8.	Commitments and Contingencies

Legal Matters

The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of Company's management, resolution of these matters is

not

anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.

Background: Related Parties And Related Party Litigation:

SPAR Business Services, Inc., f/k/a SPAR Marketing 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 an entity controlled by Robert G. Brown and prior to

November 2018

was owned by Robert G. Brown and 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 by Robert G. Brown. Messrs. Brown and Bartels (the "

Majority Stockholders

") collectively own approximately

55.8%

of SGRP's common stock and are the founders of SGRP. Mr. Brown was Chairman and an officer and director of SGRP through

May 3, 2018 (

when he retired), and Mr. Bartels is Vice Chairman and a director and officer of SGRP. Messrs. Brown and Bartels also are stockholders, directors and executive officers of various affiliates of SGRP.

Delaware Litigation Settlement

September 4, 2018,

SGRP filed in the Court of Chancery of the State of Delaware (the "

Chancery Court

") a claim, C.A.

No.

2018

0650,

which it amended on

September 21, 2018 (

the "By-Laws Action"), in a Verified Complaint Seeking Declaratory Judgment and Injunctive Relief against the Majority Stockholders. SGRP sought to invalidate the proposed amendments to SGRP's By-Laws put forth in a written consent by the Majority Stockholders (the "

Proposed Amendments

") because the Board's Governance Committee believed that the Proposed Amendments would have negatively impacted all stockholders (particularly minority stockholders) by (among other things) weakening the independence of the Board through new supermajority requirements, eliminating the Board's independent majority requirement, and subjecting various functions of the Board respecting vacancies on the Board to the prior approval of the holders of a majority of the Common Stock (i.e., the Majority Stockholders), and thus also potentially reducing the representation of SGRP's minority stockholders.

September 18, 2018,

Robert G Brown (

one

of the Majority Stockholders) commenced an action in the Chancery Court pursuant to

Del. C.

§225

(a) from (C.A.

No.

2018

00687

-TMR) (the "

225

Action

") against the

225

Defendants seeking to remove Lorrence T. Kellar from the Board and add Jeffrey Mayer to the Board.

January 18, 2019,

SGRP, Messrs. Brown and Bartels, Christiaan Olivier (Chief Executive Officer, President and a Director of SGRP), and all

four

of the members of the Governance Committee at that time, namely Lorrence T. Kellar (Chairman), Jack W. Partridge, Arthur B. Drogue and R. Eric McCarthey (together with Mr. Olivier, the "

225

Defendants

"), reached a settlement (the "

Delaware Settlement

") in the By-Laws Action and the

225

Action (together, the "

Delaware Actions

") and had the Delaware Actions then dismissed.

In the Delaware Settlement, the parties agreed to amend and restate SGRP's By-Laws (the "

2019

Restated By-Laws

") with negotiated changes to the Proposed Amendments that preserve the current roles of the Governance Committee and Board in the location, evaluation, and selection of candidates for director and in the nominations of those candidates for the annual stockholders meeting and appointment of those candidates to fill Board vacancies (other than those under a stockholder written consent making a removal and appointment, which is unchanged). The Board approved and adopted the

2019

Restated By-Laws on

January 18, 2019.

The Governance Committee and the Board believe that those changes in the

2019

Restated By-Laws will help the Corporation maintain the independent Board desired by them.

Additionally, as part of the Delaware Settlement, the parties to the Delaware Actions executed a Limited Mutual Release Agreement limited to the Actions and subject to specific exclusions (the "

Delaware Releases

") and the parties to the Delaware Actions mutually agreed upon Stipulations of Dismissal ending those actions without prejudice and without admission or retraction of any fact cited therein, and the parties caused them to be filed with the Chancery Court on

January 18, 2019.

The Delaware Releases are limited to matters related to those actions described therein and subject to specific exclusions, and the parties expressly preserved all unrelated actions and claims. Accordingly, there remain a number of unresolved claims and actions (each a "

Non-Settled Matter

") between the Company and certain related parties, including (without limitation) post termination claims by and against SBS (which is now in a voluntary bankruptcy proceeding in Nevada) and SAS and the lawsuit by Infotech against the Company, and the claims by Messrs. Brown and Bartels for advancement and indemnification of legal fees and expenses in connection with the Delaware Actions and certain related party claims (see

Advancement Claims

, below).

Robert G. Brown Demands Directors Either Support His Positions or Resign

July 10, 2019,

Robert G Brown wrote in an email communication to Arthur B. Drogue, an independent director and Chairman of the Board, to which he copied Mr. Bartels, Mr. Peter W. Brown and Mr. Jeffery Mayer (each a director), expressing Mr. Brown's concerns with the positions of certain of SGRP's directors (the "

July 10

"), including the independent directors. In the

July 10

Email, Mr. Brown indicated his desire to have SGRP's directors acquiesce to his requests or resign, neither of which SGRP's independent directors believe are in the best interests of SGRP, which Mr. Drogue communicated to the Majority Stockholders in response to the

July 10

Email. The Majority Stockholders have furthered Mr. Brown's threats to remove directors who do

not

comply with his demands by submitting to the Board a written request to hold a special stockholders' meeting to vote on the removals of Messrs. Drogue and McCarthey, each an independent director, from the Board. For further information regarding Mr. Brown's demands, his threatened removal of directors who oppose such demands and the Majority Stockholders' request to hold a special stockholders meeting to effect such director removals.

Background: Recent Actions of the Majority Stockholders and their Control Group

June 1, 2018,

June 29, 2018,

July 5, 2018,

August 6, 2018

and

January 25, 2019,

the Majority Stockholders each filed an amended Schedule

13D

with the SEC, in which they each acknowledged that they

"may

be deemed to comprise a 'group' within the meaning of [the Securities Exchange Act of

1934]"

and

"may

act in concert with respect to certain matters", including various listed items. Pursuant to those Schedule

13D

filings, the Majority Stockholders have acted as a control group and adopted written consents to unilaterally, and without the participation of the Board, Governance Committee or other stockholders, endeavoring to: approve the selection, appointment and election of Mr. Jeffrey A. Mayer as a director of SGRP; remove Lorrence T. Kellar as an independent director of SGRP; and change SGRP's By-Laws in order to (among other things) remove authority from the Board through new supermajority requirements and stockholder only approvals (the "

Proposed Amendments

"), which the Governance Committee believed weakened the Board's independence, and which were contested by SGRP and ultimately concluded in the Delaware Settlement.

Prior to SGRP's

2019

annual stockholders' meeting (the "

2019

Annual Meeting

"), Jack Partridge, an independent director of SGRP, retired effective as of the close of business on

May 15, 2019.

Mr. Partridge indicated that he was prepared to serve on the Board for another year, but based on Mr. Partridge's discussions with Mr. Bartels and the preliminary vote totals (including Mr. Brown's votes), Mr. Partridge believed that the Majority Stockholders would vote "against" him, so he elected to retire before the

2019

Annual Meeting. Following the departure of Messrs. Kellar and Partridge, SGRP had

two

fully independent directors, Arthur B. Drogue and R. Eric McCarthey. Jeffery Mayer is also considered independent except for related party matters.

Since the departure of Messrs. Kellar and Partridge, SGRP appointed Arthur Baer as an independent director, and the Majority Stockholders appointed Panagiotis "Panos" Lazaretos as a director via written consent actions, whom the Governance Committee has determined is

not

independent.

Failure to Maintain a Majority of Independent Directors on the Board

The Board and the Governance Committee have determined that the Board should always have a majority of independent directors as required by applicable Nasdaq and SEC rules. SGRP's Statement of Policy Regarding Director Qualifications and Nominations dated as of

May 18, 2004,

requires that (among other things) a majority of the directors of the Board, and all of the members of its Audit Committee, Compensation Committee and Governance Committee, be independent directors as required by applicable Nasdaq and SEC rules. Nasdaq Listing Rule

5605

(b)(

) requires a majority of the board of directors of a listed company to consist of independent directors, as defined in Rule

5605

(a)(

) (together, the "

Board Independence Rules

").

The

seven

-member Board currently has

three

wholly independent directors and

one

director classified as independent on all but related party matters, which has satisfied Nasdaq's Board Independence Rules. However, with the increase in Board size to

eight

and the addition of Mr. Lazaretos as a non-independent director when the written consent actions submitted by the Majority Stockholders take effect, the Board will have half (

) independent and half (

) non-independent directors, and will

not

satisfy Nasdaq's Board Independence Rules.

Advancement Claims

From

October 2018

through

January 2019,

the Majority Stockholders, in a series of correspondence, demanded from SGRP advancement and indemnification of their respective shares of legal fees and expenses incurred by them in connection with the By-Laws Action and the

225

Action and other related party litigation matters. Robert G. Brown was denied both advancement and indemnification since he was sued as a shareholder and was

not

a director at the time of the Delaware Actions. William H. Bartels was ultimately granted advancement because he was a director at the time of the Delaware Actions, but

determination has been made respecting his entitlement to indemnification or whether Mr. Bartels will be required to repay that advancement.

SBS Bankruptcy and Settlement

August 6, 2019,

SGRP, and its subsidiaries SPAR Marketing Force, Inc., 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 SPAR Business Services, Inc., 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 connection with SBS's petition for bankruptcy protection under chapter

of the United States Bankruptcy Code. Pursuant to the Settlement Agreement, the Company settled its claims for (among other things) indemnification from SBS in the Clothier and Rodgers cases, and SBS released all receivable and other claims against the Company. See Note

to the Company's Consolidated Financial Statements – Related Party Transactions –

SBS Bankruptcy and Settlement

, above.

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

"). See Exhibits

10.1

and

10.2.

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

not

released from Clothier, any related case or Rodgers.

SBS is

not

and will never be part of the Company, the Company will never in any way use or support (financially or otherwise) SBS' reorganized business, and the Company will caution its clients and others accordingly.

SBS Field Specialist Litigation

The Company's merchandising, audit, assembly and other services for its domestic clients are performed by field merchandising, auditing, assembly and other field personnel (each a "Field Specialist") furnished by others and substantially all of whose services were provided to the Company prior to

August 2018

by SBS, the Company's affiliate, SBS is

not

a subsidiary or in any way under the control of SGRP, SBS is

not

consolidated in the Company's financial statements, SGRP did

not

manage, direct or control SBS, and SGRP did

not

participate in or control the defense by SBS of any litigation against it. The Company terminated its relationship with SBS and received

services from SBS after

July 27, 2018.

For affiliation, termination, contractual details and payment amounts, see Note

to the Company's Consolidated Financial Statements -

Related Party Transactions

Domestic Related Party Services

, above.

The appropriateness of SBS' treatment of Field Specialists as independent contractors had been periodically subject to legal challenge (both currently and historically) by various states and others. SBS' expenses of defending those challenges and other proceedings generally were, through but

not

after the termination of the SBS services, reimbursed by the Company after and to the extent the Company determined (on a case by case basis) that those defense expenses were costs of providing services to the Company.

The Company settled its potential liability (as a current or former party) under

two

class action lawsuits against SBS, namely Clothier and Hogan. SBS was separately dismissed from the Hogan class action prior to the Company's settlement. Prior to the Company's settlement, SBS was found to have misclassified its Field Specialists in California as independent contractors in the Clothier Determination. SBS settled with Clothier and Rodgers in the SBS Bankruptcy, but Robert G. Brown and William H. Bartels were

not

released from Clothier, any related case or Rodgers (see above). The Company has never been a party to the Rodgers case.

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

third

party that the Company is somehow liable (through indemnification or otherwise) for any judgment or similar amount imposed against Mr. Brown, Mr. Bartels, SBS or SAS or any other related party, 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.