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, Related Party Transaction Summary, Related Party Transaction Summary, 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.

The Special Committee also has been involved in the review of the Proposed Amendments to SGRP's By-Laws and the By-Laws Action and

225

Action (see Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies

Settled Delaware Litigations

, 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 Robert G. Brown and prior to

December 2018

was owned by William H. Bartels. 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. Brown and Mr. Bartels are the Majority Stockholders (see below), members of a

13D

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

May 3, 2018 (

when he retired), and Mr. Bartels was and continues to be Vice Chairman and a director and officer of SGRP. Mr. 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

, below. See also

SBS Bankruptcy and Settlement

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.

SBS provided substantially all of the Field Specialist services in the U.S.A. to the Company from

January 1

through

July 27, 2018,

and an independent vendor and licensee provided them for the balance of

2018

. The Company paid

$13.3

million during the

nine

months ended

September 30, 2018

, to SBS for its provision as needed of the services of approximately

4,500

of SBS's available Field Specialists in the U.S.A. (which amounted to approximately

43%

of the Company's total domestic Field Specialist service expense for the

nine

months ended

September 30, 2018

Since the termination of the Amended and Restated Field Service Agreement with SBS on

December 1, 2014 (

as amended, the "

Prior SBS Agreement

"), the Company and SBS agreed to an arrangement where the Company reimbursed SBS for the Field Specialist service costs and certain other approved reimbursable expenses incurred by SBS in performing services for the Company and paid SBS a revised fixed percentage of such reimbursable expenses (the "

Cost Plus Fee

") equal to

2.96%

of those reimbursable expenses, subject to certain offsetting credits. The Company had offered a new agreement to SBS confirming that reimbursable expenses were subject to review and approval by the Company, but SBS rejected that proposal.

Due to (among other things) the Clothier Determination (as defined below) 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 on substantially better terms to replace those administrative services formerly provided by SAS, effective

August 1, 2018 (

the "

Independent Field Administrator

").

Even though the Company believes it had paid SBS for all services provided through

July 27, 2018,

the Company received notice that there

may

not

have been sufficient funds in SBS' bank accounts to honor all payments SBS had made by check to their Field Specialists. Based on this notice, the Company withheld approximately

$112,000

of final mark-up compensation due SBS and had made payments, on a daily basis, into the SBS bank account designated for Field Specialist payments to ensure all SBS Field Specialists that had provided services to the Company were properly compensated for those services. The

$112,000

had been completely exhausted and the Company was required to fund an additional

$13,000

to cover these duplicate Field Specialist payments. See

SBS Bankruptcy and Settlement

, below.

The Company has reached a non-exclusive agreement on substantially better terms than SBS with an experienced independent

third

-party vendor to provide substantially all of the domestic Field Specialist services used by the Company. The Company has also reached a separate non-exclusive agreement on substantially better terms than with SAS with another independent

third

-party vendor to provide substantially all of the domestic Field Administrator services used by the Company. The Company transitioned to such new vendors during

July 2018,

and such transition was virtually unnoticeable to the Company's clients

SAS provided substantially all of the Field Administrators in the U.S.A. to the Company from

January 1

through

September 30, 2018

. The Company paid

$2.7

million to SAS for its provision of its

full-time regional and district administrators (which amounted to approximately

91%

of the Company's total domestic field administrative service cost for the

nine

month period ended

September 30, 2018

In addition to these field service and administration expenses, SAS also incurred other administrative expenses related to benefit and employment tax expenses of SAS and payroll processing, and other administrative expenses and SBS incurred expenses for processing vendor payments, legal defense and other administrative expenses (but those expenses were only reimbursed by SGRP to the extent approved by the Company as described below).

SAS compensation to any officer, director or other related party (other than to Mr. Peter W. Brown, a related party as noted below, pursuant to previously approved budgets) had been reimbursed by the Company. This was

not

a restriction on SAS since SAS is

not

controlled by the Company and could have paid any compensation to any person that SAS desires out of its own funds. Since SAS is a "Subchapter S" corporation, all income from SAS is allocated to its stockholders (see above).

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. The Company transitioned to such new vendor during

July 2018,

and it was virtually unnoticeable to the Company's clients.

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,

SAS has apparently continued to operate and claim that the Company owes them for all of their post-termination expenses for the foreseeable future. For the period from

August, 2018

through

September 30, 2019

, SAS has invoiced the Company over

$200,000.

All such invoices have been rejected by the Company. The Company has determined that it is

not

obligated to reimburse any such post-termination expense (other than for potentially reimbursing SAS for mutually approved reasonable short term ordinary course transition expenses in previously allowed categories needed by SAS to wind down its business, if any), and that such a payment would be an impermissible gift to a related party under applicable law, which determinations have been supported by SGRP's Audit Committee. See

SAS Settlement Discussions and Arbitration

below.

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

See also

SBS Bankruptcy and Settlement 

and

SAS Settlement Discussions and Arbitration

, below.

Any claim by Robert G. Brown, William H. Bartels, 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. See

Infotech Litigation and Settlement, below

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

May 3, 2018,

replacing Mr. Robert G. Brown upon his retirement from the Board and Company at that date. He is

not

considered independent because Peter Brown an affiliate and related party in respect of 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 (a current significant stockholder of SGRP, a member of a

13D

control group and SGRP's former Chairman and director), he is a director of SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation and SGRP subsidiary ("SPAR BSMT") and owns Earth Investments LLC, ("EILLC"), which owns

10%

interest in the SGRP's Brazilian subsidiary.

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, which is representative of current market rates. 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. ("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 at local market rates.

SBS Bankruptcy and Settlement

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

").

Management recommended, and the Audit Committee agreed, that it would be in the best interest of all stockholders to oppose SBS's proposed reorganization unless a reasonable settlement could be reached, and that any settlement should include a reasonable disposition of the SGRP Claims (as defined in the SBS Settlement Agreement) and mutual releases of all other claims. After extensive negotiation between the SBS Parties and the SGRP Parties, the parties entered into the Compromise and Settlement Agreement dated as of

July 26, 2019,

and was signed and released over the succeeding weekend (the "

SBS Settlement Agreement

"). See Exhibit

10.1.

The SBS Settlement Agreement provides for a mutual release of all claims (including the SBS Claims and the SGRP Claims, as defined therein), except for the following:

(i) SBS will pay to the applicable SGRP Parties the SGRP Claims (before discount,

$2,231,260

) discounted to their pro rata share (among all creditors of the same class) of the New Value Contribution (after discount, est.

$111,563

) and of the Settlement Contribution in

twenty-four

(

) equal monthly amounts (after discount, est.

$61,370

), starting

January 2020

and without any interest (collectively, the "

Discounted Claim Payments

"), as such terms are defined in the SBS Settlement Agreement.

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

In the SBS Settlement Agreement, the parties agreed to have Rehmann Robson ("

Rehmann

"), a 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 Rehmann as final and binding, and all other claims and amounts are released. Rehmann has preliminarily determined that the Company had paid all amounts due to SBS and that the Proven Unpaid A/R equals zero. The final Rehmann report is expected by the end of

November 2019.

The Company has recorded the total settlement amount of

$172,933

as of

September 30, 2019,

and will continue to evaluate its collectability from SBS and establish reserves as appropriate.

The Company believes that the robust and comprehensive mutual releases in the SBS Settlement Agreement provide valuable relief from potential future claims and litigation by SBS respecting the Company's past involvement with SBS. However, Robert G. Brown, president, director and indirect owner of SBS, has since the Court's approval of the SBS Settlement Agreement has continued to allege that the claims and amounts that were fully released pursuant to the SBS Settlement Agreement and approved by the bankruptcy court are due to SBS from the Company, and the Company strongly disagrees. Since all such claims have been completely released by SBS (with Mr. Brown's approval), the Company owes nothing and will

not

accrue anything respecting Mr. Brown's renewed claims.

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. See Exhibit

10.1.

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 Robert G. Brown ("Mr.

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

Mr. 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. Brown submitted his unauthorized and unsubstantiated "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 offed

$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. 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. 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 requires 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 Company has made appropriate accruals for those installment obligations.

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.

SAS Settlement Discussions and Arbitration

SAS provided substantially all of the Field Administrators in the U.S.A. to the Company from

July 1999

through

July 31, 2018.

For the

seven

month period ended

July 31, 2018,

the Company paid

$2.7

million to SAS for its provision of its

full-time regional and district administrators, which amounted to approximately

91%

of the Company's total domestic field administrative service cost.

In addition to field administration expenses, SAS also incurred other administrative expenses related to benefit and employment tax expenses, payroll processing, rent and other similar administrative expenses but those expenses were only reimbursed to the extent approved by the Company.

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) the restated SAS Field Administration Agreement signed in

2016

(the "

SAS Agreement

"). The Company transitioned to its new Independent Field Administrator (see above) during

July 2018.

See

Domestic Related Party Services

, above.

Although SAS has

not

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

July 31, 2018),

SAS has apparently continued to operate and claims that the Company owes them for all of their post-termination expenses for the foreseeable future. For the period from

August 2018

through

June 30, 2019,

SAS has invoiced the Company over

$200,000.

All such invoices have been rejected by the Company. While the Company has determined that it is

not

obligated to reimburse any such post-termination expenses, it has, in good faith, entered into settlement discussions with SAS to resolve these matters. Part of the settlement discussions include an offsetting recovery by the Company for cash advances it has provided to SAS to meet its insurance obligations.

Due to a shortfall in its bank accounts and its inability to pay Affinity approximately

$215,000

in premium adjustments, SAS alleged that the Company had failed to pay the required Affinity premiums to SAS. The parties agreed to have Rehmann Robson ("

Rehmann

"), a financial and accounting services firm, independently determine whether the Company had made all such payments to SAS. Rehmann has determined that the Company had paid all amounts due to SAS except for

$26,000.

In the process, the parties learned from Robert G. Brown that he had caused SAS to transfer approximately

$200,000

to SBS from the SAS bank accounts for "SBS Affinity adjustments". The final Rehmann report addressing other items is expected by the end of

November 2019.

These advances were essential support to ensure SAS satisfied its insurance carriers premium advance requirements. The offsetting amount due the Company is approximately

$226,000.

See

Affinity Insurances

, below.

At this time, settlement discussions have halted and the Company is seeking resolution though arbitration as permitted under the SAS Field Administration Agreement.

International Related Party Services:

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

51%

by SGRP and

23%

by FRIEDSHELF

401

Proprietary Limited (owned by Mr. Brian Mason and Mr. Garry Bristow) and

26%

by Lindicom Proprietary Limited. Mr. Mason is President and a director and Mr. Bristow is an officer and director of Meridian. Mr. Mason is also an officer and director and

50%

shareholder of Merhold Property Trust ("MPT"). Mr. Mason and Mr. Bristow are both officers and directors and both own

50%

of Merhold Cape Property Trust ("MCPT"). Mr. Mason and Mr. Bristow are officers and owners of Merhold Holding Trust ("MHT") which provides similar services like MPT. MPT owns the building where Meridian is headquartered and also owns

vehicles, all of which are subleased to Meridian. MCPT provides a fleet of

172

vehicles to Meridian under a

year lease program. These leases are provided to Meridian at local market rates included in the summary table below.

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 supplied administrative and operational consulting support to SPAR Todopromo in

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 in respect of 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 SGRP"s largest shareholder and member of a

13D

control group, Robert G. Brown. Accordingly, PWB and EILLC are each a related party in respect of 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 at local market rates 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 in respect of the Company.

Summary of Certain Related Party Transactions:

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Services provided by affiliates:
Field merchandiser and other expenses (SBS)*	$	-	$	2,063	$	-	$	15,353
Field administration and other expenses (SAS)*		-		475		-		2,738
National Store Retail Services (NSRS)		4,088		-		4,473		-
Office lease expenses (Mr. Burdekin)		6		6		18		18
Office lease expenses (RJ Holdings)		162		-		361		-
Office and vehicle lease expenses (MPT)		16		15		48		44
Vehicle rental expenses (MCPT)		294		292		881		839
Office and vehicle rental expenses (MHT)		73		53		205		142
Consulting and administrative services (CON)		29		49		103		160
Legal Services (KMSA)		21		40		64		93
Warehousing rental (JFMD)		13		13		37		37

Total services provided by affiliates	$	4,702	$	3,006	$	6,190	$	19,424

*	Includes substantially all overhead (in the case of SAS and SBS), or related overhead, plus any applicable markup. The services provided by SAS and SBS were terminated as of July 2018.

Due to affiliates consists of the following (in thousands):	September 30,		December 31,
	2019		2018
Loans from local investors:(1)
Australia	$	429	$	226
Mexico		1,001		1,001
Brazil		139		139
China		2,200		2,130
South Africa		624		618
Resource Plus		531		531
Total due to affiliates	$	4,924	$	4,645

(

)

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:

In addition to the above, through

August 1, 2018,

SAS purchased insurance coverage from Affinity Insurance, Ltd. ("

Affinity

") for worker compensation, casualty and property insurance risk for itself, for SBS on behalf of Field Specialists that require such insurance coverage (if they do

not

provide their own), and for the Company. SAS owns a minority (less than

) of the common stock in Affinity. 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. Since

August 1, 2018,

the new independent vendor providing the Company's Field Administrators also is a member of and provided such insurance through Affinity for itself and on behalf of the Field Specialists that require such insurance coverage (if they do

not

provide their own), and the Company is obtaining its own such insurance through Affinity (in which the Company is also now a member).

In addition to those required periodic premiums, Affinity also requires payment of cash collateral deposits ("

Cash Collateral

"), and Cash Collateral amounts are initially determined and from time to time re-determined (upward or downward) by Affinity. From

2013

through

August 1, 2018,

SAS deposited Cash Collateral with Affinity that now totals approximately

$965,000;

approximately

$379,000

of that Cash Collateral was allocable to SBS and approximately

$296,000

of that Cash Collateral was allocable to SMF and the balance of approximately

$290,000

was allocated to other affiliates of the Company. The

$379,000

Cash Collateral deposits allocable to SBS were paid by SAS on behalf of SBS, SAS received advances to make such payments from SBS, and SBS in turn received advances to make such payments from SMF. The SGRP Claims for this debt in the SBS Chapter

Case were settled at a substantial discount as part of the overall Settlement Agreement. See Note

to the Company's Consolidated Financial Statements,

Commitments and Contingencies

Legal Matters

SBS Bankruptcy and Settlement

Settlement Agreement

below) The Cash Collateral deposits allocable to SMF have been paid by SAS on behalf of SMF, and SAS received advances to make such payments from SMF. At the time those advances were requested by Mr. Brown be made by the Company to SAS and SBS, they were

not

specifically disclosed by Mr. Robert G. Brown (then SGRP executive Chairman), Mr. William H. Bartels (SGRP Vice Chairman then and now) or Mr. James R. Segreto (Chief Financial Officer), to or approved by the Audit Committee or Board (as a related party transaction or otherwise), and at the time Mr. Brown and Mr. Bartels were the sole owners and executives of SAS and SBS. In addition to funding such Cash Collateral, the Company believes that it has provided (after

1999

) all of the funds for all premium payments to and equity investments in Affinity and that the Company

may

be owed related amounts by SAS, SBS and their affiliates.

The Company also has advanced money to SAS to prepay Affinity insurance premiums (which in the case of workers compensation insurance are a percentage of payroll). The Company had advanced approximately

$226,000

to SAS for the

2019

2020

Affinity plan year based on estimates that assumed SBS and SAS would be providing services to the Company for the full plan year ("

Premium Advances

"). However, the Company terminated their services at the end of

July 2018

therefore, that insurance was required for only

one

month's payroll. Upon completion of the Affinity audit for the Affinity

2018

2019

plan year, the Company anticipates that SAS will receive a premium refund from Affinity of approximately

$150,000

and will be obligated to repay that amount to the Company.

Affinity from time to time

may (

in the case of a downward adjustment in such periodic premiums or the Cash Collateral) make refunds, rebates or other returns of such periodic premiums and Cash Collateral deposits to SAS for the benefit of itself, SBS and SMF (including any premium refund, as returned or returnable, "

Affinity Returns

"). The Company believes that SAS is obligated to return to SMF any and all Affinity Returns allocable to SMF in repayment of the corresponding advances from SMF and allocable to SAS in repayment of the corresponding advances from SMF. The Company also believes that SAS is obligated to return to SBS, and SBS is obligated to return to SMF, any and all Affinity Returns allocable to SBS in repayment of the corresponding advances. The Company believes that SBS and SAS will have limited operations after

August 1, 2018,

that the litigation and likely resulting financial difficulties facing SBS are significant, and that without adequate security, those circumstances puts such repayments to the Company at a material risk.

July 2017,

SAS gave SR Services, Inc. ("

SRS

"), an enforceable reimbursement and security agreement respecting the approximately

$180,000

in Cash Collateral SAS owed SRS. However, SAS did

not

disclose that transaction to the Company for over a year and did

not

offer the same terms to the Company until the Company finally received a copy in

July 2018.

SMF had been in negotiations with SAS (represented by William H. Bartels, Vice Chairman of SGRP and

one

of the Majority Stockholders) since

November 2017

for an enforceable reimbursement and security agreement to document and secure those Cash Collateral advances and Premium Advances and SAS' corresponding repayment obligations, which advances total approximately

$516,000

(

$290,000

for Cash Collateral advances and

$226,000

for Premium Advances).

The Company offered settlement terms to SAS subject to

first

finalizing an enforceable reimbursement and security agreement between them (based on the SRS Agreement) and finalizing an Intercreditor Agreement with SRS and SBS recognizing and protecting their respective interests. SBS and SRS have never accepted the Intercreditor agreement.

Due to a shortfall in its bank accounts and its inability to pay Affinity approximately

$215,000

in premium adjustments, SAS alleged that the Company had failed to pay the required Affinity premiums to SAS. The parties agreed to have Rehmann Robson ("

Rehmann

$26,000.

In the process, the parties learned from Robert G. Brown that he had caused SAS to transfer approximately

$200,000

to SBS from the SAS bank accounts for "SBS Affinity adjustments". The final Rehmann report addressing other items is expected by the end of

November 2019.

According to the SBS reorganization plan and subsequent actions, SBS plans to market SAS' Affinity insurance connection to provide Affinity insurance to others, which would likely put the Company's Cash Collateral at risk. SAS also allowed SBS to withdraw approximately

$200,000

from SAS' bank accounts, which had prevented SAS' repayment to the Company of the Premium Advances.

Negotiations have recently broken down over SAS' refusal to protect the Cash Collateral, as well as their demands for post-termination payments and offsets potentially larger than the Cash Collateral. As a result the Company has recorded a reserve for

$901,000

(which includes such receivables) in

2018.

The Company expects that SAS

may

use every available means to attempt to collect reimbursement from the Company for the foreseeable future for post-termination expense, including service provided to SBS post-reorganization. See Note

to the Company's Consolidated Financial Statements -

Commitments and Contingencies – Legal Matters

, below. See also

SBS Bankruptcy and Settlement,

above.

The Company believes that SAS will have limited operations and the likely resulting financial difficulties facing SBS are significant, and that without adequate security, those circumstances puts any such repayments to the Company at a material risk.

The Company has decided that the issues with SAS can only be resolve through binding arbitration as provided in the SAS Agreement.

The SGRP Claims against SBS for this debt in the SBS Chapter

Case were settled at a substantial discount as part of the overall Settlement Agreement. See Note

to the Company's Consolidated Financial Statements,

Commitments and Contingencies

Legal Matters

SBS Bankruptcy and Settlement

Settlement Agreement

below).

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. Brown and prior to

December 2018

was owned by Mr. Bartels), SAS (owned by Mr. Bartels and family members of Mr. 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.