under the Canadian Revolving Credit Facility exceed One Million Five
Hundred Thousand Canadian Dollars (CDN$1,500,000) (said Canadian Dollar limit being, the Canadian Advance Limit).
4. Conditions to Effectiveness of this Modification Agreement. As conditions precedent to this Modification Agreement, Borrowers shall
deliver, or cause to be delivered to Lender, or Lender shall have received the following, all in form and substance satisfactory to Lender, on or before the
date hereof:
(a) This Modification Agreement, duly executed by Borrowers, together with the consent of the Guarantors attached hereto; [and]
(b) [Current UCC and good standing searches on [each Borrower], showing no results objectionable to Lender; and]
(c) A modification fee of Fifteen Thousand Dollars ($15,000) (the "Modification Fee"), which Modification Fee is payable
contemporaneously with the execution hereof.
5. Reaffirmation of Representations and Warranties. Each Borrower hereby reaffirms the representations and warranties made by it in the
Loan Agreement and all of the other Loan Documents as fully and completely as if set forth herein at length and made anew. All of such representations
and warranties are true, correct and complete as of the date hereof (except as to such representations and warranties which are made as of a specified date,
in which case such representations and warranties remain true as of such date, and except as to the matters expressly waived hereunder). In addition, each
Borrower represents and warrants to Lender that:
(a) No consent or approval of, or exemption by any person is required to authorize, or is otherwise required in connection with the
execution and delivery of this Modification Agreement, which has not been obtained and which remains in full force and effect;
(b) Such Borrower has the power to execute, deliver and carry out this Modification Agreement and all documents executed in
connection herewith, and this Modification Agreement and such other Loan Documents have been duly authorized by all requisite organizational action
and are valid, binding and enforceable as against such Borrower in accordance with their terms;
(c) No material adverse change in the financial condition of such Borrower has occurred since the date of the most recent financial
statements of such Borrower submitted to Lender, and the information contained in said statements and reports is true and correctly reflects the financial
condition of such Borrower as of the dates of the statements and reports, and such statements and reports have been prepared in accordance with GAAP and
do not contain any material misstatement of fact or omit to state any facts necessary to make the statements contained therein not misleading; and
(d) No default or Event of Default exists under the Loan Agreement.
6. Reaffirmation of Covenants. Each Borrower hereby reaffirms the affirmative and negative covenants set forth in the Loan Agreement and
the other Loan Documents as fully and completely as if set forth herein at length (except as otherwise revised herein), and agrees that such covenants shall
remain in full force and effect until payment in full of the Obligations.
7. Reaffirmation of Security Interests and Liens. Each Borrower hereby confirms the security interests and liens granted by such Borrower
to Lender in, to and under the Collateral in accordance with the Loan Agreement and other Loan Documents as security for its Obligations to Lender and
acknowledges that such security interests shall continue unimpaired and in full force and effect. Each Borrower represents and warrants that, as of the date
hereof, there are no claims, setoffs or defenses to Lender's exercise of any rights or remedies available to it as a creditor in realizing upon such assets under
the terms and conditions of the Loan Agreement and the other Loan Documents and the security interests and liens in favor of Lender on such assets shall
cover and secure all of such Borrower's existing and future Obligations to Lender, as modified by this Modification Agreement.
8. Miscellaneous.
(a) Each Borrower agrees to pay any and all fees and expenses, including the Modification Fee and reasonable counsel fees (including
allocated fees of in-house counsel) incurred by Lender in connection with the preparation and execution of this Modification Agreement and all other
documents executed in connection herewith.
(b) This Modification Agreement is intended to supplement and modify the Loan Agreement and the rights and obligations of the
parties under the Loan Agreement shall not in any way be vacated, modified or terminated except as herein provided. All terms and conditions contained in
each and every agreement or promissory note or other evidence of indebtedness of Borrowers to Lender are incorporated herein by reference. If there is a
conflict between any of the provisions heretofore entered into and the provisions of this Modification Agreement, then the provisions of this Modification
Agreement shall govern. By entering into this Modification Agreement, Lender is not waiving any Event of Default, if any so exists, or any of its rights and
remedies as a consequence thereof. Each Borrower expressly ratifies and confirms the confession of judgment and waiver of jury trial provisions
contained in the Loan Documents.
(c) This Modification Agreement will be binding upon an inure to the benefit of each Borrower and Lender and their respective
successors and assigns.
(d) This Modification Agreement may be executed and delivered in counterparts and by facsimile or other electronic delivery means,
with each such counterpart and facsimile or other electronic delivery means constituting a valid, effective and enforceable agreement.
9. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. THE VALIDITY OF THIS MODIFICATION AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS MODIFICATION AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN
THE COUNTY OF MERCER, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE OF NEW JERSEY OR
AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH LOAN PARTY AND LENDER EACH
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING
UNDER THIS MODIFICATION AGREEMENT OR RELATING TO THE DEALINGS OF LOAN PARTIES AND LENDER AND ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Modification Agreement to be executed and delivered as of the day and year first
above written.
SPAR MARKETING FORCE, INC., a Nevada
corporation, as US Borrower
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR CANADA COMPANY, an unlimited company
organized under the laws of Nova Scotia, as Canadian
Borrower
By:
Name: Fay DeVriese
Title: Chief Financial Officer
NORTH MILL CAPITAL LLC
By:
Name: Beatriz Hernandez
Title: Executive Vice President
Signature Page to Third Modification Agreement
CONSENT OF GUARANTORS
Each of the undersigned guarantors (collectively, the "Guarantors") consents to the provisions of the foregoing Modification Agreement and all
prior amendments (if any) to the Loan Agreement and confirms and agrees that: (a) such Guarantor's obligations under its respective guaranty dated April
10, 2019 (as amended, modified, supplemented, substituted, extended or renewed, from time to time, each a "Guaranty") relating to the Obligations
mentioned in the Loan Agreement, as modified by the Modification Agreement shall be unimpaired by the Modification Agreement; (b) such Guarantor
has no defenses or setoffs, counterclaims, discounts, or charges of any kind against Lender, its officers, directors, investors, bank group members,
employees, agents or attorneys with respect to its Guaranty; and (c) all of the terms, conditions, and covenants in its Guaranty remain unaltered and in full
force and effect and are hereby ratified and confirmed and apply to the Obligations, as amended by the Modification Agreement. Each Guarantor certifies
that all representations and warranties made in its Guaranty are true and correct on the date hereof (except as to such representations and warranties which
are made as of a specified date, in which case such representations and warranties remain true as of such date). Each Guarantor acknowledges and agrees
that its obligations under its Guaranty include, without limitation, its guaranty of the payment and performance obligations of Borrowers under the Loan
Agreement, as modified, and the Notes evidencing the same. Each Guarantor acknowledges and confirms the cross-default and cross-collateralization
provisions of the Loan Agreement, as modified by the Modification Agreement. Each Guarantor expressly ratifies and confirms the confession of
judgment and waiver of jury trial provisions contained in the Guaranty.
[signature page follows]
WITNESS the due execution hereof as a document under seal, as of the date of this Modification Agreement, intending to be legally bound
hereby.
SPAR GROUP, INC., a Delaware corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR ACQUISITION, INC., a Nevada corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR CANADA, INC., a Nevada corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR TRADEMARKS, INC., a Nevada corporation, as
a Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR ASSEMBLY & INSTALLATION, INC., a
Nevada corporation, as a Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
Signature Page to Consent of Guarantors to Third Modification Agreement
FIFTH MODIFICATION AGREEMENT
THIS FIFTH MODIFICATION AGREEMENT (this "Modification Agreement") is entered into as of August 9 , 2022, by and among NORTH
MILL CAPITAL LLC, a Delaware limited liability company, d/b/a SLR Business Credit ("Lender"), with a place of business at 821 Alexander Road,
Suite 130, Princeton, New Jersey 08540, SPAR MARKETING FORCE, INC., a Nevada corporation ("US Borrower"), with its chief executive office
located at 1910 Opdyke Court, Auburn Hills, Michigan 48326, and SPAR CANADA COMPANY, an unlimited company organized under the laws of
Nova Scotia ("Canadian Borrower"), with its chief executive office located at 10 Planchet Road, Unit 21, Vaughan, Ontario L4K 2C8.
Exhibit 10.59
RECITALS
WHEREAS, Lender, US Borrower and Canadian Borrower entered into a Loan and Security Agreement dated as of April 10, 2019 (as amended,
modified, supplemented, substituted, extended or renewed from time to time, the "Loan Agreement") which sets forth the terms and conditions of a US
Revolving Credit Facility by Lender to US Borrower and a Canadian Revolving Credit Facility by Lender to Canadian Borrower; and
WHEREAS, Borrowers and Lender have agreed to make certain amendments to the Loan Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto adopt the above recitals and
agree as follows:
1. Definitions. Capitalized terms used herein, but not defined herein, shall have the same meanings ascribed to such terms in the Loan
Agreement. The term "Modification Agreement," as defined in the preamble to this Modification Agreement, is incorporated by reference into the Loan
Agreement.
2. Estoppel; Release. To induce Lender to enter into this Modification Agreement, each Borrower represents and warrants to Lender that it
has no defenses, offsets or counterclaims regarding its Obligations under the Loan Agreement and the other Loan Documents to which it is a party. To
induce Lender to enter into this Modification Agreement, each Borrower waives and releases and forever discharges Lender and its officers, directors,
investors, bank group members, attorneys, agents, and employees from any liability, damage, claim, loss or expense of any kind that it may have against
Lender or any of them arising out of or relating to the Obligations. Each Borrower further agrees to indemnify and hold Lender and its officers, directors,
investors, bank group members, attorneys, agents and employees harmless from any loss, damage, judgment, liability or expense (including reasonable
attorneys' fees) suffered by or rendered against Lender or any of them on account of any claims arising out of or relating to the Obligations, in each case,
except to the extent caused by the gross negligence or willful misconduct of the indemnitee or any of its representatives.
3. Specific Amendments to the Loan Agreement. Effective as of the date hereof, Section 2.7(a) (Facility Fee) of the Loan Agreement is
hereby modified to read as follows:
(a) (i) For the contract (loan) year commencing October 10, 2021, US Borrower shall pay to Lender a Facility Fee equal to eight
tenths of one percent (0.80%) of Twelve Million Five Hundred Thousand Dollars ($12,500,000). One twelfth (1/12) of such Facility Fee shall be
paid on October 10, 2021, and the remaining amount shall be paid in installments of like amount on the first (1st) day of each month thereafter
until paid in full.
(ii) In addition, if the amount owed under the US Revolving Credit Facility during the contract (loan) year commencing October
10, 2021, (A) exceeds Twelve Million Five Hundred Thousand Dollars ($12,500,000), but is less than or equal to Thirteen Million Five Hundred
Thousand Dollars ($13,500,000), an additional Facility Fee of Fifteen Thousand Dollars ($15,000) will be charged at the initial occurrence
thereof, (B) exceeds Thirteen Million Five Hundred Thousand Dollars ($13,500,000), but is less than or equal to Fourteen Million Five Hundred
Thousand Dollars ($14,500,000), an additional Facility Fee of Fifteen Thousand Dollars ($15,000) will be charged at the initial occurrence
thereof, (C) exceeds Fourteen Million Five Hundred Thousand Dollars ($14,500,000), but is less than or equal to Fifteen Million Five Hundred
Thousand Dollars ($15,500,000), an additional Facility Fee of Fifteen Thousand Dollars ($15,000) will be charged at the initial occurrence
thereof, (D) exceeds Fifteen Million Five Hundred Thousand Dollars ($15,500,000), but is less than or equal to Sixteen Million Five Hundred
Thousand Dollars ($16,500,000), an additional Facility Fee of Fifteen Thousand Dollars ($15,000) will be charged at the initial occurrence
thereof, or (E) exceeds Sixteen Million Five Hundred Thousand Dollars ($16,500,000), but is less than or equal to the US Advance Limit (that is,
Seventeen Million Five Hundred Thousand Dollars ($17,500,000)), an additional Facility Fee of Fifteen Thousand Dollars ($15,000) will be
charged at the initial occurrence thereof (each such $1,000,000 increment in clause (A), (B), (C), (D) and (E) above, being hereinafter referred to
as an Increment). The highest Daily Balance of the US Revolving Credit Facility during the contract (loan) year commencing October 10, 2021
(rounded upward to the next $1,000,000, unless such amount is a multiple of $1,000,000, in which case, such amount need not be rounded
upward), but in no event less than Twelve Million Five Hundred Thousand Dollars ($12,500,000), shall hereinafter be referred to as the October
2021 Benchmark Advance Amount.
(iii) For the contract (loan) year commencing October 10, 2022, US Borrower shall pay to Lender a Facility Fee equal to eight
tenths of one percent (0.80%) of the sum of (x) the October 2021 Benchmark Advance Amount plus (y) any Advances other than under the US
Revolving Credit Facility. One twelfth (1/12) of such Facility Fee shall be paid on October 10, 2022, and the remaining amount shall be paid in
installments of like amount on the first (1st) day of each month thereafter until paid in full.
(iv) In addition, Borrower shall pay to Lender an additional Facility Fee of Fifteen Thousand Dollars ($15,000) at the initial
occurrence that the amount owed under the US Revolving Credit Facility during the contract (loan) year commencing October 10, 2022 exceeds
the October 2021 Benchmark Advance Amount by each applicable Increment. The highest Daily Balance of the US Revolving Credit Facility
during the contract (loan) year commencing October 10, 2022 (rounded upward to the next
$1,000,000 unless such amount is a multiple of $1,000,000, in which case, such amount need not be rounded upward), but in no event less than the October
2021 Benchmark Advance Amount, shall hereinafter be referred to as the October 2022 Benchmark Advance Amount.
(v) For the contract (loan) year commencing October 10, 2023, US Borrower shall pay to Lender a Facility Fee equal to eight
tenths of one percent (0.80%) of the sum of (x) the October 2022 Benchmark Advance Amount plus (y) any Advances other than under the US
Revolving Credit Facility. One twelfth (1/12) of such Facility Fee shall be paid on October 10, 2023, and the remaining amount shall be paid in
installments of like amount on the first (1st) day of each month thereafter until paid in full.
(vi) In addition, Borrower shall pay to Lender an additional Facility Fee of Fifteen Thousand Dollars ($15,000) at the initial
occurrence that the amount owed under the US Revolving Credit Facility during the contract (loan) year commencing October 10, 2023 exceeds
the October 2022 Benchmark Advance Amount by each applicable Increment. The highest Daily Balance of the US Revolving Credit Facility
during the contract (loan) year commencing October 10, 2023 (rounded upward to the next $1,000,000 unless such amount is a multiple of
$1,000,000, in which case, such amount need not be rounded upward), but in no event less than the October 2022 Benchmark Advance Amount,
shall hereinafter be referred to as the October 2022 Benchmark Advance Amount.
4. Conditions to Effectiveness of this Modification Agreement. As conditions precedent to this Modification Agreement, Borrowers shall
deliver, or cause to be delivered to Lender, or Lender shall have received this Modification Agreement, duly executed by Borrowers, together with the
consent of the Guarantors attached hereto.
5. Reaffirmation of Representations and Warranties. Each Borrower hereby reaffirms the representations and warranties made by it in the
Loan Agreement and all of the other Loan Documents as fully and completely as if set forth herein at length and made anew. All of such representations
and warranties are true, correct and complete as of the date hereof (except as to such representations and warranties which are made as of a specified date,
in which case such representations and warranties remain true as of such date, and except as to the matters expressly waived hereunder). In addition, each
Borrower represents and warrants to Lender that:
(a) No consent or approval of, or exemption by any person is required to authorize, or is otherwise required in connection with the
execution and delivery of this Modification Agreement, which has not been obtained and which remains in full force and effect;
(b) Such Borrower has the power to execute, deliver and carry out this Modification Agreement and all documents executed in
connection herewith, and this Modification Agreement and such other Loan Documents have been duly authorized by all requisite organizational action
and are valid, binding and enforceable as against such Borrower in accordance with their terms;
(c) No material adverse change in the financial condition of such Borrower has occurred since the date of the most recent financial
statements of such Borrower submitted to Lender, and the information contained in said statements and reports is true and correctly reflects the financial
condition of such Borrower as of the dates of the statements and reports, and such statements and reports have been prepared in accordance with GAAP and
do not contain any material misstatement of fact or omit to state any facts necessary to make the statements contained therein not misleading; and
(d) No default or Event of Default exists under the Loan Agreement.
6. Reaffirmation of Covenants. Each Borrower hereby reaffirms the affirmative and negative covenants set forth in the Loan Agreement and
the other Loan Documents as fully and completely as if set forth herein at length (except as otherwise revised herein), and agrees that such covenants shall
remain in full force and effect until payment in full of the Obligations.
7. Reaffirmation of Security Interests and Liens. Each Borrower hereby confirms the security interests and liens granted by such Borrower
to Lender in, to and under the Collateral in accordance with the Loan Agreement and other Loan Documents as security for its Obligations to Lender and
acknowledges that such security interests shall continue unimpaired and in full force and effect. Each Borrower represents and warrants that, as of the date
hereof, there are no claims, setoffs or defenses to Lender's exercise of any rights or remedies available to it as a creditor in realizing upon such assets under
the terms and conditions of the Loan Agreement and the other Loan Documents and the security interests and liens in favor of Lender on such assets shall
cover and secure all of such Borrower's existing and future Obligations to Lender, as increased and modified by this Modification Agreement.
8. Miscellaneous.
(a) Each Borrower agrees to pay any and all fees and expenses, including reasonable counsel fees (including allocated fees of in-house
counsel) incurred by Lender in connection with the preparation and execution of this Modification Agreement and all other documents executed in
connection herewith.
(b) This Modification Agreement is intended to supplement and modify the Loan Agreement and the rights and obligations of the parties
under the Loan Agreement shall not in any way be vacated, modified or terminated except as herein provided. All terms and conditions contained in each
and every agreement or promissory note or other evidence of indebtedness of Borrowers to Lender are incorporated herein by reference. If there is a
conflict between any of the provisions heretofore entered into and the provisions of this Modification Agreement, then the provisions of this Modification
Agreement shall govern. By entering into this Modification Agreement, Lender is not waiving any Event of Default, if any so exists, or any of its rights and
remedies as a consequence thereof. Each Borrower expressly ratifies and confirms the confession of judgment and waiver of jury trial provisions
contained in the Loan Documents.
(c) This Modification Agreement will be binding upon an inure to the benefit of each Borrower and Lender and their respective
successors and assigns.
(d) This Modification Agreement may be executed and delivered in counterparts and by facsimile or other electronic delivery means,
with each such counterpart and facsimile or other electronic delivery means constituting a valid, effective and enforceable agreement.
9. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. THE VALIDITY OF THIS MODIFICATION AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS MODIFICATION AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN
THE COUNTY OF MERCER, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE OF NEW JERSEY OR
AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH LOAN PARTY AND LENDER EACH
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING
UNDER THIS MODIFICATION AGREEMENT OR RELATING TO THE DEALINGS OF LOAN PARTIES AND LENDER AND ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Modification Agreement to be executed and delivered as of the day and year first
above written.
SPAR MARKETING FORCE, INC., a Nevada
corporation, as US Borrower
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR CANADA COMPANY, an unlimited company
organized under the laws of Nova Scotia, as Canadian
Borrower
By:
Name: Fay DeVriese
Title: Chief Financial Officer
NORTH MILL CAPITAL LLC
By:
Name: Beatriz Hernandez
Title: Executive Vice President
Signature Page to Fifth Modification Agreement
CONSENT OF GUARANTORS
Each of the undersigned guarantors (collectively, the "Guarantors") consents to the provisions of the foregoing Modification Agreement and all
prior amendments (if any) to the Loan Agreement and confirms and agrees that: (a) such Guarantor's obligations under its respective guaranty dated April
10, 2019 (as amended, modified, supplemented, substituted, extended or renewed, from time to time, each a "Guaranty") relating to the Obligations
mentioned in the Loan Agreement, as increased and modified by the Modification Agreement shall be unimpaired by the Modification Agreement; (b) such
Guarantor has no defenses or setoffs, counterclaims, discounts, or charges of any kind against Lender, its officers, directors, investors, bank group
members, employees, agents or attorneys with respect to its Guaranty; and (c) all of the terms, conditions, and covenants in its Guaranty remain unaltered
and in full force and effect and are hereby ratified and confirmed and apply to the Obligations, as amended by the Modification Agreement. Each Guarantor
certifies that all representations and warranties made in its Guaranty are true and correct on the date hereof (except as to such representations and
warranties which are made as of a specified date, in which case such representations and warranties remain true as of such date). Each Guarantor
acknowledges and agrees that its obligations under its Guaranty include, without limitation, its guaranty of the payment and performance obligations of
Borrowers under the Loan Agreement, as modified, and the Notes evidencing the same. Each Guarantor acknowledges and confirms the cross-default and
cross-collateralization provisions of the Loan Agreement, as increased and modified by the Modification Agreement. Each Guarantor expressly ratifies
and confirms the confession of judgment and waiver of jury trial provisions contained in the Guaranty.
[signature page follows]
WITNESS the due execution hereof as a document under seal, as of the date of this Modification Agreement, intending to be legally bound
hereby.
SPAR GROUP, INC., a Delaware corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR ACQUISITION, INC., a Nevada corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR CANADA, INC., a Nevada corporation, as a
Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR TRADEMARKS, INC., a Nevada corporation, as
a Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
SPAR ASSEMBLY & INSTALLATION, INC.,
a Nevada corporation, as a Guarantor
By:
Name: Fay DeVriese
Title: Chief Financial Officer
Signature Page to Consent of Guarantors to Fifth Modification Agreement
SPAR Group, Inc.
List of Subsidiaries
Owned Subsidiaries
SPAR Acquisition, Inc.
SPAR Assembly & Installation, Inc. (f/k/a SPAR National
Assembly Services, Inc.)
SPAR Canada Company
SPAR Canada, Inc.
SPAR Group International, Inc.
SPAR, Inc.
SPAR International Ltd.
SPAR Marketing Force, Inc.
SPAR Trademarks, Inc.
SPAR Merchandising Romania, Ltd. (inactive and being
dissolved)
SPAR China Ltd.
SPAR FM Japan, Inc.
SPAR (Shanghai) Field Marketing Ltd. (inactive) 1
SGRP Brasil Participações Ltda. ("Brazil Holdings")8A
SPAR NMS Holdings, Inc.
NMS Retail Services, ULC
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
51 %
51 %
36.2 %
51 %
51 %
51 %
51 %
51 %
51 %
51 %
51 %
51 %
38.5 %
51 %
51 %
51 %
51 %
Owned Subsidiaries
National Merchandising Services, LLC2
Resource Plus of North Florida, Inc. (RPI")
BDA Resources, LLC3
Leasex, LLC. (Operated by and with RPI)
Mobex of North Florida, Inc. (Operated by and with RPI)
SGRP Meridian Proprietary Limited ("Meridian")4
CMR-Meridian Proprietary Limited5
Bordax Retail Services (Pty) Ltd 5
Bordax Retail Services Gauteng (Pty) Ltd 5
SPARFACTS Australia (Pty), Ltd.6
SPAR (Shanghai) Marketing Management Company Ltd.7
Unilink7A
SPAR DSI Human Resource Company7B
SPAR TODOPROMO, SAPI, de CV
SPAR NDS Tanitim Ve Danismanlik A.S.
SPAR KROGNOS Marketing Private Limited
Preceptor Marketing Services Private Limited
SPAR Brasil Serviços de Merchandising e Tecnologia S.A.
("SPAR Brazil")8B
SPAR Brasil Serviços Ltda. (f/k/a New Momentum Ltda.)8C 51 %
SPAR Brasil Serviços Temporários Ltda. (f/k/a New
Momentum Serviços Temporários Ltda.)8C
Plus Trade Do Brasil Prestacao De Servicos Ltda9
SPAR Brasil Servicos Ltda 9
SGRP Servicos Ltda9
51 %
51 %
51 %
51 %
51 %
Exhibit 21.1
State or Country of Incorporation
Nevada
Nevada
Nova Scotia, Canada
Nevada
Nevada
Nevada
Cayman Islands
Nevada
Nevada
Romania
China
Japan
China
Brazil
Nevada
Nova Scotia, Canada
State or Country of Incorporation
Nevada
Florida
Florida
Florida
Florida
South Africa
South Africa
South Africa
South Africa
Australia
China
China
China
Mexico
Turkey
India
India
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
1 Dissolved on November 29, 2022.
2 The Company sold its 51% interest in this joint venture effective December 31, 2023.
3 RPI owns a 70% interest in BDA Resource, LLC, a Florida limited liability company.
4 The Company has entered into an agreement to sell its 51% interest in this joint venture. See Note 15 Subsequent Events, above.
5 Owned by and being sold with Meridian.
6 The Company sold its 51% interest in this joint venture effective December 31, 2023.
7 The Company has entered into an agreement to sell its 51% interest in this joint venture. See Note 15 Subsequent Events, above.
7A Owned by and being sold with SPAR (Shanghai) Marketing Management Company Ltd.
7B Inactive and being liquidated. It is 75.5% Owned by and being sold with SPAR (Shanghai) Marketing Management Company Ltd.
8A The Company owns 100% of SGRP Brasil Participações Ltda. ("Brazil Holdings") and has entered into an agreement to sell Brazil Holdings (the "Brazil
Holdings Sale"). See Note 15, Subsequent Events, above.
8B Brazil Holdings owns 51% of SPAR Brasil Serviços de Merchandising e Tecnologia S.A. ("SPAR Brazil"), and Brazil Holdings will continue to own
those interests after the Brazil Holdings Sale.
8C Brazil Holdings effectively owns slightly more than 51% of this subsidiary since SPAR Brazil owns 99% and Brazil Holdings owns 1% of the equity in
this subsidiary, and SPAR Brazil and Brazil Holdings will continue to own those equity interests after the Brazil Holdings Sale.
9
The Company effectively owns 51% of this subsidiary since we believe SPAR Brazil owns 100% of this subsidiary, and SPAR Brazil will continue to own
those interests after the Brazil Holdings Sale.
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-53400, 333-730000, 333-73002, 333-152706,
333-72998, 3333-189964, 333-228185, and 333-254991) of SPAR Group, Inc. and Subsidiaries of our report dated April 1, 2024, relating to the
consolidated financial statements, which appears in this Annual Report on Form 10-K.
/s/ BDO USA, P.C.
Troy, Michigan
April 1, 2024
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael R. Matacunas, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2023, of SPAR Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 1, 2024
/s/ Michael R. Matacunas
Michael R. Matacunas, President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Antonio Calisto Pato, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2023 of SPAR Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 1, 2024
/s/ Antonio Calisto Pato
Antonio Calisto Pato, Chief Financial Officer,
Treasurer and Secretary
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
In connection with the annual report on Form 10-K for the year ended December 31, 2023 (this "Report"), of SPAR Group, Inc. (the "Registrant"), the
undersigned hereby certifies that, to his knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.
/s/ Michael R. Matacunas
Michael R. Matacunas
President and Chief Executive Officer
April 1, 2024
A signed original of this written statement required by Section 906 has been provided to SPAR Group, Inc. and will be retained by SPAR Group,
Inc., and furnished to the Securities and Exchange Commission or its staff upon request.
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.2
In connection with the annual report on Form 10-K for the year ended December 31, 2023 (this "Report"), of SPAR Group, Inc. (the "Registrant"), the
undersigned hereby certifies that, to her knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Registrant.
/s/ Antonio Calisto Pato
Antonio Calisto Pato
Chief Financial Officer, Treasurer and Secretary
April 1, 2024
A signed original of this written statement required by Section 906 has been provided to SPAR Group, Inc. and will be retained by SPAR Group,
Inc., and furnished to the Securities and Exchange Commission or its staff upon request.