Exhibit
10.5
CHANGE IN CONTROL SEVERANCE
AGREEMENT
This Change in Control Severance Agreement (as modified,
amended or restated from time to time in the manner provided
herein, this “ Agreement ”) is by and between
the individual employee named below (the “ Employee
”) and SPAR Group, Inc. (the “Company ”).
The Employee and the Company may be referred to individually as a
“ Party ” and collectively as the “
Parties ”.
In
consideration of past, present and future employment by the
Company, the mutual covenants below and other good and valuable
consideration (the receipt and adequacy of which are hereby
acknowledged), the Employee and Company hereby agree as
follows:
Section 1.
Introduction . The Employee is
an officer of the Company or one of the SPAR Affiliates (as
hereinafter defined). The Employee and the Company have entered
into this Agreement in order to provide severance payments from the
Company to the Employee under certain circumstances if, pending or
following a Change in Control, the Employee leaves for Good Reason
or is terminated other than in a Termination For Cause (as such
terms are hereinafter defined). However, this Agreement is not
intended, and shall not be deemed or construed, to create any
employment term or period, and except as otherwise provided in any
other written agreement with the Employee, the Employee
acknowledges and agrees that the Employee’s employment is
“at will” and modifiable from time to time and
terminable at any time, for any reason or no reason, and without
notice or benefit of any kind.
Section
2. Certain
Definitions . Definitions shall be
applicable equally to the singular and plural forms of the terms
defined, each use of a neuter, masculine, feminine or plural
pronoun shall be deemed to refer to the form of pronoun appropriate
to the circumstance, and each other reference to or by gender shall
include reference to each other or neuter gender appropriate to the
circumstance, in each case as the context may permit or require. As
used in this Agreement, the following capitalized terms and
non-capitalized words and phrases shall have the meanings
respectively assigned to them:
(a)
“ Authorized Representative ” shall mean,
for the Company or any SPAR Affiliate for whom the Employee works,
any of (i) the Board, (ii) the Chairman, (iii) any other executive
officer of the Company or applicable SPAR Affiliate who directly or
indirectly supervises or is responsible for the Employee or (iv)
any other Representative of the Company or applicable SPAR
Affiliate who directly or indirectly supervises or is responsible
for the Employee and is authorized to do so by the Board, the
Chairman or any such executive officer, in each
case other than the Employee.
(b)
“ Beneficial Owner ” shall mean any
person who beneficially owns (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act), securities issued
by the referenced corporation or other entity, whether directly or
indirectly, and whether individually, jointly with any other
person(s) or otherwise.
(c)
“ Board ”shall mean the Board of
Directors of the Company or (except for purposes of a Change in
Control) the applicable SPAR Affiliate.
(d)
“ Chairman ” shall mean the Chairman of
the Company or applicable SPAR Affiliate.
(e)
“ Change in Control ” shall mean any of
the following:
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(i)
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when any “person” or
“group” (as contemplated in Sections 3(a)(9) and
13(d)(3), respectively, of the Securities Exchange Act), becomes a
Beneficial Owner of a Majority of Voting Securities issued by the
Company, ineachcase other than any acquisition of Company
Securities (A) in any transaction covered by and exempted under
clause (iv) of this definition, (B) by the Employee or any group of
which the Employee voluntarily is a member, (C) by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any SPAR Affiliate or (D) by any corporation or other
entity if, immediately following such acquisition, the Beneficial
Owners of a Majority of Voting Securities of the acquirer (or its
ultimate parent) outstanding immediately after such event are
either (1) the persons who were the Beneficial Owners of all or
substantially all of the voting Company Securities immediately
prior to such acquisition and in substantially the same proportions
as their ownership immediately prior to such event, or (2) by
Robert G. Brown and/or William H. Bartels;
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(ii)
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when individuals who are members
of the Board as of the date hereof or who are added as hereinafter
provided (the “ Incumbent Board ”) cease for any
reason to constitute at least a majority of the Board;
provided , however , that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the then Incumbent
Board shall thereafter be added (for the purposes hereof) as a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened solicitation of proxies or
consents not by or on behalf of at least a majority of the then
Incumbent Board;
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(iii)
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when any individual shall become
the Chairman or Chief Executive Officer of the Company if such
individual was not the Chairman or Chief Executive Officer of the
Company or any of its subsidiaries as of January 1,
2007;
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(iv)
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any reorganization, merger or
consolidation of the Company or any of its subsidiaries,
ineachcase other than (A) any merger of any SPAR Affiliate
(other than the Company) into the Company or any of its
subsidiaries as the surviving entity, or (B) one in which all or
substantially all of the Beneficial Owners’ of the voting
Company Securities immediately prior to such event are, immediately
following such event, Beneficial Owners of a Majority of Voting
Securities of either the Company or the surviving entity of a
merger with the Company (or its ultimate parent), as the case may
be, outstanding immediately after such event and in substantially
the same proportions as their ownership immediately prior to such
event;
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(v)
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the approval by the
Company’s Board or stockholders of a plan of complete
liquidation of the Company; or
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(vi)
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any sale or other disposition by
the Company of all or substantially all of its assets ,
ineachcase other than (A) any assignment or pledge of all or
substantially all of the respective assets and properties of the
Company and its subsidiaries to one or more lenders as security for
their respective credit, indebtedness and guaranties, (B) any
acquisition by the Company or any of its subsidiaries of the assets
of any SPAR Affiliate (whether by assignment, merger, liquidation
or otherwise), or (C) any transaction in which all or substantially
all of the Beneficial Owners’ of the voting Company
Securities immediately prior to such event are, immediately
following such event, Beneficial Owners of a Majority of Voting
Securities of both the Company and the acquiring entity (or its
ultimate parent) outstanding immediately after such event and in
substantially the same proportions as their ownership immediately
prior to such event;
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provided
, however , that it
shall not constitute a Change in Control if and for so long as
Robert G. Brown retains effective control of the Company and shall
continue to be both the Chairman and Chief Executive Officer of the
Company.
(f)
“ Company Securities ” shall mean any
securities issued by the Company, whether acquired directly from
the Company, in the marketplace or otherwise.
(g)
“ Good Reason ” shall mean the occurrence
of any of the following events:
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(i)
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the failure to elect or appoint,
or re-elect or re-appoint, the Employee to, or removal or attempted
removal of the Employee from, his position positions with the
Company or applicable SPAR Affiliate (except in connection with the
proper termination of the Employee’s employment by the
Company by reason of death, disability or Termination For
Cause);
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(ii)
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the assignment to the Employee of
any duties inconsistent with the status of the Employee’s
office and/or position with the Company;
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(iii)
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any adverse change in the
Employee’s title or in the nature or scope of the
Employee’s authorities, powers, functions or duties of the
position(s) with the Company or applicable SPAR
Affiliate;
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(iv)
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the willful delay by the Company
or applicable SPAR Affiliate for more than ten (10) business days
in the payment to the Employee, when due, of any part of his or her
compensation;
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(v)
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a reduction in the
Employee’s salary or benefits (other than a discretionary
bonus);
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(vi)
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a failure by the Company to
obtain the assumption of, and agreement to perform, this Agreement
by any successor to the Company; or
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(vii)
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a change in the location at which
substantially all of the Employee’s duties with the Company
are to be performed from the county and state in which the Employee
is currently performing substantially all of his or her duties
(excluding those duties performed at home or on the
road);
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provided
, however , that the
appointment of a new Chief Executive Officer, or requiring the
Employee to report to or be supervised by the new Chief Executive
Officer (in whole or in part), shall not (without more) constitute
Good Reason.
(h)
“ Majority of Voting Securities ” shall
mean securities of the referenced person representing more than
fifty percent (50%) of the combined voting power of the referenced
person’s then outstanding securities having the right to vote
generally in the election of directors, managers or the
equivalent.
(i)
“ Protected Period ” shall mean the last
to expire of (A) the thirty-six month period commencing on the date
hereof, and (B) the twenty-four month period commencing on the date
of the relevant Change in Control. For the sake of clarity, a
Protected Period based on a Change in Control shall restart with
each new Change in Control during the Employee’s employment
with the Company or applicable SPAR affiliate (or their respective
successors in any Change in Control, as applicable).
(j)
“ Representative ” shall mean any
subsidiary or other affiliate of the referenced person or any
shareholder, partner, equity holder, member, director, officer,
manager, employee, consultant, agent, attorney, accountant,
financial advisor or other representative of the referenced person
or of any of its subsidiaries or other affiliates, in
each case other than the Employee.
(k)
“ Securities Exchange Act ” shall mean
the Securities Exchange Act of 1934, as amended, or any
corresponding or succeeding provisions of any applicable law
(including those of any state or foreign jurisdiction), and the
rules and regulations promulgated thereunder, in each
case as the same may have been and hereafter may be adopted,
supplemented, modified, amended, restated or replaced from time to
time.
(l)
“ SPAR Affiliate ” shall mean and
currently includes (without limitation) each of the Company’s
direct and indirect subsidiaries (including, without limitation,
SPAR Acquisition, Inc., SPAR Marketing, Inc., SPAR/Burgoyne Retail
Services, Inc., SPAR, Inc., SPAR Marketing Force, Inc., SPAR
Trademarks, Inc., SPAR Group International, Inc., SPAR/PIA Retail
Services, Inc., SPAR Technology Group, Inc., SPAR All Store
Marketing Services, Inc., SPAR Canada, Inc., SPAR Canada Company,
Retail Resources, Inc., Pivotal Field Services, Inc., PIA
Merchandising Co., Inc., Pacific Indoor Display Co. d/b/a Retail
Resources, Pivotal Sales Company, and PIA Merchandising Ltd.), the
Company’s affiliates (including, without limitation, SPAR
Marketing Services Inc., SPAR Management Services, Inc., and SPAR
InfoTech, Inc.), and each other entity under the control of or
common control with any of the foregoing entities, in
each case whether now existing or hereafter acquired,
organized or existing.
(m)
“ SPAR Group ” shall mean the Company and
all of the SPAR Affiliates.
(n)
“ Termination For Cause ” shall mean any
termination of the Employee for any of the following reasons: (i)
the Employee’s willful, negligent or repeated breach of, or
the Employee’s willful, negligent or repeated nonperformance,
misperformance or dereliction of any of his or her duties and
responsibilities under, (A) any employment agreement or
confidentiality agreement with the Company or any Spar Affiliate,
(B) the directives of the Board or any Authorized Representative,
or (C) the Company’s policies and procedures governing his or
her employment, in each case other than in
connection with any absence or diminished capacity due to illness,
disability or incapacity excused by (1) the policies and procedures
of the Company, (2) the terms of his or her employment or (3) the
action of the Board or any Authorized Representative; (ii) the
gross or repeated disparagement by the Employee of the business or
affairs of the Company, any SPAR Affiliate or any of their
Representatives that in the reasonable judgment of the Company or
SGRP has adversely affected or would be reasonably likely to
adversely affect the operations or reputation of any
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such person; (iii) any resume,
application, report or other information furnished to the Company
or any SPAR Affiliate by or on behalf of the Employee shall be in
any material respect untrue, incomplete or otherwise misleading
when made or deemed made; (iv) the Employee 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 the Company or any
SPAR Affiliate), (B) any theft or embezzlement by the Employee of
any asset or property of the Company, any SPAR Affiliate or any of
their respective Representatives, customers or vendors, (C) any
other misdemeanor involving moral turpitude, or (D) any other
felony; (vi) alcohol or drug abuse by the Employee; or (v) 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.
Section
3.
Severance . (a) Lump Sum
Payment. If the Employee’s
employment with the Company or applicable SPAR affiliate (or their
respective successors in any Change in Control, as applicable)
shall be terminated pending or within the Protected Period
following any Change in Control by (i) the Company for any reason
other than the Employee’s death or permanent disability or a
Termination For Cause, or (ii) by the Employee for Good Reason
(either of which will be referred to as a “ Severance
Termination ”), then the Company shall promptly (but not
later than the tenth business day following such Severance
Termination) pay (or cause the applicable SPAR Affiliate to
promptly pay) to the Employee severance pay (in a lump sum) in an
amount equal to the sum of:
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(i)
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the Employee’s annual
salary rate in effect immediately prior to his cessation of such
employment (or, if greater, at the highest annual salary rate in
effect at any time during the one-year period preceding the date of
such termination), times a multiple (calculated to two decimal
places) equal to the remainder of (i) Protected Period (
i.e. , the number of months in the Protected Period, minus
(ii) the number of months (to two decimal places, but not less than
zero) by which the Severance Termination date followed the
effective date of the Change in Control; and
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(ii)
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the maximum bonus that would have
been paid or payable to the Employee under the Company’s
bonus proposal to the Employee for the full year of the Severance
Termination as if all performance criteria had been fully
satisfied, but in any event not to exceed twenty-five percent (25%)
of the Employee’s annual salary rate referred to
above.
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(b)
Vacation
Days . In addition and in any event, promptly (but not later
than the tenth business day) following the date of any termination
or resignation pending or following a Change in Control, the
Company shall pay (or cause the applicable SPAR Affiliate to pay)
to the Employee an amount equal to his or her accrued and unused
vacation days, computed at the Employee’s annual salary rate
in effect immediately prior to his cessation of such employment
(or, if greater, at the highest annual salary rate in effect at any
time during the one-year period preceding the date of such
termination) and in accordance with the applicable policy of the
Company (or if changed pending or following a Change in Control, in
accordance with the immediately preceding applicable policy of the
Company).
(c)
Insurance.
In addition, during the two-year period following the effective
date of any Change in Control, the Employee and his dependents
shall continue to receive the insurance benefits received during
the preceding year as well as any additional insurance benefits as
may be provided to executive officers or their dependents during
such period in accordance with the Company’s policies and
practices. The Employee’s required co-payments shall not
exceed those payable by the other executive officers of the SPAR
Group.
(d)
Stock
Options. Each stock option granted to the Employee that has
not, by its express terms, vested shall be deemed to have vested on
the date of any Severance Termination, and shall thereafter be
exercisable for the maximum period of time allowed for exercise
thereof under the terms of such option, assuming that the
Employee’s employment with the Company had been terminated by
the Company other than Termination For Cause or by the Employee for
Good Reason. An election by the Employee to terminate his or her
employment for Good Reason pending or following a Change in Control
shall be deemed to be a permitted retirement (irrespective of age)
of the Employee for the purpose of interpreting the provisions of
any of the Company’s employee benefit plans, programs, or
policies.
(e)
401k. The
Employee
