5.	Related-Party Transactions

SGRP's policy respecting approval of transactions with related persons, promoters and control persons is contained in the SPAR Group Code of Ethical Conduct for its Directors, Executives, Officers, Employees, Consultants and other Representatives Amended and Restated (as of)

March 15, 2018 (

the "

Ethics Code

"). The Ethics Code is intended to promote and reward honest, ethical, respectful and professional conduct by each director, executive, officer, employee, consultant and other representative of any of SGRP and its subsidiaries (together with SGRP, the "

Company

") and each other Covered Person (as defined in the Ethics Code) in his or her position with the Company anywhere in the world, including (among other things) serving each customer, dealing with each vendor and treating each other with integrity and respect, and behaving honestly, ethically and professionally with each customer, each vendor, each other and the Company. Article II of the Ethics Code specifically prohibits various forms of self-dealing (including dealing with relatives) and collusion and Article V of the Ethics Code generally prohibits each "Covered Person" (including SGRP's officers and directors) from using or disclosing the Confidential Information of the Company or any of its customers or vendors, seeking or accepting anything of value from any competitor, customer, vendor, or other person relating to doing business with the Company, or engaging in any business activity that conflicts with his or her duties to the Company, and directs each "Covered Person" to avoid any activity or interest that is inconsistent with the best interests of the SPAR Group, in each case except for any "Approved Activity" (as such terms are defined in the Ethics Code). Examples of violations include (among other things) having any ownership interest in, acting as a director or officer of or otherwise personally benefiting from business with any competitor, customer or vendor of the Company other than pursuant to any Approved Activity. Approved Activities include (among other things) any contract with an affiliated person (each an "

Approved Affiliate Contract

") or anything else disclosed to and approved by SGRP's Board of Directors (the "

Board

"), its Governance Committee or its Audit Committee, as the case

may

be, as well as the ownership, board, executive and other positions held in and services and other contributions to affiliates of SGRP and its subsidiaries by certain directors, officers or employees of SGRP, any of its subsidiaries or any of their respective family members. The Company's senior management is generally responsible for monitoring compliance with the Ethics Code and establishing and maintaining compliance systems, including those related to the oversight and approval of conflicting relationships and transactions, subject to the review and oversight of SGRP's Governance Committee as provided in clause

IV.11

of the Governance Committee's Charter, and SGRP's Audit Committee as provided in clause

I.2

(l) of the Audit Committee's Charter. The Governance Committee and Audit Committee each consist solely of independent outside directors (see

Domestic Related Party Services, International Related Party Services, SBS Bankruptcy, Settlement and

March 2020

Claim, Summary of Certain Related Party Transactions, Infotech Litigation and Settlement, Affinity Insurance, and Other Related Party Transactions and Arrangements

, below).

SGRP's Audit Committee has the specific duty and responsibility to review and approve the overall fairness and terms of all material related-party transactions. The Audit Committee receives affiliate contracts and amendments thereto for its review and approval (to the extent approval is given), and these contracts are periodically (often annually) again reviewed, in accordance with the Audit Committee Charter, the Ethics Code, the rules of the Nasdaq Stock Market LLC ("

Nasdaq

"), and other applicable law to ensure that the overall economic and other terms will be (or continue to be)

less favorable to the Company than would be the case in an arms-length contract with an unrelated provider of similar services (i.e., its overall fairness to the Company, including pricing, payments to related parties, and the ability to provide services at comparable performance levels). The Audit Committee periodically reviews all related party relationships and transactions described below.

Domestic Related Party Services:

SPAR Business Services, Inc. ("

SBS

"), SPAR Administrative Services, Inc. ("

SAS

"), and SPAR InfoTech, Inc. ("

Infotech

"), have provided services from time to time to the Company and are related parties and affiliates of SGRP, but are

not

under the control or part of the consolidated Company. SBS is an affiliate because it is owned by SBS LLC which in turn is beneficially owned by Robert G. Brown. SAS is an affiliate because it is owned by William H. Bartels and certain relatives of Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company for related party purposes). Infotech is an affiliate because it is owned principally by Robert G. Brown. Mr. Robert G. Brown and Mr. Bartels (the "Majority Stockholders") (see below), are members of a

13D

control group and founders of SGRP, Mr. Robert G. Brown was Chairman and an officer and director of SGRP through

May 3, 2018 (

when he retired), and became a director again on

April 24, 2020,

pursuant to the written consents of the Brown Group and Mr. Bartels. Mr. Bartels was and continues to be Vice Chairman and a director of SGRP, but retired as an employee of SGRP as of

January 1, 2020 (

see

Bartels' Retirement and Director Compensation

, below). Mr. Robert G. Brown and Mr. Bartels also have been and are stockholders, directors and executive officers of various other affiliates of SGRP. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies – Legal Matters

, and

SBS Bankruptcy, Settlement and

March 2020

Claim

and

Infotech Litigation and Settlement,

below.

The Company executes its domestic field services 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

"), and substantially all of the Field Administrators are in turn are employed by other independent

third

parties.

Due to (among other things) the adverse determination in

2016

in the Clothier case (as defined below) that SBS had misclassified its employees as independent contractors and the ongoing proceedings against SBS (which could have had a material adverse effect on SBS's ability to provide future services needed by the Company), SBS' continued higher charges and expense reimbursement disputes, and the Company's identification of an experienced independent

third

party company (the "

Independent Field Vendor

") who would provide comparable services on substantially better terms, the Company terminated the services of SBS effective

July 27, 2018,

and the Company has engaged that Independent Field Vendor to replace those field services previously provided by SBS (other than in California). The Company similarly terminated SAS and has engaged another independent

third

party company to replace those administrative services formerly provided by SAS, effective

August 1, 2018 (

the "

Independent Field Administrator

").

May 7, 2018,

the Company gave a termination notice to SAS specifying

July 31, 2018,

as the end of the Service Term under (and as defined in) SAS Agreement signed in

2016.

The Company has reached a non-exclusive agreement with an independent

third

party vendor to provide substantially all of the domestic Independent Field Administrators used by the Company.

Although SAS has

not

provided or been authorized to perform any services to the Company after their terminations described above effective on or before

July 31, 2018.

While SAS has apparently continued to operate for its own benefit and/or the winding down of its operations, the Company has determined that it is

not

obligated to reimburse any post-termination expense. However, in the spirit of settlement, the Company had offered to reimburse SAS

$237,500

for claimed transition expenses to be offset by

$226,000

owed by SAS to the Company, for a net payment to SAS of

$11,500.

SAS has

not

accepted the Company's offer.

The Company expects that SBS and SAS

may

use every available means to attempt to collect reimbursement from the Company for the foreseeable future for all of their post-termination expense, including repeated litigation. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies -- Legal Matters

and

SBS Bankruptcy, Settlement and

March 2020

Claim

, below.

Any claim by Robert G. Brown, William H. Bartels, SBS, SAS, any other related party or any

third

party that the Company is somehow liable for any judgment or similar amount imposed against SBS or SAS or any other related party, any judicial determination that the Company is somehow liable for any judgment or similar amount imposed against SBS or SAS or any other related party, or any increase in the Company's use of employees (rather than the services of independent contractors provided by

third

parties) to perform Field Specialist services domestically, in each case in whole or in part, could have a material adverse effect on the Company or its performance or condition (including its 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), whether actual or as planned, intended, anticipated, estimated or otherwise expected. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies

Legal Matters,

below.

Current material and potentially material legal proceedings impacting the Company are described in Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies

Legal Matters,

below. These descriptions are based on an independent review by the Company and do

not

reflect the views of SBS, its management or its counsel. Furthermore, even though SBS was solely responsible for its operations, methods and legal compliance, in connection with any proceedings against SBS, SBS continues to claim that the Company is somehow liable to reimburse SBS for its expenses in those proceedings. The Company does

not

believe there is any basis for such claims and would defend them vigorously.

Infotech sued the Company in New York seeking reimbursement for approximately

$190,000

respecting alleged lost tax benefits and other expenses it claims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and previously denied on multiple occasions by both management and SGRP's Audit Committee, whose approval was required because Infotech is a related party. Infotech also threatened to sue the Company in Romania for approximately

$900,000

for programming services allegedly owed to the Company's former Romanian subsidiary (sold at book value to Infotech in

2013

) and

not

provided to Infotech, for which the Company vigorously denies liability. The Company and Infotech settled this matter. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies

Legal Matters,

below.

Peter W. Brown was appointed as a Director on the Board as of

May 3, 2018,

replacing Mr. Robert G. Brown upon his retirement from the Board and Company at that date. He has recently been deemed independent by the Board except for with respect to related party matters and for matters concerning SPAR Brasil Servicos de Merchandising e Tecnologia S.A., a Brazilian corporation and SGRP subsidiary ("

SPAR BSMT

"). Peter Brown is an affiliate and related party respecting SGRP and was proposed by Mr. Robert G. Brown to represent the Brown family interests. He worked for and is a stockholder of SAS (see above) and certain of its affiliates, he is the nephew of Mr. Robert G. Brown, he is a director of SPAR BSMT and owns Earth Investments LLC, ("

EILLC

"), which owns

10%

interest in the SGRP's Brazilian subsidiary. Mr. Robert G. Brown is a significant stockholder of SGRP, and member of a

13D

control group, SGRP's former Chairman and director and became a director again on

April 24, 2020,

pursuant to the written consents of the Brown Group and Mr. Bartels.

National Merchandising Services, LLC ("

NMS

"), is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP through its indirect ownership of

51%

of the NMS membership interests and by National Merchandising of America, Inc. ("

NMA

"), through its ownership of the other

49%

of the NMS membership interests. Mr. Edward Burdekin is the Chief Executive Officer and President and a director of NMS and also is an executive officer and director of NMA. Ms. Andrea Burdekin, Mr. Burdekin's wife, is the sole stockholder and a director of NMA and a director of NMS. NMA is an affiliate of the Company but is

not

under the control of or consolidated with the Company. Mr. Burdekin also owns

100%

of National Store Retail Services ("

NSRS

"). Since

September 2018,

NSRS provided substantially all of the domestic merchandising specialist field force used by NMS. For those services, NMS agrees to reimburse NSRS the total costs for providing those services and to pay NSRS a premium equal to

1.0%

of its total cost.

Also, NMS leases office and operational space that is owned personally by Mr. Burdekin. The lease expense is

$2,000

a month. While there is

formal signed agreement, there is

expected change to the arrangement.

August 10, 2019,

NMS, to protect continuity of its Field Specialist nationwide, petitioned for bankruptcy protection under chapter

of the United States Bankruptcy Code in the U.S. District for Nevada (the "

NMS Chapter

Case

"), and as a result, the claims of NMS' creditors must now generally be pursued in the NMS Chapter

Case. On

August 11, 2019,

NSRS and Mr. Burdekin also filed for reorganization in the NMS Chapter

Case, NMS is part of the consolidated Company. Currently the Company believes that the NMS Chapter

Case is

not

likely to have a material adverse effect on the Company, and the Company's ownership of and involvement in NMS is

not

likely to change as a result of the NMS Chapter

Case or any resulting NMS reorganization.

Resource Plus of North Florida, Inc. "Resource Plus" or "RPI" is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP through its indirect ownership of

51%

of the RPI membership interests and by Mr. Richard Justus through his ownership of the other

49%

of the RPI membership interests. Mr. Justus has a

50%

ownership interest in RJ Holdings which owns the buildings where RPI is headquartered and operates. Both buildings are subleased to RPI.

BS Bankruptcy, Settlement and

March 2020

Claim

November 23, 2018,

SBS petitioned for bankruptcy protection under chapter

of the United States Bankruptcy Code in the U.S. District for Nevada (the "

SBS Chapter

Case

"). On

March 18, 2019,

the Company filed claims in the SBS Chapter

Case seeking reimbursement for

$378,838

for SMF's funding of the Affinity Security Deposits and

$12,963

for SMF's funding of the field payment checks that would have otherwise bounced, and

$1,839,459

for indemnification of SGRP for its settlement (see below) of the Clothier class action case in California ("

Clothier"

) and legal costs and an unspecified amount for indemnification of SGRP for the Hogan action (see below) and other to be discovered indemnified claims.

August 6, 2019,

SGRP, and its subsidiaries SPAR Marketing Force, Inc. ("

SMF

"), a Nevada corporation, and SPAR Assembly & Installation, Inc., f/k/a SPAR National Assembly Services, Inc., a Nevada corporation, submitted to the U.S. District Court in Nevada (the "

Bankruptcy Court

") their Compromise and Settlement Agreement, dated

July 26, 2019 (

the "

Settlement Agreement

"), with SBS, a Nevada corporation formerly known as SPAR Marketing Services, Inc., debtor and debtor-in-possession, and SBS, LLC, a Nevada limited liability company. The Settlement Agreement was submitted in the SBS Chapter

Case. Pursuant to the Settlement Agreement, the Company settled its claims for (among other things) indemnification from SBS in Clothier and the Rodgers class action case in Texas ("

Rodgers

)

August 6, 2019,

the Bankruptcy Court approved the Settlement Agreement and the SBS reorganization pursuant to SBS' First Amended Chapter

Plan of Reorganization, as amended by the Settlement Agreement (the "

Plan of Reorganization

"). Pursuant to its Plan of Reorganization, SBS also settled its potential liability in the Clothier and Rodgers cases, but the Company believes that Robert G. Brown and William H. Bartels were

not

released from Clothier, any related case or Rodgers. See Note

to the Company's Consolidated Financial Statements in the

Commitments and Contingencies --

Legal Proceedings -- SBS Bankruptcy, Settlement and

March 2020

Claim, SBS Clothier Litigations,

and

SBS Rodgers Litigation,

below

In the Settlement Agreement, except for the carve out described in the next paragraph, SBS completely released the Company from all obligations that

may

be owed to SBS.

August 6, 2019,

with the support of (among others) the Clothier and Rodgers plaintiffs and the Company, the Court approved the SBS Settlement Agreement and the SBS Reorganization pursuant to the SBS Plan (as defined in the SBS Settlement Release). The SBS Settlement Agreement provides for a mutual release of claims (including the SBS Claims and the SGRP Claims, as defined therein), except for the following:

(i) the Company's

$2.2

million in claims were settled for

$174,097

payable by SBS over

monthly installments of

$7,254

per month starting

January 1, 2020,

and without any interest (collectively, the "

Discounted Claim Payments

"), as such terms are defined in the SBS Settlement Agreement and the Company accrued

$174,097

for the Discounted Claim Payments; and

(ii) SMF will pay to SBS the Proven Unpaid A/R (as defined in the SBS Settlement Agreement) upon its determination (as described below).

In the SBS Settlement Agreement, the parties agreed to have a

third

party financial and accounting services firm, independently determine the Proven Unpaid A/R based on parameters set forth in the SBS Settlement Agreement. In the SBS Settlement Agreement, the parties will accept the determination of the

third

party financial and accounting services firm as final and binding, and all other claims and amounts are released. The

third

party financial and accounting services firm has determined that the Company had paid all amounts due to SBS and that the Proven Unpaid A/R equals zero.

The Company has recorded the total settlement amount of

$174,097

as of

December 31, 2019.

This settlement amount is payable in

equal monthly payments of

$7,254

starting

January 1, 2020.

To date SBS is in default of the

first

six

payments totaling

$43,524

and formal default notices have been sent to SBS. SBS has responded and claimed an offset respecting its undocumented and unproven claims. As of

June 30, 2020,

the total settlement has been reserved.

March 6, 2020,

Robert G. Brown on behalf of SBS sent an email communication to Arthur B. Drogue, to which he copied Arthur H. Baer, demanding payment of

$1,707,374

to SBS from SMF pursuant to (among other things) the SBS Settlement Agreement (the "

March 2020

Claim

"). The Company has reviewed the

March 2020

Claim in detail (although Brown has provided

backup or proof) and the Company strongly disagrees that any such amount is owed. The Company believes that the robust and comprehensive mutual releases and other provisions in the SBS Settlement Agreement provide valuable relief from such claims and potential future claims and litigation by SBS respecting the Company's past involvement with SBS, including the

March 2020

Claim. However, Robert G. Brown, president, director and indirect owner of SBS, since and notwithstanding the Court's approval of the SBS Settlement Agreement, has continued to make unproven and undocumented claims that amounts that were fully released pursuant to the SBS Settlement Agreement and approved by the bankruptcy court are nevertheless due to SBS from the Company, and the Company strongly disagrees. The Company is prepared to take action in Nevada Bankruptcy Court by reopening the SBS bankruptcy case and petitioning official settlement of this matter. Since all such claims have been completely released by SBS (with Mr. Robert G. Brown's approval), the Company owes nothing and has

not

accrued anything respecting Mr. Robert G. Brown's renewed claims. Mr. Robert G. Brown is significant stockholder of SGRP, and member of a

13D

control group, SGRP's former Chairman and director of SGRP, and became a director again on

April 24, 2020,

pursuant to the written consents of the Brown Group and Mr. Bartels.

At SGRP's

March 2020

Board meeting, Mr. Bartels was requested by an independent director to compile a list of unproven and undocumented claims that he and Mr. Brown believe are owed by the Company. On

March 17, 2020,

that list was given to the Audit Committee Chairman and included additional claims, net of an anticipated reduction, totaling approximately

$1.3

million, bringing their total claims to approximately

million. The Company has completely rejected these claims, and believes it was released from all such claims by SBS in the SBS bankruptcy reorganization.

The

March 2020

Claim includes estimates for the individual legal defenses of Robert G. Brown and William H. Bartels in the private attorney general action in California ("

PAGA

") and Texas ("

Rodgers

") in cases that do

not

involve and never included the Company and for which the Company believes it has

liability. The

March 2020

Claim also includes defense expenses for SBS Clothier case, which expenses SBS settled for a highly discounted amount in its bankruptcy reorganization but now wants the Company to pay in full. SBS in its bankruptcy reorganization but SBS now wants the Company to pay in full. SBS in its bankruptcy reorganization settled its potential liability in the Rodgers and Clothier cases and SBS has, and since

July 2019

had,

more defense expenses in those cases. Subsidiaries of SGRP were at

one

time in the Clothier case but were dismissed without prejudice leaving SGRP subject to potential liability. Accordingly, SGRP settled the Clothier case separately. SGRP was never named in the Rodgers case. However, the alleged continued willful misclassification by SBS of its independent contractors after the Clothier misclassification determination is a claimed basis for the PAGA lawsuit against Brown and Bartels. See Note

to the Company's Consolidated Financial Statements in the Commitments and Contingencies --

Legal Proceedings -- SBS Field Specialist Litigation, SBS Clothier Litigation, and SGRP Hogan Litigation

. Mr. Bartels' list also includes payments of

$500,000

per year to Robert G. Brown for extended retirement and advisory fees, although the Company has never proposed, committed or agreed to them and on several occasions specifically rejected Mr. Brown's proposals in various forms for them.

Infotech Litigation and Settlement

September 19, 2018,

SGRP was served with a Summons and Complaint by SPAR InfoTech, Inc. ("

Infotech

"), an affiliate of SGRP that is owned principally by Mr. Robert G. Brown (

one

of the Majority Stockholders) as plaintiff commencing a case against SGRP (the "

Infotech Action

"). The Infotech Action sought payment from SGRP of approximately

$190,000

for alleged lost tax benefits and other expenses that it claims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and that were previously denied on multiple occasions by both management and SGRP's Audit Committee (whose approval was required because Infotech is a related party).

2016,

SGRP acquired SPAR Brasil Serviços de Merchandising e Tecnologia S.A. ("

SPAR BSMT

"), its Brazilian subsidiary, with the assistance of Mr. Robert G. Brown (while he was still Chairman and an officer and director of SGRP) and his nephew, Peter W. Brown, who became an indirect

10%

owner of SPAR BSMT, and later became a director of SGRP on

May 3, 2018.

Mr. Robert G. Brown used his private company, Infotech and undisclosed foreign companies to structure the acquisition for SGRP.

Mr. Robert G. Brown incurred his alleged expenses associated with the transaction through Infotech, including salary allocations for unauthorized personnel and claims for his "lost tax breaks". Mr. Robert G. Brown submitted his unauthorized, unproven and undocumented "expenses" to SGRP, and SGRP's Audit Committee allowed approximately

$50,000

of them (which was paid) and disallowed approximately

$150,000

of them. His claim increased to over

$190,000

in the Infotech Action. The Company vigorously denied owing any of those amounts.

2018,

Infotech also threatened to sue the Company in Romania for approximately

$900,000

for programming services allegedly owed to the Company's former Romanian subsidiary (sold at book value to Infotech in

2013

) and

not

provided to Infotech (the "

Romanian Claim

"). Infotech gave a draft complaint to the Company in

2018.

The Company also vigorously denied owing any of those obligations or amounts.

In order to avoid the expenses of protracted litigation, SGRP's Management and the Audit Committee agreed that it would be in the best interest of all stockholders to reach a reasonable settlement of both the Infotech Action and the Romanian Claim for installment payments in reasonable amounts and mutual releases of all other related claims. Management had offered

$225,000

to settle both, but at the urging of the Board and assurances of several Board members that it would help them persuade Mr. Robert G. Brown to settle, management agreed to increase the settlement offer to a total of

$275,000.

After extensive negotiation between the Company and Infotech, Mr. Robert G. Brown accepted the

$275,000

offer and the parties entered into the Confidential Settlement Agreement and Mutual Release on

October 8, 2019 (

the "

Infotech Settlement Agreement

"), which was approved and ordered by the Court on

October 30, 2019,

and the Infotech Action was discontinued (dismissed) with prejudice.

The Infotech Settlement Agreement required the Company to make payments totaling

$275,000

four

installments: (i)

$75,000

following Court approval (which Payment has already been made); (ii)

$75,000

within

days following discontinuance of the Infotech Action (which was discontinued on

October 30, 2019); (

iii)

$75,000

within

days following discontinuance of the Infotech Action; and (iv)

$50,000

within

days following discontinuance of the Infotech Action. The Infotech Settlement was paid in accordance with the agreement and is therefore paid in full effective

January 2020.

The Company believes that the robust and comprehensive mutual releases in the Infotech Settlement Agreement provide valuable relief from potential future claims and litigation by Infotech respecting the Company's past involvement with Infotech in the Brazilian and Romanian transactions.

International Related Party Services:

SGRP Meridian (Pty), Ltd. ("Meridian") is a consolidated international subsidiary of the Company and is owned

51%

by SGRP,

23%

by Friedshelf

401

Proprietary Limited and

26%

by Lindicom Empowerment Holdings Proprietary Limited. Mr. Garry Bristow, who is an executive at SGRP Meridian and a Director of CMR Meridian, is

one

of the beneficial owners of both Merhold Cape Property Trust ("MCPT") and Merhold Holding Trust ("MHT"). Mr. Adrian Wingfield, who is a Director of CMR Meridian, is

one

of the beneficial owners of MHT. MHT owns the building where Meridian is headquartered and also owns

vehicles which are leased to Meridian. MCPT provides a fleet of

173

vehicles to Meridian under a

year lease program.

SPAR Todopromo is a consolidated international subsidiary of the Company and is owned

51%

by SGRP and

49%

by the following individuals: Mr. Juan F. Medina Domenzain, Juan Medina Staines, Julia Cesar Hernandez Vanegas, and Jorge Medina Staines. Mr. Juan F. Medina Domenzain is an officer and director of SPAR Todopromo and is also majority shareholder (

90%

) of CONAPAD ("

CON

") which has supplied administrative and operational consulting support to SPAR Todopromo since

2016.

Mr. Juan F. Medina Domenzain ("

JFMD

"), partner in SPAR Todopromo, leased a warehouse to SPAR Todopromo. The lease expires on

December 31, 2020.

SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("

SPAR BSMT

" is owned

51%

by the Company,

39%

by JK Consultoria Empresarial Ltda.-ME, a Brazilian limitada ("

JKC

"), and

10%

by Earth Investments, LLC, a Nevada limited liability company ("

EILLC

").

JKC is owned by Mr. Jonathan Dagues Martins, a Brazilian citizen and resident ("

JDM

") and his sister, Ms. Karla Dagues Martins, a Brazilian citizen and resident. JDM is the Chief Executive Officer and President of each SPAR Brazil company pursuant to a Management Agreement between JDM and SPAR BSMT dated

September 13, 2016.

JDM also is a director of SPAR BSMT. Accordingly, JKC and JDM are each a related party respecting the Company. EILLC is owned by Mr. Peter W. Brown, a citizen and resident of the USA ("

PWB

") and a director of SPAR BSMT and SGRP and nephew of Robert G. Brown. Mr. Robert G. Brown is significant stockholder of SGRP, and member of a

13D

control group, SGRP's former Chairman and director of SGRP, and became a director again on

April 24, 2020,

pursuant to the written consents of the Brown Group and Mr. Bartels. Accordingly, PWB and EILLC are each a related party respecting the Company.

SPAR BSMT has contracted with Ms. Karla Dagues Martins, a Brazilian citizen and resident and JDM's sister and a part owner of SPAR BSMT, to handle the labor litigation cases for SPAR BSMT and its subsidiaries. These legal services are being provided to them by Ms. Martins' company, Karla Martins Sociedade de Advogados ("

KMSA

"). Accordingly, Mr. Jonathan Dagues Martins and Ms. Karla Dagues Martins are each an affiliate and a related party respecting the Company.

Summary of Certain Related Party Transactions:

The following costs of affiliates were charged to the Company (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Services provided by affiliates:
National Store Retail Services (NSRS)		1,050		260		2,392		385
Office lease expenses (Mr. Burdekin)		6		-		12		-
Office lease expenses (RJ Holdings)		177		97		350		199
Office and vehicle lease expenses (MPT)		11		16		27		32
Vehicle rental expenses (MCPT)		281		297		580		587
Office and vehicle rental expenses (MHT)		58		68		131		132
Consulting and administrative services (CON)		11		37		23		74
Legal Services (KMSA)		34		21		57		43
Warehousing rental (JFMD)		12		12		25		24
Consulting and administrative fees (SPARFACTS)		41		-		72		-

Total services provided by affiliates	$	1,681	$	808	$	3,669	$	1,476

Due to affiliates consists of the following (in thousands):	June 30,		December 31,
	2020		2019
Loans from local investors:(1)
Australia	$	696	$	467
Mexico		623		623
Brazil		140		139
China		1,387		2,271
South Africa		403		635
Resource Plus		531		531
Total due to affiliates	$	3,780	$	4,666

(

)

Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loans have

payment terms and are due on demand and as such have been classified as current liabilities in the Company's consolidated financial statements.

Affinity Insurance:

SMF, a wholly-owned subsidiary of SGRP that provides merchandising and marketing service to its clients throughout the United States through (among other things) services provided by others, is owed

$675,000

for security deposit advances and

$226,000

for quarterly premium advances made by SMF (as described below) to SAS. Prior to the termination of the services provided by SAS and SBS (effective at the end of

July 2018),

SMF engaged SAS as an independent contractor to provide the services of Field Administrators to domestically schedule, deploy and administer the independent Field Specialists provided by SBS as an independent contractor under a similar engagement.

Affinity Insurance Company, Ltd. ("

Affinity

") is a captive insurance company that provides insurance and reinsurance products to its shareholders and their affiliates in exchange for payment of premium installments, posting of security collateral and other requirements, and subject to adjustments and assessments. SAS is, and has been, a shareholder and member of Affinity and has been since approximately

2000.

SMF became a direct shareholder and member of Affinity in

March 2018

in order to directly procure insurance for the domestic employees of the Company.

The business services SAS provided to, or on behalf of, SMF included insurance coverages for SMF and other SGRP employees domestically prior to

March 2018,

for SAS' Field Administrators and other employees through the termination by SMF of SAS' services effective on or about

July 31, 2018,

and for the Field Specialists provided by SBS to SMF through the termination by SMF of SBS' services effective on or about

July 31, 2018,

all in connection with services provided by SMF to its clients. In connection with the business services provided by SAS, and based on informal arrangements between the parties, the Affinity insurance premiums for such coverage were ultimately charged (through SAS) for their fair share of the costs of that insurance to SMF, SAS (which then charges the Company) and SBS. The Company also advanced money to SAS to prepay Affinity insurance premiums.

SAS has received and

may

shortly be receiving returns of those security deposit advances and quarterly premium advances from Affinity totaling approximately

$921,000.

SMF has demanded repayment of its advances to SAS from these recent refunds received from Affinity, but SAS has refused and appears to have distributed the moneys to other SAS related parties. SAS has recently stated it has

funds available to remit to SMF even though they have repeatedly acknowledged SAS owes these advances to SMF and in fact, it has been documented that these liabilities were properly reported in SAS' financial statements.

July 8, 2020

the Company issued a demand notice to SAS for the return of

$901,000

(the

$675,000

security advances and the

$226,000

premium advances) but to-date SAS has refused to comply with this demand.

The Company has prepared the draft of a complaint to be filed in the Supreme Court of the State of New York in Westchester County, NY, seeking appropriate relief and recovery from SAS and other related parties, which it prepared with the support of SGRP's Audit Committee (which has certain oversight responsibilities respecting related party matters). However, because of the pending changes in the SGRP' CEO and CFO positions, the Audit Committee recommended that management delay filing the complaint until it can be reviewed and pursued by SGRP's new CEO and CFO (upon their selection and appointment) if and as they determine appropriate.

Bartels' Retirement and Director Compensation

William H. Bartels retired as an employee of the Company as of

January 1, 2020.

However, he will continue to serve as Vice Chairman and a member of SGRP's Board of Directors (the "

Board

"), positions he has held since

July 8, 1999.

Effective as of

January 18, 2020,

SGRP's Governance Committee proposed and unanimously approved the following benefits for the

five

year period commencing

January 1, 2020,

and ending

December 31, 2024 (

the "

Five Year Period

"), for Mr. Bartels in connection with his retirement: (a) retirement payments of

$100,000

per year ("

Retirement Compensation

"); (b) the then applicable regular non-employee director fees ("

Regular Fees

"), currently

$55,000

per year, and a supplemental Board fee of

$50,000

per year ("

Supplemental Fees

"); and (c) the same medical, dental, eye and life insurance benefits he received as of

December 31, 2019,

under an arrangement whereby Mr. Bartels shared part of the cost of Medicare and supplemental health benefits, currently valued at approximately

$15,588

per year ("

Medical Benefits

"); in each case paid in accordance with SGRP's payroll schedule and policies, and payable whether or

not

Mr. Bartels remains a director of SGRP for any reason.

The Retirement Compensation, Regular Fees and Supplemental Fees that remain unpaid during the Five Year Period: (i) shall be accelerated and paid to Mr. Bartels (or his heirs or assigns) in full upon the sale to a

third

party of a majority of the SGRP Shares or all or substantially all of SGRP's assets; and (ii) shall survive and be payable in full to his heirs and assigns in the event of the death of Mr. Bartels.

Based on current rates and benefits, the aggregate value of such compensation, fees and benefits payable to Mr. Bartels will be approximately

$220,558

per year and a total of

$1,102,790

for the Five Year Period. Such compensation, fees and benefits (in whole or in part)

may

be extended beyond the Five Year Period in the discretion of the Board. The Company recognized

$700,000

of retirement benefit expense during the

six

-month period ended

June 30, 2020,

representing the present value of the future payments due Mr. Bartels.

In the event of any future business transaction involving Mr. Bartels and SGRP for which Bartels

may

receive additional compensation as mutually agreed at the time of or in connection with such transaction, which under applicable law also will require approval of SGRP's Audit Committee as a related party payment or transaction (as Mr. Bartels will still be a related party if he is then a director or significant stockholder), such retirement compensation, fees or benefits will

not

offset, replace or limit any such additional approved transactional compensation payable to Mr. Bartels.

Mr. Bartels is

one

of the founders and a significant stockholder of SGRP (holding approximately

25.1%

of the SGRP Shares). He also is part of a control group holding a majority of the SGRP Shares with Robert G. Brown (together with Mr. Bartels), which group most recently acted to (

) unilaterally select, appoint and elect Panagiotis ("Panos") N. Lazaretos to serve on the board of directors of SGRP, effective on

December 10, 2019,

and unilaterally select, appoint and elect Robert G. Brown to serve on the board of directors of SGRP, effective as of

April 24, 2020.

Other Related Party Transactions and Arrangements:

July 1999,

SMF, SBS and SIT 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 (the "

Co-Owned Software

") are co-owned with SBS and Infotech and each entered into a non-exclusive royalty-free license from the Company to use certain "SPAR" trademarks in the United States (the "

Licensed Marks

"). As a result of the SBS Chapter

Case, SBS' rights in the Co-Owned Software and Licensed Marks are assets of SBS' estate, subject to sale or transfer in any court approved reorganization or liquidation. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies

Legal Matters, Related Party Litigation

and

SBS Bankruptcy

, below.

Through arrangements with the Company, SBS (owned by Mr. Bartels and Mr. Brown), SAS (owned by Mr. Bartels and family members of Mr. Robert G. Brown), and other companies owned by Mr. Brown participate in various benefit plans, insurance policies and similar group purchases by the Company, for which the Company charges them their allocable shares of the costs of those group items and the actual costs of all items paid specifically for them. All such transactions between the Company and the above affiliates are paid and/or collected by the Company in the normal course of business.