UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

September 15, 2017

 

Date of Report (Date of earliest event reported)

STAFFING 360 SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

 

Delaware

 

001-37575

 

68-0680859

 

(State or other jurisdiction of

incorporation)

 

(Commission File Number)

 

(I.R.S. Employer

Identification Number)

641 Lexington Avenue

27 th Floor

New York, NY 10022

(Address of principal executive offices)

(646) 507-5710

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 


 

It em 1.01 Entry into a Material Definitive Agreement.

 

The information set forth in Item 2.01 and Item 2.03 is incorporated by reference into this Item 1.01.

 

Asset Purchase Agreement

 

On September 15, 2017, Staffing 360 Georgia, LLC (“Staffing Georgia”), a wholly-owned subsidiary of Staffing 360 Solutions, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Firstpro Inc. (“FPI”), Firstpro Georgia, LLC (“FPL”, and together with FPI, the “Sellers”), and certain individuals, pursuant to which the Sellers sold substantially all of their assets to Staffing Georgia (the “Firstpro Transaction”).

 

The Firstpro Transaction closed simultaneously with the signing of the Asset Purchase Agreement. The purchase price in connection with the Firstpro Transaction was $8 million, of which, (a) $4.5 million was paid at closing, (b) $825,000 (the “Quarterly Consideration”) is payable in quarterly installments of $75,000 beginning on October 1, 2017, and (c) $2.675 million (the “Deferred Consideration”) is payable annually in three equal installments beginning on October 30, 2018.

 

The Asset Purchase Agreement also contains representations, warranties and indemnification obligations of the parties customary for transactions similar to those contemplated by the Asset Purchase Agreement. Such representations and warranties are made solely for purposes of the Asset Purchase Agreement and, in some cases, may be subject to qualifications and limitations agreed to by the parties in connection with the negotiated terms of the Asset Purchase Agreement and may have been qualified by disclosures that were made in connection with the parties' entry into the Asset Purchase Agreement.

 

The foregoing description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein by reference.

 

Item 2.01 Completion of Acquisition or Dis position of Assets

 

CBS Butler Acquisition

 

On September 15, 2017, the Company and Longbridge Recruitment 360 Limited (“Longbridge”), a wholly-owned subsidiary of the Company, entered into an Agreement (the “Share Purchase Agreement”) with the holders (the “CBS Butler Shareholders”) of share capital of CBS Butler Holdings Limited (“CBS Butler”) and an agreement (the “Option Purchase Agreement”) with the holders of outstanding options of CBS Butler (the “CBS Option Holders”), pursuant to which the CBS Butler Shareholders and CBS Butler Option Holders sold all of their shares and options of CBS Butler to Longbridge (the “CBS Butler Acquisition”), in exchange for (i) an aggregate cash payment of £13,810,880 (including repayment of certain outstanding debt owed to certain CBS Butler Shareholders as set forth in the Share Purchase Agreement) and an aggregate of 500,000 shares of the Company’s common stock, (ii) the earn-out payment of up to £4,214,508, the amount to be calculated and paid pursuant to the Share Purchase Agreement, and (iii) the deferred consideration £150,000 less the aggregate amount of each CBS Butler Shareholder’s portion of the net asset shortfall amount, as determined pursuant to the Share Purchase Agreement and the Option Purchase Agreement, if any, to be paid on or around September 18, 2018, allocated pursuant to the Share Purchase Agreement and the Option Purchase Agreement. The Transaction closed simultaneously with the execution of the Share Purchase Agreement.

 

The foregoing description of the Share Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Share Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

 

Item 2.02 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On September 19, 2017, the Company announced the refinancing under the A&R Note Purchase Agreement (as defined below under item 2.13), and completion of the Firstpro Transaction and the CBS Butler Acquisition. A copy

 


 

of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference herein.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, that is furnished pursuant to this Item 2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

Amendment to Revolving Loan Facility

 

On September 15, 2017, certain domestic subsidiaries (the “Borrowers”) of the Company refinanced their existing revolving loan facility (the “Revolving Loan”) under the Credit and Security Agreement, dated as of April 8, 2015, as amended, and entered into Amendment No.8 to the Credit and Security Agreement (as amended, the “Credit Agreement”), with MidCap Funding X Trust, as successor-by-assignment to Midcap Financial Trust (“Midcap”).  

 

The Revolving Loan matures on April 8, 2020, unless otherwise accelerated or terminated earlier. The interest rate on the Revolving Loan is 4.0% plus LIBOR, with a LIBOR floor of 1.0% per annum.

 

The obligations of the Borrowers are secured by a first priority lien in favor of MidCap on all of the Borrowers’ accounts receivable and certain other assets pursuant to the terms of the Intercreditor Agreement (as defined below).

 

The foregoing description of the Amendment No.8 to the Credit and Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Share Purchase Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.

 

Jackson Amended and Restated Note Purchase Agreement

 

On September 15, 2017, the Company, as borrower, and certain domestic subsidiaries of the Company, as guarantors, entered into an Amended and Restated Note Purchase Agreement with Jackson Investment Group LLC (“Jackson”), as lender (the “A&R Note Purchase Agreement”), pursuant to which Jackson made a senior debt investment of $40 million in the Company in exchange for a senior secured note in the principal amount of $40 million (the “Jackson Note”). The proceeds of the sale of the secured note will used to repay the existing subordinated notes previously issued to Jackson pursuant to the existing note purchase agreement in the aggregate principal amount of $11,165,000 and to fund a portion of the purchase price consideration of the Firstpro Transaction and the CBS Butler Acquisition and repay certain other outstanding indebtedness of the Company. The maturity date for the amounts due under the Jackson Note is September 15, 2020.  The Jackson Note will accrue interest at 12% per annum, due quarterly on January 1, April 1, July 1 and October 1 in each year, with the first such payment due on January 1, 2018. Interest on any overdue payment of principal or interest due under the Jackson Note will accrue at a rate per annum that is 5% in excess of the rate of interest otherwise payable thereunder.

 

The Company may prepay the amounts due on the Jackson Note in whole or in part from time to time, without penalty or premium, subject to the conditions set forth in the A&R Note Purchase Agreement, and such prepayments, depending on the timing of the prepayments, may result in a discount on the principal amount to be prepaid as set forth in the A&R Note Purchase Agreement.  

 

The Company paid a closing fee of $1,000,000 in connection with its entry into the A&R Note Purchase Agreement and agreed to issue 2,250,000 shares of the Company’s common stock as a closing commitment fee (the “Commitment Fee Shares”).  The Commitment Fee Shares are subject to registration rights in favor of Jackson and will be included in a new resale registration statement which must be filed by the Company not later than October 30, 2017.

 

 


 

The A&R Note Purchase Agreement contains representations, warranties and indemnification obligations of the parties customary for transactions similar to those contemplated by the A&R Note Purchase Agreement.

 

The obligations of the Company under the Jackson Note are secured by liens on and security interests in substantially all of the personal property of the Company and the Borrowers, pursuant to the terms of the Intercreditor Agreement (as defined below).  

 

The A&R Note Purchase Agreement also contains restrictions against incurrence of additional debt, payment of dividend or other distribution (whether in cash, securities or other property) on any equity interest of the Company or repayment of debt, consolidations, mergers, sales of assets or change in control and financial covenants.  

 

The foregoing description of the A&R Note Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the A&R Note Purchase Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.

 

Intercreditor Agreement

 

In connection with the Company’s entry into the A&R Note Purchase Agreement, on September 15, 2017, Jackson, Midcap, the Company and certain subsidiaries of the Company entered into an Intercreditor Agreement (the “Intercreditor Agreement”), setting forth the relative rights and priorities of the lenders under the Credit Agreement and Jackson in the common collateral securing the obligations under the Credit Agreement and the Jackson Note.  Pursuant to the Intercreditor Agreement, the lien that secures the Borrowers’ obligations under the Credit Agreement has priority in certain collateral, including all accounts, cash, certain deposit accounts, and proceeds from such collateral, and the lien that secures the obligations under the Jackson Note has priority in certain deposit accounts and all equity interests of any subsidiaries of the Company and all intercompany notes issued or payable to the Company or its subsidiaries party to the Credit Agreement or the A&R Note Purchase Agreement pledged as security to secure the obligations under the Jackson Note.

 

The foregoing description of the Intercreditor Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Intercreditor Agreement, a copy of which is attached hereto as Exhibit 10.4 and incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information set forth under Item 1.01 above with respect to the issuance of an aggregate of 500,000 shares of the Company’s common stock to the CBS Butler Shareholders and the CBS Option Holders and the issuance of 2,250,000 shares of common stock of the Company to Jackson pursuant to the A&R Note Purchase Agreement and the Jackson Note is incorporated herein by reference. Such issuance was undertaken in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder.

 

Item 8.01 Other Events.

 

On September 19, 2017, the Company announced the amendment to the Credit Agreement, the refinancing under the A&R Note Purchase Agreement, the completion of the Firstpro Transaction and the CBS Butler Acquisition. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference herein.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial statements of businesses acquired.

 

The Company hereby undertakes to file with the Securities and Exchange Commission an amendment to this Form 8-K, to include independent audit of its financial statements for the fiscal years ended December 31, 2016 and 2015 and notes thereto of CBS Butler in accordance with Item 9.01(a) within 75 days of the closing date of the CBS Butler Acquisition.

 


 

 

(b) Pro forma financial information

 

The Company hereby undertakes to file with the Securities and Exchange Commission an amendment to this Form 8-K, to include independent audit of its financial statements for the fiscal years ended December 31, 2016 and 2015 and notes thereto of CBS Butler, and pro forma consolidated financial statements in accordance with Item 9.01(b) within 75 days of the closing date of the Transaction and the Share Purchase Agreement.

 

(d) Exhibits

 

 

Exhibit No.

Description

2.1

Asset Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Georgia, LLC, FirstPro Inc., Firstpro Georgia LLC, April F. Nagel and Philip Nagel

10.1

Share Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., Longbridge Recruitment 360 Limited and the holders of outstanding shares of CBS Butler Holdings Limited

10.2

Amendment No.8 to the Credit and Security Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc. and MidCap Funding X Trust

10.3

Amended and Restated Note Purchase Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc. and Jackson Investment Group, LLC

10.4

Intercreditor Agreement, dated September 15, 2017, by and among Staffing 360 Solutions, Inc., certain subsidiaries of Staffing 360 Solutions, Inc., MidCap Funding X Trust and Jackson Investment Group, LLC

99.1

Press release, dated September 19, 2017

 

 


 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:  September 19, 2017

STAFFING 360 SOLUTIONS, INC.

 

 

 

 

 

 

By:

/s/ Brendan Flood

 

 

Brendan Flood

 

 

Executive Chairman

 

 

 

EXHIBIT 2.1

 

ASSET PURCHASE AGREEMENT

by and among

STAFFING 360 Georgia, LLC,

Firstpro Inc.,

FIRSTPRO GEORGIA LLC,

April F. Nagel,

and

Philip Nagel ,

 

Dated as of September 15, 2017

 

 

 

 

 

 

 

 

{00977292.DOCX /2}

 


Table of Contents

Page

ARTICLE 1 PURCHASE AND SALE

1

 

 

1.01

Purchase and Sale1

 

 

1.02

Excluded Assets2

 

 

1.03

[Reserved]3

 

 

1.04

Excluded Liabilities3

 

 

1.05

Purchase Price4

 

 

1.06

[Reserved]5

 

 

1.07

Withholding5

 

 

1.08

Allocation of Purchase Price.5

 

 

1.09

The Closing5

 

ARTICLE 2 CLOSING

5

 

 

2.01

Sellers’ Closing Deliverables5

 

 

2.02

Buyer’s Closing Deliverables7

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS

7

 

 

3.01

Organization and Qualification of each Seller7

 

 

3.02

Authority of each Seller7

 

 

3.03

No Conflicts; Consents8

 

 

3.04

Financial Statements8

 

 

3.05

Undisclosed Liabilities8

 

 

3.06

Absence of Certain Changes, Events and Conditions8

 

 

3.07

Material Contracts9

 

 

3.08

Title to Purchased Assets11

 

 

3.09

Sufficiency of Assets11

 

 

3.10

Real Property11

 

 

3.11

Intellectual Property12

 

 

3.12

[Reserved]14

 

 

3.13

Customers14

 

 

3.14

Insurance14

 

 

3.15

Legal Proceedings; Governmental Orders14

 

 

3.16

Compliance with Laws; Permits.15

 

 

3.17

Environmental Matters15

 

 

3.18

Employee Benefit Matters16

 

 

3.19

Employment Matters18

 

 

3.20

Taxes19

 

 

3.21

Brokers20

 

 

3.22

Solvency20

 

 

3.23

Full Disclosure.20

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER

20

 

 

4.01

Good Standing20

 

 

4.02

Power and Authority; Authorization20

 

 

4.03

Enforceability20

 

 

4.04

No Conflicts20

 

 

4.05

Litigation21

 

 

4.06

Brokers21

 

i


ARTICLE 5 COVENANTS

21

 

 

5.01

Confidentiality21

 

 

5.02

Non-Competition and Non-Solicitation22

 

 

5.03

Assigned Contracts23

 

 

5.04

Public Announcements23

 

 

5.05

Bulk Sales Laws23

 

 

5.06

Receivables23

 

 

5.07

Transfer Taxes23

 

 

5.08

[Reserved]23

 

 

5.09

Further Assurances.23

 

 

5.10

Cooperation on Tax Matters.24

 

 

5.11

Prorations.24

 

ARTICLE 6 [RESERVED]

24

 

ARTICLE 7 ADDITIONAL AGREEMENTS

24

 

 

7.01

Survival24

 

 

7.02

Indemnification by Buyer24

 

 

7.03

Indemnification by Sellers25

 

 

7.04

Expiration of Claims26

 

 

7.05

Procedures Relating to Indemnification26

 

 

7.06

Direct Claims27

 

 

7.07

Setoff27

 

 

7.08

Rights Cumulative27

 

ARTICLE 8 DEFINITIONS

28

 

 

8.01

Definitions28

 

 

8.02

Cross‑Reference of Other Definitions33

 

 

8.03

Other Definitional Matters34

 

ARTICLE 9 MISCELLANEOUS

34

 

 

9.01

Expenses34

 

 

9.02

Notices35

 

 

9.03

Assignment35

 

 

9.04

Severability35

 

 

9.05

Captions36

 

 

9.06

Amendment and Waiver36

 

 

9.07

Complete Agreement36

 

 

9.08

Counterparts36

 

 

9.09

Governing Law36

 

 

9.10

Jurisdiction; Venue; Service of Process 36

 

 

9.11

WAIVER OF JURY TRIAL37

 

 

9.12

No Third Party Beneficiaries37

 

 

9.13

Payments under Agreement37

 

 

9.14

Equitable Relief37

 

 

 

ii


Exhibits

Exhibit A Form of Transition Services Agreement

Exhibit B Form of Bill of Sale and Assignment and Assumption Agreement

Exhibit C

License Agreement

 

Exhibit D -

Sublease Agreement

 

 

 

 

iii


ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “ Agreement ”) is executed and delivered as of September 15, 2017, by and among (i) Staffing 360 Georgia, LLC, a Georgia limited liability company (“ Buyer ”), (ii) Firstpro Inc., a Georgia corporation (“ FPI ”), (iii) Firstpro Georgia LLC, a Georgia limited liability company (“ FPL ” and together with FPI, the “ Sellers ” and each a “ Seller ”), April F. Nagel, an individual residing at [REDACTED] (“ Mrs. Nagel ”), and Philip Nagel, an individual residing at [REDACTED] (“ Mr. Nagel ” and together with Mrs. Nagel, the “ Principals ”). Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 8 .

WHEREAS, Sellers have engaged through their Atlanta, Georgia office in the staffing and recruitment services for the accounting and finance, information technology, life sciences, medical device sales,  supply chain and engineering industries in the Southeastern United States (the “ Business ”).

WHEREAS, subject to the terms and conditions in this Agreement, Buyer desires to purchase and assume from Sellers, and Sellers desire to sell, assign, transfer and convey to Buyer, substantially all of the assets, and certain specified liabilities, of the Business.

WHEREAS, simultaneously with the execution and delivery of this Agreement, as a condition and inducement to Buyer’s willingness to enter into this Agreement, Buyer will enter into employment agreements (each, an “ Employment Agreement ”) with each of the individuals identified on Annex 1 attached hereto, each in a form acceptable to Buyer, dated as of the date hereof, to be effective as of (and subject to the occurrence of) the Closing.

WHEREAS, the Principals, being significant shareholders of each Seller, shall receive substantial direct and indirect benefits from the transactions contemplated hereby.  

NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants and agreements contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.

ARTICLE 1
PURCHASE AND SALE

1.01 Purchase and Sale

.  Subject to the terms and conditions set forth herein, at the Closing, Sellers shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Sellers, free and clear of any Liens other than Permitted Liens, all of Sellers’ right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired (other than the Excluded Assets), which relate to, or are used or held for use in connection with, the Business (collectively, the “ Purchased Assets ”), including, without limitation, the following:

(a) all Contracts, including Intellectual Property Agreements, set forth on Section 1.01(a) of the Disclosure Schedule (the “ Assigned Contracts ”);

(b) the Intellectual Property Assets identified on Section 1.01(b) of the Disclosure Schedule;

(c) all furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible personal property (the “ Tangible Personal Property ”);

 

 


(d) all Permits which are held by Seller s and required for the conduct of the Business as currently conducted or for the ownership and use of the Purchased Assets;

(e) all rights to any Actions of any nature available to or being pursued by Sellers to the extent related to the Business or the Purchased Assets, whether arising by way of counterclaim or otherwise;

(f) all prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment, deposits, charges, sums and fees (including any such item relating to the payment of Taxes) set forth on Section 1.01(f) of the Disclosure Schedule;

(g) all of Sellers’ rights under warranties, indemnities and all similar rights against third parties to the extent related to any Purchased Assets;

(h) all insurance benefits, including rights and proceeds, arising from or relating to the Business or the Purchased Assets;

(i) originals, or where not available, copies, of all books and records, including, but not limited to, books of account, ledgers and general, financial and accounting records, customer lists, customer purchasing histories, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data (including all correspondence with any Governmental Authority), sales material and records (including pricing history, total sales, terms and conditions of sale, sales and pricing policies and practices), strategic plans, internal financial statements, marketing and promotional surveys, material and research and files relating to the Intellectual Property Assets and the Intellectual Property Agreements; and

(j) all goodwill and the going concern value of the Business.

1.02 Excluded Assets

. Notwithstanding the foregoing, the Purchased Assets shall not include the following assets (collectively, the “ Excluded Assets ”):

(a) All cash and cash equivalents;

(b) All accounts and notes receivable (“ Accounts Receivable ”);

(c) Contracts, including Intellectual Property Agreements, that are not Assigned Contracts (the “ Excluded Contracts” );

(d) the corporate seals, organizational documents, minute books, stock books, Tax Returns, bank accounts, books of account or other records having to do with the corporate organization of each Seller;

(e) all Plans and assets attributable thereto;

(f) the assets, properties and rights specifically set forth on Section 1.02(f) of the Disclosure Schedule; and

(g) the rights which accrue or will accrue to Sellers under the Transaction Documents.

1.03 [Reserved]

.

2

 


1.04 Excluded Liabilities

. Notwithstanding any provision in this Agreement to the contrary, Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Sellers or any of their respective Affiliates of any kind or nature whatsoever (the “ Excluded Liabilities ”). Sellers shall, and shall cause each of their respective Affiliates to, pay and satisfy in due course all Excluded Liabilities which they are obligated to pay and satisfy. Without limiting the generality of the foregoing, the Excluded Liabilities shall include, but not be limited to, the following:

(a) any Liabilities of Sellers arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of counsel, accountants, consultants, advisers and others;

(b) any Liability for (i) Taxes of a Seller (or any stockholder or Affiliate of such Seller) or relating to the Business, the Purchased Assets for any Pre-Closing Tax Period; (ii) Taxes that arise out of the consummation of the transactions contemplated hereby or that are the responsibility of Sellers pursuant to Section 5.07 ; or (iii) other Taxes of a Seller (or any shareholder or Affiliate of such Seller) of any kind or description (including any Liability for Taxes of a Seller (or any stockholder or Affiliate of such Seller) that becomes a Liability of Buyer under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Applicable Law);

(c) any Liabilities relating to or arising out of the Excluded Assets;

(d) any Liabilities in respect of any pending or threatened Action arising out of, relating to or otherwise in respect of the operation of the Business or the Purchased Assets to the extent such Action relates to such operation on or prior to the Closing Date;

(e) any Liabilities of a Seller arising under or in connection with any Plan providing benefits to any present or former employee of such Seller;

(f) any Liabilities of a Seller for any present or former employees, officers, directors, retirees, independent contractors or consultants of such Seller, including, without limitation, any Liabilities associated with any claims for wages or other benefits, bonuses, accrued vacation, workers' compensation, severance, retention, termination or other payments;

(g) any Liabilities under Environmental Laws or Environmental Claims, to the extent arising out of or relating to facts, circumstances or conditions existing on or prior to the Closing or otherwise to the extent arising out of any actions or omissions of Sellers;

(h) any trade accounts payable of Sellers;

(i) any Liabilities of the Business relating to or arising from unfulfilled commitments, quotations, purchase orders, customer orders or work orders that (i) do not constitute part of the Purchased Assets issued by the Business' customers to a Seller on or before the Closing, (ii) did not arise in the Ordinary Course of Business, or (iii) are not validly and effectively assigned to Buyer pursuant to this Agreement;

(j) any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of a Seller (including with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 7.02 as Seller Indemnified Parties;

3

 


(k) any Liabilities under the Excluded Contracts or any other Contracts, including Intellectual Property Agreements, (i) which are not validly and effectively assigned to Buyer pursuant to this Agreement , (ii) which do not conform to the representations and warranties with respect thereto contained in this Agreement , or (iii) to the extent such Liabilities arise out of or relate to a breach by a Seller of such Contracts prior to Closing;

(l) any Liabilities associated with debt, loans or credit facilities of Sellers and/or the Business owing to financial institutions; and

(m) any Liabilities arising out of, in respect of or in connection with the failure by a Seller or any of its Affiliates to comply with any Applicable Law or order or decree of a Governmental Authority.

1.05 Purchase Price

.  The aggregate purchase price for the purchased Assets shall be an amount in cash equal to $8,000,000 (the “ Purchase Price ”).  Subject to the terms and conditions of this Agreement, the Purchase Price shall be paid as follows (and in each case, as more specifically set forth on Schedule 1.05 hereto):

(a) on the Closing Date, Buyer shall pay to Sellers, by wire transfer of immediately available funds in accordance with the allocation of the Purchase Price between each Seller provided to the Buyer in writing at least three Business Days prior to the Closing, an amount equal to $4,500,000;

(b) on October 1, 2017, and on the first day of each fiscal quarter of Buyer thereafter, an amount in cash payable to Sellers equal to $75,000 until the aggregate amount of payments under this Section 1.05(b) equals $825,000;  

(c) on the date that is 45 days after the first anniversary of the Closing Date, Buyer shall pay to Seller, by wire transfer of immediately available funds, an amount equal to one-third (1/3) of the Deferred Payment Amount;

(d) on the date that is 45 days after the second anniversary of the Closing Date, Buyer shall pay to Sellers, by wire transfer of immediately available funds, an amount equal to one-third (1/3) of the Deferred Payment Amount; and

(e) on the date that is 45 days after the third anniversary of the Closing Date, Buyer shall pay to Seller, by wire transfer of immediately available funds, an amount equal to one-third (1/3) of the Deferred Payment Amount.

1.06 [Reserved]

.

1.07 Withholding

(a) .   Notwithstanding anything to the contrary herein, each of Buyer, its permitted assigns, their respective Affiliates, and any applicable withholding agent shall upon two (2) days prior written notice to Sellers) be entitled to deduct and withhold, or cause to be deducted and withheld, from any amounts payable under this Agreement any withholding taxes or other amounts required under the Code or any Applicable Law to be deducted and withheld. To the extent that any such amounts are so deducted and withheld and paid to the applicable Tax Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

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1.08 Allocation of Purchase Price .

 

  Within ninety (90) days of the Closing Date, Buyer shall provide to Seller a schedule allocating the Purchase Price among the Purchased Assets (the “ Purchase Price Allocation Schedule ”).  The Purchase Price Allocation Schedule shall be prepared by Buyer in accordance with the Code.  The Parties agree, for all Tax reporting purposes, to report the transactions contemplated by this Agreement in accordance with the Purchase Price Allocation Schedule, and to not take any position during the course of any audit or other proceeding inconsistent with the Purchase Price Allocation Schedule unless required by applicable Law or a determination of the applicable Governmental Authority that is final.

1.09 The Closing

.  The closing of the purchase and sale of the Purchased Assets (the “ Closing ”) shall take place, and the parties hereto shall consummate such purchase and sale, at the offices of Haynes and Boone, LLP, located at 30 Rockefeller Plaza, 26 th Floor, New York, New York 10112, at 10:00 a.m. local time on the date hereof.  The date on which the Closing occurs is referred to herein as the “ Closing Date .”  All proceedings to be taken and all documents to be executed and delivered by all parties hereto at the Closing shall be deemed to have been taken and executed simultaneously and no proceedings shall be deemed to have been taken nor documents executed or delivered until all have been taken, executed and delivered.  In lieu of an in-person Closing, the Closing may instead be accomplished by facsimile or email (in portable document format) transmission to the respective offices of legal counsel for the parties of the requisite documents, duly executed where required, with originals to be delivered by overnight courier service on the next business day following the Closing.  The parties agree that Buyer shall be deemed to own and control the Purchased Assets on the Closing Date.

 

ARTICLE 2
CLOSING

2.01 Sellers’ Closing Deliverables

.  At the Closing, each Seller shall deliver or cause to be delivered to Buyer the following:

(a) the Transition Services Agreement duly executed by the Sellers;

(b) (i) copies of the resolutions duly adopted by such Seller’s board of directors or equivalent governing body and shareholders or members, as applicable, authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and stating that such resolutions have not been amended, modified, revoked or rescinded; (ii) a certificate of good standing from the State of Georgia for such Seller, dated in each case within ten days prior to the Closing Date; and (iii) the incumbency, authority and specimen signature of the officer of such Seller executing this Agreement;

(c) a certificate duly executed by each Seller , in the form prescribed by Section 1.1445-2(b)(2) of the Treasury Regulations and in substance reasonably satisfactory to Buyer, certifying that Seller (or, in the event Seller is an entity disregarded as separate from its owner for U.S. federal income Tax purposes, the Person treated as the transferor of the applicable property for U.S. federal income Tax purposes), is not a foreign person for purposes of such regulations.

(d) a bill of sale in the form of Exhibit B hereto (the “ Bill of Sale and Assignment and Assumption Agreement ”) and duly executed by each Seller, transferring the tangible personal property included in the Purchased Assets to Buyer;

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(e) a license agreement substantially in the form attached hereto as Exhibit C (the “ License Agreement ”) and duly executed by FPI , with respect to the Firstpro trademark ;

(f) the Employment Agreements duly executed by the individuals set forth on Annex I attached hereto;

(g) written evidence, in form satisfactory to Buyer in its sole discretion, that each of the Assigned Contracts set forth on Section 1.01(a) of the Disclosure Schedule shall have been assigned to Buyer in accordance with their terms or Sellers shall provide Buyer with the benefits of such Assigned Contracts in accordance with Section 5.03 ;

(h) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer and duly executed by each Seller, as may be required to give effect to this Agreement;  

(i) written evidence, in form satisfactory to Buyer in its sole discretion, that the release of All Liens relating to the Purchased Assets shall have been released in full, other than Permitted Liens; and

(j) the Office Sublease Agreement in substantially the form attached hereto as Exhibit D duly executed by FPI and Premier Plaza Property, L.L.C. (provided, however, if FPI cannot cause Premier Plaza Property, L.L.C. to execute and deliver the Office Sublease Agreement on the Closing Date after using its commercially reasonable efforts to do so, FPI shall cause Premier Plaza Property, L.L.C. to execute and deliver such Office Sublease Agreement by not later than the date that is 20 days after the Closing Date).

2.02 Buyer’s Closing Deliverables

.  At the Closing, the Buyer shall deliver to the Sellers the following:

(a) the Transition Services Agreement, the Bill of Sale and Assignment and Assumption Agreement and the License Agreement, in each case, duly executed by the Buyer ;

(b) (i)  copies of the resolutions duly adopted by Buyer’s board of directors or equivalent governing body authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and stating that such resolutions have not been amended, modified, revoked or rescinded; (ii) a certificate of good standing from the State of Georgia for Buyer, dated in each case within ten days prior to the Closing Date; and (iii) the incumbency, authority and specimen signature of the officer of Buyer executing this Agreement;

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as set forth in the correspondingly numbered Section of the Disclosure Schedule, Sellers represent and warrant, jointly and severally, to Buyer that the statements contained in this Article 3 are true and correct as of the date hereof.

3.01 Organization and Qualification of each Seller

. Each Seller is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of the State of Georgia and has full corporate or limited liability company, as applicable, power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the

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Business as currently conducted. Section 3.01 of the Disclosure Schedule sets forth each jurisdiction in which each such Seller is licensed or qualified to do business, and each such Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the failure to be so licensed or qualified would result in a Material Adverse Effect.

3.02 Authority of each Seller

. Each Seller has full corporate or limited liability company, as applicable, power and authority to enter into this Agreement and the other Transaction Documents to which such Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Seller of this Agreement and any other Transaction Document to which each such Seller is a party, the performance by each such Seller of its obligations hereunder and thereunder and the consummation by each such Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate or limited liability company action on the part of each such Seller. This Agreement has been duly executed and delivered by each Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of each such Seller enforceable against each such Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws of general application relating to or affecting the enforcement of creditors’ rights in general and general principals of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) (the “ Enforceability Exception ”) . When each other Transaction Document to which a Seller is or will be a party has been duly executed and delivered by such Seller (assuming due authorization, execution and delivery by each other party thereto), such Transaction Document will constitute a legal and binding obligation of such Seller enforceable against it in accordance with its terms, subject to the Enforceability Exception.

3.03 No Conflicts; Consents

. The execution, delivery and performance by each Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of such Seller; (b) conflict with or result in a violation or breach of any provision of any Applicable Law or order or decree of a Governmental Authority applicable to such Seller, the Business or the Purchased Assets; (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract or Permit to which such Seller is a party or by which such Seller or the Business is bound or to which any of the Purchased Assets are subject (including any Assigned Contract); or (d) result in the creation or imposition of any Lien other than Permitted Liens on the Purchased Assets. No consent, approval, Permit, order or decree of a Governmental Authority, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to a Seller in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

3.04 Financial Statements

.  Complete copies of the financial statements consisting of the unaudited balance sheet of the Business as at December 31 in each of the years 2016, 2015 and 2014 and the related unaudited statements of income and retained earnings, stockholders' equity and cash flow for the years then ended (the “ Annual Financial Statements ”), and unaudited financial statements consisting of the balance sheet of the Business as at July 31, 2017, and the related statements of income and retained earnings, stockholders' equity and cash flow for the six month period then ended (the “ Interim Financial Statements ” and together with the Annual Financial Statements, the “ Financial Statements ”) are included in the Disclosure Schedule. The Financial Statements have been prepared in accordance with the Sellers’ accounting policies, which are set forth on Section 3.04 of the Disclosure Schedule, applied on a consistent

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basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the Annual Financial Statements). The Financial Statements are based up on the books and records of the Business, and fairly present in all material respects the financial condition of the Business as of the respective dates they were prepared and the results of the operations of the Business for the periods indicated. The balance sheet of the Business as of December 31, 2016, is referred to herein as the Balance Sheet and the date thereof as the Balance Sheet Date and the balance sheet of the Business as of July 31 , 2017, is referred to herein as the Interim Balance Sheet and the date thereof as the Interim Balance Sheet Date .

3.05 Undisclosed Liabilities

.  Sellers have no Liabilities with respect to the Business of the type required to be disclosed in a balance sheet prepared in accordance with GAAP, except (a) those which are adequately reflected or reserved against in the Interim Balance Sheet as of the Interim Balance Sheet Date, and (b) those which have been incurred in the Ordinary Course of Business consistent with past practice since the Interim Balance Sheet Date and which are not, individually or in the aggregate, material in amount.

3.06 Absence of Certain Changes, Events and Conditions

. Since the Balance Sheet Date, and other than in the Ordinary Course of Business or except as set for on Section 3.06 of the Disclosure Schedule, there has not been any:

(a) event, occurrence or development that has had, or w ould reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) material change in any method of accounting or accounting practice for the Business, except as required by GAAP or as disclosed in the notes to the Financial Statements;

(c) entry into any Contract that would constitute a Material Contract;

(d) transfer, assignment, sale or other disposition of any of the Purchased Assets shown or reflected in the Balance Sheet;

(e) cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets;

(f) transfer, assignment or grant of any license or sublicense of any material rights under or with respect to any Intellectual Property Assets or Intellectual Property Agreements;

(g) material damage, destruction or loss, or any material interruption in use, of any Purchased Assets, whether or not covered by insurance;

(h) acceleration, termination, material modification to or cancellation of any Assigned Contract or Permit;

(i) material capital expenditures ;

(j) imposition of any Lien upon any of the Purchased Assets;

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(k) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy l aw or consent to the filing of any bankruptcy petition against it under any similar Law;

(l) purchase, lease or other acquisition of the right to own, use or lease any property or assets in connection with the Business for an amount in excess of $10,000, individually (in the case of a lease, per annum) or $10,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of supplies in the Ordinary Course of B usiness;

(m) Tax elections made in connection with the Business and the Purchased Assets; and

(n) any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.

3.07 Material Contracts

.  

(a) Section 3.07(a) of the Disclosure Schedule lists each of the following Contracts (x) by which any of the Purchased Assets are bound or affected or (y) to which a Seller is a party or by which it is bound in connection with the Business or the Purchased Assets (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Leased Real Property (including without limitation, brokerage contracts) listed or otherwise disclosed in Section 3.10 of the Disclosure Schedule and all Intellectual Property Agreements set forth in Section 3.11(a) of the Disclosure Schedule, being “ Material Contracts” ):

(i) all Contracts involving aggregate consideration in excess of $25,000 and which, in each case, cannot be cancelled without penalty or without more than 90 days' notice;

(ii) all Contracts that require a Seller to purchase or sell a stated portion of the requirements or outputs of the Business or that contain “take or pay” provisions;

(iii) all Contracts that provide for the indemnification of any Person or the assumption of any Tax, environmental or other Liability of any Person;

(iv) all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);

(v) all broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts;

(vi) all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) and which are not cancellable without material penalty or without more than 90 days' notice;

(vii) except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees);

(viii) all Contracts with any Governmental Authority (“ Government Contracts );

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(ix) all Contracts that limit or purport to limit the ability of a Seller to compete in any line of business or with any Person or in any geographic area or during any period of time;

(x) all joint venture, partnership or similar Contracts;

(xi) all Contracts for the sale of any of the Purchased Assets or for the grant to any Person of any option, right of first refusal or preferential or similar right to purchase any of the Purchased Assets;

(xii) all powers of attorney with respect to the Business or any Purchased Asset;

(xiii) all collective bargaining agreements or Contracts with any Union; and

(xiv) all other Contracts that are material to the Purchased Assets or the operation of the Business and not previously disclosed pursuant to this Section 3.07 .

(b) Each Material Contract is valid and binding on the applicable Seller party thereto in accordance with its terms and is in full force and effect, subject to the Enforceability Exception. None of Sellers or, to Sellers’ Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer. There are no material disputes pending or, to Sellers’ Knowledge, threatened under any Contract included in the Purchased Assets.

3.08 Title to Purchased Assets

.  Sellers have good and valid title to, or a valid leasehold interest in, all of the Purchased Assets. All such Purchased Assets (including leasehold interests) are free and clear of Liens except for the following (collectively referred to as “ Permitted Liens ”):

(a) those items set forth in Section 3.08 of the Disclosure Schedule ;

(b) Liens for Taxes not yet due and payable;

(c) mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the Ordinary Course of B usiness or amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business or the Purchased Assets;

(d) easements, rights of way, zoning ordinances and other similar encumbrances affecting Leased Real Property which are not, individually or in the aggregate, material to the Business or the Purchased Assets, which do not prohibit or interfere with the current operation of any Leased Real Property and which do not render title to any Leased Real Property unmarketable; or

(e) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the Ordinary Course of Business which are not, individually or in the aggregate, material to the Business or the Purchased Assets.

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3.09 Sufficiency of Assets

. The Purchased Assets are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the rights, property and assets necessary to conduct the Business as currently conducted. None of the Excluded Assets are material to the Business.

3.10 Real Property

.

(a) Neither Seller owns any real property.   Section 3.10(a) of the Disclosure Schedule sets forth each parcel of real property leased by a Seller and used in or necessary for the conduct of the Business as currently conducted (together with all rights, title and interest of such Seller in and to leasehold improvements relating thereto, including, but not limited to, security deposits, reserves or prepaid rents paid in connection therewith, collectively, the “ Leased Real Property ”), and a true and complete list of all leases, subleases, licenses, concessions and other agreements (whether written or oral), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which such Seller holds any Leased Real Property (collectively, the “ Leases ”). Sellers have delivered to Buyer a true and complete copy of each Lease. With respect to each Lease:

(i) such Lease is valid, binding, enforceable and in full force and effect, subject to the Enforceability Exception, and the applicable Seller party thereto enjoys peaceful and undisturbed possession of the Leased Real Property;

(ii) the applicable Seller party thereto is not in material breach or default under such Lease, and no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or default, and such Seller has paid all rent due and payable under such Lease;

(iii) the applicable Seller party thereto has not received nor given any notice of any default or event that with notice or lapse of time, or both, would constitute a default by such Seller under any of the Leases and, to Sellers’ Knowledge, no other party is in default thereof, and no party to any Lease has exercised any termination rights with respect thereto;

(iv) the applicable Seller party thereto has not subleased, assigned or otherwise granted to any Person the right to use or occupy such Leased Real Property or any portion thereof; and

(v) the applicable Seller thereto has not pledged, mortgaged or otherwise granted a Lien on its leasehold interest in any Leased Real Property.

(vi) Neither Seller has received any written notice of (i) material violations of building codes and/or zoning ordinances or other governmental or regulatory Laws affecting the Leased Real Property, (ii) existing, pending or, to Sellers’ Knowledge, threatened condemnation proceedings affecting the Leased Real Property, or (iii) existing, pending or, to Sellers’ Knowledge, threatened zoning, building code or other moratorium proceedings, or similar matters which could reasonably be expected to materially and adversely affect the ability to operate the Leased Real Property as currently operated. Neither the whole nor any material portion of any Leased Real Property has been damaged or destroyed by fire or other casualty.

(vii) The Leased Real Property is sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitutes all of the real property necessary to conduct the Business as currently conducted.

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3.11 Intellectual Property

(a) Section 3.11(a) of the Disclosure Schedule lists all (i) Intellectual Property Registrations and (ii) Intellectual Property Assets, including software, that are not registered but that are material to the operation of the Business. All required filings and fees related to the Intellectual Property Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Intellectual Property Registrations are otherwise in good standing. Sellers have provided Buyer with true and complete copies of file histories, documents, certificates, office actions, correspondence and other materials related to all Intellectual Property Registrations.

(b) Section 3.11(b) of the Disclosure Schedule lists all Intellectual Property Agreements. Sellers have provided Buyer with true and complete copies of all such Intellectual Property Agreements, including all modifications, amendments and supplements thereto and waivers thereunder. Each Intellectual Property Agreement is valid and binding on the applicable Seller party thereto in accordance with its terms and is in full force and effect, subject to the Enforceability Exception. None of Sellers or, to Sellers’ Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of breach or default of or any intention to terminate, any Intellectual Property Agreement. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Intellectual Property Agreement or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder.

(c) Sellers are the sole and exclusive legal and beneficial, and with respect to the Intellectual Property Registrations, record, owner of all right, title and interest in and to the Intellectual Property Assets, and have the valid right to use all other Intellectual Property used in or necessary for the conduct of the Business as currently conducted, in each case, free and clear of Liens other than Permitted Lien s.

(d) The Intellectual Property Assets and Intellectual Property licensed under the Intellectual Property Agreements are all of the Intellectual Property necessary to operate the Business as presently conducted. The consummation of the transactions contemplated hereunder will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, Buyer 's right to own, use or hold for use any Intellectual Property as owned, used or held for use in the conduct of the Business as currently conducted.

(e) Each Seller's rights in the Intellectual Property Assets owned, licensed or used by such Seller are valid, subsisting and enforceable. Each Seller has taken all reasonable steps to maintain the Intellectual Property Assets owned, licensed or used by such Seller and to protect and preserve the confidentiality of all trade secrets included in the Intellectual Property Assets, including requiring all Persons having access thereto to execute written non-disclosure agreements.

(f) The conduct of the Business as currently and formerly conducted, and the Intellectual Property Assets and Intellectual Property licensed under the Intellectual Property Agreements as currently or formerly owned, licensed or used by a Seller, have not infringed, misappropriated, diluted or otherwise violated, and have not, do not and will not infringe, dilute, misappropriate or otherwise violate, the Intellectual Property or other rights of any Person. To Sellers’ Knowledge, n o Person has infringed, misappropriated, diluted or otherwise violated, or is currently infringing, misappropriating, diluting or otherwise violating, any Intellectual Property Assets.

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(g) There are no Actions (including any oppositions, interferences or re-examinations) settled, pending or , to Sellers’ Knowledge, threatened (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by a Seller in connection with the Business; (ii) challenging the validity, enforceability, registrability or ownership of any Intellectual Property Assets or a Seller's rights with respect to any Intellectual Property Assets; or (iii) by a Seller or any other Person alleging any infringement, misappropriation, dilution or violation by any Person of any Intellectual Property Assets. Neither Seller is subject to any outstanding or prospective order or decree of a Governmental Authority (including any motion or petition therefor) that does or would restrict or impair the use of any Intellectual Property Assets.

(h) Each Seller ’s Data Handling practices are in material compliance with all Applicable Laws and are, in any event, commercially reasonable. Each Seller maintains policies and procedures, which are regularly and consistently followed in the conduct of the Business, regarding Data Handling of Sensitive Data and administrative, technical, and physical safeguards that are commercially reasonable and, in any event, in compliance with all Applicable Laws in all material respects. To Sellers’ Knowledge, no Sensitive Data handled by a Seller has been lost, inappropriately accessed, misappropriated or misused. To Sellers’ Knowledge, there have been no material breaches or material lapses in the security of any information systems or facilities of a Seller that have resulted in unauthorized access to Sensitive Data. Neither Seller has experienced any material unpermitted intrusions or been the target of any material denial-of-service attacks. Neither Seller has, and to Sellers’ Knowledge, no service provider to Seller, has notified, or has been required under Applicable Law to notify (i) any current employee of a Seller, customer or any other Person, in connection with the Business, of any information security breach involving such employee’s, customer’s or other Person’s Sensitive Data or (ii) any Governmental Authority in relation to any of the foregoing. The consummation of the transactions contemplated by this Agreement will not violate any privacy policy, terms of use or contractual obligation of a Seller or any Applicable Law relating to the use, dissemination or transfer of any Sensitive Data used by a Seller.

3.12 [Reserved]

.

3.13 Customers

.   Section 3.13 of the Disclosure Schedule sets forth with respect to the Business (i) a list of the top twenty customers of the Business based on gross revenue for each of the two most recent fiscal years (collectively, the “ Material Customers ”); and (ii) the amount of consideration paid by each Material Customer during such periods. Seller has not received any notice, and has no reason to believe, that any of the Material Customers has ceased, or intends to cease after the Closing, to use the goods or services of the Business or to otherwise terminate or materially reduce its relationship with the Business.  The Business does not stand to lose any Material Customer or to suffer a material diminution in revenues from any Material Customer following the Closing Date as a result of the Business no longer being majority owned by women or other minorities or protected classes of individuals.

3.14 Insurance

. Section 3.14 of the Disclosure Schedule sets forth (a) a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers' compensation, vehicular, fiduciary liability and other casualty and property insurance maintained by a Seller or its Affiliates and relating to the Business or the Purchased Assets (collectively, the “ Insurance Policies” ); and (b) with respect to the Business or the Purchased Assets, a list of all pending claims and the claims history for each Seller since January 1, 2014. There are no claims related to the Business or the Purchased Assets pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. Neither Seller nor any Affiliates of a Seller has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if not yet due, accrued. All such Insurance Policies

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(a) are in full force and effect and enforceable in accordance with their terms; (b) are provided by carriers who are financially solvent; and (c) have not been subject to any lapse in coverage. Neither Seller n or any Affiliate of a Seller is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such Insurance Policy. The Insurance Policies are of the type and in the amounts customarily carried by Persons conducting a business similar to the Business and are sufficient for compliance with all Applicable Law s and Contracts to which a Seller is a party or by which it is bound. True and complete copies of the Insurance Policies have been made available to Buyer.

3.15 Legal Proceedings; Governmental Orders

(a) There are no Actions pending or, to Sellers’ Knowledge, threatened against or by a Seller (a) relating to or affecting the Business or the Purchased Assets ; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

(b) There are no outstanding orders or decrees of a Governmental Authority and no unsatisfied judgments, penalties or awards against, relating to or affecting the Business.

3.16 Compliance with Laws; Permits. 

(a) Each Seller has complied, and is now complying, with all Laws applicable to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets.

(b) All Permits required for Sellers to conduct the Business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by Sellers and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full. Section 3.16(b) of the Disclosure Schedule lists all current Permits issued to a Seller which are related to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets, including the names of the Permits and their respective dates of issuance and expiration. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Section 3.16(b) of the Disclosure Schedule.

3.17 Environmental Matters

(a) The operations of each Seller with respect to the Business and the Purchased Assets are currently and have been in material compliance with all Environmental Laws. Neither Seller has received from any Person, with respect to the Business or the Purchased Assets, any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.

(b) Each Seller has obtained and is in material compliance with all Environmental Permits necessary for the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets and all such Environmental Permits are in full force and effect and shall be maintained in full force and effect by such Seller through the Closing Date in accordance with Environmental Law, and such Seller is not aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets. With respect to any such Environmental Permits, each Seller has undertaken, or will undertake prior to the Closing Date, all measures necessary to facilitate

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transferability of the same, and such Seller is not aware of any condition, event or circumstance that might prevent or impede the transferability of the same, and has not received any Environmental Notice or written communication regarding any material adverse change in the status or terms and conditions of the same.

(c) None of the Business or the Purchased Assets or any real property currently or formerly owned, leased or operated by a Seller in connection with the Business is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.

(d) To Sellers’ Knowledge, there has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the Business or the Purchased Assets or any real property currently owned, leased or operated by Seller in connection with the Business, and Seller has not received an Environmental Notice that any of the Business or the Purchased Assets or real property currently owned, leased or operated by a Seller in connection with the Business (including soils, groundwater, surface water, buildings and other structure located thereon) has been contaminated with any Hazardous Material which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, such Seller.

3.18 Employee Benefit Matters

(a) Section 3.18(a) of the Disclosure Schedule contains a true and complete list of each pension, benefit, retirement, compensation, employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock or stock-based, change in control, retention, severance, vacation, paid time off, welfare, fringe-benefit and other similar agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is or has been maintained, sponsored, contributed to, or required to be contributed to by a Seller for the benefit of any current or former employee, officer, director, retiree, independent contractor or consultant of the Business or any spouse or dependent of such individual, or under which such Seller or any of its ERISA Affiliates has or may have any Liability, or with respect to which Buyer or any of its Affiliates would reasonably be expected to have any Liability, contingent or otherwise (as listed on Section 3.18(a) of the Disclosure Schedule, each, a “ Plan ).

(b) With respect to each Plan, the applicable Seller has made available to Buyer accurate, current and complete copies of each of the following: (i) where the Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Plan has not been reduced to writing, a written summary of all material plan terms; (iii) where applicable, copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements, now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise; (iv) copies of any summary plan descriptions, summaries of material modifications, employee handbooks and any other written communications (or a description of any oral communications) relating to any Plan; (v) in the case of any Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the IRS; (vi) in the case of any Plan for which a Form 5500 is required to be filed, a copy of the two most recently filed Form 5500, with schedules and financial statements attached; (vii) actuarial valuations and reports related to any Plans with respect to the most recently completed plan years; (viii) the most recent nondiscrimination tests performed under the Code; and (ix) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Plan.

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(c) E ach Plan and related trust (other than any multiemployer plan within the meaning of Section 3(37) of ERISA (each a Multiemployer Plan )) has been established, administered and maintained in accordance with its terms and in material compliance with all Applicable Law s (including ERISA and the Code and any applicable local Laws ). Each Plan that is intended to be qualified under Section 401(a) of the Code (a Qualified Benefit Plan ) is so qualified and has received a favorable and current determination letter from the I RS , or with respect to a prototype plan, can rely up on an opinion letter from the I RS to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and nothing has occurred that could reasonably be expected to adversely affect the qualified status of any Qualified Benefit Plan. Nothing has occurred with respect to any Plan that has subjected or to Sellers’ Knowledge could reasonably be expected to subject a Seller or any of its ERISA Affiliates or, with respect to any period on or after the Closing Date, Buyer or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. A ll benefits, contributions and premiums relating to each Plan have been timely paid in accordance with the terms of such Plan and all Applicable Law s and accounting principles, and all benefits accrued under any unfunded Plan have been paid, accrued or otherwise adequately reserved to the extent required.

(d) Neither Seller nor any ERISA Affiliates of a Seller has: (i) incurred or reasonably expects to incur, either directly or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code or applicable local Law relating to employee benefit plans; (ii) failed to timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any Plan; or (iv) engaged in any transaction which would give rise to liability under Section 4069 or Section 4212(c) of ERISA.

(e) With respect to each Plan: (i) no such plan is a Multiemployer Plan; (ii) no such plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA); (iii) no Action has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan; (iv) no such plan is subject to the minimum funding standards of Section 412 of the Code or Title IV of ERISA, and none of the Purchased Assets is, or may reasonably be expected to become, the subject of any lien arising under Section 302 of ERISA or Section 412(a) of the Code; and (v) no “reportable event,” as defined in Section 4043 of ERISA, has occurred with respect to any such plan.

(f) Except as set forth in Section 3.18(f) of the Disclosure Schedule and other than as required under Section 601 et. seq. of ERISA or other Applicable Law, no Plan or other arrangement provides post-termination or retiree welfare benefits to any individual for any reason.

(g) There is no pending or, to Sellers’ Knowledge, threatened Action relating to a Plan (other than routine claims for benefits), and no Plan has within the three years prior to the date hereof been the subject of an examination or audit by a Governmental Authority or the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.

(h) There has been no amendment to, announcement by a Seller or any of its Affiliates relating to, or change in employee participation or coverage under, any Plan or collective bargaining agreement that would increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year with respect to any director, officer, employee, consultant or independent contractor of the Business, as applicable. Neither Seller nor any Affiliates of a Seller has any commitment or obligation or has made any representations to any director, officer, employee,

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consultant or independent contractor of the Business, whether or not legally binding, to adopt, amend, modify or terminate any Plan or any collective bargaining agreement.

(i) Each Plan that is subject to Section 409A of the Code has been administered in compliance with its terms and the operational and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including, notices, rulings and proposed and final regulations) thereunder. Neither Seller has any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.

(j) Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee, independent contractor or consultant of the Business to severance pay or any other payment; (ii) accelerate the time of payment, funding or vesting, or increase the amount of compensation due to any such individual; (iii) increase the amount payable under or result in any other material obligation pursuant to any Plan; (iv) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; or (v) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(c) of the Code.

3.19 Employment Matters

(a) Section 3.19 of the Disclosure Schedule contains a list of all persons who are employees, independent contractors or consultants of the Business as of the date hereof, including any employee who is on a leave of absence of any nature, paid or unpaid, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof. As of the date hereof, all compensation, including wages, commissions and bonuses payable to all employees, independent contractors or consultants of the Business for services performed on or prior to the date hereof have been paid in full or accrued and there are no outstanding agreements, understandings or commitments of Seller with respect to any compensation, commissions or bonuses.

(b) Neither Seller is , and has not been for the past five (5) years, a party to, bound by, or negotiating any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “ Union ”), and there is not, and has not been for the past five (5) years, any Union representing or purporting to represent any employee of a Seller, and, to Sellers’ Knowledge, no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. There has never been, nor to Sellers’ Knowledge has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting a Seller or any employees of the Business. Seller has no duty to bargain with any Union.

(c) Each Seller is and has been in compliance in all material respects with all Applicable Laws pertaining to employment and employment practices to the extent they relate to employees of the Business, including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers' compensation, leaves of absence and unemployment insurance. All individuals characterized and treated by a Seller as consultants or independent contractors of the Business are properly treated as independent contractors under all Applicable Laws. All employees of the Business classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified

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in all material respects . T here are no Actions against a Seller pending, or to Seller s Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant , volunteer, intern or independent contractor of the Business, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wages and hours or any other employment related matter arising under Applicable Law s.

(d) Each Seller has complied in all material respects with the WARN Act, and it has no plans to undertake any action in the future that would trigger the WARN Act .

(e) With respect to each Government Contract, each Seller is and has been in compliance in all material respects with Executive Order No. 11246 of 1965 (“ E.O. 11246” ), Section 503 of the Rehabilitation Act of 1973 (“ Section 503 ”) and the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (“ VEVRAA ”), including all implementing regulations. Each Seller maintains and complies with affirmative action plans in compliance with E.O. 11246, Section 503 and VEVRAA, including all implementing regulations. Each Seller is not, and has not been for the past five (5) years, the subject of any audit, investigation or enforcement action by any Governmental Authority in connection with any Government Contract or related compliance with E.O. 11246, Section 503 and VEVRAA. Seller has not been debarred, suspended or otherwise made ineligible from doing business with the United States government or any government contractor.

3.20 Taxes

.  Except as set forth in Section 3.20 of the Disclosure Schedule:

(a) All Tax Returns required to be filed by each Seller for any Pre-Closing Tax Period have been, or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all material respects. All Taxes due and owing by each Seller (whether or not shown on any Tax Return) have been, or will be, timely paid.

(b) Each Seller has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of Applicable Law.

(c) No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of a Seller.

(d) All deficiencies asserted, or assessments made, against a Seller or in connection with the Business as a result of any examinations by any taxing authority have been fully paid.

(e) Neither Seller is a party to any Action by any taxing authority. There are no pending or, to Sellers’ Knowledge, threatened Actions by any taxing authority.

(f) There are no Liens for Taxes upon any of the Purchased Assets nor is any taxing authority in the process of imposing any Liens for Taxes on any of the Purchased Assets.

(g) Neither Seller is a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.

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(h) Neither Seller is, and has not been, a party to, or a promoter of, a reportable transaction within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b).

(i) None of the Purchased Assets is (i) required to be treated as being owned by another person pursuant to the so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, (ii) subject to Section 168(g)(1)(A) of the Code, or (iii) subject to a disqualified leaseback or long-term agreement as defined in Section 467 of the Code.

(j) Seller is not a party to any tax sharing, allocation, indemnity or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing.

3.21 Brokers

. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Sellers.

3.22 Solvency

.  Immediately after giving effect to the transactions contemplated hereby and the payment of other necessary fees, expenses and other amounts in connection therewith, each Seller shall be able to pay its debts as they become due and shall own property which has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities) and will have adequate capital to carry on its remaining business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of a Seller.  

3.23 Full Disclosure .

  No representation or warranty by Sellers in this Agreement and no statement contained in the Disclosure Schedule to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers that the statements contained in this Article 4 are true and correct as of the date hereof.

4.01 Good Standing

.  Buyer is a corporation existing and in good standing under the laws of the State of Georgia.

4.02 Power and Authority; Authorization

.  Buyer has all requisite corporate power and authority to execute and deliver the Transaction Documents and to perform its obligations thereunder and consummate the transactions contemplated thereby.  The execution, delivery and performance of the Transaction Documents by Buyer and the consummation of the transactions contemplated thereby have been duly authorized by all requisite corporate action on the part of Buyer, and no other corporate proceedings on Buyer's part are necessary to authorize the execution, delivery or performance of the Transaction Documents.

4.03 Enforceability

.  This Agreement has been duly executed and delivered by Buyer, and assuming that this Agreement is a valid and binding obligation of each Seller, this Agreement constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject

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to the Enforceability Exception .  Each other Transaction Document to which Buyer is a party , when executed and delivered by Buyer, will be duly executed and delivered by Buyer, and assuming that each such other Transaction Documents are valid and binding obligations of the other parties thereto, each such Transaction Document to which Buyer is a party will constitute a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to the Enforceability Exception.

4.04 No Conflicts

.  The execution, delivery and performance of the Transaction Documents to which it is a party by Buyer and the consummation of the transactions contemplated thereby do not conflict with or result in any breach of, constitute a default under, result in a violation of, result in the creation of any Lien upon any assets of Buyer, or require any authorization, consent, approval or other action by or notice to any Governmental Authority or other third party, under the provisions of Buyer's organizational documents or any agreement or instrument to which Buyer is bound, or any Applicable Laws to which Buyer is subject.

4.05 Litigation

.  There are no actions, suits or proceedings pending or, to Buyer's knowledge, threatened against or affecting Buyer or its Affiliates at law or in equity, by or before any Governmental Authority, arbitrator or any other Person, which could adversely affect Buyer's performance under any Transaction Document to which it is a party or the consummation of the transactions contemplated thereby.

4.06 Brokers

.  There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Buyer, except those that will be satisfied by Buyer (and not satisfied or otherwise borne by a Seller or any of its members or Affiliates).

ARTICLE 5
COVENANTS

5.01 Confidentiality

.   Buyer shall not (and shall cause its employees, agents, representatives and Affiliates not to) contact, in any manner, any officer, director, employee, manager, customer, supplier or other business relation of Sellers prior to the Closing without the prior written consent of Sellers.  In addition to and without limiting the foregoing, Buyer acknowledges that it is, and remains, bound by the Confidentiality and Non-Disclosure Agreement, dated in or around May 2017, between DPM Wealth Management, Inc., on behalf of Sellers, and Buyer (the “ Confidentiality Agreement ”) and that the Confidentiality Agreement remains in full force and effect in accordance with its terms.  Buyer shall, and shall cause its employees, agents, representatives and Affiliates to, abide by the terms of the Confidentiality Agreement with respect to such access and any information furnished to it or its representatives.  From and after the Closing, Sellers and each Principal shall (and shall cause each of their respective Affiliates to) keep secret and retain in strictest confidence, and shall not (and shall cause each of their respective Affiliates not to), without the prior written consent of Buyer, furnish, make available or disclose to any third party or use for the benefit of itself or any third party, any Confidential Information; provided , however , nothing herein shall prohibit disclosure by Sellers or a Principal (a) as required by Applicable Law (so long as, to the extent permitted by Applicable Law, prompt prior written notice is given to Buyer of such required disclosure and, to the extent permitted by Applicable Law, a reasonable opportunity is afforded to Buyer, at its expense, to seek (with the reasonable cooperation of Sellers and the Principals) an appropriate protective order or other appropriate remedy; provided , that in the event that such protective order or other remedy is not obtained or Buyer waives compliance with the relevant provisions of this Agreement, such disclosing party will furnish only that portion of the Confidential Information which, on the advice of its legal counsel, is legally required to be disclosed and, use its reasonable efforts to obtain assurances that confidential treatment will be accorded to such Confidential Information), (b) to its legal counsel, accountants and other professional advisers with whom Sellers or

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the Principals, as applicable, have a confidential relationship (provided that Seller s and Principals shall be responsible for any breach of this Section 5 .01 by any such Person if Seller s or Principals, as applicable, disclose the Confidential Information to such Person), and (c) as necessary to enforce the terms of this Agreement.   As used in this Section 5 .01 , “ Confidential Information ” shall mean any information relating to the Business, including information relating to financial statements, employees, programs, strategies and information, analyses, profit margins or other proprietary information; provided , however , that Confidential Information shall not include any information which is in the public domain or becomes generally known in the public domain other than a result of disclosure by Seller s, Principals or any of their respective Affiliates (or, if Seller s, Principals or any of their respective Affiliates disclose Confidential Information to such Person, by Sellers ’ or Principals’ or such Affiliates legal counsel, accountants or other professional advisers) in violation of this Agreement.

5.02 Non-Competition and Non-Solicitation

.

(a) For a period of five years commencing on the Closing Date (the “ Restricted Period ”), neither Sellers nor the Principals shall, and shall not permit any of their respective Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the Restricted Business in the Territory; (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in the Territory in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; or (iii) cause, induce or encourage any material actual or prospective client, customer, supplier or licensor of the Business (including any existing or former client or customer of a Seller and any Person that becomes a client or customer of the Business after the Closing), or any other Person who has a material business relationship with the Business, to terminate or modify any such actual or prospective relationship. Notwithstanding the foregoing, a Seller, a Principal and/or their respective Affiliates may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if such Seller, Principal or Affiliate thereof, as applicable is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(b) Neither Sellers nor the Principals shall, and shall not permit any of their respective Affiliates to, directly or indirectly:

(i) during the Restricted Period, recruit, offer employment or engagement to, employ or engage as a consultant, directly or indirectly, any employee of a Seller who was employed in the Business as of the Closing Date or at any time during the six-month period immediately preceding the Closing Date, or seek to persuade any such employee of a Seller to terminate or diminish his or her relationship with the Business, Buyer or any of its Affiliates; provided , however , that this Section 5.02(b)(i) shall (A) not prohibit any general public advertisement for employment or any solicitation activities conducted by an employment agency, so long as the advertisement or agency search was not directed towards any such employee or any employees and (B) not apply to any individual that was terminated by Buyer after the Closing Date; or

(ii) during the Restricted Period in the Territory, (A) solicit or encourage any customer or other business partner of the Business who was such as of the Closing Date or at any time during the six-month period immediately preceding the Closing Date, to terminate or diminish its relationship with the Business with respect to the services of the type provided by the Business as of the Closing Date, or (B) seek to persuade any such customer or other business partner, or prospective customer or other business partner of the Business who was such as of the Closing Date or at any time during the six-month period immediately preceding the Closing Date, to conduct with any other Person any business or

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activity which such business partner or prospective business partner co nducts or could conduct with the Business , solely as it relates to the services of the type provided by the Business as of the Closing Date.

(c) Each Seller and each Principal acknowledges that its agreement to the covenants contained in Section 5.01 and this Section 5.02 is a material condition of Buyer's willingness to enter into this Agreement and consummate the transactions contemplated by this Agreement and that the covenants in Section 5.01 and this Section 5.02 are necessary to protect the good will, confidential information, trade secrets and other legitimate information related to the Business.  In addition and not in the alternative to any other remedies available to it, Buyer shall be entitled to preliminary and permanent injunctive relief (without having to post bond or other security) against any breach or threatened breach by a Seller, a Principal or any Affiliate of a Seller or a Principal of any of the covenants in Section 5.01 or this Section 5.02 .  If a court of competent jurisdiction declares that any term or provisions of Section 5.01 or this Section 5.02 is invalid or unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, that term or provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.  Sellers and Principals agree that the periods of restriction applicable to Sellers, Principals and their respective Affiliates set forth in Section 5.01 and Section 5.02 shall be tolled, and shall not run, during the period of any breach (as determined by a court of competent jurisdiction) by a Seller, a Principal or any of their respective Affiliates of any such covenants.  No claimed breach of this Agreement attributed to Buyer or any of its Affiliates shall operate to excuse Seller from the performance of its obligations under this Section 5.01 or this Section 5.02 .

5.03 Assigned Contracts

.  In the event that any necessary consent to cause any Assigned Contract listed on Section 1.01(a) of the Disclosure Schedule to be assigned to Buyer prior to the date hereof shall not have been obtained prior to the Closing Date, Sellers shall use commercially reasonable efforts to obtain the necessary consents following the Closing.  Until such consents are obtained, Sellers shall cooperate in any reasonable arrangement designed to provide Buyer with the benefits of any such unassigned Assigned Contract and enforce at the request of Buyer any rights arising under any such unassigned Assigned Contract.

5.04 Public Announcements

.   Unless otherwise required by Applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.

5.05 Bulk Sales Laws

. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Applicable Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer; it being understood that any Liabilities arising out of the failure of Sellers to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Applicable Laws of any jurisdiction shall be treated as Excluded Liabilities.

5.06 Receivables

.    From and after the Closing:

(a) if Buyer or its Affiliate receives or collects any funds relating to any Excluded Asset, Buyer or its Affiliate shall remit any such funds to the applicable Seller within five Business Days after its receipt thereof; and

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(b) if Sellers or their Affiliate s receive or colle ct any funds relating to any Purchased Asset, the applicable Seller or its Affiliate shall remit any such funds to the Buyer within five Business Days after its receipt thereof .

5.07 Transfer Taxes

. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne paid by Sellers when due. Sellers shall, at their own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).

5.08 [Reserved]

.  

5.09 Further Assurances .

  Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.

5.10 Cooperation on Tax Matters.

  Buyer and Sellers shall furnish or cause to be furnished to each other, as promptly as practicable, such information and assistance relating to the Purchased Assets and the Business as is reasonably necessary for the preparation and filing of any Tax Return, claim for refund or other filings relating to Tax matters, for the preparation for any Tax audit, for the preparation for any Tax protest, for the prosecution or defense of any suit or other proceeding relating to Tax matters.

5.11 Prorations .

  All real property taxes, personal property taxes, or ad valorem obligations and similar recurring taxes and fees on the Purchased Assets for taxable periods beginning before, and ending after, the Closing Date, shall be prorated between Buyer and Sellers as of the Closing Date.  Sellers shall be responsible for all such taxes and fees on the Purchased Assets accruing during any period up to and including the Closing Date.  Buyer shall be responsible for all such taxes and fees on the Purchased Assets accruing during any period after the Closing Date.  With respect to Taxes described in this Section 5.11 , Seller shall timely file all Tax Returns due before the Closing Date with respect to such Taxes and Buyer shall prepare and timely file all Tax Returns due after the Closing Date with respect to such Taxes.  If one party remits to the appropriate taxing authority payment for Taxes, which are subject to proration under this Section 5.11 and such payment includes the other party’s share of such Taxes, such other party shall promptly reimburse the remitting party for its share of such Taxes.

ARTICLE 6
[RESERVED]

ARTICLE 7
ADDITIONAL AGREEMENTS

7.01 Survival

.  The representations and warranties contained in Article 3 and Article 4 shall survive the Closing until the date that is eighteen (18) months after the Closing Date (the “ Survival Date ”); provided, that the Fundamental Representations shall survive indefinitely. All covenants and agreements that require performance prior to or at the Closing shall survive until the Survival Date. All covenants and agreements that require performance after the Closing shall survive in accordance with their terms and Applicable Laws.  For the avoidance of doubt, all representations, warranties, covenants and agreements with respect to which a claim has been brought prior to the applicable survival date shall survive with

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respect to such claim until such claim is finally resolved (and the payment of all amounts owed with respect thereto).

7.02 Indemnification by Buyer

.  From and after the Closing (but subject to the provisions of this Article 7 ), Buyer shall defend and indemnify Sellers, their Affiliates and their respective officers, directors, shareholders, members, employees, agents, successors and permitted assigns, and the members, officers, employees, directors, managers, agents of each of the foregoing and each of their heirs and personal representatives (collectively, “ Seller Indemnified Parties ”) against, and hold Seller Indemnified Parties harmless from and against, and pay to the applicable Seller Indemnified Parties the amount of, any and all Losses which any Seller Indemnified Party may suffer, sustain or become subject to, as a result of, in connection with, or relating to: (a) any breach of any representation or warranty (without giving effect to materiality, Material Adverse Effect or similar phrases in each of such representations and warranties) of Buyer contained in this Agreement; (b) any breach or violation of any covenant or agreement of Buyer contained in this Agreement or (c) the failure of FPI to obtain Premier Plaza Property, L.L.C.’s consent to the Office Sublease Agreement referred to in Section 2.01(j) . All payments under this Section 7.02 shall, to the extent permitted by Applicable Law, be deemed to be adjustments for Tax purposes to the aggregate purchase price paid by Buyer for the Purchased Assets pursuant to Article 1 .

7.03 Indemnification by Sellers

.

(a) From and after the Closing (but subject to the provisions of this Article 7 ), Sellers shall, jointly and severally, defend and indemnify Buyer, its Affiliates and their respective successors and permitted assigns, and the respective members, officers, employees, directors, managers, agents of each of the foregoing and each of their heirs and personal representatives (collectively, “ Buyer Indemnified Parties ”) against, and hold Buyer Indemnified Parties harmless from and against, and pay to the applicable Buyer Indemnified Parties the amount of, any and all Losses which any Buyer Indemnified Party may suffer, sustain or become subject to, as a result of, in connection with, or relating to: (i) a breach of any representation or warranty (without giving effect to materiality, Material Adverse Effect or similar phrases in each of such representations and warranties) of Sellers contained in Article 3 ; (ii) any breach or violation by Sellers or the Principals of any covenant or agreement of Sellers or the Principals contained in this Agreement; (iii) any Excluded Asset; or (iv) any Excluded Liability.  All payments made pursuant to this Section 7.03 shall, to the extent permitted by Applicable Law, be deemed to be adjustments for Tax purposes to the aggregate purchase price paid by Buyer for the Purchased Assets pursuant to Article 1 hereof. Except (y) in the case of fraud and (z) actions seeking specific performance or similar equitable relief pursuant to Section 9.14 , including with respect to any breach of the covenants or agreements contained in Section 5.01 ( Confidentiality ) or Section 5.02 ( Non-Competition and Non-Solicitation ), recovery pursuant to this Section 7.03 constitutes Buyer Indemnified Parties’ sole and exclusive remedy for any and all Losses or other claims relating to or arising from this Agreement or in connection with the transactions contemplated hereby, including in any Section of the Disclosure Schedule or any certificate delivered hereunder.  For the avoidance of doubt, this subsection (and this Agreement) shall not limit any Buyer Indemnified Parties’ remedies under the other Transaction Documents or any other agreement.  

(b) Notwithstanding anything herein to the contrary, the rights of Buyer Indemnified Parties pursuant to Section 7.03(a) shall be subject to the following limitations:

(i) Buyer Indemnified Parties shall not be entitled to receive amounts pursuant to Section 7.03(a)(i) (other than for Losses relating to breaches of the Fundamental Representations) for any individual item or series of related items based on substantially the same facts and circumstances where the Losses relating to such item or series of related items based on substantially the

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same facts and circumstances are less than $ 5 , 0 00 , and such Losses shall not be applied against the Deductible Amount ;

(ii) Buyer Indemnified Parties shall not be entitled to receive amounts pursuant to Section 7.03(a)(i) (other than for Losses relating to breaches of the Fundamental Representations) unless and until the aggregate amount of Losses relating thereto exceeds on a cumulative basis an amount equal to $50,000 (the “ Deductible Amount ”), and then Buyer Indemnified Parties shall be entitled to receive amounts only to the extent such Losses exceed the Deductible Amount (subject to the other provisions of this Agreement);

(iii) Buyer Indemnified Parties shall not be entitled to receive amounts pursuant to Section 7.03(a)(i) (other than for Losses relating to breaches of the Fundamental Representations) in excess of $1,600,000; and

(iv) The aggregate liability of Sellers pursuant to Section 7.03(a) for breaches of the Fundamental Representations shall not exceed an aggregate amount equal to the Purchase Price.

7.04 Expiration of Claims

.  The ability of any Seller Indemnified Party to receive indemnification from Buyer under Section 7.02 , and the ability of Buyer Indemnified Parties to receive proceeds from Sellers pursuant to Section 7.03(a) , shall terminate with respect to a particular indemnifiable matter upon the termination of the applicable survival period specified in Section 7.01 , as applicable, unless such Person, as applicable, shall have made either a claim for indemnification pursuant to Section 7.02 or Section 7.03 , as applicable, prior to the termination of the applicable survival period specified in Section 7.01 .  If a Seller Indemnified Party or Buyer Indemnified Party, as applicable, made either a claim for indemnification pursuant to Section 7.02 or Section 7.03 , as applicable, prior to the termination of the applicable survival period specified in Section 7.01 , such claim and the right to be indemnified hereunder with respect to such claim shall survive the termination of the applicable survival period specified in Section 7.01 until the final resolution of such claim and the payment of all indemnifiable amounts with respect thereto.

7.05 Procedures Relating to Indemnification

.

(a) In the event that a Buyer Indemnified Party or Seller Indemnified Party (such Person the “ Claiming Party ”) receives a claim or demand made by any Person against the Claiming Party that is reasonably likely to result in Losses that are indemnifiable hereunder (a “ Third Party Claim ”), such Claiming Party shall give written notice (a “ Third Party Claim Notice ”) to the indemnifying party hereunder (the “ Defending Party ”) of the Third Party Claim as promptly as reasonably possible after receipt by such Claiming Party of written notice of the Third Party Claim; provided, that failure to provide any information specified in this Section 7.05(a) or to give such prompt notification shall not affect the Claiming Party’s right to indemnification provided hereunder except and to the extent the Defending Party shall have been prejudiced as a result of such failure.  The Third Party Claim Notice shall, in each case to the extent (if any) then known to the Claiming Party, describe the Third Party Claim in reasonable detail, indicate the estimated amount of the Loss that has been sustained by the Claiming Party and provide any other material details pertaining thereto, along with copies of all material notices and documents (including court papers) evidencing such Third Party Claim, and the basis for indemnification sought.  

(b) If a Third Party Claim is made against a Claiming Party, the Defending Party shall either be entitled to participate in (but not control) the defense thereof or, if it so chooses, to assume the defense thereof with reputable counsel selected by the Defending Party; provided, that the Defending Party shall not be entitled to assume the defense unless (i) the Defending Party has given written notice to the

25

 


Claiming Party within thirty ( 30 ) days after the receipt of the Third Party Claim Notice (or sooner, if the circumstances of such Third Party Claim so require and such circumstances were expressly stated in the Third Party Claim Notice) that the Defending Party will, and thereby covenants to, indemnify, defend and hold harmless the Claiming Party from and against the Losses that the Claiming Party may suffer, sustain or become subject to, as a result of, in connection with, or relating to the Third Party Claim (subject to the limitations contained in this Article 7 ), (ii) the Third Party Claim does not relate to, or otherwise arise in connection with, Taxes or any criminal proceeding, action, indictment, allegation or investigation, (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief against the Claiming Party and (iv) the Claiming Party has not been advised in writing by counsel that a conflict of interest exists or is reasonably likely to exist between the Claiming Party and the Defending Party with respect to the Third Party Claim. Should a Defending Party so elect to assume the defense of a Third Party Claim in accordance with this Section 7.05(b) , the Defending Party shall not be liable to the Claiming Party for legal expenses subsequently incurred by the Claiming Party in connection with the defense thereof for so long as such Defending Party complies with this Section  7.05(b) and diligently conducts the defense .  If the Defending Party assumes such defense in accordance with this Section 7.05(b) , the Claiming Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Defending Party, it being understood, however, that the Defending Party shall control such defense (including any settlement with respect thereto) for so long as such Defending Party complies with this Section 7.05(b) and diligently conducts the defense.  In connection with any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution of such Third Party Claim, including by retaining and (upon the Defending Party's request) providing to the Defending Party all records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of an y material provided hereunder. The Defending Party shall not, without the prior written consent of the Claiming Party (such consent to not be unreasonably withheld, conditioned or delayed), consent to the entry of judgment, or settle, compromise or voluntarily discharge, any Third Party Claim, unless the terms of such judgment, settlement, compromise or discharge (x) provides for the payment by the Defending Party of money as sole relief for the claimant, (y) results in the full and general release of all Claiming Parties from all material liabilities arising or related to, or in connection with, the Third Party Claim and (z) involves no finding or admission of a violation of Applicable Law or other wrongdoing by any Person.   If the Defending Party shall not have assumed the defense of a Third Party Claim in accordance with this Section  7.05(b) , then the Claiming Party shall be entitled to defend such Third Party Claim through counsel of its choosing, and may resolve such Third Party Claim; provided, that the Claiming Party shall not admit any liability with respect to, consent to the entry of judgment, or settle, compromise or voluntarily discharge, any Third Party Claim for which any sums are recoverable from or indemnifiable by the Defending Party pursuant to this Agreement, without the prior written consent of the Defending Party (such consent to not be unreasonably withheld, conditioned or delayed).  

7.06 Direct Claims

.   Any claim for indemnification pursuant to this Article 7 which does not result from a Third Party Claim (a “ Direct Claim ”) shall be asserted by the Claiming Party giving written notice (a “ Direct Claim Notice ”) to the Defending Party of the Direct Claim as promptly as reasonably possible after the determination of such Loss; provided, that failure to give such prompt notification shall not affect the indemnification or recovery, as applicable, provided hereunder except and to the extent the Defending Party shall have been prejudiced as a result of such failure. The Defending Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. If the Defending Party does not so respond within such 30-day period, the Defending Party shall be deemed to have accepted

26

 


such claim and the Claiming Party will be entitled to payment directly from such Defending Party in accordance with this Agreement.  

7.07 Setoff

.  In addition to any rights of setoff or other similar rights that Buyer or any of the other Buyer Indemnified Parties may have at common law or otherwise, and notwithstanding anything to the contrary herein, Buyer shall have the right to withhold and deduct from any of the Deferred Payment Amount that would be otherwise payable hereunder any sum that (i) is owed to Buyer or any Buyer Indemnified Party under this Article 7 , subject to the limitations in this Article 7 or (ii) Buyer reasonably and in good faith believes may be owed to it or any Buyer Indemnified Party under this Article 7 , subject to the limitations in this Article 7 . Buyer shall exercise the foregoing right of setoff by delivering a written notice to the Sellers.

7.08 Rights Cumulative

.  The rights of each Buyer Indemnified Party and Seller Indemnified Party under this Article 7 are cumulative, and each Buyer Indemnified Party and Seller Indemnified Party will have the right in any particular circumstance, in its sole discretion, to enforce any provision of this Article 7 without regard to the availability of a remedy under any other provision of this Article 7 .

ARTICLE 8
DEFINITIONS

8.01 Definitions

.  For purposes hereof, the following terms, when used herein with initial capital letters, shall have the following meanings.

Action ” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

Affiliate ” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person.

Applicable Law means any U.S. federal, state, local or non-U.S. law, constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority applicable to such Person.

Business Day ” means any day, other than a Saturday, a Sunday or any other day on which banks located in New York City, New York are closed for business as a result of federal, state or local holiday.

CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

Code ” means the Internal Revenue Code of 1986, as amended.

Contract ” means, with respect to any Person, any contract, agreement, deed, mortgage, lease, sublease, license, sublicense or other legally binding commitment, promise, undertaking, obligation, arrangement or understanding, whether written or oral, to which or by which such Person is bound.

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Disclosure Schedule means the Disclosure Schedule delivered by Seller s and Buyer concurrently with the execution and delivery of this Agreement.

Data Handling ” means the collection, storage, processing, use, transmission, disclosure and securing of data.

Deferred Payment Amount ” means an amount equal to $2,675,000.

Employees ” means all current and former employees of Sellers involved in the Business.

Environmental Claim ” means any Action, Governmental order or decree of a Governmental Authority, Lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.

Environmental Law ” means any Applicable Law, and any order or decree of a Governmental Authority or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

Environmental Notice ” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.

Environmental Permit ” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to Environmental Law.

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

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ERISA Affiliate means all employers (whether or not incorporated) that would be treated together with a Seller or any of its Affiliates as a single employer within the meaning of Section 414 of the Code.

Firm ” means Grant Thornton LLP, but if Grant Thornton LLP is unable or unwilling to perform such services, the American Institute of Certified Public Accounts shall select a firm to be the Firm hereunder.

Fundamental Representations ” means the representations and warranties of Seller set forth in Sections 3.01 ( Organization and Qualification of each Seller ), 3.02 ( Authority of each Seller ), 3.08 ( Title to Purchased Assets ), 3.09 ( Sufficiency of Assets ), 3.20 ( Taxes ), 3.21 ( Brokers ) and 3.22 ( Solvency ).

GAAP ” means accounting principles generally accepted in the United States, consistently applied.

Governmental Authority ” means any federal, state, local or foreign government, political subdivision, legislature, court, agency, department, bureau, commission or other governmental regulatory authority, body or instrumentality, and any tribunal, arbitrator or arbitral body.

Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

Intellectual Property ” means, collectively: (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all letters patent and pending applications for patents of the United States and all countries foreign thereto and all reissues, reexaminations, divisions, continuations, continuations-in-part and extensions thereof; (ii) all trademarks, service marks, trade names, and Internet domain names, all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (iii) all published and unpublished works of authorship (including databases and software), and all applications, registrations and renewals in connection therewith; (iv) all mask works and all applications, registrations, and renewals in connection therewith; (v) all trade secrets and confidential business information (including confidential ideas, research and development, know how, methods, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (vi) all computer software programs (including all information systems, source and object codes and user interfaces), firmware and computer hardware; (vii) all copies and tangible embodiments of the foregoing (in whatever form or medium); and (viii) the right to assert and collect damages for past present and future infringements, violations and misappropriations of the foregoing.

Intellectual Property Agreements ” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other Contracts (including any right to receive or obligation to pay royalties or any other consideration), whether written or oral, relating to any Intellectual Property that is used in or necessary for the conduct of the Business as currently conducted to which a Seller is a party, beneficiary or otherwise bound.

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Intellectual Property Assets means all Intellectual Property that is owned by a Seller and used in or necessary for the conduct of the Business as currently conducted.

Intellectual Property Registrations ” means all Intellectual Property Assets that are subject to any issuance, registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.

IRS ” means the Internal Revenue Service.

Knowledge of Sellers or Sellers’ Knowledge ” or any other similar knowledge qualification, means the actual or constructive knowledge of the Principals, Neil Ellison or Bobby Ingram, after due inquiry.  

Liabilities ” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

Liens ” means any lien, mortgage, security interest, pledge deposit, encumbrance or other similar restriction.

Loss or Losses ” means actual out-of-pocket losses, damages, Liabilities, interest, awards, penalties, fines, costs or expenses of whatever kind (including expenses of investigation and reasonable attorneys’ fees and expenses in connection with any and all demands, claims, suits, actions, arbitrations, inquiries, investigations, pursuit of claims or other proceedings) and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not include special, punitive, exemplary or consequential damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority.

Material Adverse Effect ” means any change, effect, fact, condition, circumstance, occurrence, state of facts or development that, when considered either individually or in the aggregate together with all other changes, effects, facts, conditions, circumstances, occurrences, states of facts or developments with respect to which such phrase is used in this Agreement, has had or would reasonably be expected to have a material and adverse effect on (x) the ability of a Seller to consummate the transactions contemplated hereby or (y) the business, results of operations, financial or other condition, operations, properties or assets of the Business, or (z) the value of the Purchased Assets.

Ordinary Course of Business ” means, with respect to actions and operations conducted by a Seller, actions and operations that are (a) consistent with the past practices of such Seller, (b) taken in the ordinary course of the normal, day-to-day operations of such Seller, and (c) similar in nature and magnitude to actions and operations customarily taken by suchSeller.

Permits ” mean all material approvals, filings, permits, licenses and other authorizations of Governmental Authorities.

Person ” means an individual, a partnership, a corporation, a limited liability company, an association or enterprise, a joint stock company, a trust, a joint venture, an unincorporated organization, a Governmental Authority or any other entity.

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Pre-Closing Tax Period means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.

Release ” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

Restricted Business ” means staffing and recruitment services for the accounting and finance, information technology, life sciences, medical device sales, supply chain and engineering industries.

Sensitive Data ” means (i) information required by any Applicable Law to be encrypted, masked or otherwise protected from disclosure; (ii) government identifiers, such as Social Security or other tax identification numbers, driver’s license numbers or other government-issues identification numbers; (iii) account, credit or debit card numbers, with or without any required security code, access code, personal identification number or password that would permit access to an individual’s financial account, and account information, including balances and transaction data; (iv) user names, email addresses, passwords, or other credentials for accessing accounts; or (v) any other sensitive information regarding individuals or their employment, family, health or financial status, such as salary, benefits, marital status, geolocation data and genetic information.

Tax ” or “ Taxes ” means  (i) any and all U.S. federal, state, local or non-U.S. income, gross receipts, license, payroll, employment, severance, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, escheat or unclaimed property obligation, disability, real property, ad valorem/personal property, stamp, excise, occupation, sales, use, transfer, registration, value added, alternative or add-on  minimum, estimated or other tax of any kind in the nature of (or similar to) taxes whatsoever, including any interest, penalty or addition thereto, whether disputed or not and (ii) any liability for the payment of any amounts of the type described in clause (i) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, as a result of any tax sharing or tax allocation agreement, arrangement or understanding, or as a result of being liable for another Person’s taxes as a transferee or successor, by Contract or otherwise.

Tax Authority ” means the Internal Revenue Service and any other Governmental Authority responsible for the administration or imposition of any Tax.

Tax Returns ” means any return, report, election, declaration, disclosure, schedule, estimate, claim for refund, information return or other document (including any related or supporting schedules, statements or information or attachments thereto and including any amendment thereof) connected with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

Territory ” means the States of Alabama, Georgia, North Carolina, South Carolina and Tennessee.

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Transaction Documents means this Agreement, the Bill of Sale and Assig nment and Assumption Agreement, the License Agreement , the Transition Services Agreement, and the other agreements, instruments and documents required to be delivered at the Closing.

Transition Services Agreement ” means the Transition Services Agreement by and between Buyer and Sellers in substantially the form attached hereto as Exhibit A .

WARN Act ” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.

8.02 Cross‑Reference of Other Definitions

.  Each capitalized term listed below is defined in the corresponding Section of this Agreement:

Term Section No.

Accounts Receivable 1.0 2(b)

Agreement Preamble

Annual Financial Statements 3.04

Assigned Contracts 1.01(a )

Assignment and Assumption of Lease 2 .01(g)

Balance Sheet 3.04

Balance Sheet Date 3.04

Bill of Sale 2.01( d)

Business Recitals

Buyer Preamble

Buyer Indemnified Parties 7.03(a)

Claiming Party 7.05(a)

Closing 1.09

Closing Date 1.09

Confidentiality Agreement 5.07

Confidential Information 5.07

Deductible Amount 7.03(b)(ii)

Defending Party 7.05(a)

Direct Claim 7 .06

Direct Claim Notice 7 .06

Employment Agreements Recitals

Enforceability Exception 3.02

E.O. 11246 3.19(e)

Excluded Assets 1.02

Excluded Contracts 1.02(c )

Excluded Liabilities 1.04

Financial Statements 3.04

FPI Preamble

FPL Preamble

Government Contracts 3.07(a)(viii)

Insurance Policies 3.14

Interim Balance Sheet 3.04

Interim Balance Sheet Date 3.04

Interim Financial Statements 3.04

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Leased Real Property 3.10( a )

Leases 3.10(b)

License Agreement 2.01(f )

Material Contracts 3.07(a)

Material Customers 3.13

Mr. Nagel Preamble

Mrs. Nagel Preamble

Multiemployer Plan 3.18(c)

Permitted Liens 3.08

Plan 3.18(a)

Principals Preamble

Purchase Price 1.05

Purchase Price Allocation Schedule 1.08

Purchased Assets 1.01

Qualified Benefit Plan 3.18(c)

Quarterly Payments 1.05(b )

Restricted Period 5.0 2(a)

Section 503 3.19(e)

Seller Indemnified Parties 7.02

Sellers Preamble

Survival Date 7.01

Tangible Personal Property 1.01(c )

Third Party Claim 7.05(a)

Third Party Claim Notice 7.05(a)

Transferred Employees 5.08

Union 3.19(b)

VEVRAA 3.19(e)

 

8.03 Other Definitional Matters

.  All references in this Agreement to Exhibits, the Disclosure Schedule, Annexes, Schedules, Articles, Sections and subsections refer to the corresponding Exhibits, the Disclosure Schedule, Annexes, Schedules, Articles, Sections and subsections of or to this Agreement, unless expressly provided otherwise.  Titles appearing at the beginning of any Articles, Sections and subsections of this Agreement are for convenience only, do not constitute any part of this Agreement and shall be disregarded in construing the intent of the parties hereto.  The Schedules to this Agreement are incorporated herein by this reference.  The word “ including ” (in its various forms) means including without limitation.  The word “ or ” is not exclusive and the words “ herein ,” “ hereof ,” “ hereby ,” “ hereto ” and “ hereunder ” refer to this Agreement as a whole and not to the particular provision in which such words appear. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.  References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all rules and regulations promulgated thereunder and shall refer to such statute, law, rules and regulations as amended from time to time and includes any successor legislation thereto.  References to an agreement, instrument or document means such agreement, instrument or document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by this Agreement.  The Disclosure Schedule, Schedules, Annexes and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein.  The phrase “made available,” “delivered” or “provided” in the context of documents made available or delivered or provided by any Person to Buyer means (a) uploaded to the Client Access and Reporting Link electronic data room established in respect of the transactions contemplated hereby and accessible for viewing by

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Buyer and its representatives or (b) actually delivered to Buyer or its counsel, in each case, prior to 5:00 p.m., Eastern Time, on the s econd Business D ay prior to the date hereof.

ARTICLE 9
MISCELLANEOUS

9.01 Expenses

.  Except as expressly provided by this Agreement, (a) Buyer shall pay all of its fees, costs and expenses (including investment bankers' and attorneys' fees and expenses) incurred in connection with the negotiation of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby (whether consummated or not) and (b) Sellers shall pay all of their fees, costs and expenses (including investment bankers', attorneys' and accountants' fees and expenses) incurred in connection with the negotiation of this Agreement, the performance of their obligations hereunder and the consummation of the transactions contemplated hereby (whether consummated or not).

9.02 Notices

.  Any notice or other communication provided for herein or given hereunder to a party hereto must be in writing, and sent by facsimile or e-mail transmission (provided that such facsimile or email delivery is followed within one Business Day by delivery by nationally recognized overnight courier service guaranteeing overnight delivery) or portable document format (.pdf), delivered in person, mailed by first class registered or certified mail, postage prepaid, or sent by Federal Express or other overnight courier of national reputation, addressed as follows:

Notices to Buyer (and, after the Closing, the Company) :

Staffing 360 Solutions, Inc.

641 Lexington Ave., 27 th

New York, New York 10022

Attn: Brendan Flood

with a copy to :

Haynes and Boone, LLP

30 Rockefeller Plaza, 26 th Floor

New York, NY 10012

Attn: Rick A. Werner, Esq. and Greg Kramer, Esq.

Notices to Sellers and Principals :

Philip Nagel and April F. Nagel

[REDACTED]

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with a copy to :

Taylor English Duma LLP

1600 Parkwood Circle, Suite 200

Atlanta, Georgia 30339

Attn: George C. Gaskin, Esq.

 

9.03 Assignment

.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but with it being understood that neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by any party hereto; provided, that Buyer may assign any and all of its rights and obligations under this Agreement or any Transaction Documents to one or more of its Affiliates so long as such assignment does not impair or delay the Closing and Buyer guarantees obligations of such Affiliate(s) hereunder.

9.04 Severability

.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under Applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

9.05 Captions

.  The captions used in this Agreement and descriptions of the Schedules are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no such caption or description had been used in this Agreement.

9.06 Amendment and Waiver

.  This Agreement may be amended only in a writing executed and delivered by each of Buyer and Sellers and the Principals.  Any provision of this Agreement may be waived only in a writing signed by the party against whom such waiver is to be enforced.  No waiver of any provision hereunder or any breach or default hereunder shall extend to or affect in any way any other provision or prior or subsequent breach or default.  No failure of any party hereto to exercise any power given it under this Agreement, or to insist upon strict compliance with any provision of this Agreement, and no custom or practice at variance with the terms of this Agreement, shall constitute a waiver of any such party’s right to demand strict compliance with the terms of this Agreement.

9.07 Complete Agreement

.  This Agreement, together with the Confidentiality Agreement, and the other Transaction Documents, and any other certificate, schedule, exhibit or agreement referred to herein or therein and executed and delivered on or after the date hereof in connection herewith or therewith, contain the complete agreement among the parties hereto and supersede any prior understandings, agreements or representations by or between such parties, written or oral, which may have related to the subject matter hereof in any way.

9.08 Counterparts

.  This Agreement may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same Agreement .  The execution of this Agreement and any agreement or instrument entered into in connection with this Agreement , and any amendment hereto or thereto, by any of the parties may be evidenced by way of a facsimile or portable document format (.pdf) transmission of such party’s signature, or a

35

 


photocopy of such facsimile or portable document format (.pdf) transmission, and such facsimile or portable document format (.pdf) signature shall be deemed to constitute the original signature of such party hereto.

9.09 Governing Law

.  All matters relating to the interpretation, construction, validity and enforcement of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than the State of Delaware.

9.10 Jurisdiction; Venue; Service of Process

.  SUBJECT TO THE PROVISIONS OF SECTION 1.06 (WHICH SHALL GOVERN ANY DISPUTE ARISING UNDER SUCH SECTION), THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY PARTY SEEKING RELIEF UNDER OR PURSUANT TO THIS AGREEMENT SHALL PROPERLY AND EXCLUSIVELY LIE IN THE STATE AND FEDERAL COURTS LOCATED IN NEW CASTLE COUNTY, DELAWARE.  EACH PARTY ALSO AGREES NOT TO BRING ANY SUIT, ACTION OR PROCEEDING SEEKING RELIEF ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURTS.  BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH SUIT, ACTION OR PROCEEDING.  THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH SUIT, ACTION OR PROCEEDING.  THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.

9.11 WAIVER OF JURY TRIAL

.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

9.12 No Third Party Beneficiaries

.  Except as expressly provided herein (including Seller Indemnified Parties and Buyer Indemnified Parties), no Person other than the parties hereto and their respective successors and permitted assigns shall have any rights, remedies, or benefits under any provision of this Agreement.

9.13 Payments under Agreement

.  Each party agrees that all amounts required to be paid hereunder shall be paid in United States currency and, except as otherwise expressly set forth in this

36

 


Agreement, without discount, rebate or reduction and subject to no counterclaim or offset, on the dates specified herein.

9.14 Equitable Relief

.  The parties hereto agree that irreparable damage would occur in the event that, at any time, any of the provisions of this Agreement were not performed by Buyer or Sellers or the Principals, as applicable, in accordance with their specific terms or were otherwise breached by Buyer or Seller, as applicable (whether before or after Closing). It is accordingly agreed that each of the parties hereto shall be entitled to (i) an injunction or injunctions to prevent breaches of this Agreement by any of Buyer or Sellers or the Principals, as applicable, and (ii) enforce specifically the terms and provisions hereof against Buyer or Sellers or the Principals, as applicable, in each case at any time (whether before or after the Closing), these being in addition to any other remedy to which the parties hereto are otherwise entitled at law or in equity.

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

BUYER :

STAFFING 360 GEORGIA, LLC

By: Staffing 360 Solutions, Inc., its sole member

 

By:  _ /s/ Brendan Flood __________________

Name:  Brendan Flood

Title: Executive Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]


 

 


SELLER S :

FIRSTPRO, INC.

By:  _ /s/ April F. Nagel _____________________

Name:  _ April F. Nagel _____________________

Title: _ Chief Executive Officer ______________

FIRSTPRO GEORGIA, LLC

By:  _/s/ Philip A. Nagel____________________

Name:  _ Philip A. Nagel ____________________

Title: _ Managing Partner ___________________

 

PRINCIPALS:

 

_ /s/ April F. Nagel _____________________

April F Nagel

 

_ /s/ Philip A. Nagel ____________________

Philip Nagel

 

 

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

 

 

 


Annex I

Individuals to Sign Employment Agreements

Neil Ellison

 

Exhibit 10.1

 

Date                      15 September 2017

 

 

 

 

(1)

the persons named in schedule 1

(2)

LONGBRIDGE RECRUITMENT 360 LIMITED

(3)

staffing 360 solutions, inc.

 

 

 

 

 

 

 

AGREEMENT TO BUY THE SHARES IN

CBS BUTLER HOLDINGS LIMITED

 

 

 

 

 

 

 

 

 

 

Mishcon de Reya LLP

Africa House

70 Kingsway

London WC2B 6AH

Tel: +44 20 3321 7000

Fax: +44 20 7404 5982

Ref: NMD/GJ/44694.7

E-mail: nick.davis@mishcon.com

 

23715336.12

 


TABLE OF CONTENTS

No. Heading Page

 

1.

DEFINITIONS AND INTERPRETATION1

 

2.

SALE AND PURCHASE8

 

3.

Purchase price9

 

4.

PARENT COMPANY GUARANTEE11

 

5.

Completion Accounts13

 

6.

REFERENCES TO EXPERT14

 

7.

WARRANTIES15

 

8.

COMPLETION17

 

9.

Right of set-off19

 

10.

Announcements and CONFIDENTIALITY21

 

11.

RESTRICTIve covenants22

 

12.

RELEASE OF GUARANTEES AND INDEMNITIES25

 

13.

TAX COVENANT26

 

14.

SPECIFIC PAYMENT COVENANTS26

 

15.

Sellers' representative26

 

16.

notices and SERVICE of proceedings27

 

17.

Costs28

 

18.

Assignment and Successors28

 

19.

Continuing agreement29

 

20.

Further assurance29

 

21.

Entire agreement30

 

22.

remedies, variation and waiver30

 

23.

Severable provisions31

 

24.

Payments31

 

25.

withholding and grossing up32

 

26.

THIRD PARTY RIGHTS32

 

27.

Counterparts32

 

28.

Law and jurisdiction32

 

Schedule 1 – THE SELLERS AND THE SELLERS' SHAREHOLDINGS AND OPTION HOLDERS

34

 

Schedule 2 – THE COMPANY AND THE SUBSIDIARY

40

 

Part A – The Company 40

Part B –  The Subsidiary 40

Schedule 3 – WARRANTIES

41

 

Schedule 4 – SELLERS' LIMITS

75

 

Schedule 5 – COMPLETION

84

 

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1


Part A – Documents to be delivered by the Sellers 84

Part B – Decisions to be taken at Completion by the directors of the Target Group Companies 85

Part C – Other action to be taken by the Sellers and other items to be delivered by the Sellers 86

Part D – Documents to be delivered and actions to be taken by the Buyer 86

Part E – Documents to be delivered and actions to be taken by Staffing 360 87

Schedule 6 – THE PROPERTY

88

 

Part A – Property 88

Part B – Encumbrances to which the Properties are subject 88

Schedule 7 – TAX SCHEDULE

89

 

Part A – Definitions and Interpretation 89

Part B – Tax Covenant 93

Part C – Tax Warranties 99

Part D – Tax Administration 107

Schedule 8 – COMPLETION ACCOUNTS

109

 

Part A – Basis of Preparation of the Completion Accounts 109

Part B – The Specific accounting policies and procedures for the Completion accounts 109

Part C – Format of the Completion Accounts 111

Schedule 9 – BUYER SHARES

118

 

Schedule 10 – EARN-OUT

122

 

PART A – Earn-out Provisions 122

PART B – Basis of Preparation of the Relevant Accounts 129

PART C – Format of the Relevant Accounts 130

Schedule 11 – BUYER & STAFFING 360 WARRANTIES

137

 

 

 

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2


THIS AGREEMENT is dated as of the 15 th of September 2 017

PARTIES

(1)

The persons whose names and addresses are set out in column (1) of the table in Part A of Schedule 1 (the Sellers and each a Seller ).  

(2)

LONGBRIDGE RECRUITMENT 360 LIMITED a company registered in England and Wales under number 06745176 whose registered office is at 3a London Wall Buildings, London Wall, London EC2M 5SY (the Buyer ).

(3)

STAFFING 360 SOLUTIONS, INC. , a company registered in the State of Delaware under File Number 6178457 whose principal place of business is at Suite 2701 , 641 Lexington Ave, New York, NY 10022, United States of America ( Staffing 360 ).

BACKGROUND

(A)

The Buyer has agreed terms with the Sellers and Option Holders for the acquisition of the entire issued share capital of CBS Butler Holdings Limited (the Company ).

(B)

The Option Holders shall enter into the Option Holder Sale Agreements in order to sell their respective Option Shares to the Buyer, as more particularly described in the Option Holder Sale Agreements.

(C)

More details of the Company are set out in Part A of Schedule 2.

AGREED TERMS

1.

DEFINITIONS AND INTERPRETATION

1.1

In this agreement the following definitions apply:

Accountants means the Sellers' Accountants and the Buyer's Accountants;

Accounts means the Individual Accounts and the Target Group Accounts;

Accounts Date means 31 December 2016;

Actual Net Assets means the aggregate assets less the aggregate liabilities of the Target Group (calculated on a consolidated basis) as derived from the Completion Accounts;

Agreed Form means, in relation to any document, in the form agreed by or on behalf of the parties to this agreement;

Assigned Lease means the lease of the Assigned Property dated 28 September 2007 made between (1 ) Crescent Trustees Limited and David Kennedy and (2) CBS Butler;

Assigned Property means the leasehold property known as The Old Mill, Kings Mill, Kings Mill Lane, South Nut field, Redhill, RH1 5NB registered at the Land Registry under title number SY768048;

Associate means, in relation to any person, a person who is connected with that person determined in accordance with section 1122 of the Tax Act;

. 1


Business Day means any day on which clearing banks generally are open for business in the City of London excluding Saturdays or Sundays;

BWIL means Butler Wells International Limited, a company incorporated in England (Company No. 08584289);

Buyer’s Group means Staffing 360 and the Buyer and any subsidiaries and subsidiary undertakings from time to time of Staffing 360 and/or the Buyer and any holding company and parent undertaking from time to time of Staffing 360 and/or the Buyer and any subsidiaries and subsidiary undertakings from time to time of any such holding company or parent undertaking, and member of the Buyer's Group will be construed accordingly;

Buyer's Accountants means Menzies LLP of Lynton House, 7 – 12 Tavistock Square, London WC1H 9LT or their successors in business or any other firm of chartered accountants appointed by the Buyer and notified to the Sellers for the purposes of this agreement;

Buyer's Bank Account means HSBC Bank plc, sort code: 40-11-60 and account number: 30462853;

Buyer Shares means 431,860 common stock of par value US$0 .00001 each in the capital of Staffing 360 issued and allotted to the Sellers in accordance with clauses 3.2.2, 3.4 and 8.4.2 and Schedule 9;

Buyer's Solicitors means Mishcon de Reya LLP, Africa House, 70 Kingsway, London WC2B 6AH or their successors in business or any other firm appointed as solicitors by the Buyer for the purposes of this agreement;

CBS Butler means CBS Butler Limited (Company No. 01654251);

Cash Bonuses means a sum of £132,463 (which includes a sum equal to all PAYE and all employee and employer National Insurance Contributions due in relation to such Cash Bonuses) to be paid (net of all taxes) by CBS Butler after Completion to the Cash Bonus Employees, as set out opposite their respective names in the table in Part C of Schedule 1;

Cash Bonus Employees means the persons whose names are set in the table in Part C of Schedule 1;

Claim means a Warranty Claim, an Indemnity Claim, RC Claim and/or a Tax Claim;

Claim for Tax has the meaning given to it in the Tax Schedule;

Companies Act or the Act means the Companies Act 2006;

Company's Bank Account means HSBC Bank, account name: CBS Butler Ltd, sort code: 40-18-22 and account number: 01821954;

Completion means the performance by the parties of the obligations (to the extent not previously waived under this agreement) assumed by them under clauses 8.2, 8.3 (other than clauses 8.3.3 and 8.3.4), 8.4 (other than clause 8.4.4) and 8.5. For the avoidance of doubt, Completion shall be deemed to have occurred notwithstanding that the events referred to in clauses 8.3.3, 8.3.4 and/or 8.4.4 have not occurred (and no person waives any of their rights pursuant to such clauses);

. 2


Completion Accounts means the accounts for the Completion Period ( and a net assets statement as at 31 August 2017 setting out the amount of the Actual Net Assets as derived from the Completion Accounts) prepared and agreed or determined in accordance with clause 5 and Schedule 8 ;

Completion Period means the period starting on 1 January 2017 and ending on 31 August 2017 (both dates inclusive);

Conduct Regulations means the Conduct of Employment Agencies and Employment Businesses Regulation 2003;

Confidential Information means secret or confidential, commercial, financial, marketing, technical or other information of any Target Group Company and know-how relating to the Target Group's projects, or the working of any of the processes or inventions it owns or uses including details of its research projects or its business (including its organisation and staff involved), lists and details of customers, prices, and commercial relationships and negotiations and any information in respect of which any Target Group Company is bound by an obligation of confidence to a third party, in each case together with any reproductions of the information in any form or medium or any part(s) of it;

Contractor as defined in paragraph 25.1 of Schedule 3;

Data Room means the virtual data room hosted by Gateley Plc and titled "Project Louisiana" comprising the copies of documents and other information relating to the Target Group Companies and/or their businesses as at 5pm on 13 September 2017 and made available by or on behalf of the Sellers as listed in the Data Room index attached to the Disclosure Letter;

Deed of Assignment means an assignment of the Assigned Lease from CBS Butler to Bulletpoint Consult Limited in the Agreed Form;

Deed of Variation means the deed of variation of the Lease varying the repair covenant, including a break clause after 15 years and replacing the 2017 rent review with a rent review in 2020 in the Agreed Form;

Deferred Consideration means the sum of £150,000;

Disclosure Disk means the USB memory stick containing the Disclosure Documents, which accompanies and forms part of the Disclosure Letter;

Disclosure Documents means the documents contained in the Data Room as listed in the Data Room index attached to the Disclosure Letter;

Disclosed means fairly disclosed in such a manner so as to enable a reasonable buyer to identify the nature of the matter disclosed and to make a reasonably informed assessment of the effect of the matter disclosed;

Due Proportion means the respective proportions, as shown opposite the name of each Seller, in column 6 of Part A of Schedule 1;

Disclosure Letter means the letter dated today in the Agreed Form from the Sellers to the Buyer relating to the Warranties, and which is delivered (together with the Disclosure Disk) to the Buyer or the Buyer's Solicitors immediately before the execution of this agreement (and which includes the Disclosure Documents, which shall be deemed to form part of the Disclosure Letter);

. 3


Earn-out Payment means that part of the Purchase Price to be determined and paid after Completion by the Buyer to the Sellers as provided in clause s 3.1 and 3.7 and Schedule 10 ;

Encumbrance means and includes any right, claim, interest or equity of any person (including any right to acquire, option, right of pre-emption or right of conversion) or any mortgage, charge (whether fixed or floating), pledge, lien or assignment or any other encumbrance, priority or security interest or arrangement over or in the relevant property;

Exchange Rate means for a particular currency for a particular day, the rate for the conversion of that currency into £ sterling which appears on the Bloomberg page "Foreign Exchange Cross Rates" at 15 :30, London time, on that day for the required currency pair;

Event has the meaning given to it in the Tax Schedule;

Expert has the meaning given in clause 6;

FRS102 means the Financial Reporting Standard for Companies in the UK and Republic of Ireland issued by the Financial Reporting Council and in force for the accounting period ending on the Accounts Date;

group in relation to an undertaking, means that undertaking, any subsidiary undertaking or parent undertaking of that undertaking and any subsidiary undertaking of any parent undertaking of that undertaking and member of the group includes any undertaking in the group;

Indemnity Claim means any claim under the indemnities in clause 14 ( Specific Payment Covenants );

Individual Accounts or the CBSBL Accounts means the audited financial statements of CBS Butler for the period ended on the Accounts Date, including the statement of financial position, statement of comprehensive income, statement of changes in equity, notes and directors' and auditors' reports (a copy of which is set out at Tab 4.60 of the Data Room);

Initial Cash Payment means the sum of £11,928,685;

Initial Consideration has the meaning given in clause 3.2;

Insolvency Proceedings means any formal insolvency proceedings whether in or out of court, including proceedings leading to any form of bankruptcy, liquidation, administration, receivership, arrangement or scheme with creditors, moratorium, stay or limitation of creditors' rights, interim or provisional supervision by a court or court appointee or any distress, execution or other similar process levied; or any winding up, striking off or dissolution (whether or not due to insolvency); or any event analogous to any of those events in any jurisdiction;

Joint Announcement means the joint announcement by the Sellers and the Buyer of the execution of this agreement in the Agreed Form;

Lease has the meaning given in paragraph 27 ( Property ) of Schedule 3 ( Warranties );

Licence to Assign means the licence pursuant to which the Deed of Assignment is permitted in the Agreed Form;

. 4


Life Assurance Schemes means the group life cover provided by Ellipse , the keyman level term assurance cover provided by Zurich , the group income protection cover provided by Unum and every other arrangement disclosed in the Disclosure Letter in relation to paragraph 26 ( Pensions ) of Schedule 3 ;

Management Accounts means the unaudited statement of financial position and statement of comprehensive income of CBS Butler Limited for the seven month period ended on the Management Accounts Date, a copy of which is set out at Tab 4.62 of the Data Room;

Management Accounts Date means 31 July 2017;

Net Asset Shortfall means an amount (in GB Pounds Sterling) calculated in accordance with clause 5.9;

NASDAQ means the NASDAQ stock market;

Options means the share options granted to the Option Holders pursuant to the Option Scheme in respect of B ordinary shares of £0.10 each in the capital of the Company;

Option Holders means those persons whose names and addresses are set out in P art B of Schedule 1;

Option Holder Sale Agreements means the agreements in the Agreed Form pursuant to which each Option Holder will transfer to the Buyer at Completion such number of Option Shares as is set out opposite his name in Part B of Schedule 1 for cash and common stock of par value of $0 .00001 each in the capital of Staffing 360;

Option Scheme means the CBS Butler Holdings Limited Enterprise Management (EMI) Scheme dated February 2016, pursuant to which options have been granted to the Option Holders to acquire shares in the capital of the Company;

Option Shares means the 256,395 B ordinary shares of £0.10 each in the capital of the Company to be allotted and issued to the Option Holders following the exercise of their Options pursuant to the Option Scheme on or prior to the date of this agreement as detailed in column 3 of the table in Part B of Schedule 1;

Outstanding Debt means the following amounts (including all principal and interest) owed by each of the following Sellers to CBS Butler:

David Leyshon: £1,656,900.17;

Alison Leyshon: £4,952.34;

David Kennedy: £112,545.70;

Simon Bartington: £1,744.74; and

John Docherty:   £74,245.88;

Pension Schemes means the group personal pension scheme administered by Scottish Widows, the occupational work place pension scheme known as the People’s Pension and every other arrangement disclosed in the Disclosure Letter in relation to paragraph 26 ( Pensions ) of Schedule 3;

. 5


Purchase Price has the meaning given in clause 3 ;

Prescribed Rate means the base rate of National Westminster B ank plc from time to time plus 3 per cent;

Property has the meaning given in paragraph 27 of Schedule 3;

RC Claim means a claim under clause 11 ( Restrictive Covenants );

Sellers' Accountants means Saffery Champness LLP or their successors in business or any other firm of chartered accountants appointed by the Sellers and notified to the Buyer for the purposes of this agreement;

Sellers' Representative means David Leyshon or any other person with a postal address in the United Kingdom as at least four of the five Sellers or the Sellers' Solicitors not ifies to the Buyer by at least 5 Business Days prior written notice with express reference to this agreement;

Sellers' Solicitors means Gateley Plc, 1 Paternoster Square, London EC4M 7DX or their successors in business or any other firm appointed as solicitors by the Sellers for the purposes of this agreement;

Sellers' Solicitors' Bank Account means Bank of Scotland plc, sort code: 12-08-81, account number: 00553357, IBAN No: GB57 BOFS12088100553357 and Swift Code:         BOFSGB21258;

Shares means the 1 ,325 ,005 A ordinary shares of £0.10 each and 300 ,000 B ordinary shares of £0.10 each in the capital of the Company and owned by the Sellers as set out opposite their respective names in column 3 of the table in Part A of Schedule 1 (each a Share ) being the entire issued share capital of the Company as at Completion owned by the Sellers (excluding, for the avoidance of doubt, the Option Shares);

Subsidiary means the subsidiary of the Company at the date of this agreement, details of which are set out in Part B of Schedule 2;

Target Group Accounts means the audited financial statements of the Company and the audited consolidated financial statements of the Company, the Subsidiary and BWIL for the period ended on the Accounts Date, including the consolidated statement of financial position, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity, notes and directors' and auditors' reports, a copy of which is set out at tab 4.61 of the Data Room;

the Target Group means the Company and the Subsidiary and Target Group Company means any of them;

Target Net Asset Amount means the amount of £3,838,875;

Taxation or Tax has the meaning given to it in the Tax Schedule;

Tax Act means the Corporation Tax Act 2010;

Tax Claim means any claim by the Buyer under the Tax Covenant or any of the Tax Warranties;

Tax Covenant means the covenants set out in paragragh 1 of Part B of the Tax Schedule;

. 6


Tax Schedule means Schedule 7 ;

Tax Statute has the meaning given to it in the Tax Schedule;

Tax Warranty means any warranty set out in Part C of the Tax Schedule and Tax Warranties will be construed accordingly;

TCGA has the meaning given to it in the Tax Schedule;

Temporary Worker as defined in Paragraph 25 .1 of Schedule 3;

Title Claim means a claim by the Buyer for breach of any of the Warranties set out at paragraphs 1 and 2 of Schedule 3;

Transitional Services Agreement means a transitional services agreement in the Agreed Form between Bulletpoint Consult Limited (Company number: 10886881) and the Buyer relating to the transitional services to be provided by Bulletpoint Consult Limited and David Rhys Leyshon to the Target Group following Completion;

undertaking , subsidiary undertaking and parent undertaking have the meanings set out in sections 1161 and 1162 of the Companies Act, and subsidiary and holding company have the meanings set out in section 1159 of the Companies Act ;

United Kingdom means the United Kingdom of Great Britain and Northern Ireland;

US$ means the lawful currency of the United States of America;

Warranties means the warranties contained in Schedule 3 ( Warranties ) and in Part C of the Tax Schedule and references to Warranty shall be construed accordingly; and

Warranty Claim means a claim for breach of Warranty.

1.2

References in this agreement to statutory provisions are references to those provisions as amended, extended, consolidated or re‑enacted from time to time and include the corresponding provisions of any earlier legislation and any orders, regulations, instruments or other subordinate legislation made under the statute concerned except to the extent that any amendment enacted after the date of this agreement would increase or extend the liability of any party.

1.3

Unless otherwise specified, the words "include", "including" and "in particular" (or any similar words or expression) do not limit the generality of any preceding words and any words which follow them shall not be limited by any preceding words where a wider interpretation is possible.

1.4

Unless otherwise specified, words importing the singular include the plural, words importing any gender include every gender and words importing persons include bodies corporate and unincorporated and (in each case) vice versa.

1.5

References to clauses, Schedules and other provisions are references to clauses and other provisions of and Schedules to this agreement. The Schedules are part of this agreement as if set out in the main body of it.

1.6

The headings are for ease of reference only and do not affect the interpretation of this agreement.

. 7


1.7

References to this agreement or any other document are, where the context admits, references to this agreement or that other document as varied, supplemented, novated and/or replaced in accordance with its terms or with the agreement of the relevant parties .

1.8

Subject to paragraphs 1.4 and 1.5 of Schedule 4 ( Sellers’ Limits ), obligations and liabilities assumed by more than one person are assumed jointly and severally unless otherwise stated.

1.9

Any reference (including any reference in Schedule 3, Part C of the Tax Schedule or Schedule 11 or clause 4 ( Guarantee ) to any English legal or accounting term for any action, remedy, method of judicial proceeding, legal or accounting document, legal or accounting status, court, governmental or administrative authority or agency, accounting body, official or any legal or accounting concept practice or principle are deemed to include what most approximates in the analogous jurisdiction in the countries in which the Company and the Subsidiary operates (in the case of Schedule 3 or Part C of the Tax Schedule) or the countries in which the Buyer or Staffing 360 operates (in the case of Schedule 11) to the English legal or accounting term concerned.

1.10

References to time are to London time.

1.11

Unless otherwise specified, for the purpose of applying any reference to a monetary sum expressed in £ sterling, an amount in a different currency will be deemed to be an amount in £ sterling translated at the Exchange Rate at the relevant date (which in relation to a Claim, will be the date of the receipt of notice of that Claim under paragraph 2 of Schedule 4 and in relation to items shown in Completion Accounts will be the date of Completion) or, if that day is not a Business Day, on the immediately preceding Business Day.

1.12

Any reference to a party is to a party to this agreement and includes its permitted assignees, successors in title or personal representatives, and in the case of an individual his estate and personal representatives.

2.

SALE AND PURCHASE

2.1

Each Seller will severally sell and the Buyer will buy the full legal and beneficial ownership in the Shares shown opposite that Seller's name in column (3) of Part A of Schedule 1 with effect from Completion together with all rights and benefits attaching or accruing to them at or after Completion. Title to, beneficial ownership of and any risk attaching to the Shares shall pass to the Buyer on Completion.

2.2

The Sellers covenant that the Shares and the Option Shares together constitute the whole of the allotted and issued share capital of the Company.

2.3

Each Seller severally covenants (in respect of himself and his Shares only) that:

 

2.3.1

the Shares shown opposite his name in column (3) of Part A of Schedule 1 are fully paid (or credited as fully paid);

 

2.3.2

he has full power and authority and the right to transfer the legal and beneficial title to the Shares shown opposite his name in column (3) of Part A of Schedule 1 on the terms of this agreement; and

 

2.3.3

on Completion the Shares shown opposite his name in column (3) of Part A of Schedule 1 will be free from any Encumbrance (whether or not known about by any Seller or the Buyer), save from any Encumbrance arising under the articles of association of the Company or this agreement.

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2.4

Each Seller waives and agrees to procure the waiver by any third party of any pre-emption or similar right which may exist in relation to the sale and purchase of the Shares being sold by him pursuant to this agreement whether under the articles of association of the Company or otherwise.

2.5

Each Seller further waives any pre-emption or similar right which may exist in relation to the sale and purchase of the Option Shares being sold by the Option Holders pursuant to the Option Holder Sale Agreements whether under the articles of association of the Company or otherwise.

2.6

Neither the Sellers nor the Buyer shall be required to complete the purchase of any of the Shares and the Option Shares unless all of the Shares and the Option Shares are transferred at the same time.

3.

Purchase price

3.1

The aggregate consideration to be paid by the Buyer to the Sellers (the Purchase Price ) for the Shares will be the aggregate sum of the Initial Consideration, the aggregate amount of each Seller's Due Proportion of the Earn-out Payment and the aggregate amount of each Seller's Due Proportion of the Deferred Consideration (less the aggregate amount of each Seller's Due Proportion of the Net Asset Shortfall amount (if any)) .

3.2

The Initial Consideration shall be satisfied by:

 

3.2.1

the payment of the Initial Cash Payment in cash at Completion (in accordance with clause 3.3), to be apportioned between the Sellers in the amounts as set out opposite their respective names in names in column (4 ) of part A of Schedule 1 ; and

 

3.2.2

the allotment and issue by Staffing 360 to the Sellers at Completion of the Buyer Shares, credited as fully paid up, such Buyer Shares to be apportioned between the Sellers as set out opposite their respective names in names in column (5 ) of part A of Schedule 1.

3.3

The Initial Cash Payment in the sum of £11,928,685, will be paid or satisfied in full on Completion by the Buyer in accordance with clause 8.3 as follows:

 

3.3.1

paying the sum of £10,078,296.17 by telegraphic transfer of immediately available funds to the Sellers' Solicitors' Bank Account; and

 

3.3.2

paying to CBS Butler on behalf of each of the Sellers listed below (the Debtor Sellers ), the sum as set out below opposite the name of each such Debtor Seller, in full and final settlement of the Outstanding Debt owed by each such Debtor Seller to CBS Butler (including any directors’ loans owed). Such sums to be deducted from the amounts payable to each such Debtor Seller as set out opposite his name in column (4 ) of Part A of Schedule 1. Such payments to be made by telegraphic transfer of immediately available funds to the Company's Bank Account:

David Leyshon: £1,656,900.17;

Alison Leyshon: £4,952.34;

David Kennedy: £112,545.70;

Simon Bartington: £1,744.74; and

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John Docherty:  £74,245.88.

3.4

Staffing 360 agrees to issue and allot the Buyer Shares to the Sellers in accordance with this agreement. The Buyer Shares shall rank equally with the existing common stock of par value of US$0 .00001 each in the capital of Staffing 360, including the right to receive in full all dividends and other distributions declared, made or paid after the date of their allotment (other than any dividend or distribution declared, made or paid by reference to a record date prior to Completion). The provisions of Schedule 9 shall apply in relation to the Buyer Shares.

3.5

The Completion Accounts shall be prepared, and the Actual Net Assets agreed or determined, pursuant to the provisions of clause 5 and Schedule 8. On or before the date falling five Business Days after the date on which the Net Asset Shortfall amount becomes final and binding in accordance with clause 5 and Schedule 8, each Seller will pay to the Buyer a sum equal to such Seller's Due Proportion of the amount (if any) of the Net Asset Shortfall (calculated in accordance with clause 5.9).  Any payment made by the Sellers to the Buyer under this clause 3.5 will be made by telegraphic transfer of immediately available funds to the Buyer's Bank Account. To the extent that any Seller has not paid to the Buyer a sum equal to such Seller's Due Proportion of the amount of the Net Asset Shortfall by the date that is 12 months from Completion, the Buyer may deduct from and set-off any such outstanding amount against, first, such Seller's Due Proportion of the Deferred Consideration payable by the Buyer in accordance with clause 3.6 and, second (in respect of any balance), such Seller's Due Proportion of the Earn-out Payment payable by the Buyer to such Seller in accordance with clause 3.7 and Schedule 10.

3.6

The Deferred Consideration shall be paid on the date that is 12 months from Completion (or if such date is not a Business Day – on the first Business Day immediately following such date). The Deferred Consideration amount will be apportioned between the Sellers in accordance with their respective Due Proportions (as set out opposite their names in column 6 of the table in Part A of Schedule 1), so that each Seller shall be paid a sum equal to his Due Proportion of the Deferred Consideration. Any payment made to the Sellers under this clause 3.6 will be made by telegraphic transfer of immediately available funds to the Sellers' Solicitors' Bank Account.

3.7

The Earn-out Payment will be determined and will be paid or satisfied to each Seller in accordance with Schedule 10. The Earn-out Payment shall be apportioned between the Sellers in accordance with their respective Due Proportions (as set out opposite their names in column 6 of the table in Part A of Schedule 1), so that each Seller shall be paid a sum equal to his Due Proportion of the Earn-out Payment. Any payment made to the Sellers under this clause 3.7 will be made by telegraphic transfer of immediately available funds to the Sellers' Solicitors' Bank Account in accordance with Schedule 10.

3.8

The value of each Buyer Share shall be a sum equal to the average of the closing price for an existing share of common stock of par value of US$0 .00001 each in the capital of Staffing 360 on NASDAQ for each of the last 60 dealing days ending on the Business Day before Completion.

3.9

Any amount payable by any party under this agreement and not paid on the due date for payment shall bear interest which shall accrue:

 

3.9.1

from day to day (before and after judgement) at the Prescribed Rate; and

 

3.9.2

from the due date for payment up to and including the day of actual payment.

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3.10

U nless the parties otherwise agree in writing or otherwise provided for in this agreement , any sum due under this agreement shall be paid by telegraphic transfer of funds to the receiving party's solicitors. The receipt of the receiving party's solicitors will give a full discharge to the paying party who shall not be obliged to see to the application of the monies.

3.11

Unless otherwise agreed by the Buyer (such agreement not to be unreasonably withheld or delayed) and, except as expressly provided otherwise in this agreement, any payment of the Purchase Price will be apportioned between the Sellers in the amounts specified alongside their respective names in part A of Schedule 1.

4.

PARENT COMPANY GUARANTEE

4.1

Staffing 360 guarantees:

 

4.1.1

the due performance of all the obligations and liabilities of the Buyer under or otherwise arising out of or in connection with this agreement and/or any other agreement in the Agreed Form (as any of such obligations and liabilities may from time to time be varied, novated, extended, increased or replaced) and undertakes to keep the Sellers fully indemnified on demand against all liabilities, losses, proceedings, claims, damages, costs and expenses (including reasonable legal costs and expenses) of whatever nature which the Sellers may suffer or incur as a result of any failure or delay by the Buyer in the due performance of any such obligations and liabilities; and

 

4.1.2

undertakes to pay within 15 Business Days of demand by the Sellers, all or any part of the Purchase Price which the Buyer is due and liable to pay under this agreement, if the Buyer fails to pay all or such part of the Purchase Price when due and liable to pay it in accordance with this agreement, in the manner prescribed in this agreement as if it were the Buyer.

4.2

If any obligation or liability of the Buyer expressed to be the subject of the guarantee contained in this clause 4 (the Guarantee ) is not, or ceases to be, valid or enforceable against the Buyer (in whole or in part) on any ground whatsoever including, without limitation:

 

4.2.1

any defect in or want of powers of the Buyer or the irregular exercise of any such powers;

 

4.2.2

any lack of authority on the part of any person purporting to act on behalf of the Buyer;

 

4.2.3

any legal or other limitation, disability or incapacity of the Buyer;

 

4.2.4

any change in the constitution of the Buyer;

 

4.2.5

any amalgamation or reconstruction of the Buyer; or

 

4.2.6

the, liquidation, administration or insolvency of, the Buyer (or the Buyer suffering or being subject to any other Insolvency Proceedings),

Staffing 360 shall nevertheless be liable to the Sellers, in respect of that purported obligation or liability as if that obligation or liability were fully valid and enforceable and Staffing 360 was the principal obligor in respect of that obligation or liability.

4.3

The liability of Staffing 360 under the Guarantee shall not be discharged or affected by:

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4.3.1

the Seller s compounding or entering into any compromise, settlement or   arrangement with the Buyer, any co-guarantor or any other person;

 

4.3.2

any amendment (however fundamental), extension, increase, renewal, determination, release or replacement of this agreement or any other agreement in the Agreed Form, whether or not made with the consent or knowledge of Staffing 360;

 

4.3.3

the grant of any time, indulgence, waiver, consent, concession, relief, discharge or release to the Buyer, any co-guarantor or any other person or realising, taking, giving up, agreeing to any variation, renewal or replacement of, releasing, abstaining from or delaying in taking advantage of or otherwise dealing with any securities from or other rights or remedies against the Buyer, any co-guarantor or any other person;

 

4.3.4

any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of the security;

 

4.3.5

any legal limitation, disability or other circumstance relating to the Buyer or any unenforceability or invalidity of any obligation of the Buyer under this agreement;

 

4.3.6

any unenforceability, illegality or invalidity of any obligation of any person under this agreement or any other document; or

 

4.3.7

any other matter or thing which, but for this provision, might exonerate or affect the liability Staffing 360.

4.4

The Sellers shall not be obliged to take any steps to proceed against or to enforce any right, security or remedy against the Buyer or any other person before enforcing the Guarantee.

4.5

The Guarantee is in addition to any other right, security or remedy available to the Sellers from time to time and is a continuing security notwithstanding any liquidation, administration, insolvency (or any similar terms or processes in any jurisdiction) or ot her incapacity of the Buyer or Staffing 360 or any other person or any change in the ownership of any of them.

4.6

Until the full and final discharge of all obligations and liabilities (both actual and contingent) which are the subject of the Guarantee:

 

4.6.1

in the event of the liquidation or insolvency or the administration of the Buyer, Staffing 360 waives all of its rights of subrogation, reimbursement and indemnity against the Buyer and all rights of contribution against any co-guarantor and agrees not to demand or accept any security from the Buyer or any co-guarantor in respect of any such rights and not to prove in competition with the Sellers in the liquidation or insolvency or the administration of the Buyer or any such co-guarantor; and

 

4.6.2

in the event of the liquidation or insolvency or the administration of the Buyer, Staffing 360 agrees that it will not claim or enforce payment (whether directly or by set-off, counterclaim or otherwise) of any amount which may be or has become due to Staffing 360 by the Buyer, any co-guarantor or any other person liable to the Sellers in respect of the obligations guaranteed by this clause 4 if and so long as the Buyer is in default under this agreement.

4.7

If the Guarantee is discharged or released in consequence of any performance by the Buyer of the guaranteed obligations which is set aside for any reason, the Guarantee shall be automatically reinstated in respect of the relevant obligations.

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4.8

The G uarantee contained in clause 4.1 will remain in full force and effect until all the amounts and obligations referred to in clause 4.1 have been irrevocably paid and discharged in full.

5.

Completion Accounts

5.1

The Completion Accounts shall consist of a consolidated statement of financial position of the Target Group as at the close of business on 31 August 2017 and a consolidated statement of comprehensive income of the Target Group in respect of the Completion Period, together with a net assets statement setting out the amount of the Actual Net Assets (as at the close of business on 31 August 2017) as derived from the Completion Accounts. The Completion Accounts must be prepared in accordance with Part A and Part B of Schedule 8, a pro forma for which is included in Part C of Schedule 8.

5.2

As soon as possible after Completion and in any event on or before the date falling 30 Business Days after Completion (the Completion Accounts Deadline ), the Sellers shall prepare the draft Completion Accounts and deliver them to the Buyer for review. The Buyer shall give (and shall procure each Target Group Company shall give) such assistance and access to information as the Sellers (or their advisers) may reasonably require in connection with the preparation of the draft Completion Accounts during such period.

5.3

The Buyer may on or before the date falling 20 Business Days after submission to the Buyer of the draft Completion Accounts (the Response Deadline ), notify the Sellers' Representative (on behalf of all the Sellers) in writing (the Response Notice ) that the Buyer does not agree with the draft Completion Accounts (and/or the net assets statement setting out the amount of the Actual Net Assets as at the close of business on 31 August 2017), setting out in reasonable detail the items in dispute and the adjustments (with a suitable explanation) which, in the opinion of the Buyer is required to be made, and the amount of the Actual Net Assets calculated by the Buyer after giving effect to the items detailed in the Response Notice (the Response ANA Amount ). The items not identified in the Response Notice as being in dispute will be deemed to be agreed.  If no Response Notice is received by the Sellers’ Representative on or before the Response Deadline, the Buyer will be deemed to have accepted the draft Completion Accounts as being in accordance with this agreement, and the draft Completion Accounts and the amount of the Actual Net Assets stated in them will be final and binding on the parties.

5.4

If a Response Notice is received by the Sellers' Representative on or before the Response Deadline, the Sellers' Representative and the Buyer will have until the date falling 20 Business Days after the date on which the Response Notice is received (the Resolution Date ) to agree to accept the Response ANA Amount or in the alternative agree the items in dispute and therefore the Completion Accounts and the amount of the Actual Net Assets. The accepted Response ANA Amount, or the amount of the Actual Net Assets so agreed, will (in the absence of fraud or manifest error) be final and binding on the parties.

5.5

If a Response Notice is received by the Sellers’ Representative on or before the Response Deadline and the draft Completion Accounts and/or the amount of the Actual Net Assets does not become final and binding under clause 5.4 by the Resolution Date then the matters outstanding or in dispute must be referred to the Expert for final decision in accordance with clause 6 of this agreement.  The Expert will decide:

 

5.5.1

the matters outstanding or in dispute and therefore what revisions (if any) are required to be made to the draft Completion Accounts in order for them to comply with this clause 5 and Schedule 8; and

 

5.5.2

the amount of the Actual Net Assets and the amount of the Net Asset Shortfall.

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5.6

Each party must procure (so far as such party is able) that the Sellers' Representative and the Buyer and the ir respective Accountants are given any documents and information as are reasonably required by the other (but not including advice on the Completion Accounts given to a party by its own Accountants) for the purpose of preparing or reviewing the Completion Accounts and access on reasonable notice and during normal working hours to relevant personnel, records and information in the control of the relevant party.

5.7

The Sellers and the Buyer will each pay the costs of their own Accountants.

5.8

No claim which the Buyer or any Target Group Company may have against the Sellers in respect of any breach of any of the Warranties or any other provision of this agreement will be affected, waived or limited by the determination of the Actual Net Assets under this agreement except to the extent provided in Schedule 4 ( Sellers’ Limits ) or the Tax Schedule.

5.9

The Net Asset Shortfall amount shall be calculated as follows:

 

5.9.1

if the amount of the Actual Net Assets (as agreed or determined in accordance with this clause 5 and Schedule 8) is an amount which is equal to, or in excess of, the Target Net Asset Amount, then the amount of the Net Asset Shortfall shall be zero, and no payment shall be made to the Buyer pursuant to clause 3.5; or

 

5.9.2

if the amount of the Actual Net Assets (as agreed or determined in accordance with this clause 5 and Schedule 8) is an amount which is less than the Target Net Asset Amount, then the amount of the Net Asset Shortfall shall be the amount by which the amount of the Actual Net Assets (as agreed or determined in accordance with this clause 5 and Schedule 8) is less than the Target Net Asset Amount.

6.

REFERENCES TO EXPERT

6.1

Any matter, item or dispute which, under the terms of this agreement, is to be determined under this clause 6 will be determined by an independent firm of chartered accountants appointed under this clause (the Expert ).

6.2

The Sellers' Representative and the Buyer will use reasonable endeavours to agree the identity of the Expert and terms of engagement complying with this agreement with that firm by no later than the date falling 10 Business Days after either of the Buyer or the Sellers' Representative first requests the other to approve a named firm for the purpose and provides draft terms of engagement of that firm.  If terms of engagement for that firm have not been signed by the Sellers' Representative and the Buyer by that date, either the Buyer or the Sellers' Representative may apply to have the Expert chosen by the President for the time being of the Institute of Chartered Accountants in England and Wales (the President ). The Sellers' Representative and the Buyer will cooperate in good faith to agree terms of engagement complying with this agreement with the firm chosen ( Terms ) by no later than 15 Business Days after the date on which the terms of engagement of the firm chosen by the President are received by both of them.  Neither will unreasonably withhold consent to the terms of engagement of the firm chosen. If the Buyer and the Sellers' Representative fail to agree on the Terms of the Expert's engagement then the Expert shall be engaged on such terms as may be specified by the President on the application at any time of either party.

6.3

The Expert will act on the following basis:

 

6.3.1

as an expert and not as an arbitrator and his written determination will be final and binding on the parties (save in the event of fraud or manifest error, in which case the error must be rectified as soon as practical);

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6.3.2

the Expert will only be required to decide the matters, items or disputes which this agreement provides should be decided by the Expert under this clause 6 and not any additional or separate issues subsequently raised by the parties (unless otherwise agreed in writing by the Buyer and the Sellers' Representative) ;

 

6.3.3

the Expert will provide his decision and any calculation, statement or accounts to be provided by the Expert in writing to the parties on or before the date falling 20 Business Days after the date of the Expert's engagement;

 

6.3.4

the Sellers' Representative and the Buyer may make representations to the Expert in writing (and each will deliver a copy of their representations to the other party at the same time); and

 

6.3.5

except as set out in this clause 6, the Expert may decide on the procedure to be followed in reaching his decision.

6.4

The parties will each use all reasonable endeavours to co-operate with the Expert to enable the decision to be reached in the time provided in this agreement.  They will give, and so far as they are able to do so will procure that each Target Group Company will give, the Expert all facilities, information and access to their respective premises and personnel, papers, books, accounts and records as the Expert may reasonably require for the purposes of the Expert's decision.  If any party does not comply with any request within any time specified by the Expert, the Expert may make any assumption for the purposes of giving a decision under this agreement, including any decision to costs, as the Expert may decide.

6.5

The costs of the Expert (including the costs and fees of any advisers appointed by the Expert) will be shared equally by the Buyer on the one hand and the Sellers on the other, unless the Expert decides otherwise.

7.

WARRANTIES

7.1

Except as Disclosed, the Sellers warrant to the Buyer as at Completion as set out in Schedule 3 ( Warrantie s) and Part C of the Tax Schedule.

7.2

Unless the context otherwise expressly requires, any reference in Schedule 3 ( Warranties ) or Part C of the Tax Schedule to the Company means the Company and the Subsidiary separately so that the Warranties are given in respect of each such company separately.

7.3

Where any Warranty or reference made in the Disclosure Letter or any reply to enquiries raised by the Buyer's Solicitors is qualified by the expression " to the best of the knowledge , information and belief of the Sellers" or " so far as the Sellers are aware" or similar expression, such expression shall be deemed to mean only the actual personal knowledge of the Sellers, and for these purposes the Sellers shall, in addition to their actual personal knowledge, be deemed to have such knowledge that the Sellers would have obtained had the Sellers immediately prior to the date of this agreement made due and careful enquiry (which are reasonable in the context of the sale of the Shares) in to the subject matter of that Warranty of each other and of each of the Option Holders, but the Sellers shall not be deemed or required to have made enquiry of any other person and will not be liable for a breach of Warranty if a fact or circumstance that would otherwise constitute a breach of Warranty was known to any other person.

7.4

Except as Disclosed and except as set out in clause 7.5 , Schedule 4 ( Sellers’ Limits ) or the Tax Schedule, nothing of which the Buyer may have knowledge at the date of this agreement

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(including constructive, implied or imputed knowledge) will prejudice any claim which the Buyer may bring or reduce any amount recoverable by the Buyer under the Warranties.

7.5

The Buyer may not bring a claim for breach of the Warranties, and the Sellers shall have no liability to the Buyer, to the extent that the Buyer is, at the date of this agreement, actually aware of any fact, matter, event or circumstance which will or may entitle the Buyer to bring a claim for breach of Warranty after Completion. For the purposes of this clause, the knowledge of the Buyer will be deemed to be the actual knowledge of Brendan Flood, Chris Lutzo, David Faiman, Ryan Jackson and Matt Briand.

7.6

No right of the Buyer in respect of the Warranties will be waived by Completion.

7.7

The Sellers waive any claim the Sellers may have against any Target Group Company or any of their officers, agents or employees (other than a Seller) in relation to the completeness or accuracy of any information supplied (or failure to supply information) prior to Completion to the Sellers, Buyer or their respective advisers in connection with this agreement or any document executed or delivered under it.  

7.8

The Buyer acknowledges that, save in the case of fraud, fraudulent misrepresentation or deliberate non-disclosure or deliberate concealment , no breach of any provision of this agreement shall entitle the Buyer or Staffing 360 to rescind this agreement or treat it as having been terminated and, save as aforesaid and to the fullest extent permitted by law, the Buyer and Staffing 360 waive all such rights of rescission and termination in respect of this agreement howsoever arising.

7.9

Each Warranty is separate and, unless specifically otherwise provided, is not limited or affected by any other Warranty.

7.10

The provisions of this clause 7, Schedule 4 ( Sellers’ Limits ) and paragraph 3 ( Limitations ) of Part B of the Tax Schedule will limit the liability of the Sellers as provided in this clause and/or those Schedules.

7.11

The limitations of liability in this agreement (including this clause 7, Schedule 4 ( Sellers’ Limits ) and the Tax Schedule) or in any other Agreed Form document shall not exclude or limit any liability for or remedy in respect of fraud, fraudulent misrepresentation or deliberate non-disclosure or deliberate concealment on the part of any Seller.

7.12

Any payment made by the Sellers under this clause 7 or clause 5 ( Completion Accounts ) or clause 14 ( Specific Payment Covenants ) or the Tax Schedule shall be deemed to be a reduction in the Purchase Price.

7.13

The Buyer and   Staffing 360 warrant to the Buyer as at Completion as set out in Part A of Schedule 11 ( Buyer & Staffing 360 Warranties ) in each case, subject to the provisions of Part B of Schedule 11 which shall limit the liability of the Buyer and Staffing 360 as provided in that Schedule. Each warranty set out in Part A of Schedule 11 ( Buyer & Staffing 360 Warranties ) is separate and, unless specifically otherwise provided, is not limited or affected by any other warranty in Part A of Schedule 11. No right of the Sellers in respect of the warranties set out in Part A of Schedule 11 will be waived by Completion.

8.

COMPLETION

8.1

Completion will take place at the offices of the Buyer's Solicitors (or such other place as the parties may agree) immediately after execution of this agreement.   

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8.2

On Completion, the Sellers will deliver to the Buyer's Solicitors the documents and evidence listed in Part A of Schedule 5 and procure that decisions of the board of each Target Group Company are passed dealing with the matters set out in Part B of Schedule 5 .

8.3

Conditional upon performance by the Sellers of their obligations under clause 8.2, on Completion the Buyer will (and Staffing 360 will procure that the Buyer will):

 

8.3.1

deliver to the Sellers' Solicitors the documents and evidence listed in Part D of Schedule 5;

 

8.3.2

pay the Initial Cash Payment as follows:

 

(a)

pay the sum of £10,078,296.17 by telegraphic transfer to the Sellers' Solicitors' Bank Account; and

 

(b)

pay to CBS Butler on behalf of each of the Debtor Sellers listed below, the sum as set out below opposite the name of each such Debtor Seller, in full and final settlement of the Outstanding Debt owed by each such Debtor Seller to CBS Butler (including any outstanding director's loans) as at Completion:  

 

(i)

David Leyshon: £1,656,900.17;

 

(ii)

Alison Leyshon: £4,952.34;

 

(iii)

David Kennedy: £112,545.70;

 

(iv)

Simon Bartington: £1,744.74; and

 

(v)

John Docherty:  £74,245.88;

 

8.3.3

within one Business Day of Completion, pay each of the Option Holders the cash element of the consideration for the sale of their Option Shares to the Buyer in accordance with the Option Holder Sale Agreements; and

 

8.3.4

pay or procure the relevant Target Group Company pays the Cash Bonuses (net of all taxes) to the persons entitled to such bonuses in the amounts as set out opposite their respective names in Part C of Schedule 1 (and separately accounting for any amount in respect of all PAYE and all employee and employer National Insurance Contributions due in relation to such Cash Bonuses in respect of each such person).

8.4

Conditional upon performance by the Sellers of their obligations under clause 8.2 , on Completion Staffing 360 will:

 

8.4.1

deliver to the Sellers' Solicitors the documents and evidence listed in Part E of Schedule 5;

 

8.4.2

allot and issue to each Seller the number of Buyer Shares set out opposite their respective names in column 5 of Part A of Schedule 1;

 

8.4.3

allot and issue such number of the common stock of par value US$0.00001 each in the capital of Staffing 360 to be issued and allotted to each of the Option Holders for the sale of their Option Shares to the Buyer in accordance with the Option Holder Sale Agreements; and

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8.4.4

d eliver to each Seller within 21 days of Completion a properly executed stock certificate for the Buyer Shares issued to that Seller.

8.5

On completion Crescent Trustees Limited and David Leyshon and CBS Butler shall complete the Deed of Variation.

8.6

As soon as reasonably practicable after and in any event within one day of Completion, Crescent Trustees Limited and Crescent Trustees Limited as trustee of the PY SIPP (Account Number P303613) will complete the transfer of Assigned Property, CBS Butler and Bulletpoint Limited will complete the Deed of Assignment of the Assigned Property, and David Leyshon will procure that Crescent Trustees Limited complete the Licence to Assign. The Buyer will procure that CBS Butler complete the Licence to Assign and the Deed of Assignment of the Assigned Property.

8.7

As soon as reasonably practicable following completion of the Deed of Assignment as contemplated by clause 8.6, David Leyshon shall submit an application to the Land Registry to update the leasehold title of the Assigned Property and shall deal with all requisitions raised and following closure shall provide the Buyer with a copy of the correspondence received from the Land Registry confirming closure of the title.

8.8

Unless otherwise agreed between the parties, if all the events referred to in clauses 8.2, 8.3 (other than clauses 8.3.3 and 8.3.4) and 8.4 (other than 8.4.4) do not take place within 6 hours after the execution of this agreement, then this agreement will be of no effect and no party will have any claim against or liability to any other under this agreement except that this clause 8.8 and clauses 1, 10.1, 10.3, 10.4, 10.5, 16, 17, 26, 27 and 28 inclusive will continue to have effect.

8.9

In the event the Deed of Assignment is not completed by the parties thereto on the date of Completion, it is agreed that Bulletpoint Limited shall be responsible for all rents and outgoings payable under the Assigned Lease in respect of the period from and including the date of Completion until completion of the Deed of Assignment, and it is further agreed that CBS Butler will be released from all obligations, liabilities, actions, proceedings, costs, claims, outgoings, demands or expenses arising out of the Assigned Lease or relating to the Assigned Property relating to or in respect of the period following Completion.

8.10

Within one month following Completion, David Kennedy and David Leyshon will procure that CBS Butler Qatar LLC changes its name to such other name that does not include the words “CBS” and/or “Butler”.

9.

Right of set-off

9.1

Unless the context otherwise requires, the following definitions shall apply in respect of this clause 9:

Counsel means a counsel appointed under clause 9.4;

Determined Claim means any claim by the Buyer or any Target Group Company against the Sellers under this agreement (including, without limitation, any amount payable by the Buyer under clause 3.5):

 

(a)

which is agreed in writing between the Buyer and the Sellers’ Representative;

 

(b)

in respect of which final judgment has been obtained from a court of   competent jurisdiction, which judgment is not (or no longer) appealable;

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(c)

it is subject to an award of an arbitration tribunal, which is not (or no longer) appealable; or

 

(d)

in respect of which the Buyer files a notice of acceptance of an offer made by the Sellers under Part 36 of the Civil Procedure Rules 1998 or a notice of acceptance of an offer made by the Buyer under Part 36 of the Civil Procedure Rules 1998 is filed by the Sellers;

Estimated Amount means the amount estimated by Counsel under clause 9.5.3 (or agreed in writing by the Buyer and the Sellers’ Representative); and

Undetermined Claim means any claim by the Buyer or Target Group Company against the Sellers under this agreement (including, without limitation, any amount payable by the Buyer under clause 3.5) which has been notified to the Sellers under this agreement but which is not a Determined Claim.

9.2

The Buyer may deduct from and set-off against any amount payable by the Buyer to any of the Sellers under this agreement (including, without limitation, any amount payable by the Buyer under Schedule 10):

 

9.2.1

the amount of any Determined Claim; and

 

9.2.2

subject to clause 9.11, the Estimated Amount of any Undetermined Claim.

which, in either case, is subsisting and has not been settled in full by the Sellers at the time on which any payment is due from the Buyer to the Sellers.

9.3

Following notification of any claim by the Buyer or any Target Group Company against the Sellers under this agreement, either the Buyer or the Sellers’ Representative may require, by notice in writing to the other, that the matter is referred to Counsel for certification of the Estimated Amount of such claim.

9.4

The Counsel shall be a counsel of at least 10 years standing and experience in relevant commercial matters. The Buyer and the Sellers’ Representative shall use their reasonable endeavours to agree the identity of the Counsel and the terms of the Counsel's engagement in writing. If the Buyer and the Sellers’ Representative fail to agree the identity of the Counsel or the terms of Counsel's engagement within 10 Business Days of either serving details of a suggested Counsel on the other, then the Counsel shall be nominated by, and engaged on such terms as may be specified by, the Chairman for the time being of the Bar Council in England and Wales on the application at any time of either party.

9.5

The Counsel shall be instructed to:

 

9.5.1

prepare a written opinion and give notice of that opinion (including Counsel's reasons) to the parties within 20 Business Days of the Counsel's appointment;

 

9.5.2

give an opinion as to whether or not, on the basis of the information before Counsel, the Buyer or the relevant Target Group Company has a reasonable prospect of succeeding in relation to the relevant Undetermined Claim; and

 

9.5.3

where the Counsel's opinion states that the relevant Undetermined Claim is one where the Buyer or the relevant Target Group Company has a reasonable prospect of succeeding, give an opinion as to the amount which the Counsel estimates may reasonably be claimed by the Buyer or the relevant Target Group Company in respect of such Undetermined Claim (the Estimated Amount ).

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9.6

The parties shall supply the Counsel with any information which t he Counsel may reasonably request in connection with his determination ( provided that a copy of any such information is also simultaneously delivered to the other party ) .

9.7

The Buyer and the Sellers’ Representative may make written submissions to the Counsel relating to the relevant Undetermined Claim provided that a copy of any such written submission is also simultaneously delivered to the other party.

9.8

The Counsel shall be deemed to act as an expert and not as an arbitrator. Other than in the case of fraud or manifest error, the Counsel’s decision shall be final and binding on the parties.

9.9

The Counsel's costs (and the costs, if any, of the Chairman for the time being of the Bar Council in England and Wales) shall be borne equally by the Buyer on the one hand and the Sellers on the other or in such proportions as the Counsel directs.

9.10

Where the Counsel's opinion states (or the Buyer and the Sellers’ Representative agree in writing) that the relevant Undetermined Claim is one where the Buyer or the relevant Target Group Company has a reasonable prospect of succeeding, the Buyer shall, on the date on which the relevant payment is due for payment to the Sellers under this agreement, withhold an amount equal to the applicable Estimated Amount (as determined by Counsel or agreed in writing by the Buyer and the Sellers’ Representative) from the amount payable to the Sellers in accordance with clause 9.2.2 (the Retained Amount ).

9.11

If an amount is withheld in accordance with clause 9.10 in respect of an Undetermined Claim, the Buyer undertakes within five Business Days of the relevant Undetermined Claim becoming a Determined Claim (or the Buyer agreeing in writing to withdraw or discontinue the relevant Undetermined Claim), to pay to the Sellers’ Solicitors’ Bank Account the balance of the monies due to the Sellers, being a sum equal to the amount of the Retained Amount less the amount of such Determined Claim (or in the case of the Buyer withdrawing or discontinuing a claim – all of the Retained Amount)) (if any), plus interest on such amount at the Prescribed Rate (payable as from the Relevant Date to the actual date of payment).

9.12

In the event the Buyer gives notice to the Sellers of a bona fide claim prior to the Relevant Date (such notice to comply with the provisions of paragraphs 2.1 and 2.2 of Schedule 4 ( Sellers’ Limits )), and Counsel has not determined pursuant to clause 9.5 whether the relevant Undetermined Claim is one where the Buyer or the relevant Target Group Company has a reasonable prospect of succeeding and/or Counsel’s estimate of the amount which may reasonably be claimed by the Buyer or the relevant Target Group Company in respect of such Undetermined Claim, then the Buyer may retain from the Earn-out Payment such amount as it considers (acting reasonably) may reasonably be claimed by the Buyer or the or the relevant Target Group Company in respect of such Undetermined Claim, and shall give written notice to the Sellers’ Representative setting out the amount so retained ( Retention Notice ) and, to the extent reasonably available, details of the relevant Undetermined Claim.  Following receipt of a Retention Notice, the Sellers’ Representative and the Buyer:

 

9.12.1

shall use all reasonable endeavours to either agree whether the relevant Undetermined Claim is one where the Buyer or the relevant Target Group Company has a reasonable prospect of succeeding and/or agree the Estimated Amount of such Undetermined Claim;

 

9.12.2

if they fail to do so within 10 Business Days of receipt by the Sellers’ Representative of the Retention Notice, they shall refer the matter to determination by Counsel in ac cordance with clauses 9.3 to 9.9 (inclusive).

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9.13

If Counsel determines (or the Buyer and the Sellers’ Representative agree in writing) that the Buyer or the relevant Target Group Comp any has a reasonable prospect of succeeding in relation to the relevant Undetermined Claim and provides his opinion as to the amount which he estimates may reasonably be claimed by the Buyer or the relevant Target Group Company in respect of such Undetermined Claim (or the Buyer and the Sellers’ Representative agree in writing such estimated amount) , then such Estimated A mount (as determined by Counsel or agreed in writing by the Buyer and the Sellers’ Representative ) shall be retained by the Buyer and the balance ( if any ) shall be paid to the Sellers in accordance with clause 9.11 . I f the amount so estimated by Counsel (or agreed in writing by the Buyer and the Sellers’ Representative ) is less than the amount retained by the Buyer (as set out in the Retention Notice ) , the Buyer shall immediately pay such excess amount to the Sellers Solicitors’ Bank Account ( together with interest on such amount at the Prescribed Rate (payable as from the Relevant Date to the actual date of payment)).

9.14

Save as set out in this clause 9, all payments due from the Buyer to the Sellers under this agreement shall be paid in full on the relevant due date and without any set-off, counterclaim or other deduction.

10.

Announcements and CONFIDENTIALITY

10.1

Save for the Joint Announcement, no party will make any announcement relating to the existence, terms or subject matter of this agreement without prior written approval, in the case of the Sellers, by the Buyer or, in the case of the Buyer and Staffing 360, by the Sellers’ Representative.

10.2

The Sellers will not (and will procure that none of the Sellers' Associates will) disclose to any person or make use of any Confidential Information.

10.3

Each of the Sellers will keep confidential all information acquired by that Seller about the Buyer Group (as such group is constituted immediately before Completion) and will use the information only for the purposes contemplated by this agreement.

10.4

Each of the Buyer and Staffing 360 will keep confidential all information acquired by it about the Sellers (and will use the information only for the purposes contemplated by this agreement) and will procure that their respective Associates will not disclose any such information.

10.5

The obligations of confidence set out in clauses 10.1, 10.2, 10.3 and 10.4 do not apply to the extent that disclosure is:

 

10.5.1

required by law or regulation (including, without limitation, by the NASDAQ Stock Market Rules; the Securities and Exchange Commission; or any similar governmental authority in connection with any filings with the Securities and Exchange Commission or any similar governmental authority), to give effect to this agreement, where the information in question has become public otherwise than as a result of its wrongful disclosure to any person or, in the case of the Buyer, to disclosures to bona fide prospective assigns under clause 18.3. Each of the Sellers undertakes to supply the Buyer or any Target Group Company with any information about that Seller or the Target Group as the Buyer or any Target Group Company may reasonably require for the purposes of complying with any legal or regulatory requirement;

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10.5.2

to a director, officer, employee or advisor of any Seller, the Buyer, any member of the Buyer’s Group or a Target Group Company whose function requires him to have the Confidential Information or other information ;

 

10.5.3

in connection with an application for a tax return, tax filing or tax clearance, grant or other concession;

 

10.5.4

required to enforce any rights under, defend a claim under or otherwise afford the benefit of this agreement or any other document in Agreed Form (including in connection with any court proceedings);

 

10.5.5

in connection with a Seller carrying out or complying with or performing his rights, duties or obligations as a director, officer, consultant or employee of a Target Group Company or any member of the Buyer's Group (including pursuant to the Transitional Services Agreement); or

 

10.5.6

to an adviser for the purpose of advising the Sellers and/or the Buyer in relation to this agreement or in relation to any document in the Agreed Form.

11.

RESTRICTIve covenants

11.1

In this clause 11:

Capacity means as agent, consultant, director, employee, owner, shareholder or in any other capacity;

Covenantor means each of the Sellers (and so that any reference to Covenantor in this clause 11 in relation to any particular Seller means that particular Seller);

Customer means any Person who or which at any time during the Relevant Period , to the Covenantor's knowledge, (i) was provided with goods or services by any Target Group Company; or (ii) was in the habit of dealing with any Target Group Company as a client or customer;

Investment means any holding as a bona fide investment of not more than five per cent of the total issued share capital in any company, whether or not its shares are listed or dealt in on any recognised investment exchange, as defined in section 285 of the Financial Services and Markets Act 2000;

Key Employee means any person (other than David Kennedy and David Leyshon) who immediately before Completion was employed or engaged by any Target Group Company at managerial level or above, or any other person (other than David Kennedy and David Leyshon) employed by any Target Group Company who had knowledge of Confidential Information or who could materially damage the interests of any Target Group Company if they were involved in any Capacity in any business which competes with any Restricted Business, and with whom the Covenantor had personal dealings during the Relevant Period;

Person means any person, firm, company or entity;

Prospective Customer means any Person to whom or which, during the period of six months before Completion, to the Covenantor's knowledge, any Target Group Company had submitted a tender, made a pitch or presentation or with whom or which it was otherwise negotiating for the supply of goods or services;

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Relevant Period means the period of 2 4 months ending on Completion;

Restricted Business means the business of providing recruitment services (including, without limitation, permanent and temporary contract recruitment services) in relation to the introduction and/or supply of engineering and ICT professionals primarily but not solely within the following industry sectors: namely aviation, process controls, defence and security, built environment, medical and life sciences, as carried out (in each case) by any Target Group Company as at Completion; and

Supplier means any Person who or which, to the Covenantor's knowledge was at any time during the Relevant Period a supplier of services or goods (other than utilities and goods or services supplied for administrative purposes) to any Target Group Company.

11.2

Subject to clause 11.6, each Covenantor severally covenants (in respect of himself only) with the Buyer that the Covenantor will not (i) in the case of David Leyshon, Alison Leyshon and David Kennedy, for the period of 36 months following Completion and (ii) in the case of John Docherty and Simon Bartington for the period of 24 months following Completion in any Capacity:

 

11.2.1

be engaged, concerned or involved with, or interested in, any business which is (or intends to be) in competition with any Restricted Business;

 

11.2.2

solicit or endeavour to entice away from any Target Group Company the business or custom of a Customer or Prospective Customer in the course of any business which is in competition with any Restricted Business;

 

11.2.3

be involved with the provision of goods or services to, or otherwise have any business dealings with, any Customer or Prospective Customer in the course of any business which is in competition with any Restricted Business;

 

11.2.4

be involved with the receipt of goods or services from any Supplier where that receipt would adversely affect the ability or willingness of the Supplier to meet the requirements of any Target Group Company;

 

11.2.5

offer to employ or engage or otherwise endeavour to entice away from any Target Group Company any Key Employee (whether or not that person would breach their contract of employment or engagement);

 

11.2.6

employ or engage or facilitate the employment or engagement of any Key Employee (whether or not that person would breach their contract of employment or engagement) in any business which is in competition with any Restricted Business;

 

11.2.7

at any time after Completion indicate a connection or continuing interest in the business of any Target Group Company which may be misleading or use any registered names or trading names associated with any Target Group Company as at Completion;

 

11.2.8

at any time after Completion, use:

 

(a)

the words "CBS Butler", "CBSbutler" or "CBSB"; or

 

(b)

any trade or service mark, business or domain name, design, logo or get-up which, at Completion, was or had been used by any Target Group Company; or

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(c)

anything which is capable of confusion with such words, mark, name, design , logo or get-up.

11.3

The covenants in clause 11.2 are intended for the benefit of the Buyer and each Target Group Company and apply to actions carried out by a Covenantor in any Capacity and whether directly or indirectly, on a Covenantor's own behalf, on behalf of any other person or jointly with any other person.

11.4

No restriction in clause 11.2 will prevent a Covenantor from:

 

11.4.1

holding an Investment;

 

11.4.2

being engaged or concerned in any business carried on in geographical areas where that business is not in competition with any Restricted Business as carried on at Completion; or

 

11.4.3

being a shareholder of the Buyer or Staffing 360 or an employee of or consultant of or otherwise engaged by a Target Group Company or any member of the Buyer's Group;

 

11.4.4

carrying out his duties as a director or employee of, or a consultant to, or service provider to any member of the Buyer’s Group; or

 

11.4.5

complying with any obligations or enforcing any rights pursuant to this agreement or any Agreed Form document.

11.5

The restrictions in clause 11.2 are separate from any service agreement, contract of employment or other agreement or arrangement between a Target Group Company and any Covenantor and termination of any of those agreements or arrangements will not affect the enforceability of the restrictions in clause 11.2.

11.6

Subject always to the provisions of clause 9 ( Set Off ), all the obligations, covenants, restrictions and undertakings of a Seller under this clause 11, shall lapse and cease to have any further effect in the event that the Buyer fails to pay to such Seller his Due Proportion of the Earn-out Payment in full within the period of three calendar months following the date referred to in paragraph 3 of PART A of Schedule 10 ( Earn-Out ) (the Relevant Date ), and such Seller shall be released and exonerated from all such obligations, covenants, restrictions and undertakings as from the Relevant Date. Nothing in this clause 11.6 shall exonerate or release the Sellers from any antecedent breach of this clause 11 occurring prior to the Relevant Date.

12.

RELEASE OF GUARANTEES AND INDEMNITIES

12.1

The Sellers will use all reasonable endeavours (which will include procuring a bank or other person to act as substitute guarantor or indemnifier) to secure the release of each Target Group Company with effect from Completion from any and all guarantees and indemnities which any Target Group Company has given (whether alone or jointly with others) in respect of any obligations of any of the Sellers or the Associates of any of the Sellers (other than, in each case, any guarantees and indemnities pursuant to the Lease and/or any agreement entered into in connection with the Lease).  Until that release, the Sellers will pay to the Buyer (for itself and as agent and trustee for each Target Group Company) on demand the amount of all reasonable costs and expenses which may arise under or in connection with that guarantee or indemnity or be incurred because of a requirement that the guarantee or

. 24


indemnity be honoured or enforced (other than, in each case, any guarantees and indemnities pursuant to the Lease and/or any agreement entered into in connection with the Lease) .

12.2

Each Seller irrevocably and unconditionally waives, releases and discharges (and, as the case may be, the Sellers undertake to procure such waivers, releases and discharges from each of its Associates for) each Target Group Company from any and all claims any Seller and each of his Associates has now, or may have at any time in the future, against any Target Group Company pursuant to the terms of the articles of association of any Target Group Company or any other agreement to which a Target Group Company is a party as at Completion (other than the Lease and/or any agreement entered into in connection with the Lease) and in respect of any indebtedness owing to any such Seller or any of his Associates by a Target Group Company (other than pursuant to the Lease and/or any agreement entered into in connection with the Lease).

12.3

Nothing contained in this clause 12 shall prevent, limit, discharge, restrict or prejudice in any way, or constitute a waiver, discharge or release of:

 

12.3.1

a Seller’s (or any of his Associate's) payments, rights and claims under this agreement or any Agreed Form document and/or any employment, consultancy or services agreement (including the Transitional Services Agreement) with a Target Group Company or any member of the Buyer's Group in force following Completion;

 

12.3.2

a Seller’s (or any of his Associate's) rights or ability to enforce his rights, to bring a claim or defend a claim under or in connection with any this agreement or any Agreed Form document;

 

12.3.3

any accrued remuneration and other employment related emoluments payable to a Seller and/or any Associate of a Seller in respect of the period prior to Completion;

 

12.3.4

a Seller’s (or any of his Associate’s) payments, rights and claims under the Lease, and/or any agreement entered into in connection with the Lease and/or the Deed of Variation; or

 

12.3.5

a Seller's (or any of his Associate's) payments, rights and claims under the Assigned Lease and/or any agreement entered into in connection with the Assigned Lease and/or the Deed of Assignment.

12.4

For the purposes of this clause 12 a Seller shall not be deemed to be an Associate of any other Seller, or of a Target Group Company or of any Option Holder.

13.

TAX COVENANT

The Tax Covenant will come into effect at Completion.

14.

SPECIFIC PAYMENT COVENANTS

14.1

The Sellers will on demand by the Buyer make payments to the Buyer equal to any and all Losses which the Buyer or any Target Group Company suffers or incurs and which in any case arises out of or in relation to:

 

14.1.1

the liquidation of CBS Butler Deutschland GmbH; and

 

14.1.2

the ongoing litigation claim in Italy against CBS Butler in connection with payments (in the aggregate amount of Euro 43,555) for services paid by Blue Panorama Airlines

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S.p.a in Amministrazaione Strordinaria to CBS Butler (further details of which are set out at tab 10.2 of the Data Room) .

14.2

Losses for the purposes of this clause 14 means the amount of all liabilities, losses, proceedings, claims, damages, costs and expenses reasonably incurred (including legal costs and expenses reasonably incurred), fines and penalties (whether civil or criminal), charges and demands.

15.

Sellers' representative

15.1

Any notice, consent, agreement, direction or waiver required or permitted to be given or made by all or some of the Sellers under this agreement will be validly given or made on their behalf if given or made by the Sellers' Representative for the purposes of this agreement and will be binding on the relevant Sellers, as appropriate.

15.2

The Sellers authorise the Sellers' Representative to act in the way contemplated by this agreement and to take any decision as he may decide in his absolute discretion and, provided he acts in good faith, the Sellers' Representative will have and accepts no liability to any person other than the Buyer in connection with or as a result of anything which the Sellers' Representative does, refrains from doing or neglects or omits to do in connection with any matter relating to this agreement.

16.

notices and SERVICE of proceedings

16.1

Any notice or other communication given or made in connection with this agreement must be in writing, signed by or on behalf of the party giving it and in English.

16.2

That notice or communication must be served by delivering it personally or sending it by pre-paid recorded or special delivery post (or by pre-paid internationally recognised overnight courier with proof of delivery (such as FedEx) if being sent to or from a place outside the United Kingdom) or (in the case of notices or communications to the Buyer or Staffing 360 only) by email to the address and for the attention of the relevant party set out in clause 16.3.  Provided that it has been correctly addressed as set out in clause 16.3, the notice or communication will (in the absence of earlier receipt) be deemed to have been received:

 

16.2.1

if delivered personally, at the time of delivery;

 

16.2.2

in the case of pre-paid recorded or special delivery post, two Business Days after the date of posting or in the case of internationally recognised overnight courier with proof of delivery, five Business Days after the date of posting;

 

16.2.3

in the case of email, one hour after the notice was sent.

If receipt would under this clause be deemed to occur outside 9.30 a.m. to 5.30 p.m. (London time) on a Business Day ( Working Hours ) the notice or communication will instead be deemed to have been received at the start of the next period of Working Hours.

16.3

The addresses for service of the parties are as set out below (or any other as may be notified by at least five Business Days' notice in writing from time to time by the relevant party to the other parties in accordance with this clause 16):

 

16.3.1

Buyer :  

For the attention of: Brendan Flood

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A ddress: 3a London Wall Building s, London Wall, London EC2M 5SY ; or

Email address: brendan.flood@staffing360solutions.com ,

With a copy to: Mishcon de Reya LLP, Africa House, 70 Kingsway, London WC2B 6AH, marked for the attention of Nick Davis and a copy to Chris Lutzo at chris.lutzo@staffing360solutions.com ;

 

16.3.2

Sellers:   at their respective addresses as set out in Schedule 1 ;

With a copy to: Gateley Plc, 1 Paternoster Square, London EC4M 7DX, marked for the attention of Steven Raize;

 

16.3.3

Sellers' Representative :  

For the attention of: David Leyshon

Address: Little Lodge, Woodhouse Lane, Holmbury St Mary, Dorking RH5 6NN;

With a copy to: Gateley Plc, 1 Paternoster Square, London EC4M 7DX, marked for the attention of Steven Raize; and

 

16.3.4

Staffing 360 :  

For the attention of: Brendan Flood

Address; 3a London Wall Buildings, London Wall, London EC2M 5SY;

Email address: brendan.flood@staffing360solutions.com ,

With a copy to: Mishcon de Reya LLP, Africa House, 70 Kingsway, London WC2B 6AH, marked for the attention of Nick Davis and a copy to Chris Lutzo at chris.lutzo@staffing360solutions.com .

16.4

For the avoidance of doubt, notice given under this agreement will not be validly given if sent by electronic means or in electronic form (each as defined in section 1168 of the Companies Act), except that it may be validly given to the Buyer and Staffing 360 if sent by email. No notice under this agreement will be validly given to the Sellers and/or the Sellers Representative if given by email.

16.5

Each party irrevocably consents to service of any pre-action process (including any applications to the courts) and/or proceedings arising in relation to this agreement and any papers or documents in relation to those proceedings ( Service Documents ) on it in accordance with the provisions of this clause 16, without prejudice to the right of any party to serve Service Documents in any other manner permitted by law.

16.6

Service on the Sellers' Representative by the Buyer of any notice required or permitted to be given under this agreement or any Service Document will be deemed to be sufficient and proper service on all, or some (where some only are specified in the notice or Service Document), of the Sellers.

16.7

Staffing 360 irrevocably appoints Longbridge R ecruitment 360 Limited, of 3a London Wall Buildings, London Wall, London EC2M 5SY UK as its agent to receive on its behalf any notice under this clause 16 and service of any proceedings (including all Service Documents) relating

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to this agreement and any agreement in the Agreed Form.  Such service shall be deemed completed on delivery to that agent (whether or not it is forwarded to and received by Staffing 360 ) and shall be valid until such time as the Sellers have received prior written notice that the agent has ceased to act as agent.  If for any reason the agent ceases to be able to act as agent or no longer has an address in England and Wales, Staffing 360 shall forthwith appoint a substitute and deliver to the Sellers the new agent’s name and address within England and Wales.

17.

Costs

Except as otherwise expressly provided in this agreement, each party will pay its own costs and expenses incurred in relation to the negotiation, preparation and implementation of this agreement and the documents referred to in it.

18.

Assignment and Successors

18.1

This agreement is binding on and will enure for the benefit of the parties' personal representatives, estate and successors in title. References in this agreement to a party will, except where the context requires otherwise, include his successors in title, estate, personal representatives and permitted assignees.  For the avoidance of doubt, in the event of the death or bankruptcy of a Seller, the benefit of that Seller’s rights under this agreement or other Agreed Form document, shall pass to the person(s) becoming entitled to that Seller’s estate or property as a consequence of his death or bankruptcy.

18.2

Subject to clause 18.1 and 18.3, the parties may not assign, sub-contract, hold on trust or otherwise transfer all or any part of the benefit of this agreement.

18.3

Subject to clauses 18.5 to 18.7, the Buyer may at any time assign, sub-contract, hold on trust or otherwise transfer all or any part of its rights and benefits under this agreement to:

 

18.3.1

any member of the Buyer Group for so long as that member remains part of the Buyer Group, provided and subject to the condition that if the relevant assignee ceases to be a member of the Buyer Group then the Buyer shall ensure that upon that cessation all the relevant rights or benefits are reassigned or transferred back to the Buyer or any member of the Buyer's Group (subject always to this clause 18.3.1); and

 

18.3.2

by way of security to any bank or third party acting as lender to any Target Group Company, any member of the Buyer Group or any nominee of that bank or third party lender.

18.4

Subject to clauses 18.5 to 18.7, any assignee permitted under clause 18.3 may in its own right enforce any term of this agreement in accordance with the terms of the agreement as if it were a party.

18.5

The liability of a party to an assignee and/or chargee and/or transferee of rights and/or benefits under this agreement shall be limited to the liability they would have had to the relevant assignor had the assignment, charge or transfer not occurred, such that no party shall have any greater liability than he would have had if the assignment, charge, transfer or encumbrance had not taken place.  Each party shall be entitled to enforce against such assignee or chargee or transferee or encumbrancer all of such relevant party’s rights, rights of set off or counterclaim which such party has, or would have, against the relevant assignor if such assignment, transfer, charge or encumbrance had not taken place.

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18.6

If there is an assignment, charge, transfer or encumbrance of a party’s ( the Assignor ) rights in accordance with this clause 18 (Assignment) the other parties may discharge their obligations under this agreement to the Assignor until they receive written notice of the assignment, charge, transfer or encumbrance.

18.7

The Assignor shall notify the other parties in writing as soon as reasonably practicable after any assignment, charge, transfer or encumbrance of the Assignor’s rights in accordance with this clause 18.

19.

Continuing agreement

This agreement (other than obligations which have already been performed) will remain in effect after Completion.

20.

Further assurance

20.1

Each party agrees (at that party’s expense) to promptly execute and deliver any document or do anything which any other party may reasonably require at or after Completion to give full effect to the provisions of this agreement.  This will include:

 

20.1.1

vesting in the Buyer the legal and beneficial ownership of the Shares;

 

20.1.2

vesting in the Target Group, or such other member of the Buyer’s Group as the Buyer may direct, ownership and title and all rights of the Seller in respect of all inventions and intellectual property owned by or vested in the Seller, which solely relate to the products of the Target Group;

 

20.1.3

assisting Staffing 360 and/or any other member of the Buyer Group as the Buyer may reasonably direct with meeting its reporting requirements to the Securities and Exchange Commission or any similar governmental or regulatory authority in connection with any filings with the Securities and Exchange Commission and/or NASDAQ; and

 

20.1.4

vesting the legal and beneficial ownership of the Buyer Shares in the Sellers.

20.2

The Buyer will procure that the relevant Target Group Company accounts to HMRC, in respect of each person receiving a Cash Bonus, for all PAYE and all employee and employer National Insurance Contributions due in relation to his Cash Bonus (calculated by reference to the amount(s) of the Cash Bonuses set out opposite his name in Part 3 of Schedule 1), such payments to be made to HMRC in the ordinary course of the relevant Target Group Company's payroll administration. For the avoidance of doubt, the Sellers shall not be liable for any such PAYE and/or employee and employer National Insurance Contributions pursuant to this agreement.

21.

Entire agreement

21.1

This agreement (together with the documents referred to in it in the Agreed Form) constitutes the entire agreement between the parties with respect to the matters dealt with in it and supersedes any previous agreement between the parties in relation to them.

21.2

Subject to clause 21.4, each party acknowledges to the other that it/he has not been induced to enter into this agreement or any document in Agreed Form by, nor relied on, any statement, warranty or representation other than those expressly contained in this agreement or any document in Agreed Form. No party will have any right, claim or remedy

. 29


for any pre-contractual misrepresentation or negligent misstatement or otherwise in respect of any statement or representation made by or to any person (whether a party to this agreement or not) which is not expressly incorporated in this agreement.

21.3

No party will have any right, claim or remedy for any representation or statement made or incorporated in this agreement other than in contract.

21.4

Nothing in clause 21.2, or any other provision of this agreement, operates to limit or exclude liability for fraud, fraudulent misrepresentation or deliberate non-disclosure or deliberate concealment. For the avoidance of doubt, save in the case of such fraud, fraudulent misrepresentation or deliberate non-disclosure or deliberate concealment, the disclosure of any matter or document in the Disclosure Letter or Disclosure Documents shall not imply any representation, warranty or undertaking not expressly given in this agreement nor shall such disclosure be taken as extending the scope of any of the Warranties or any other representation or undertaking expressly given in this agreement or any other document in the Agreed Form.

22.

remedies, variation and waiver

22.1

Except as expressly otherwise provided in this agreement, the rights and remedies of any party under it or in any document referred to in it are in addition to and will not affect any other right or remedy available to that party, whether under this agreement or otherwise.

22.2

No party may change this agreement without the written consent of all the parties.

22.3

The failure to exercise or delay in exercising a right or remedy provided by this agreement or by law does not constitute a waiver of the right or remedy or a waiver of other rights or remedies and no single or partial exercise of any right or remedy provided under this agreement will prevent or restrict the further exercise of that or any other right or remedy.

22.4

A waiver of a breach of any of the terms of this agreement or of a default under this agreement does not constitute a waiver of any other breach or default and will not affect the other terms of this agreement.

22.5

Except as expressly provided otherwise in this agreement, Completion will not constitute a waiver of any breach of this agreement whether or not known at the time of Completion. For the avoidance of doubt, Completion shall be deemed to have occurred notwithstanding that the events referred to in clauses 8.3.3, 8.3.4 and/or 8.4.4 have not occurred (and no person waives any of their rights pursuant to such clauses).

23.

Severable provisions

23.1

If any provision of this agreement (including under clause 11) is void or unenforceable in any jurisdiction then it will be severed from this agreement insofar as it relates to that jurisdiction only and that invalidity or unenforceability will not affect the other provisions of this agreement or the relevant provision in any other jurisdiction which will remain in full effect.

23.2

If any provision of this agreement (including under clause 11) is so found to be invalid or unenforceable but would be valid or enforceable if some part of the provision were deleted or the period, area or scope of application of the provision were reduced, the provision in question will apply with any modification(s) that may be necessary to make it valid and enforceable in the relevant jurisdiction but will continue to apply without any modification in all other relevant jurisdictions.

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23.3

The parties agree, in the circumstances referred to in clause 23.1 and if clause 23.2 does not apply to attempt to substitute for any inva lid or unenforceable provision in respect of any jurisdiction in which it has been held to be invalid or unenforceable a valid and enforceable provision which achieves to the greatest extent possible the same effect as would have been achieved by the provision which is invalid or unenforceable in that jurisdiction , then t he obligations of the parties in the relevant jurisdiction under any invalid or unenforceable provision of this agreement will be suspended while the parties attempt to agree the substitution .

24.

Payments

24.1

If any payment to be made under this agreement is not paid on the due date, it will carry interest calculated on a daily basis, after as well as before any judgment for it or the liquidation of the paying party, at the Prescribed Rate from the due date until the date of actual payment (both dates inclusive).  That interest will be paid by the payer on demand to the person entitled to payment.

24.2

Any payment made to the Sellers' Solicitors or the Sellers' Representative under the terms of this agreement will be deemed to be made to the Sellers (or other persons entitled to the payment) and will absolutely discharge the Buyer from the payment obligation.  The Buyer need not see to its application.

24.3

Any payment made to the Buyer’s Solicitors under the terms of this agreement will be deemed to be made to the Buyer (or other persons entitled to the payment) and will absolutely discharge the Sellers from the payment obligation.  The Sellers need not see to its application.

24.4

Where a provision in this agreement provides that a payment be made by the Sellers to the Buyer, that payment will be treated as a reduction in the consideration for the Shares.

25.

withholding and grossing up

25.1

The Sellers will pay any amount under this agreement free and clear of any deduction or withholding except only as may be required by law.  If any deduction or withholding is required by law, the Sellers must pay an amount which will, after that deduction or withholding has been made, leave the Buyer with the same amount as it would have been entitled to receive in the absence of the requirement to make the deduction or withholding.

25.2

If any amount payable by the Sellers to the Buyer under this agreement is subject to Tax in the hands of the Buyer, the same obligation to make an increased payment will apply in relation to that tax liability as if it were a deduction or withholding required by law.  This clause will not apply to permit double recovery where the amount payable by the Sellers under this agreement has already been increased to take account of the Tax in the hands of the Buyer.

25.3

The provisions of clause 25 shall not apply and, accordingly, the Sellers shall not be required to gross up under clause 25.1 or 25.2 if the Buyer is or becomes resident outside the UK for Tax purposes or the payout in question is made to any person other than the Buyer.

26.

THIRD PARTY RIGHTS

The provisions of clauses 7.7, 9.1 and 11 are intended to benefit (but may be enforced only with the prior written consent of the Buyer by) each Target Group Company, and (in the case of clause 7.7 ), also its officers, agents and employees.  Otherwise, only a party to this

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agreement and any person of the type referred to in clause 18.1 has a right under the Contracts (Rights of Third Parties) Act 1999 to rely on or enforce any term of it.   The parties may rescind, amend or vary any term of this agreement without the consent of any third party.

27.

Counterparts

The parties may execute this agreement in any number of copies and on separate copies.  Each executed copy will be an original and all the executed copies together form one agreement.

28.

Law and jurisdiction

28.1

This agreement and any claim or dispute (including non-contractual claims or disputes) relating to this agreement, its subject matter or formation (in this clause 28, a Dispute ), shall be governed by and interpreted in accordance with the laws of England and Wales.

28.2

Subject to clauses 5.5, 6 and 9.3 and paragraph 2.5 of PART A of Schedule 10, the parties irrevocably submit to the exclusive jurisdiction of the English Courts for any Dispute.

28.3

Each party irrevocably waives any objection to the English Courts being the forum to decide any dispute and shall not claim that the English Courts are not a convenient or appropriate forum.

 

THE PARTIES have executed this agreement as a deed and delivered it on the date first set out above.

 

. 32


 

 

EXECUTED and DELIVERED as a DEED by DAVID RHYS LEYSHON in the presence of:

) …/s/ David Rhys Leyshon.......................

)

 

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 

 

 

EXECUTED and DELIVERED as a DEED by DAVID JOHN KENNEDY in the presence of:

) …/s/ David John Kennedy.....................

)

 

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 

 



 

 

EXECUTED and DELIVERED as a DEED by DAVID RHYS LEYSHON as attorney for ALISON LEYSHON under a power of attorney dated on or around 28 July 2017 in the presence of:

) …/s/ David Rhys Leyshon.......................

)

 

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 

 

 

EXECUTED and DELIVERED as a DEED by by DAVID RHYS LEYSHON as attorney for JOHN DOCHERTY under a power of attorney dated on or around 5 September 2017 in the presence of:

) …/s/ David Rhys Leyshon.......................

)

 

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 

 


 

EXECUTED and DELIVERED as a DEED by SIMON BARTINGTON in the presence of:

) …/s/ Simon Bartington............................

)

 

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 

 

EXECUTED and DELIVERED as a DEED by LONGBRIDGE RECRUITMENT 360 LIMITED acting by a director in the presence of:

)…/s/ Brendan Flood…………………

)Director

)

 

Witness signature  /s/ Zum Mohammed

 

Witness name  Zum Mohammed

 

Address  Gateley plc

               No 1 Paternoster Square,

               London EC4M 7DX

               DX 824 London City

               Tel 0207 653 1600 Fax 0207 653 1600

 

Occupation  Solicitor

 

 



 

 

EXECUTED and DELIVERED as a DEED by STAFFING 360 SOLUTIONS, INC. acting by:

in the presence of:

)..../s/ Brendan Flood...................................

)Authorised signatory / Director

)

)

)

 

 

Witness signature  /s/ Georgia Joseph

 

Witness name  Georgia Joseph

 

Address  Mishcon de Reya LLP

              Africa House

               70 Kingsway

               London WC2B 6AH

 

Occupation  Solicitor

 

Exhibit 10.2

AMENDMENT NO. 8 AND JOINDER AGREEMENT TO

CREDIT AND SECURITY AGREEMENT AND LIMITED CONSENT

 

 

THIS AMENDMENT NO. 8 AND JOINDER AGREEMENT TO CREDIT AND SECURITY AGREEMENT AND LIMITED CONSENT (this “ Amendment ”) is dated as of the 15 th day of September, 2017, by and among PEOPLESERVE, INC ., a Massachusetts corporation, MONROE STAFFING SERVICES, LLC , a Delaware limited liability company, FARO RECRUITMENT AMERICA, INC. , a New York corporation, and LIGHTHOUSE PLACEMENT SERVICES, INC. , a Massachusetts corporation, and PEOPLESERVE PRS, INC ., a Massachusetts corporation (each of the foregoing Persons being referred to herein individually as a “ Existing Borrower ”, and collectively as “ Existing Borrowers ”) and STAFFING 360 GEORGIA, LLC , a Georgia limited liability company (“ New Borrower ”; and together with Existing Borrowers and each Subsidiary joining the Credit Agreement as hereinafter defined as a Borrower, individually, each a “ Borrower ” and collectively, “ Borrowers ”), STAFFING 360 SOLUTIONS, INC ., a Delaware corporation (as “ Parent ”), and MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment to MidCap Financial Trust (as Agent for Lenders, “ Agent ”, and individually, as a Lender), and the other financial institutions or other entities from time to time parties to the Credit Agreement referenced below, each as a Lender.

 

RECITALS

 

A. Borrowers, Agent and Lenders are party to that certain Credit and Security Agreement dated as of April 8, 2015 (as amended by that certain Amendment No. 1 and Joinder Agreement to Credit and Security Agreement dated as of July 13, 2015, by that certain Amendment No. 2 to Credit and Security Agreement dated as of August 31, 2015, by that certain Overadvance Letter dated October 9, 2015, by that certain Overadvance Letter dated as of November 20, 2015, by that certain Overadvance Letter dated as of February 8, 2016, by that certain Amendment No. 3 to Credit and Security Agreement and Limited Waiver dated as of February 8, 2016, by that certain Amendment No. 4 and Joinder Agreement to Credit and Security Agreement dated as of July 11, 2016, by that certain Amendment No. 5 to Credit and Security Agreement dated as of September 26, 2016, by that certain Amendment No. 6 to Credit and Security Agreement and Limited Consent dated as of January 26, 2017, by that certain Amendment No. 7 to Credit and Security Agreement and Limited Consent dated as of June 5, 2017 (“ Amendment No. 7 ”), as amended hereby and as it may be further amended, modified and restated from time to time, the “ Credit Agreement ”).  Capitalized terms used but not otherwise defined in this Amendment shall have the meanings set forth in the Credit Agreement.

 

B . Pursuant to Section 4.11(c) of the Credit Agreement, the Existing Borrowers are required to cause New Borrower to join the Credit Agreement as a “Borrower”, and subject to and in accordance with the terms and conditions of this Amendment and the applicable requirements of the Credit Agreement, Borrowers, Agent and Lenders are willing to enter into this Amendment to join New Borrower as a “Borrower” under the Credit Agreement and the other Financing Documents.

 

C. Borrowers, Agent and Lenders have agreed to amend the Credit Agreement as set forth herein.


 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, the terms and conditions set forth in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Agent, Lenders, Parent and Borrowers hereby agree as follows:

 

1. Recitals. This Amendment shall constitute a Financing Document and the Recitals set forth above shall be construed as part of this Amendment as if set forth fully in the body of this Amendment.

 

2. Joinder .  Subject to the satisfaction of the conditions precedent set forth in Section 8 hereof:

(a) New Borrower hereby joins in, assumes, adopts and becomes a “Borrower” under the Credit Agreement and with respect to all Loans and Obligations made and incurred pursuant thereto. New Borrower hereby becomes a party to the Credit Agreement, the Notes and the other Financing Documents applicable to it as a “Borrower” and all references to “Borrower” or “Borrowers” contained in the Financing Documents are hereby deemed for all purposes to also refer to and include New Borrower, and New Borrower hereby agrees to comply with all of the terms and conditions of the Financing Documents as if New Borrower was an original signatory thereto.

 

(b) Without limiting the generality of the provisions of subparagraph (a) above, New Borrower is hereby jointly and severally liable, along with all other Borrowers, for all existing and future Loans and other Obligations incurred at any time by any one or more Borrowers under the Financing Documents.

 

(c) Notwithstanding anything to the contrary set forth herein, each Borrower acknowledges and agrees that, as of the date hereof, Agent has not completed its due diligence of New Borrower, and therefore, the Accounts of New Borrower shall not be deemed to be Eligible Accounts, and consequently, such Accounts shall not be included in the Borrowing Base unless and until Agent has determined, in its sole and absolute discretion, to include such New Borrower’s Accounts, or a portion thereof, in the Borrowing Base as Eligible Accounts, including, but not limited to, the satisfaction of the completion or delivery of each of the post-closing obligations listed on Schedule 7.4(C) attached hereto.  Furthermore, prior to any New Borrower’s Accounts’ inclusion in the Borrowing Base, Agent shall have received tax lien, judgment lien and Uniform Commercial Code searches from all jurisdictions reasonably required by Agent for New Borrower, and such searches shall verify that Agent, for the benefit of the Lenders, will have a first priority security interest in the Collateral owned by New Borrower, subject only to Permitted Liens.  Borrowers agree to assist Agent in its completion of its due diligence of New Borrower.

 

3. Limited Consent for Subject Acquisitions. At the request of and as an accommodation to Credit Parties and subject to the strict compliance with the terms, conditions and requirements set forth herein (including, without limitation, satisfaction of each of the conditions set forth in Section 11 below), Agent and Lenders hereby consent to the Subject Acquisitions (as defined in this Amendment), the documentation for which, including the Subject Acquisition Documents Acquisitions (as defined in this Amendment), shall be in form and

2

 


substance acceptable to Agent, in its sole discretion ; provided , however , that no amount of the Loans shall be towards the Subject Acquisitions and the use of proceeds of Loans towards the Subject Acquisitions shall not be a permitted use under Section 4.7 of the Credit Agreement .    Pursuant to this limited consent , the Subject Acquisitions shall be deemed to be “Permitted Acquisitions” under the Credit Agreement. The limited consent set forth in this Section 3 is effective solely for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) except as expressly provided herein, be a consent to any amendment, waiver or modification of any term or condition of the Credit Agreement or of any other Financing Document ; ( b ) prejudice any right that Agent or the Lenders have or may have in the future under or in connection with the Credit Agreement or any other Financing Document ; ( c ) waive any Event of Default that exists as of the date hereof; or ( d ) establish a custom or course of dealing among any of the Credit Parties, on the one hand, or Agent or any Lender , on the other hand .

 

4. Amendment to Credit Agreement .   

 

(a) Legend.  The following legend is added to the beginning of the Credit Agreement:

REFERENCE IS MADE TO THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF SEPTEMBER 15, 2017 (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “INTERCREDITOR AGREEMENT”), BY AND AMONG JACKSON INVESTMENT GROUP, LLC, A GEORGIA LIMITED LIABILITY COMPANY, (“TERM NOTE PURCHASER”), STAFFING 360 SOLUTIONS, INC., A DELAWARE CORPORATION (“PARENT”), CERTAIN OF THE PARENT’S SUBSIDIARIES PARTY THERETO AND MIDCAP FUNDING X TRUST, IN ITS CAPACITY AS AGENT (TOGETHER WITH ITS AFFILIATES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, “AGENT”) FOR THE ABL LENDERS (AS DEFINED IN THE INTERCREDITOR AGREEMENT), AND EACH HOLDER AND TRANSFEREE OF THIS INSTRUMENT OR AGREEMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE INTERCREDITOR AGREEMENT.  EACH PERSON THAT BENEFITS FROM THE SECURITY HEREUNDER, BY ACCEPTING THE BENEFITS OF THE SECURITY PROVIDED HEREBY, (I) CONSENTS (OR IS DEEMED TO CONSENT), TO THE SUBORDINATION OF LIENS PROVIDED FOR IN THE INTERCREDITOR AGREEMENT, (II) AGREES (OR IS DEEMED TO AGREE) THAT IT WILL BE BOUND BY, AND WILL TAKE NO ACTIONS CONTRARY TO, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT, (III) AUTHORIZES (OR IS DEEMED TO AUTHORIZE) THE TERM NOTE PURCHASER ON BEHALF OF SUCH PERSON TO ENTER INTO, AND PERFORM UNDER, THE INTERCREDITOR AGREEMENT AND (IV) ACKNOWLEDGES (OR IS DEEMED TO ACKNOWLEDGE) THAT A COPY OF THE INTERCREDITOR AGREEMENT WAS DELIVERED, OR MADE AVAILABLE, TO SUCH PERSON.  NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN, THIS AGREEMENT, THE LIENS CREATED HEREBY AND THE RIGHTS, REMEDIES, DUTIES AND OBLIGATIONS PROVIDED FOR HEREIN ARE SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT.  IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THE INTERCREDITOR AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL CONTROL.

(b) Section 1.1 – (New Defined Term) . Section 1.1 of the Credit Agreement is hereby amended to add each of the below defined terms in their alphabetical order:

“Butler Acquisition” means the acquisition by Longbridge of all of the outstanding capital stock of Butler Holdings, pursuant to the Butler Acquisition Agreement, whereupon the Butler Entities will become wholly-owned Subsidiaries of Longbridge.

3

 


“Butler Acquisition Agreement” means that certain Agreement dated as of September 15 , 2017, among Longbridge, the Company, David Rhys Leyshon, David John Kennedy, Alison Leyshon, John Docherty, Simon Bartington and the other Persons party thereto as “Sellers”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

“Butler Acquisition Documents” means, collectively, the Butler Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Parent and/or Longbridge to the any of the Sellers (as such term is defined in the Butler Acquisition Agreement) in connection with the Butler Acquisition.

“Butler Entities” means, collectively, Butler Holdings and CBS Butler.

“Butler Holdings” means CBS Butler Holdings Limited, a company organized under the laws of England and Wales.

“CBS Butler” means CBS Butler Limited, a company organized under the laws of England and Wales, a wholly-owned Subsidiary of Butler Holdings.

“Eighth Amendment Closing Date” means September 15, 2017.

“Eligible Unbilled Account” means an Account of a Borrower arising in the ordinary course of such Borrower’s business and which Agent, in its sole discretion, shall deem to be an Eligible Unbilled Account, based on such considerations as Agent may from time to time deem appropriate; provided, that any such Account shall cease to be an Eligible Unbilled Account on the date which it becomes evidenced by an invoice or similar document.  Without limiting the foregoing, each Eligible Unbilled Account shall be an Account that (i) is properly billable in accordance with the applicable contract (with no additional performance required by any Person, and no condition to payment, other than receipt of an appropriate invoice), (ii) would constitute an Eligible Account, except such Account has not been billed, (iii) will be billed in the next seven (7) days and (iv) may, in accordance with GAAP, be included as current assets of such Borrower, even though such amount has not been billed.

“FirstPro Acquisition” means the acquisition by S360 Georgia of substantially all of the assets of the staffing and recruitment services business of Firstpro Inc., a Georgia corporation, and Firstpro LLC, a Georgia limited liability, pursuant to the FirstPro Acquisition Agreement.

“FirstPro Acquisition Agreement” means that certain Asset Purchase Agreement dated as of September 15, 2017, among S360 Georgia, Firstpro Inc., a Georgia corporation and Firstpro LLC, a Georgia limited liability, the other Persons party thereto as “Principals”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

“FirstPro Acquisition Documents” means, collectively, the FirstPro Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Parent and/or S360 Georgia to the any of the “Sellers” (as such term

4

 


is defined in the FirstPro Acquisition Agreement) in connection with the FirstPro Acquisition.

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of September 15, 2017, by and among Agent, JIG, Parent and Subsidiaries of the Parent named therein, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“JIG” means Jackson Investment Group, LLC, a Georgia limited liability company.

“Longbridge” means Longbridge Recruitment 360 Limited, a company organized under the laws of England and Wales

“Subject Acquisition Agreements” means, collectively, the Butler Acquisition Agreement and the FirstPro Acquisition Agreement.

“Subject Acquisition Documents” means, collectively, the Butler Acquisition Documents and the FirstPro Acquisition Documents.

“Subject Acquisitions” means, collectively, the Butler Acquisition, and the FirstPro Acquisition.

(c) Section 1.1 (Amended and Restated Definitions) .  The defined terms “Borrowing Base,” “Commitment Expiry Date,” “Excluded Subsidiary,” “Subordination Agreement” and “Subordinated Debt Documents” in Section 1.1 of the Credit Agreement are hereby amended and restated, respectively, in their entirety as follows:

“Borrowing Base” means:

(a) the product of (i) eighty-five percent (85%) multiplied by (ii) the aggregate net amount at such time of the Eligible Accounts, less the amount, if any, of the Dilution Reserve; plus

(b) the least of (A) the product of (i) eighty-five percent (85%) multiplied by (ii) the aggregate net amount at such time of the Unbilled Eligible Accounts, less the amount, if any, of the Dilution Reserve, (B) ten percent (10%) of the total amount of the Borrowing Base at such time and (C) $1,300,000; minus

(c) the amount of any reserves and/or adjustments provided for in this Agreement.

“Commitment Expiry Date” means the date that is five (5) years following the Closing Date.

Excluded Subsidiary” means Control Solutions International Inc., a Florida corporation, Canada Control Solutions International, Inc., a British Columbia company, Staffing Alliance, and the following companies organized under the laws of England and Wales: BB Professional Solutions Ltd.,  Longbridge Recruitment (Technology Solutions) Ltd., Longbridge Recruitment (Sales and Marketing)

5

 


Ltd., Longbridge Recruitment (Technical) Ltd., Longbridge Recruitment (Law) Ltd., Staffing 360 Solutions (UK) Limited,   Staffing 360 Solutions Limited, CBS Butler Holdings Limited and CBS Butler Holdings Limited .

“Subordination Agreement” means any agreement between Agent and another creditor of Credit Parties, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which the Debt owing from any Credit Party Grantor (s) and/or the Liens securing such Debt granted by any Credit Party Grantor (s) to such creditor are subordinated in any way to the Obligations and the Liens created under the Security Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be acceptable to Agent in the exercise of its sole discretion.  For purposes hereof, the Intercreditor Agreement is a “Subordination Agreement”.

Subordinated Debt Documents” means any documents evidencing and/or securing Debt governed by a Subordination Agreement, including without limitation, the JIG Note and Warrant Purchase Agreement, all of which documents must be in form and substance acceptable to Agent in its sole discretion (it being understood that the JIG Note Purchase Agreement delivered to the Agent on the Eighth Amendment Closing Date is in form and substance acceptable to Agent as of the Eighth Amendment Closing Date).

(d) Section 1.1 – (JIG Note and Warrant Purchase Agreement) . The definition of “JIG Note and Warrant Purchase Agreement” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“JIG Note Purchase Agreement” means that certain Amended and Restated Note Purchase Agreement, dated as of September 15, 2017, by and among the Parent, the Borrowers, certain other subsidiaries of the Parent, and JIG.

(e) Section 1.1 – (Permitted Liens) . The definition of “Permitted Debt” in Section 1.1 of the Credit Agreement is hereby amended by adding clause (k) to the end thereof to read as follow:

and (k) Debt incurred in the ordinary course of Borrower’s business pursuant to any service or facility extended to Borrowers or procured for Borrowers by means of a full-recourse agreement in an aggregate amount not to exceed $50,000 at any time outstanding with respect to (i) credit cards, (ii) credit card processing services or (iii) ACH transactions .

(f) Section 1.1 – (Permitted Liens) . Clause (f) of the definition of “Permitted Liens” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

(f) Liens in favor of JIG, but only if subject to the Intercreditor Agreement

(g) Section 2.2(f) (Deferred Revolving Loan Origination Fee) .  Section 2.2(f) is hereby amended and restated in its entirety to read as follows:

Deferred Revolving Loan Origination Fee .  If Lenders’ funding obligations in respect

6

 


of the Revolving Loan Commitment under this Agreement terminate for any reason (whether by voluntary termination by Borrowers, by reason of the occurrence of an Event of Default or otherwise, except a termination pursuant to the applicable provisions of Section 2.1(c) above) and more than sixty (60) days prior to the Commitment Expiry Date, Borrowers shall pay to Agent, for the benefit of all Lenders committed to make Revolving Loans on the Eighth Amendment Closing Date, a fee as compensation for the costs of such Lenders being prepared to make funds available to Borrowers under this Agreement, equal to an amount determined by multiplying the Revolving Loan Commitment by the following applicable percentage amount:  2% for the first and second year following the Eighth Amendment Closing Date and 1% thereafter. All fees payable pursuant to this paragraph shall be deemed fully earned and non-refundable as of the Eighth Amendment Closing Date .

(h) Section 2.2(i) (Audit Fees) .  Section 2.2(i) is hereby amended and restated in its entirety to read as follows:

Audit Fees .  Borrowers shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable fees and expenses in connection with audits and inspections of Borrowers’ books and records, and with audits, valuations or appraisals of the Collateral, audits of Borrowers’ compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to Borrowers; provided , however , that, unless a Default or an Event of Default exists, Borrowers shall not be responsible for the fees and expenses of more than three (3) such audits and inspections in any consecutive 12 month period; provided further , however , that, unless a Default or an Event of Default exists, Borrowers shall not be responsible for the fees and expenses of more than two (2) such audits and inspections in any consecutive 12 month period if, and only if, the average daily balance of the Revolving Loan Outstandings during the immediately preceding trailing 12 month period is less than seventy-five percent (75%) of the Revolving Loan Commitment.

(i) Section 5.4 (Restrictive Agreements) .  The reference in Section 5.4 to “JIG Note and Warrant Purchase Agreement” is hereby amended to read “JIG Note Purchase Agreement.”

(j) Section 6.2 (Fixed Charge Coverage Ratio) . Section 6.2 is hereby amended and restated in its entirety to read as follows:

Fixed Charge Coverage Ratio .  Commencing with the Fiscal Month ending November 28, 2015 and until such time as all Obligations are paid, satisfied and discharged in full, the Credit Parties shall not, as of the end of any Fiscal Month, permit the Fixed Charge Coverage Ratio for the period of trailing twelve Fiscal Months most recently ended on or prior to such date to be less than (i) 1.0x commencing with the Fiscal Month ending in November, 2015 through and including the Defined Period ending in April, 2016, (ii) 1.05x commencing with the Fiscal Month ending in May, 2016 through and including the Defined Period ending in August, 2017 and (iii) 1.00x commencing with the Fiscal Month ending in December, 2017 and thereafter.  For illustrative purposes, it is hereby agreed that the applicable measurement period for

7

 


the Fiscal Month ending November 28, 2015 shall be from November 29, 2014 to November 28, 2015 (“Trailing Twelve Fiscal Months” or “TTM’; each TTM measurement period herein referred to as a “Defined Period”).

(k) Section 6.3 (Minimum Liquidity) . Section 6.3 is hereby amended and restated in its entirety to read as follows:

Minimum Liquidity .  Commencing August 31, 2015 and until such time as all Obligations are paid, satisfied and discharged in full, the Credit Parties shall, as of the end of any month, have Minimum Liquidity equal to or in excess of (i) $3,000,000 as of the end of any month through and including the month ending August 31, 2017 and (ii) 1,000,000 as of the end of any month thereafter.

(l) Schedules to the Credit Agreement.   Each Borrower hereby agrees that the specific schedules attached hereto as Exhibit A , are true and correct having been revised and updated to reflect the joinder of the New Borrower as a “Borrower” under the Financing Documents and shall be deemed to be given as of the Eighth Amendment Closing Date and replace the corresponding schedules to the Credit Agreement to which they apply and shall be attached thereto and become a part thereof.

5. Waiver of Deferral Fee Upon Effective Date .   Upon the Effective Date (as defined below), Agent and Lenders hereby waive the deferral fee described in Section 2(c) of Amendment No. 7, and such deferral fee shall not be due and payable.  

 

6. Payment of Past Due Taxes . Borrowers and Parent agree that, following the Eighth Amendment Closing Date, any (i) cash contributions received from shareholders of Parent or (ii) other extraordinary receipts by Borrowers or Parent outside the Ordinary Course of Business, shall first be used immediately to repay any past due amounts for Taxes.

 

7. Confirmation of Representations and Warranties; Reaffirmation of Security Interest.

 

(a) Each Borrower including, without limitation, New Borrower, hereby confirms that all of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct in all material respects with respect to such Borrower as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, and covenants to perform its respective obligations under the Credit Agreement.  To induce Agent and Lender to enter into this Agreement, Borrowers and Parent further represent and warrant that:

 

(i) no Default or Event of Default has occurred or is continuing as of the date hereof;

(ii) as of the date hereof and, immediately after giving effect to this Amendment and the transactions contemplated hereby, the representations and warranties of Borrowers contained in the Financing Documents are true and correct in all material respects (or if any representation or warranty is qualified with respect to materiality, in all respects) on and as of the date hereof to the same extent as though made on and as of such date except to the extent such representations and warranties specifically relate to an earlier date; and

8

 


(i ii ) t he execution, delivery and performance by Borrowers and Parent of this Amendment are within each of its corporate powers and have been duly authorized by all necessary corporate action , and t his Amendment is the legal, valid and binding obligation of Borrowers and Parent enforceable against Borrowers and Parent in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by equitable principles, and neither the execution, delivery or performance by Borrowers and Parent of this Agreement (A) violates any Law, or any other rule or decree of any Governmental Authority, (B) conflicts with or results in the breach or termination of, constitutes a default under or accelerates any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Borrowers or Parent is a party or by which Borrowers or Parent or any of its property is bound, except for such conflicts, breaches, terminations, defaults or accelerations that would not reasonably be expected to have a Material Adverse Effect, (C) results in the creation or imposition of any Lien upon any of the Collateral, (D) violates or conflicts with the by-laws or other organizational documents of Borrowers and Parent , or (E) requires the consent, approval or authorization of, or declaration or filing with, any other Person, except for those already duly obtained .

(b) Each Borrower and Parent confirms and agrees that all security interests and Liens granted to Agent continue in full force and effect, and all Collateral remains free and clear of any Liens, other than those granted to Agent and Permitted Liens. Nothing herein is intended to impair or limit the validity, priority or extent of Agent’s security interests in and Liens on the Collateral.  For the avoidance of any doubt, the Collateral secures repayment of the Obligations and the Affiliated Obligations, and in furtherance thereof, Borrowers and Parent hereby reaffirm the grant to Agent, for the benefit of itself and Lenders, of a continuing first priority Lien on and security interest in all of the Collateral as security for the payment and performance of the Obligations, and for the payment and performance of all obligations under the Affiliated Financing Documents.

 

8. Enforceability . This Amendment constitutes the legal, valid and binding obligation of each Borrower and Parent, and is enforceable against each Borrower and Parent in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

9. Costs and Fees . Borrowers shall be responsible for the payment of all reasonable costs and fees of Agent’s counsel incurred in connection with the preparation of this Amendment and any related documents.  If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed.  Borrowers hereby authorize Agent to deduct all of such fees set forth in this Section 9.

 

10. Grant and Reaffirmation of Security Interest .

 

(a) Consistent with the intent of the parties and in consideration of the accommodations set forth herein, as further security for the prompt payment in full of all Obligations, and without limiting any other grant of a Lien and security interest in any Security

9

 


Document, New Borrower hereby assigns and grants to Agent, for the benefit of itself and Lenders, a continuing first priority Lien on and security interest in, upon, and to the now owned and hereafter acquired Collateral set forth on Exhibit B attached hereto and made a part hereof in which New Borrower has rights.  New Borrower hereby authorizes Agent to file UCC-1 financing statements against New Borrower covering the Collateral owned by New Borrower in such jurisdictions as Agent shall deem necessary, prudent or desirable to perfect and protect the liens and security interests granted to Agent hereunder.

 

(b) Each of the Existing Borrowers confirms and agrees that:  (i) all security interests and liens granted to Agent continue in full force and effect, and (ii) all Collateral remains free and clear of any liens other than liens in favor of Agent and Permitted Encumbrances.  Nothing herein contained is intended to impair or limit the validity, priority and extent of Agent’s security interest in and liens upon the Collateral.

 

11. Conditions to Effectiveness. This Amendment shall become effective as of the date on which each of the following conditions has been satisfied (the “ Effective Date ”):

 

(a) Amendment .  Borrowers and Parent shall have delivered to Agent this Amendment, duly executed by an authorized officer of each Credit Party.

 

(b) Repayment of Term Loan and Additional Term Loan .   The Agent shall have received from Borrowers irrevocable repayment in full as of September 18, 2017 of all Obligations with respect to the Term Loan and the Additional Term Loan.

 

(c) Representations and Warranties .  All representations and warranties of Borrowers contained herein shall be true and correct in all material respects as of the Effective Date except to the extent such representations and warranties specifically relate to an earlier date (and such parties’ delivery of their respective signatures hereto shall be deemed to be their certification thereof).

 

(d) Searches .   Agent shall have received UCC, tax, judgment and lien search results with respect to each Credit Party, the Butler Entities and the “Sellers” as defined under the FirstPro Acquisition Agreement, from all appropriate jurisdictions and filing offices as requested by the Agent, with results satisfactory to the Agent, together with executed originals of such termination statements, releases and cancellations of mortgages required by the Agent in connection with the removal of any Liens (other than Permitted Liens) against the assets of the Credit Parties and the assets and equity interests being acquired pursuant to the Subject Acquisition Agreements;

 

(e) Secretary’s Certificates .  Agent shall have received a Secretary Certificate for each Credit Party, together with attached copies of the certificate of formation, organization or jurisdictional equivalent of each Credit Party and all amendments thereto certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, together with the bylaws, operating agreement or equivalent document, in each case, certified by the relevant secretary or manager of such Credit Party as of a recent date; and (b) good standing certificates or jurisdictional equivalent for each Credit Party, issued by the relevant Secretary of State and or equivalent governmental authority in which such Credit Party is organized, in each case as of a recent date; (c) a copy of resolutions

10

 


adopted by the governing board of each Credit Party , authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which such Credit Party is a party certified as true, complete and correct by the relevant secretary of manager of such Transaction as of a recent date; and (d) specimen signatures of the officers or members of each Credit Party executing the Agreement and the other Transaction Documents, certified as genuine by the relevant secretary or manager of such Credit Party ;

 

(f) Opinions .  Agent shall have received a favorable legal opinion of (i) Haynes & Boone, LLP, counsel to the Credit Parties, (ii) Law Offices of Keith A. Minoff, P.C., special Massachusetts counsel to the Credit Parties, and (iii) special Georgia counsel to the Credit Parties with respect to the New Borrower, each addressed to the Agent, covering such matters relating to the transactions contemplated hereby as the Agent may reasonably request, and in form and scope reasonably satisfactory to Agent and its counsel;

 

(g) Fees and Expenses .  Agent shall have received from Borrowers of all of the fees owing pursuant to this Amendment and Agent’s reasonable out-of-pocket legal fees and expenses; and

 

(h) Closing Checklist . Agent shall have received from Credit Parties each agreement, document and instrument set forth on the closing checklist prepared by Agent or its counsel, each in form and substance satisfactory to Agent, and such other closing deliverables reasonably requested by Agent and Lenders, each to the satisfaction of Agent and Lenders and their respective counsel in their sole discretion.

 

12. Post-Eighth Amendment Closing Requirements .   Borrowers shall complete each of the post-closing obligations and/or provide to Agent each of the documents, instruments, agreements and information listed on Schedule 7.4(C) attached hereto on or before the date set forth for each such item thereon, each of which shall be completed or provided in form and substance satisfactory to Agent. The failure of any Borrower or of Parent to complete and satisfy any of the obligations set forth on Schedule 7.4(C) on or before the date indicated therein, or the failure of any Borrower or of Parent to deliver any of the listed items on Schedule 7.4(C) or before the date indicated therein, shall constitute an immediate and automatic Event of Default.

 

13. Release.   Each Borrower, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns, and each of their respective current and former directors, officers, shareholders, agents, and employees (collectively, “ Releasing Parties ”), does hereby fully and completely release, acquit and forever discharge each Indemnitee (as defined in the Credit Agreement) of and from any and all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate or inchoate, known or unknown that the Releasing Parties (or any of them) has against the Indemnitees (or any of them), whether directly or indirectly.  Each Borrower acknowledges that the foregoing release is a material inducement to Agent’s and Lender’s decision to enter into this Amendment and to agree to the modifications contemplated hereunder.

 

14. No Waiver or Novation.   The execution, delivery and effectiveness of this

11

 


Amendment shall not operate as a waiver of any right, power or remedy of Agent, nor constitute a waiver of any provision of the Credit Agreement, the Financing Documents or any other documents, instruments and agreements executed or delivered in connection with any of the foregoing. Nothing herein is intended or shall be construed as a waiver of any existing D efaults or Events of Default under the Credit Agreement or other Financing Documents or any of Agent’s rights and remedies in respect of such Defaults or Events of Default.  This Amendment (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Credit Agreement.

 

15. Affirmation.   Except as specifically amended pursuant to the terms hereof, the Credit Agreement and all other Financing Documents (and all covenants, terms, conditions and agreements therein) shall remain in full force and effect, and are hereby ratified and confirmed in all respects by Borrowers.  Each Borrower covenants and agrees to comply with all of the terms, covenants and conditions of the Credit Agreement (as amended hereby) and the Financing Documents, notwithstanding any prior course of conduct, waivers, releases or other actions or inactions on Agent’s or any Lender’s part which might otherwise constitute or be construed as a waiver of or amendment to such terms, covenants and conditions.

 

16. Miscellaneous.

 

(a) Reference to the Effect on the Credit Agreement. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of similar import shall mean and be a reference to the Credit Agreement, as amended by this Amendment.  Except as specifically amended above, the Credit Agreement, and all other Financing Documents (and all covenants, terms, conditions and agreements therein), shall remain in full force and effect, and are hereby ratified and confirmed in all respects by Borrowers.  

 

(b) Incorporation of Credit Agreement Provisions.   The provisions contained in Section 11.6 (Indemnification), Section 12.8 (Governing Law; Submission to Jurisdiction) and Section 12.9 (Waiver of Jury Trial) of the Credit Agreement are incorporated herein by reference to the same extent as if reproduced herein in their entirety.

 

(c) Headings.   Section headings in this Amendment are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

 

(d) Counterparts.   This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Signatures by facsimile or by electronic mail delivery of an electronic version (e.g., .pdf or .tif file) of an executed signature page shall be treated as delivery of an original and shall bind the parties hereto. This Amendment constitutes the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

   

 

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

12

 


Exhibit 10.2

IN WITNESS WHEREOF , intending to be legally bound, and intending that this document constitute an agreement executed under seal, the undersigned have executed this Amendment under seal as of the day and year first hereinabove set forth.

 

 

AGENT: MIDCAP FUNDING X TRUST

 

By:          Apollo Capital Management, L.P.,

                its investment manager

 

By:          Apollo Capital Management GP, LLC,

                its general partner

 

 

By: _ /s/ Maurice Amsellem ____________(SEAL)

Name:  Maurice Amsellem

Title:    Authorized Signatory

 

 

LENDER: MIDCAP FU NDING X TRUST

 

By:          Apollo Capital Management, L.P.,

                its investment manager

 

By:          Apollo Capital Management GP, LLC,

                its general partner

 

 

By: _ /s/ Maurice Amsellem ____________(SEAL)

Name:  Maurice Amsellem

Title:    Authorized Signatory

 

 

 

 

 

 


Exhibit 10.2

EXISTING BORROWERS:

MONROE STAFFING SERVICES, LLC ,

a Delaware limited liability company

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: President  

 

PEOPLESERVE, INC. ,

a Massachusetts corporation

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: Vice President  

 

FARO RECRUITMENT AMERICA, INC. ,

a New York corporation

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: President  

 

 

LIGHTHOUSE PLACEMENT SERVICES, INC. , a Massachusetts corporation

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: Vice President  

 

PEOPLESERVE PRS, INC. ,

a Massachusetts corporation

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: Vice President  

 

NEW BORROWER:

STAFFING 360 GEORGIA, LLC,

a Georgia limited liability company

 

 

By : _ /s/ Matt Briand ______________(Seal)

Name: Matt Briand
Title: Vice President  

 

 

 

PARENT:

STAFFING 360 SOLUTIONS, INC. ,

a Delaware corporation

 

 

By:_ /s/ Matt Briand_ _____________(Seal)

Name:  Matt Briand
Title:  President & CEO

Signature Page to

Amendment No. 8 and Joinder Agreement to Credit and Security Agreement and Limited Consent

 

 

Exhibit 10.3

US2008 13324827 3

 

 

 

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

 

Dated as of September 15, 2017

by and among

STAFFING 360 SOLUTIONS, INC. ,
as the Company,

and

FARO RECRUITMENT AMERICA, INC.,

MONROE STAFFING SERVICES, LLC,

PEOPLESERVE, INC.,

PEOPLESERVE PRS, INC.,

LIGHTHOUSE PLACEMENT SERVICES, INC.,

STAFFING 360 GEORGIA, LLC, and

the other SUBSIDIARY GUARANTORS from time to time party hereto ,


as the Subsidiary Guarantors,

and

Jackson Investment Group, LLC ,
as the Purchaser

 


 

TABLE OF CONTENTS

Article 1.

DEFINITIONS2

 

 

Section 1.1

Definitions2

 

Article 2.

ISSUANCE AND PURCHASE OF SENIOR NOTE20

 

 

Section 2.1

Purchase and Sale of Senior Note20

 

 

Section 2.2

Interest on the Senior Note20

 

 

Section 2.3

Maturity of Senior Note; Voluntary Prepayments; Funding Losses20

 

Article 3.

OTHER PROVISIONS RELATING TO THE SENIOR NOTE21

 

 

Section 3.1

Making of Payments21

 

 

Section 3.2

Increased Costs22

 

 

Section 3.3

Tax Gross Up and Indemnity22

 

 

Section 3.4

Default Rate of Interest22

 

 

Section 3.5

Calculation of Interest23

 

 

Section 3.6

Usury23

 

Article 4.

GUARANTY23

 

 

Section 4.1

The Guaranty23

 

 

Section 4.2

Obligations Unconditional23

 

 

Section 4.3

Reinstatement24

 

 

Section 4.4

Certain Additional Waivers24

 

 

Section 4.5

Remedies24

 

 

Section 4.6

Guarantee of Payment; Continuing Guarantee25

 

 

Section 4.7

Limitations on Guaranty25

 

 

Section 4.8

Contribution25

 

Article 5.

CONDITIONS PRECEDENT TO EFFECTIVENESS AND CLOSING26

 

 

Section 5.1

26

 

Article 6.

REPRESENTATIONS AND WARRANTIES30

 

 

Section 6.1

Representations and Warranties Generally30

 

 

Section 6.2

Corporate Existence; Subsidiaries30

 

 

Section 6.3

Organization and Governmental Authorization; No Contravention30

 

 

Section 6.4

Binding Effect30

 

 

Section 6.5

Capitalization31

 

 

Section 6.6

Financial Information31

 

 

Section 6.7

Litigation31

 

 

Section 6.8

Ownership of Property31

 

 

Section 6.9

No Default31

 

 

Section 6.10

Labor Matters31

 

 

Section 6.11

Regulated Entities32

 

 

Section 6.12

[Reserved]32

 

 

Section 6.13

Compliance With Laws; Anti-Terrorism Laws32

 

 

Section 6.14

Taxes32

 

 

Section 6.15

Compliance with ERISA32

 

 

Section 6.16

Consummation of Transaction Documents; Brokers33

 

 

Section 6.17

[Reserved]33

 


 

 

Section 6.18

Material Contracts 33

 

 

Section 6.19

[Reserved]34

 

 

Section 6.20

Intellectual Property34

 

 

Section 6.21

Solvency34

 

 

Section 6.22

Full Disclosure34

 

 

Section 6.23

Interest Rate35

 

 

Section 6.24

Subsidiaries35

 

 

Section 6.25

[Reserved]35

 

 

Section 6.26

Approvals35

 

 

Section 6.27

Insurance35

 

 

Section 6.28

Continuing Business of Company35

 

 

Section 6.29

[Reserved]35

 

 

Section 6.30

No General Solicitation35

 

 

Section 6.31

Representations and Warranties of the Purchaser36

 

Article 7.

AFFIRMATIVE COVENANTS37

 

 

Section 7.1

Financial Statements and Other Reports37

 

 

Section 7.2

Payment and Performance of Obligations38

 

 

Section 7.3

Maintenance of Existence39

 

 

Section 7.4

Maintenance of Property; Insurance39

 

 

Section 7.5

Compliance with Laws and Material Contracts39

 

 

Section 7.6

Inspection of Property, Books and Records39

 

 

Section 7.7

Use of Proceeds40

 

 

Section 7.8

[Reserved]40

 

 

Section 7.9

Notices of Litigation and Defaults40

 

 

Section 7.10

Further Assurances; Additional Guarantors40

 

 

Section 7.11

[Reserved]41

 

 

Section 7.12

Maintenance of Management41

 

 

Section 7.13

[Reserved]41

 

 

Section 7.14

Registration Rights; Indemnification41

 

 

Section 7.15

Closing Commitment Fee43

 

 

Section 7.16

Post-Closing Covenants; Deposit Account Arrangements43

 

Article 8.

NEGATIVE COVENANTS AND FINANCIAL COVeNANTS44

 

 

Section 8.1

Debt; Contingent Obligations44

 

 

Section 8.2

Liens44

 

 

Section 8.3

Restricted Distributions44

 

 

Section 8.4

Restrictive Agreements44

 

 

Section 8.5

Payments and Modifications of Subordinated Debt44

 

 

Section 8.6

Consolidations, Mergers and Sales of Assets; Change in Control45

 

 

Section 8.7

Purchase of Assets, Investments45

 

 

Section 8.8

Transactions with Affiliates45

 

 

Section 8.9

Modification of Organizational Documents45

 

 

Section 8.10

Modification of Certain Agreements45

 

 

Section 8.11

Conduct of Business46

 

 

Section 8.12

Lease Payments46

 

 

Section 8.13

Limitation on Sale and Leaseback Transactions46

 

 

Section 8.14

Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts46

 

 

Section 8.15

Compliance with Anti-Terrorism Laws46

 


 

Section 8.16

Sale or Discount of Receivables 47

 

 

Section 8.17

Financial Covenants47

 

 

Section 8.18

Excluded Subsidiaries49

 

Article 9.

EVENTS OF DEFAULT49

 

 

Section 9.1

Events of Default49

 

 

Section 9.2

Remedies on Default51

 

Article 10.

MISCELLANEOUS52

 

 

Section 10.1

Notices52

 

 

Section 10.2

No Waiver53

 

 

Section 10.3

Expenses53

 

 

Section 10.4

Amendments, Etc53

 

 

Section 10.5

Successors and Assigns54

 

 

Section 10.6

Governing Law54

 

 

Section 10.7

Survival of Representations and Warranties54

 

 

Section 10.8

Severability54

 

 

Section 10.9

Counterparts54

 

 

Section 10.10

Set-Off54

 

 

Section 10.11

Termination of Agreement54

 

 

Section 10.12

Consent to Service of Process54

 

 

Section 10.13

Waiver of Jury Trial55

 

 

Section 10.14

Entire Agreement55

 

 

Section 10.15

Publicity55

 

 

Section 10.16

Further Assurances55

 

 

Section 10.17

Subordination of Intercompany Indebtedness and Management Fees55

 

 

Section 10.18

Effect of Amendment and Restatement56

 

 

Exhibits and Schedules

Exhibit A - Form of S enior Note

Exhibit B - Form of Compliance Certificate

Exhibit C - Financial Statements and Projections

Exhibit D - Form of Joinder Agreement

 

Schedule 6.2 - Subsidiaries

Schedule 6.3 - No Violation

Schedule 6.5 - Capitalization

Schedule 6.7 - Litigation

Schedule 6.16 - Taxes

Schedule 6.16 - Brokers Fees

Schedule 6.18 - Material Contracts

Schedule 6.20 - Intellectual Property

Schedule 6.24 - Joint Ventures/Minority Equity Interests

Schedule 7.9 - Disputes

Schedule 8.1 - Existing Debt and Contingent Obligations

Schedule 8.2 - Permitted Liens

Schedule 8.7 - Permitted Investments

Schedule 8.8 - Transactions with Affiliates


Schedule 8.11 - Conduct of Business

Schedule 8.14 - Deposit Accounts/Securities Accounts

 

 


 

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of September 15, 2017, by and among STAFFING 360 SOLUTIONS, INC., a Delaware corporation (the “ Company ”), as issuer of the Senior Note (as defined below), the Subsidiaries of the Company listed on the signature pages hereto and any Subsidiary of the Company added hereto from time to time, as Subsidiary Guarantors, and Jackson Investment Group, LLC , as the Purchaser.

WHEREAS, the Company, Faro Recruitment America, Inc., a New York corporation (“ Faro ”), Monroe Staffing Services, LLC, a Delaware limited liability company (“ Monroe ”), Staffing 360 Solutions Limited, a company organized under the laws of England and Wales (“ S360 Ltd ”), Longbridge Recruitment 360 Limited, a company organized under the laws of England and Wales (“ Longbridge ”), The JM Group (IT Recruitment) Limited, a company organized under the laws of England and Wales (“ JM ”), PeopleServe, Inc., a Massachusetts corporation (“ PSI ”), PeopleServe PRS, Inc., a Massachusetts corporation (“ PRS ”), Lighthouse Placement Services, Inc., a Massachusetts corporation (“ Lighthouse ” and together with each of Faro, Monroe, S360 Ltd., Longbridge, JM, PSI and PRS, collectively, the “ Existing Subsidiary Guarantors ”), and the Purchaser entered into that certain Note and Warrant Purchase Agreement dated as of January 25, 2017, as amended by that certain (a) Omnibus Amendment and Reaffirmation Agreement dated as of April 5, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser, (b) Second Omnibus Amendment and Reaffirmation Agreement dated as of August 2, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser, and (c) Third Omnibus Amendment and Reaffirmation Agreement dated as of September 1, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser (as so amended, the “ Existing Note Purchase Agreement ”), pursuant to which, among other things, the Purchaser made (i) a certain subordinated debt investment of $7,400,000 in the Company in the form of a purchase of that certain  Subordinated Secured Note dated January 25, 2017, in the principal amount of $7,400,000 (the “ Original Subordinated Note ”) and the Existing Warrant (as defined herein), (ii) a certain subordinated debt investment of $1,650,000 in the form of a purchase of that certain Subordinated Secured Promissory Note, dated April 5, 2017, in the principal amount of $1,650,000 (the “ Second Subordinated Note ”), (iii) a certain subordinated debt investment of $1,600,000 in the form of a purchase of that certain 10% Subordinated Secured Promissory Note, dated August 2, 2017, in the principal amount of $1,600,000 (the “ Third Subordinated Note ”), and (iv) a certain subordinated debt investment of $515,000 in the form of a purchase of that certain 12% Subordinated Secured Promissory Note, dated September 1, 2017, in the principal amount of $515,000 (the “ Fourth Subordinated Note ”; together with the Original Subordinated Note, the Second Subordinated Note and the Third Subordinated Note referred to herein collectively as the “ Existing Subordinated Notes ”); and

WHEREAS, the obligations of the Company to Purchaser under the Existing Notes and the Note Documents (as defined in the Existing Note Purchase Agreement) are guaranteed by the Existing Guarantors pursuant to the provisions of Article 4 of the Existing Note Purchase Agreement (such guarantee being referred to herein as the “ Existing Guarantee ”);

WHEREAS, the obligations of the Company to Purchaser under the Existing Notes and the Note Documents (as defined in the Existing Note Purchase Agreement), and the obligations of the Existing Guarantors (other than S360 Ltd, Longbridge and JM) to Purchaser under the Existing Guarantee, are secured by that certain (a) Security Agreement, dated as of January 25, 2017 (as amended prior to the date hereof, the “ Existing Security Agreement ”), by and among the Company, the Existing Guarantors (other than S360 Ltd, Longbridge and JM) and the Purchaser, and (b) that certain Pledge Agreement, dated as of January 25, 2017 (as amended prior to the date hereof, the “ Existing Pledge Agreement ”), by and among the Company, the Existing Guarantors (other than S360 Ltd, Longbridge and JM) and the Purchaser;

 


WHEREAS, the Company has requested that the Purchaser make a s enior debt investment of Forty Million Dollars ($ 40 , 0 00,000) in the Company in the form of a purchase of a S enior Secured Note in the principal amount of Forty Million Dollars ($ 40 , 0 00,000), the proceeds of which will be used by the Company to repay the Existing Subordinated Notes and certain other indebtedness of the Company, to fund a portion of the purchase price consideration for the Subject Acquisitions (as defined herein) and for working capital and other purposes of the Company as specified in this Agreement;

WHEREAS, in connection with the making of such senior debt investment, the parties desire to amend and restate the Existing Note Purchase Agreement (including, without limitation, the Existing Guarantee) in its entirety as more fully described below, and to amend and restate the Existing Security Agreement and the Existing Pledge Agreement; and

WHEREAS, the parties hereto agree that the Existing Note Purchase Agreement (including, without limitation, the Existing Guarantee) shall be and hereby is amended and restated in its entirety as set forth herein.

 

NOW, THEREFORE, for and in consideration of the mutual premises, covenants and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

Article 1.

DEFINITIONS

Section 1.1 Definitions .  In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

ABN Amro Agreements for the Purchase of Debt ” means, collectively, (a) that certain Agreement for the Purchase of Debts, having a commencement date of January 8, 2013, between ABN Amro Commercial Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment (Technology Solutions) Limited), (b) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment (Sales & Marketing) Limited), (c) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment Technical Limited), and (d) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a ASA Law Limited).

ABN Amro Term Loan Agreement ” means that certain Loan Agreement dated as of November 4, 2015 by and between The JM Group (IT Recruitment) Limited and ABN AMRO Commercial Finance PLC, in each case, as amended, restated, supplemented or otherwise modified from time to time.

Advance ” has the meaning set forth in Section 2.1 .

Affiliate ” shall mean, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided that the holding by the Purchaser of the Existing Warrant (or the Equity Interests into which such Existing Warrant is converted) or the Commitment Fee Shares shall not be deemed to constitute the Purchaser as an Affiliate of the Company hereunder. The term “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies


of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “ Controlling ” and “ Controlled ” have meanings correlative thereto.

Agreement ” means this Amended and Restated Note Purchase Agreement, as the same may be amended, restated, supplemented or modified from time to time in accordance with the terms hereof.

Anti-Corruption Laws ” means all laws, rules and regulations of any jurisdiction applicable to any of the Obligors or their respective Subsidiaries from time to time concerning or relating to bribery or corruption, including without limitation, the United States Foreign Corrupt Practices Act of 1977, as amended.

Anti-Terrorism Laws ” means any laws with respect to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing effective September 24, 2001 (the “ Executive Order ”) and the PATRIOT Act.

Applicable Law ” means all applicable provisions of constitutions, statutes, rules, regulations and orders of all governmental bodies and all orders and decrees of all courts, tribunals and arbitrators including, without limitation, all Environmental Laws.

Asset Disposition ” means any sale, lease, license, transfer, assignment or other consensual disposition by any Obligor or any Subsidiary thereof of any asset.

Bankruptcy Code ” means The Bankruptcy Code of 1978, as amended and in effect from time to time (11 U.S.C. § 101 et seq. ). Section references to the Bankruptcy Code are to the Bankruptcy Code, as in effect at the date of this Agreement, and any subsequent provisions of the Bankruptcy Code, amendatory thereof, supplemental thereto or substituted therefor.

Blocked Person ” means any Person that is a blocked person described in Section 1 of the Executive Order.

Business Day ” means any day on which commercial banks located in New York, New York are required or permitted by law to be open for the purpose of conducting a commercial banking business other than a Saturday or Sunday.

Butler Acquisition ” means the acquisition by Longbridge of all of the outstanding capital stock of Butler Holdings, pursuant to the Butler Acquisition Agreement, whereupon the Butler Entities will become wholly-owned Subsidiaries of Longbridge.

Butler Acquisition Agreement ” means that certain Agreement dated as of September 2017, among Longbridge, the Company, David Rhys Leyshon, David John Kennedy, Alison Leyshon, John Docherty, Simon Bartington and the other Persons party thereto as “Sellers”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

Butler Acquisition Documents ” means, collectively, the Butler Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Company and/or Longbridge to the any of the Sellers (as such term is defined in the Butler Acquisition Agreement) in connection with the Butler Acquisition.

Butler Entities ” means, collectively, Butler Holdings and CBS Butler.


Butler Holdings ” means CBS Butler Holdings Limited , a company organized under the laws of England and Wales.

CBS Butler ” means CBS Butler Limited, a company organized under the laws of England and Wales, a wholly-owned Subsidiary of Butler Holdings.

Change in Control ” means any of the following events: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of or control over, voting stock of the Company (or other securities convertible into such voting stock) representing 40% or more of the combined voting power of all voting stock of the Company or (b) the Company ceases to own, directly or indirectly, 100% of the outstanding capital stock of S360 Ltd., Longbridge, JM, any of the Butler Entities or any of the Guarantors, except in connection with any merger or consolidation in respect of any such Person expressly permitted under Section 8.6 ; or (c) the occurrence of any “Change of Control”, “Change in Control”, or terms of similar import under any document or instrument governing or relating to Debt of or equity in such Person. As used herein, “beneficial ownership” shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Closing ” shall mean the closing of the purchase and sale of the Senior Note and the payment of the Purchase Price therefor, as contemplated by this Agreement and the other Transaction Documents.

Closing Date ” shall mean September 15, 2017, or, if later, the date upon which all conditions in Section 5.1 have been satisfied (or waived in writing by Purchaser in its sole discretion) and the Closing has occurred.

Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

Collateral ” shall mean all of the property and assets of the Obligors now or hereafter securing the Obligations pursuant to the Security Agreement, the Pledge Agreement, the Intellectual Property Security Agreements and the other Security Documents.

Commitment Fee Shares ” has the meaning set forth in Section 7.15 .

Common Stock ” means the Company’s common stock, par value $0.00001 per share.

Company ” has the meaning set forth in the introductory paragraph hereof and shall include the Company’s successors and permitted assigns.  

Compliance Certificate ” means a certificate, duly executed by a Responsible Officer of the Company, appropriately completed and substantially in the form of Exhibit B hereto.

Consolidated Subsidiary ” means, at any date, any Subsidiary the accounts of which would be consolidated with those of the Purchaser (or any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.

Contingent Obligation ” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of another Person (a “ Third Party Obligation ”) if the purpose or intent


of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so Guaranteed or otherwise supported.

Controlled Group ” means all members of any group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Obligor, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

Debt ” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business, (d) all capital leases of such Person, (e) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (f) all equity securities of such Person subject to repurchase or redemption other than at the sole option of such Person, (g) all obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (h) profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts, (i) all Debt of others Guaranteed by such Person, (j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan liabilities of such Person, (k) obligations arising under non-compete agreements, and (l) all obligations arising under bonus, deferred compensation, incentive compensation or similar arrangements in each case under this clause (l) other than those arising in the Ordinary Course of Business. Without duplication of any of the foregoing, Debt of Obligors as of any date of determination shall include the outstanding principal amount of the Senior Note.

Default ” shall mean any event that, with notice or lapse of time or both, would constitute an Event of Default.

Deposit Account Control Agreement ” shall mean any deposit account control agreement entered into on or after the Closing Date by the applicable depository bank, the applicable Obligor, and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

Designated Person ” means (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (e) a Person that is named as a “specially designated national and blocked person” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list.


Dollar ” and the sign “ $ ” shall mean the lawful money of the United States of America.

Domestic Subsidiary ” means any Subsidiary that is organized under the Laws of any state of the United States or the District of Columbia.

Environmental Laws ” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other governmental directives or requirements, as well as common law, pertaining to the environment, natural resources, pollution, health (including any environmental clean-up statutes and all regulations adopted by any local, state, federal or other Governmental Authority, and any statute, ordinance, code, order, decree, law rule or regulation all of which pertain to or impose liability or standards of conduct concerning medical waste or medical products, equipment or supplies), safety or clean-up that apply to any Obligor and relate to hazardous materials.

Equity Interests ”  means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor.

ERISA Plan ” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Plan), which any Obligor maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Obligor or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

Event of Default ” means any of the events specified in Section 9.1 .

Excluded Accounts ” means any of the following deposit accounts (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Obligors’ employees and identified to the Purchaser by the Company as such on Schedule 8.14 or otherwise identified in a writing delivered by the Company to the Purchaser after the Closing Date, and (ii) for so long as the MidCap Intercreditor Agreement remains in effect, any deposit accounts that constitute ABL Priority Deposit Accounts (as such term is defined in the MidCap Intercreditor Agreement).

Excluded Subsidiaries ” means, collectively, Control Solutions International Inc., a Florida corporation, and Canada Control Solutions International, Inc., a company organized under the laws of British Columbia.

Executive Order ” has the meaning specified in the definition of Anti-Terrorism Laws.


Existing Note Purchase Agreement ” has the meaning set forth in the first Whereas clause of this Agreement.

Existing Senior Secured Debt Documents ” means, collectively, (a) the Existing Senior Secured ABL Credit Agreements, and (b) any promissory notes or other instruments, guarantees, security agreements, pledge agreements, mortgages or other documents or agreements evidencing, guaranteeing or securing the obligations of any Obligors under any of the Senior Secured ABL Credit Agreements.

Existing Senior Secured ABL Credit Agreements ” means, collectively, (a) the MidCap ABL Credit Agreement, (b) ABN Amro Agreements for the Purchase of Debt, and (c) the HSBC Agreement for the Purchase of Debt, in each case, as amended, restated, supplemented or otherwise modified from time to time.

Existing Subordinated Notes ” has the meaning set forth in the first Whereas clause of this Agreement.

Existing Warrant ” shall mean, collectively, (i) the Warrant to purchase Common Stock of the Company, together with the exhibits thereto, dated on or about January 25, 2017 issued by the Company to the Purchaser on the Original Closing Date pursuant to the Existing Note Purchase Agreement, and (ii) any warrant issued and delivered by the Company to the Purchaser (or any successors or assigns of the Purchasers) on or after the Closing Date in substitution, replacement or exchange of the Existing Warrant referred to in clause (i) of this definition, in each case as amended, restated, supplemented or modified from time to time.

Existing Warrant Agreement ” shall mean that certain Warrant Agreement, dated on or about January 25, 2017, by and between the Purchaser and the Company, as amended, restated, supplemented or modified from time to time.

Existing Warrant Documents ” shall mean, collectively, the Existing Warrant and the Existing Warrant Agreement.

FirstPro Acquisition ” means the acquisition by S360 Georgia of substantially all of the assets used in the Atlanta-based staffing and recruitment services business of Firstpro Inc., a Georgia corporation, and Firstpro Georgia LLC, a Georgia limited liability company, pursuant to the FirstPro Acquisition Agreement.

FirstPro Acquisition Agreement ” means that certain Asset Purchase Agreement dated as of September 15, 2017, among S360 Georgia, Firstpro Inc., a Georgia corporation and Firstpro Georgia LLC, a Georgia limited liability company, the other Persons party thereto as “Principals”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

FirstPro Acquisition Documents ” means, collectively, the FirstPro Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Company and/or S360 Georgia to the any of the “Sellers” (as such term is defined in the FirstPro Acquisition Agreement) in connection with the FirstPro Acquisition.

Fiscal Month ” means, with respect each Fiscal Year of the Company and each of its Consolidated Subsidiaries, each of twelve calendar fiscal months.

Fiscal Quarter ” means, with respect each Fiscal Year of the Company and each of its Consolidated Subsidiaries, each calendar quarter ending on the Saturday closest to March 31st, June 30th, September


30th and December 31st in each year .    For example, the fourth calendar quarter of 2017 shall be deemed to have ended on December 30, 2017 (the Saturday immediately preceding Sunday, December 31, 2017).

Fiscal Year ” means with respect to the Company and each of its Consolidated Subsidiaries, a fiscal year ending on December 31st in each year.

Foreign Subsidiary ” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States, a State thereof or the District of Columbia.  

Funds Flow ” has the meaning set forth in Section 5.1(B)(8) .

GAAP ” shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or any successor authority) that are applicable to the circumstances as of the date of determination, consistently applied and maintained through the periods indicated.

Governmental Authority ” shall mean the government of the United States, any foreign country or any multinational authority, or any state, commonwealth, protectorate or political subdivision thereof, and any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the Pension Benefit Guaranty Corporation and other quasi-governmental entities established to perform such functions.

Guarantors ” shall mean, collectively, (a) the Subsidiary Guarantors and (b) any other Person that now or hereafter executes a guaranty in favor of the Purchaser in connection with the transactions contemplated by this Agreement and the other Note Documents.  For the avoidance of doubt, none of the Foreign Subsidiaries are Guarantors.

Guarantee ” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term “Guarantee” used as a verb has a corresponding meaning.

HSBC Agreement for the Purchase of Debt ” means that certain Agreement for the Purchase of Debts, dated January 27, 2009, between HSBC Invoice Finance (UK) Ltd. and CBS Butler.

Intellectual Property ” means, with respect to any Person, all patents, patent applications and like protections, including improvements divisions, continuation, renewals, reissues, extensions and continuations in part of the same, trademarks, trade names, trade styles, trade dress, service marks, logos and other business identifies and, to the extent permitted under applicable law, any applications therefore, whether registered or not, and the goodwill of the business of such Person connected with and symbolized thereby, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative works, whether published or unpublished, technology, know-how and processes, operating manuals, trade secrets, computer hardware and software, rights to unpatented inventions and all applications and licenses therefore, used in or necessary for the conduct of business by


such Person and all claims for damages by way of any past, present or future infringement of any of the foregoing.

Intellectual Property Security Agreements ” means, collectively, each Intellectual Property Security Agreement entered into by any Obligors in favor of the Purchaser as security for the Obligations, as may be amended, restated, supplemented or otherwise modified from time to time.

Investment ” means any investment in any Person, whether by means of acquiring (whether for cash, property, services, securities or otherwise), making or holding Debt, securities, capital contributions, loans, time deposits, advances, Guarantees or otherwise. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto.

 

JM ” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns.

 

Joinder Agreement ” means a Joinder Agreement and Pledge Agreement Supplement substantially in the form of Exhibit D hereto.

 

Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset. For the purposes of this Agreement and the other Transaction, any Obligor shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

Litigation ” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority.

Longbridge ” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns.

Longbridge Intercompany Note ” means that certain Promissory Note, dated as of even date herewith, issued by Longbridge to the Company in the principal amount of $16,316,941.05, as amended, restated, supplemented or otherwise modified from time to time.

Material Adverse Effect ” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, (a) a material adverse change in, or a material adverse effect upon, any of (i) the financial condition, operations, business or properties of the Obligors, taken as a whole, (ii) the rights and remedies of the Purchaser under any of the Transaction Documents or the ability of the Purchaser to enforce the Obligations or realize upon the Collateral, or the ability of the Obligors to perform any of their obligations under any Transaction Document, (iii) the legality, validity or enforceability of any Transaction Document, (iv) the existence, perfection or priority of any security interest granted in any Note Document, (v) the value of any material Collateral; or (b) the imposition of a fine against or the creation of any liability of any Obligor to any Governmental Authority in excess of $200,000 which is not satisfied or discharged in full within thirty (30) days after the imposition thereof.

Material Contract ” means (a) the Existing Senior Secured Debt Documents, (b) the Subject Acquisition Documents, (c) the Longbridge Intercompany Note, (d) the other agreement described on


Schedule 6.18 , and (e) any other agreement or instruments to which any Obligor now or hereafter is a party if the breach, nonperformance or cancellation of which, or the failure of which to renew, could reasonably be expected to have a Material Adverse Effect .

Maturity Date ” means September 15, 2020, or such earlier date upon the acceleration thereof pursuant to Section 9.2 hereof.

MidCap ABL Credit Agreement ” means that certain Credit and Security Agreement dated as of April 8, 2015, by and among PeopleServe, Inc., PeopleServe PRS, Inc., Faro Recruitment America, Inc., Lighthouse Placement Services, Inc., and Monroe Staffing Services, LLC, as borrowers, any additional borrowers from time to time party thereto, the Company, MidCap Funding X Trust (as successor by assignment to MidCap Financial Trust), as administrative agent and a lender, and the financial institutions or other entities from time to time party thereto as lenders, providing for revolving and term loan credit facilities to the borrowers thereunder, as amended, restated, supplemented or otherwise modified from time to time.

MidCap Intercreditor Agreement ” means that certain Intercreditor Agreement, dated as of the date hereof, among the Purchaser, the MidCap Senior Agent, the Company and the Domestic Guarantors party thereto, as amended, restated, supplemented or otherwise modified from time to time.

MidCap Priority Collateral ” means the “ABL Priority Collateral” as such term is defined in the MidCap Intercreditor Agreement.

MidCap Senior Agent ” means, collectively, MidCap Funding X Trust (as successor by assignment to MidCap Financial Trust) in its capacity as administrative agent under the MidCap ABL Credit Agreement, together with its successors and assigns in such capacity.

Multiemployer Plan ” means “Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Obligor or any other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made contributions.

Note Documents ” shall mean, collectively, each of the Transaction Documents (other than the Existing Warrant Documents), in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted.

Obligations ” shall mean all present and future debt, liabilities and obligations of the Company owing to the Purchaser, or any Person entitled to indemnification hereunder, or any of their respective successors, permitted transferees or permitted assigns, arising under or in connection with this Agreement, the Senior Note or any other Note Document.

Obligors ” means, collectively, the Company and the Subsidiary Guarantors.

OFAC ” means the U.S. Treasury Department Office of Foreign Assets Control.

Ordinary Course of Business ” means, in respect of any transaction involving any Person, the ordinary course of business of such Person, as conducted by such Person in a manner consistent in all material respects with past practices.


Organizational Documents ” means, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such as by-laws, a partnership agreement or an operating, limited liability company or members agreement), including any and all s tockholder agreements or voting agreements relating to the capital stock or other equity interests of such Person.

Original Closing Date ” means January 25, 2017.

Pay Proceeds Letter ” means that certain Pay Proceeds Letter, dated the Closing Date, executed by the Company and addressed to the Purchaser.

Pension Plan ” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA.

Permits ” means all governmental licenses, authorizations, provider numbers, supplier numbers, registrations, permits, drug or device authorizations and approvals, certificates, franchises, qualifications, accreditations, consents and approvals of a Obligor required under all applicable laws and required for such Obligor in order to carry on its business as now conducted.

Permitted Acquisition Other Debt ” means Debt, incurred by a Foreign Subsidiary in connection with a Permitted Acquisition.

Permitted Acquisitions ” means (a) the Subject Acquisitions, (b) those other acquisitions as the Purchaser and Company may mutually agree upon in writing from time to time, (c) Permitted Foreign Acquisitions and (d) Permitted Domestic Acquisitions; provided that, in respect of the foregoing clauses (c) and (d), (i) immediately prior to the consummation of such acquisition, no Default or Event of Default then exists or would result therefrom, (ii) with respect to each such acquisition, prior to the closing thereof, the Purchaser has received pro forma financial statements, (iii) with respect to each such acquisition, Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17, and the Purchaser shall have received a certificate from a Responsible Officer of the Company, dated the consummation date of such acquisition, certifying and demonstrating that (A) after giving effect to such acquisition (and taking into account any and all Debt incurred, issued or assumed by any Obligor or Subsidiary thereof in connection therewith, and any continuing Debt of any target entity being acquired in connection therewith, including, without limitation, any Debt of the type described under clauses (m) through (p), inclusive, of the definition of Permitted Debt), the Obligors are in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each other financial covenant in Section 8.17 , and (B) no Default or Event of Default exists as of such date or would result after giving effect to such acquisition, and (iv) in the case of any Permitted Domestic Acquisition, compliance with Section 7.10(c) .

Permitted Asset Dispositions ” means the following Asset Dispositions: (a) dispositions of furniture, fixtures and equipment in the Ordinary Course of Business that the applicable Obligor or Subsidiary thereof determines in good faith is no longer used or useful in the business of such Obligor or Subsidiary; provided, however, that at the time of such Asset Disposition, no Default or Event of Default exists or would result from such Asset Disposition, and (b) dispositions approved in writing by the Purchaser.

Permitted Contest ” means, with respect to any tax obligation or other obligation allegedly or potentially owing from any Obligor or its Subsidiary to any governmental tax authority or other third party,


a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made on the books and records and financial statements of the applicable Obligor ; provided, however, that (a) compliance with the obligation that is the subject of such contest is effectively stayed during such challenge; (b) such Obligor ’s and its Subsidiaries’ title to, and its right to use, the Collateral is not adversely affected thereby and the Purchaser ’s Lien and priority on the Collateral are not adversely affected, altered or impaired thereby; (c) Company ha s given prior written notice to the Purchaser of a n Obligor ’s or its Subsidiary’s intent to so contest the obligation; (d) the Collateral or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by such Obligor or its Subsidiaries; (e) the Company ha s given the Purchaser notice of the commencement of such contest and upon request by the Purchaser , from time to time, notice of the status of such contest by the applicable Obligors and/or confirmation of the continuing satisfaction of this definition; and (f) upon a final determination of such contest, such Obligor and its Subsidiaries shall promptly comply with the requirements thereof.

Permitted Contingent Obligations ” means, without duplication: (a) Contingent Obligations arising in respect of the Debt under the Note Documents; (b) Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business; (c) Contingent Obligations outstanding on the date of this Agreement and set forth on Schedule 8.1 (including any refinancings, extensions, increases or amendments to the indebtedness underlying such Contingent Obligations to the extent constituting (i) Refinancing Debt or (ii) extensions of the maturity thereof without any other change in terms); (d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed $250,000 in the aggregate at any time outstanding; (f) Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to the Purchaser mortgagee title insurance policies; (g) Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Section 8.6 ; (h) [Reserved]; (i) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Contingent Obligations existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by an Obligor or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation; and (j) other Contingent Obligations not permitted by clauses (a) through (i) above, not to exceed $250,000 in the aggregate at any time outstanding.

Permitted Debt ” means, without duplication: (a) the Obligors’ Debt to the Purchaser under this Agreement and the other Note Documents; (b) Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business; (c) purchase money Debt not to exceed $1,000,000 at any time (whether in the form of a loan or a lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment; (d) Debt existing, or contemplated on the date of this Agreement and described on Schedule 8.1 (other than any items otherwise expressly set forth in this definition), including any refinancings, extensions, increases or amendments to the indebtedness underlying such Debt to the extent constituting (i) Refinancing Debt or (ii) extensions of the maturity thereof without any other change in terms) ; (e) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Debt existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by any Obligor or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation; (f) Debt in the form of insurance premiums financed through the applicable insurance company; (g) trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business; (h) Debt (other than Debt for borrowed money) that is a Permitted Intercompany Transaction; (i) Subordinated Debt and


any Subordinated Debt Permitted Refinancing with respect thereto; (j) Permitted ABL Senior Debt (as defined below in the definition) ; (k) unsecured intercompany Debt between any Obligors; (l) unsecured intercompany Debt owing from any O bligor to any Foreign Subsidiary or Excluded Subsidiary , provided such Debt is at all times on and after the Closing Date subordinated to the Obligations pursuant to a subordination agreement satisfactory to Purchaser; (m) Permitted Acquisition Other Debt that is incurred in connection with the consummation of one or more Permitted Acquisitions (other than the Subject Acquisitions), provided that (i) no Default or Event of Default exists or would result therefrom, (ii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition, and (iii) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (n) and (o) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Closing Date) in the aggregate ; ( n ) unsecured Debt of any Person that becomes a Subsidiary after the Closing Date in connection with any Permitted Acquisition (other than the Subject Acquisitions) ; provided that (i) such Debt exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary , (ii) no Default or Event of Default exists or would result therefrom, (iii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition , (iv) such Debt is at all times on and after the Closing Date subordinated to the Obligations on terms satisfactory to the Purchaser , and (v) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations, except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (m) and (o) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Date) in the aggregate ; (o) unsecured Debt owing to sellers of assets or Equity Interests that is incurred in connection with the consummation of one or more Permitted Acquisitions (other than the Subject Acquisitions) so long as (i) such Debt is subordinated is at all times on and after the Closing Date subordinated to the Obligations on terms satisfactory to the Purchaser , (ii) no Default or Event of Default exists or would result therefrom, (iii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition , and (iv) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (m) and (n) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Date) in the aggregate; (p) secured Debt of a target entity acquired in connection with a Permitted Acquisition (other than the Subject Acquisitions), provided that (i) such Debt is incurred pursuant to an asset based working capital facility (“ ABL Facility ”) provided by a bank or other financial institution to such target entity and existing at the time such target entity was acquired and which ABL Facility continues following such Permitted Acquisition, (ii) the facility amount of such ABL Facility and the advance rates and eligibility requirements under such ABL Facility are not modified following the date of such Permitted Acquisition or in contemplation thereof in a manner which results in an increase in borrowing availability thereunder, (iii) neither the Company nor any other Obligor (other than the target entity) shall be liable, directly or indirectly, for any such Debt or other obligations and liabilities under such


ABL Facility, (iv) no assets of the Company or any other Obligor (other than the target entity) shall be subject to any Liens or otherwise be used to secure, repay, guarantee or otherwise provide credit support for such ABL Facility or any such Debt or other obligations and liabilities under such ABL Facility, (v) no Default or Event of Default exists or would result therefrom, (vi) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition , and (vii) the repayment of such ABL Facility shall be made solely from the cash flow of the target entity so acquired or, in the case of any default thereunder, solely from the cash flow and other assets of the target entity so acquired, and (q ) Refinancing Debt.   

 

As used above in this definition, the term “ Permitted ABL Senior Debt ” means Debt incurred pursuant to the Existing Senior Secured Debt Documents, provided that:

 

(a) the outstanding principal amount of such Debt does not at any time exceed the lesser of:

 

(i) the applicable maximum applicable facility limit set forth in such Existing Senior Secured Debt Documents from time to time (without giving effect to any accordion or similar options to increase the maximum facility, unless such option has been validly exercised and become effective), and

 

(ii) any applicable borrowing base or similar borrowing availability limit (or receivables purchase availability limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt); provided that any waiver, change or other modification to any eligibility criteria, advance rates or other component used in calculating any such borrowing base or similar borrowing availability limit (or any receivables purchase limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) from that as set forth in the Existing Senior Secured Debt Documents as in effect on the date hereof shall require the prior written consent of Purchaser if any such waiver, change or other modification would result in any increased borrowing availability (or increased receivables purchase availability in the case of any receivables purchase or factoring arrangement that constitutes Debt);

 

(b) the outstanding principal amount of all such Debt shall not at any time violate the financial covenants set forth in Section 8.17 ; and

 

(c) in the case of any such Debt incurred under the MidCap ABL Credit Agreement:

 

(i) the principal amount thereof must not exceed the “ABL Debt Cap” as such term is defined in the MidCap Intercreditor Agreement;

 

(ii) the principal amount of such Debt shall be comprised solely of (A) a term loan in an aggregate principal amount not to exceed an amount equal to $700,000 (less any repayments of such term loan made at any time on or after the Closing Date), and (B) revolving loans advanced by the lender thereunder based upon a borrowing base formula ; and

 

(iii) the outstanding principal amount of any revolving loans under the MidCap ABL Credit Agreement shall not exceed at any time, the lesser of (A) the revolving loan limit less the outstanding principal amount of any term loan under the MidCap ABL Credit Agreement, and (B) the borrowing base applicable to such revolving loans; provided that any waiver, change or other modification to any eligibility criteria, advance rates or any other component used in calculating


such borrowing base from that set forth in the MidCap ABL Credit Agreement as in effect on the date hereof shall require the prior written consent of Purchaser if any such waiver, change or other modification would result in any increased borrowing availability under the MidCap ABL Credit Agreement.

 

Permitted Distributions ” means the following Restricted Distributions: (a) dividends payable solely in common stock and preferred stock; (b) repurchases of stock from individuals who were, but are no longer, employees, directors or consultants pursuant to stock purchase agreements entered as part of their compensation so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that such repurchases do not exceed $250,000 in the aggregate per Fiscal Year; (c) dividends or distributions paid by (i) a Subsidiary to the Company or another Obligor that is the direct or indirect parent of such Subsidiary or (ii) by a Foreign Subsidiary to an Obligor or to another Foreign Subsidiary that is the direct parent company of such Foreign Subsidiary; (d) dividends, distributions, management fees or other fees or compensation payable solely by an Obligor or a Subsidiary thereof to the Company or another Obligor; (e) dividends and distributions that are Permitted Intercompany Transactions so long as no Event of Default exists at the time thereof or would result therefrom, and (f) in respect of the Series A Preferred Stock of the Company, provided that the aggregate monthly amount of all such Series A Preferred Stock dividends shall not exceed $17,000 (excluding any catch-up payment amount in respect of the delinquent dividend payments currently outstanding as of the Original Date in an aggregate amount not to exceed $400,000; the payment of any such catch-up amount being referred to herein as the “ Series A Catch-up Payment ”) and at the time of the making of such dividend no Event of Default shall exist or would result therefrom.

Permitted Domestic Acquisitions ” means the collective reference to each acquisition by the Company (directly or indirectly by new wholly-owned direct or indirect Domestic Subsidiaries), (a) of substantially all of the assets, or all of the capital stock, of a Person in the line of business in which the Obligors are engaged on the Closing Date or that is incidental thereto and (b) involving assets and operations domiciled inside of the United States.

Permitted Foreign Acquisitions ” means the collective reference to each acquisition by the Company (directly or indirectly by new wholly-owned direct or indirect Foreign Subsidiaries), (a) of substantially all of the assets, or all of the capital stock, of a Person in the line of business in which the Obligors are engaged on the Closing Date or that is incidental thereto and (b) involving assets and operations domiciled outside of the United States.

Permitted Intercompany Transaction ” has the meaning set forth in Section 8.8 .

Permitted Investments ” means: (a) Investments shown on Schedule 8.7 and existing on the Closing Date; (b) cash and cash equivalents; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business; (d) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Obligors pursuant to employee stock purchase plans or agreements approved by such Obligors’ Board of Directors (or other governing body), but the aggregate of all such loans outstanding may not exceed $250,000 at any time; (e) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business; (f) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the Ordinary Course of Business, provided, however, that this subpart (f) shall not apply to Investments of Obligors in any Subsidiary; (g) Investments consisting of deposit accounts in which the Purchaser has received a Deposit Account Control Agreement; (h)


Investments by any Obligor in any other Obligor ; (i) Investments made by Obligor in any Foreign Subsidiary in connection with Permitted Acquisitions, provided that the aggregate of all such Investments, together with the outstanding principal amount of all Permitted Acquisition Other Debt, may not at any time exceed $1,000,000; (j) Permitted Acquisitions (including for the avoidance of doubt the Subject Acquisitions) ; and (k ) other Investments in an amount not exceeding $250 ,000 in the aggregate.

Permitted Liens ” means: (a) deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA) pertaining to an Obligor’s employees, if any; (b) deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (c) carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral arising in the Ordinary Course of Business with respect to obligations which are not due, or which are being contested pursuant to a Permitted Contest; (d) Liens on Collateral for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or the subject of a Permitted Contest; (e) attachments, appeal bonds, judgments and other similar Liens on Collateral, for sums not exceeding $250,000 in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest; (f) [reserved]; (g) Liens and encumbrances in favor of the Purchaser under the Transaction Documents; (h) Liens on Collateral existing on the date hereof and set forth on Schedule 8.2 (other than items otherwise expressly set forth in this definition); (i) (A) Liens on receivables of Foreign Subsidiaries and any related rights or proceeds thereof (but not on any equity interests of any Foreign Subsidiary) granted pursuant to the applicable Existing Senior Secured Debt Documents to secure any Permitted ABL Senior Debt incurred thereunder or any other obligations of such Foreign Subsidiary under the ABN Amro Agreements for the Purchase of Debt or the HSBC Agreement for the Purchase of Debt, as applicable, and (B) Liens granted on the assets of Domestic Subsidiaries to secure any Permitted ABL Senior Debt incurred thereunder and any other obligations (not constituting Debt) of the Company and the Domestic Subsidiaries under the MidCap ABL Credit Agreement and related Financing Documents (as defined in the MidCap ABL Credit Agreement), provided such Liens in favor of MidCap are at all times subject to the MidCap Intercreditor Agreement; (j) Liens on the property of a Foreign Subsidiary (but not on any equity interest of any Foreign Subsidiary), which Liens secure only Permitted Acquisition Other Debt not to exceed $1,000,000 in the aggregate at any time; (k) Liens on Refinancing Debt permitted hereunder to the extent and only to the extent that the original Debt being so refinanced was secured by a Permitted Lien; (l) any Lien on any equipment securing Debt permitted under subpart (c) of the definition of Permitted Debt, provided , however , that such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof; and (m) Liens securing Debt permitted to be incurred under clause (p) of the definition of Permitted Debt, provided that such Liens do not at any time extend to any assets of the Company or any other Obligor (other than the target entity which is being acquired and which is party to the applicable ABL Facility described in clause (p) of the definition of Permitted Debt).

Permitted Modifications ” means (a) such amendments or other modifications to an Obligor’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of an Obligor or Subsidiary or involving a reorganization of a Obligor or Subsidiary under the laws of a different jurisdiction) as are required by applicable Law and fully disclosed to the Purchaser within thirty (30) days after such amendments or modifications have become effective, and (b) such other amendments or modifications to an Obligor’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of an Obligor or Subsidiary or involving a reorganization of a Obligor or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of the Purchaser and fully disclosed to the Purchaser within thirty (30) days after such amendments or modifications have become effective.


Person ” shall mean an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated association, or other entity, or a government or any political subdivision or agency thereof.

Pledge Agreement ” means that certain Amended and Restated Pledge Agreement, dated as of the date hereof, by and among the Company, the Domestic Subsidiaries party thereto and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

Post-Closing Letter Agreement ” means that certain Post-Closing Letter Agreement, dated as of the date hereof, between Purchaser and the Company.

Principal Office ” means the office of the Purchaser at the address as specified in Section 10.1 .

Purchase Price ” has the meaning set forth in Section 2.1 .

Purchaser ” means Jackson Investment Group, LLC, together with its successors and assigns and including, without limitation, any Transferee.

Refinancing Debt ” means Debt which represents extensions, renewals, refinancing or replacements of any Debt described in clauses (c), (d), (j), (n), or (p) in the definition of “Permitted Debt” hereunder (such Debt being referred to herein as the “Original Debt”); provided that (i) such Refinancing Debt does not increase the principal amount of the Original Debt (except by an amount equal to unpaid accrued interest and premium thereon, plus original issue discount and upfront fees plus other fees and expenses reasonably incurred in connection with such extensions, renewals, refinancing or replacement plus an amount equal to any existing commitments unutilized thereunder to the extent such commitments are otherwise permitted hereunder, plus an amount equal to any incremental facilities unutilized thereunder to the extent such amount is otherwise permitted hereunder), (ii) if the Original Debt is unsecured, such Refinancing Debt shall be unsecured, and if the Original Debt was permitted to be secured hereunder, then any Liens securing such Refinancing Debt are not extended to any additional property of an Obligor or any of its Subsidiaries (other than replacement Liens so long as the replacement Liens only encumber those assets or classes of assets that the original Lien encumbered), (iii) no Obligor or any of its Subsidiaries that is not originally obligated with respect to repayment of such Original Debt is required by the terms thereof to become obligated with respect to such Refinancing Debt, (iv) such Refinancing Debt does not result in a shortening of the average weighted maturity of such Original Debt, (v) the terms of such Refinancing Debt are not, taken as a whole, materially more burdensome or restrictive to the Obligors or materially more adverse to the interests of the Purchaser than the original terms of the Original Debt; it being understood that in the case of any refinancing of any Permitted ABL Senior Debt (as such term is defined in the definition of Permitted Debt), such refinancing shall require the prior written consent of the Purchaser if the applicable borrowing base or similar borrowing availability limit (or receivables purchase availability limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) in respect of such Refinancing Debt, including any eligibility criteria, advance rates or other components used in calculating such borrowing base or similar borrowing availability limit (or any receivables purchase limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) would result in any increased borrowing availability (or receivables purchase availability in the case of any receivables purchase or factoring arrangement that constitutes Debt) from that set forth in the applicable Existing Senior Secured Debt Documents as in effect on the date hereof , and (vi) if such Original Debt was subordinated in right of payment to the Obligations, then the terms and conditions of such Refinancing Debt must include subordination terms and conditions that are at least as favorable to the Purchaser as those that were applicable to such Original Debt (and in the case of Original Debt subject to the MidCap Intercreditor Agreement, the holder of such Refinancing Debt shall agree to be bound by the terms of the MidCap Intercreditor Agreement or otherwise shall enter into a new intercreditor agreement with Purchaser having


terms and conditions at least as favorable to the Purchaser as those applicable to the MidCap Intercreditor Agreement).

Responsible Officer ” means any of the Executive Chairman (with respect the Company), Chief Executive Officer, Chief Financial Officer or any other officer of the applicable Obligor acceptable to the Purchaser.

Restricted Distribution ” means as to any Person (a) any dividend or other distribution (whether in cash, securities or other property) on any equity interest in such Person (except those payable solely in its equity interests of the same class), (b) any payment by such Person on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any equity interests in such Person or any claim respecting the purchase or sale of any equity interest in such Person (except in connection with the Existing Warrant), or (ii) any option, warrant or other right to acquire any equity interests in such Person (excluding, however the Existing Warrant), (c) any management fees, salaries or other fees or compensation to any Person holding an equity interest in an Obligor or a Subsidiary of an Obligor (other than (i) payments of compensation to individuals, (ii) customary directors fees, and (iii) advances and reimbursements to employees or directors, all in the Ordinary Course of Business), or to any Affiliate of an Obligor or an Affiliate of any Subsidiary of an Obligor, (d) any lease or rental payments to an Affiliate or Subsidiary of an Obligor other than such payments made in the Ordinary Course of Business and in compliance with Section 8.8, or (e) repayments of or debt service on loans or other indebtedness held by any Person holding an equity interest in an Obligor or a Subsidiary of an Obligor, an Affiliate of an Obligor or an Affiliate of any Subsidiary of an Obligor unless permitted under and made pursuant to a Subordination Agreement, in form and substance reasonably satisfactory to Purchaser, applicable to such loans or other indebtedness.

S360 Georgia ” means Staffing 360 Georgia, LLC, a Georgia limited liability company.

S360 Ltd ” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns.

SEC ” means the United States Securities and Exchange Commission.

Securities Account Control Agreement ” shall mean any securities account control agreement entered into on or after the Closing Date by the applicable securities intermediary, the applicable Obligor, and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

Securities Act ” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

Security Agreement ” means that certain Amended and Restated Security Agreement, dated as of the date hereof, by and among the Company, the Domestic Guarantors and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

Security Documents ” means, collectively, the Security Agreement, the Pledge Agreement, Intellectual Property Security Agreements, the Deposit Account Control Agreements, the Third Party Waiver Agreements and all other security agreements, pledge agreements, collateral assignments, financing statements, powers of attorney, stock transfer powers and other instruments, documents or agreements now or hereafter executed and delivered by any of the Obligors to the Purchaser for the purposes of creating, perfecting, or preserving the Purchaser’s Liens in, to and under any of the Collateral.

Segregated Account ” has the meaning set forth in Section 7.16(b) .


Senior Note shall mean, collectively, the 12% Senior Secured Promissory Note, dated as of the date hereof, in the principal amount of Forty Million Dollars ($ 40,000,000 ) issued by the Company to the Purchaser on the Closing Date pursuant to Section 2.1 , in substantially the form of Exhibit A hereto, and each other senior promissory note now or hereafter delivered by the Company to the Purchaser in substitution, replacement or exchange thereof, in each case as amended, restated, supplemented or modified from time to time pursuant to the provisions of this Agreement.

Series A Catch-up Payment ” has the meaning set forth in the definition of Permitted Distributions.

Solvent ” shall mean, with respect to any Person at any time, that (i) each of the fair value and the present fair saleable value of such Person’s assets (including any rights of subrogation or contribution to which such Person is entitled, under any of the Transaction Documents or otherwise) is greater than such Person’s debts and other liabilities (including contingent, unmatured and unliquidated debts and liabilities) and the maximum estimated amount required to pay such debts and liabilities as such debts and liabilities mature or otherwise become payable; (ii) such Person is able and expects to be able to pay its debts and other liabilities (including, without limitation, contingent, unmatured and unliquidated debts and liabilities) as they mature; and (iii) such Person does not have unreasonably small capital to carry on its business as conducted and as proposed to be conducted.

Sterling Facility Agreement ” means that certain Agreement dated as of November 4, 2013, between Sterling National Bank and Control Solutions International, Inc., as amended, restated, supplemented or otherwise modified from time to time.

Subject Acquisition Agreements ” means, collectively, the Butler Acquisition Agreement and the FirstPro Acquisition Agreement.

Subject Acquisition Documents ” means, collectively, the Butler Acquisition Documents and the FirstPro Acquisition Documents.

Subject Acquisitions ” means, collectively, the Butler Acquisition, and the FirstPro Acquisition.

Subordinated Debt ” means any Debt of any Obligor or Subsidiary thereof that by its terms is expressly subordinated to the Obligations and is incurred pursuant to the terms of the Subordinated Debt Documents and with the prior written consent of the Purchaser, all of which documents must be in form and substance reasonably acceptable to the Purchaser in its good faith discretion.

Subordinated Debt Documents ” means any documents evidencing and/or securing Subordinated Debt governed by a subordination agreement, all of which documents and subordination agreement must be in form and substance reasonably acceptable to the Purchaser in its good faith discretion.

Subordinated Debt Permitted Refinancing ” means the assignment or refinancing of Subordinated Debt if (a) that Subordinated Debt was incurred solely with respect to borrowed money, (b) the assignee or refinancer thereof has given the Purchaser not less than ten (10) Business Days’ prior written notice of such assignment or refinancing, (c) prior to the consummation of any such assignment or refinancing, the assignee or refinancer thereof shall execute and deliver to the Purchaser a joinder to the applicable subordination agreement (or to a replacement thereof) in form and substance satisfactory to the Purchaser in its good faith discretion pursuant to which such assignee or refinancer agrees to be bound by and subject to the terms the Subordination Agreement, (d) the assignee or refinancer specifically acknowledges and agrees in that joinder that no provision of any Subordinated Debt Documents with respect such Subordinated Debt shall contain any provision, and that no action shall be taken, that causes or that would cause a violation of Section 8.5 and (e) there exists no Default or Event of Default.


Subsidiary ” shall mean, as to any person, any corporation, limited liability company, partnership or joint venture, whether now existing or hereafter organized or acquired: (i) in the case of a corporation, of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (other than stock having such voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person and/or one or more of its Subsidiaries or (ii) in the case of a limited liability company, partnership or joint venture, in which such Person or a Subsidiary of such Person is a member, general partner or joint venturer or of which a majority of the partnership or other ownership interests are at the time owned by such Person or one or more of its Subsidiaries.   Unless otherwise specified herein, all references to a “Subsidiary” shall be deemed to refer to “Subsidiaries” of the Company.

Subsidiary Guarantors ” means, collectively, (a) each Subsidiary of the Company identified as a “Subsidiary Guarantor” on the signature pages hereto, (b) each other Subsidiary that now or hereafter becomes a guarantor party to this Agreement and bound by the provisions of Article 4 hereof, by executing and delivering a Joinder Agreement in favor of Purchaser, including without limitation, S360 Georgia and any other Subsidiary of the Company that joins as a Guarantor pursuant to Section 7.10(c) hereof or otherwise.

Swap Contract ” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to provide protection against fluctuations in interest or currency exchange rates, but only if the Purchaser provides its prior written consent to the entry into such “swap agreement”.

Taxes ” shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto.

Third Party Waiver Agreement ” shall mean any waiver agreement, executed on or after the Closing Date, by the applicable landlord, bailee, warehousemen, processor or other third party operator of premises on which any Collateral is located and the applicable Obligor in favor of the Purchaser, in each case in form and substance reasonably satisfactory to the Purchaser.

Transaction Documents ” shall mean, collectively, this Agreement, the Senior Note, the Security Documents, the Existing Warrant Documents, the Post-Closing Letter Agreement, the MidCap Intercreditor Agreement, the Pay Proceeds Letter, any Joinder Agreement executed by the Company or any Subsidiary thereof, together with any other guaranty now or hereafter executed by any Obligor in favor of the Purchaser, and all consents, notices, documents, certificates and instruments heretofore, now or hereafter executed by or on behalf of any Obligor, and delivered to the Purchaser in connection with this Agreement, the Security Documents, the Existing Warrant or the transactions contemplated thereby, each as amended, restated, supplemented or otherwise modified from time to time.

Transferee ” shall mean any permitted direct or indirect transferee of all or any part of the Senior Note purchased under this Agreement.

UCC ” means the Uniform Commercial Code as in effect in the State of New York, unless the context requires application of the Uniform Commercial Code as in effect in another State, in which case such term means the Uniform Commercial Code as in effect in such State.  For purposes of this Agreement, “UCC” also means the equivalent, similar or analogous statutes, regulations and other laws of any foreign


country or jurisdiction as the same may be applicable and the context requires , and any successor statute, regulation or law thereto.

Article 2.

ISSUANCE AND PURCHASE OF SENIOR NOTE

Section 2.1 Purchase and Sale of Senior Note .  The Company hereby agrees to sell to the Purchaser and, subject to the terms and conditions set forth herein and in reliance upon the representations and warranties of the Company contained herein, Purchaser agrees to purchase from the Company the Senior Note for an aggregate total purchase price of Forty Million Dollars ($40,000,000) (the “ Purchase Price ”).  Subject to the conditions as provided below in this Section and to the satisfaction of all conditions precedent set forth in Sections 5.1 and 5.2 hereof, at the Closing the Purchaser shall pay the Purchase Price by wire transfer (or by credit, in the case of any proceeds of the Purchase Price to be applied by the Company to satisfy certain payment obligations owing by the Company to the Purchaser) pursuant to the instructions of the Company as set forth in the Pay Proceeds Letter.  For the avoidance of doubt, if the conditions precedent set forth in Sections 5.1 and 5.2 are not satisfied (or waived in writing by Purchaser in its sole discretion), then Purchaser shall be under no obligation to purchase the Senior Note and pay the Purchase Price and, in such case, Purchaser shall return to the Company the Senior Note, which shall not be considered issued and outstanding unless and until the Closing has occurred (as evidenced by payment of the Purchase Price to the Company as provided above in this Section 2.1 at Closing).

Section 2.2 Interest on the Senior Note .

(a) Interest on the outstanding principal balance of the Senior Note shall accrue at a rate per annum equal to twelve percent (12.00%) on and after the Closing Date (or, if later, the date specified in the Senior Note) until the principal amount of such Senior Note has been paid in full.  All accrued and unpaid interest on the outstanding principal balance of the Senior Note shall be due and payable quarterly on January 1, April 1, July 1 and October 1 in each year on and after the date hereof (with the first such quarterly payment due on January 1, 2018, which shall include all accrued and unpaid interest from the Closing Date) and on the Maturity Date, provided that upon any prepayment of the Senior Note or any portion thereof, accrued and unpaid interest shall be payable with respect to the principal amount of the Senior Note so prepaid on such date of prepayment.  

(b) After maturity, whether by acceleration or otherwise, interest shall accrue on the unpaid principal amount of the Senior Note at the Default Rate set forth in Section 3.4 below and shall be payable on demand.  

Section 2.3 Maturity of Senior Note; Voluntary Prepayments; Funding Losses .

(a) The entire unpaid principal amount of the Senior, together with all accrued and unpaid interest on the Senior Note, shall be due and payable on the Maturity Date, unless sooner accelerated in accordance with the terms hereof.

(b) Optional Prepayments . The Company may prepay principal on the Senior Note in whole or in part from time to time, without penalty or premium, upon five (5) Business Days’ prior notice to Purchaser, provided that (i) any partial prepayment hereunder shall be in a principal amount of not less than $100,000 or, if greater than $100,000, then in integral multiples of $100,000, and (ii) such prepayment is accompanied by all accrued and unpaid interest on the amount prepaid through the date of prepayment.


(c) Prepayment Incentive . The Purchaser hereby agrees that so long as no Default or Event of Default exists and so long as the maturity of the Senior Note has not been accelerated (i) if on or prior to September 1 5 , 2018, the Company makes an optional prepayment of the Senior Note in accordance with Section 2.3(b), then the Company shall be entitled to a three percent (3%) discount on the principal amount to be prepaid (for example, if the Company desires to make an optional prepayment of $1,000,000 in principal during such period, the Company would only be required to pay to the Purchaser $970,000 of such optional prepayment amount and the $30,000 portion of such optional prepayment amount (i.e. 3%) shall be treated as debt forgiveness and shall not be required to be repaid by the Company to the Purchaser), and (ii) if after September 1 5 , 2018 and on or prior to September 1 5 , 2019, the Company makes an optional prepayment of the Senior Note in accordance with Section 2.3(b), then the Company shall be entitled to a two percent (2%) discount on the principal amount to be prepaid (for example, if the Company desires to make an optional prepayment of $1,000,000 in principal during such period, the Company would only be required to pay to the Purchaser $980,000 of such optional prepayment amount and the $20,000 portion of such optional prepayment amount (i.e. 2%) shall be treated as debt forgiveness and shall not be required to be repaid by the Company to the Purchaser); provided , however , that (A) the prepayment notice required to be delivered by the Company to the Purchaser under Section 2.3(b) must (1) specify the full principal amount of the proposed optional prepayment, (2) specify the 3% or 2%, as applicable, discounted portion of such optional prepayment, and state that such discounted amount will be withheld from the specified prepayment amount in accordance with Section 3.2(c), and (3) certify to Purchaser that no Default or Event of Default exists and that all conditions to such discount set forth in Section 2.3(c) have been met, (B) nothing in this Section 2.3(c) shall require the Purchaser to refund or return any payments, whether of principal or interest, on the Senior Note to the extent received by the Purchaser, (C) in connection with any prepayment of principal, the Company must pay to Purchaser all accrued interest on the full amount of the optional prepayment amount in accordance with Section 2.3(b)(i) (without giving effect to any incentive discount provided for in this Section 2.3(c)), and (D) any forgiveness of debt otherwise provided for above in this Section 2.3(c) shall be deemed void ab initio if any payments of principal or interest on the Senior Note received by the Purchaser are required for any reason to be disgorged or turned over by the Purchaser to any court, creditor, trustee, Governmental Authority or other Person, and, in such case, the Company shall remain liable for the full payment of the entire original principal amount of the Senior Note, together with all accrued interest thereon, in accordance with the terms of this Agreement and the Senior Note.  Upon the effectiveness of any valid optional prepayment discount made in accordance with this Section 2.3(c), the remaining principal amount of the Senior Note shall be deemed reduced by the applicable amount of such discount for purposes of calculating accrued interest on the balance of the Senior Note on and after the date of receipt by Purchaser of the applicable optional prepayment.  The Purchaser’s records regarding any principal discounts made in accordance with this Section 2.3(c), and the remaining principal balance of the Senior Note after giving effect to any such discounts, will be conclusive and binding on the Company , absent manifest error .

Article 3.

OTHER PROVISIONS RELATING TO THE SENIOR NOTE

Section 3.1 Making of Payments .  The Company shall make each payment hereunder and under the Senior Note not later than 1:00 p.m. (New York, New York time) on the day when due in Dollars in same day funds to the Purchaser at its Principal Office, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes.  All payments received after that hour shall be deemed to have been received by the Purchaser on the next following Business Day.


Section 3.2 Increased Costs .  In the event that any change in any applicable law, treaty or governmental regulation, or in the interpretation or application thereof, or compliance by the Purchaser with any guideline, request or directive (whether or not having the force of law) from any central bank or other U.S. or foreign financial, monetary or other governmental authority, shall:  (a) subject the Purchaser to any tax of any kind whatsoever with respect to this Agreement, the Senior Note or the Existing Warrant or change the basis of taxation of payments to the Purchaser of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of the Purchaser); (b) impose, modify, or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by or committed to be extended by any office of the Purchaser, including, without limitation, pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or (c) impose on the Purchaser any other condition with respect to this Agreement, the Senior Note or the Existing Warrant; and the result of any of the foregoing is to increase the cost to the Purchaser of making or maintaining the Senior Note or the Existing Warrant or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of the Senior Note or the Existing Warrant, THEN, IN ANY CASE, the Company shall pay, within five ( 5) Business Days following the demand of the Purchaser , such additional amounts as will compensate the Purchaser for such additional cost or such reduction, as the case may be , so long as such amounts have accrued on or after the date which is 270 days prior to the date of demand by the Purchaser .  The Purchaser shall certify the amount of such additional cost or reduced amount to the Company, and such certification shall be conclusive absent manifest error.

Section 3.3 Tax Gross Up and Indemnity .  (a) Subject to clause (b) below, any payment to be made by any Obligor under this Agreement and under any other Note Document, shall be made to the Purchaser free and clear of and without deductions or withholdings of Taxes, unless the Obligor is required by law to make such deduction or withholding, in which case the Obligor shall, to the extent permitted by law, increase the sum due to the Purchaser to the extent necessary to ensure that the Purchaser receives a sum equal to the sum which it would have received if no such deduction or withholding had been made or required to be made.  In addition, the Obligors shall indemnify the Purchaser, within 10 days after demand therefor, for the full amount of any such Tax payable or paid by the Purchaser or required to be withheld or deducted from a payment to the Purchaser and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Government Authority.  A certificate as to the amount of such payment or liability delivered to the Obligors by the Purchaser shall be conclusive absent manifest error.

(b)   On or before the Closing Date, Purchaser shall deliver to the Company (or to its legal counsel for forwarding to the Company) an IRS Form W-9 establishing its exemption from certain federal income tax withholding. Failure to deliver such Form W-9 shall result in the inapplicability of clause (a) above to the extent any withholding of tax is required as a result of such failure.

Section 3.4 Default Rate of Interest .  If the Company shall fail to pay on the due date therefor (after giving effect to any grace periods as provided by the terms of the Transaction Documents), whether by acceleration or otherwise, any principal owing under the Senior Note or any other Obligations, then interest shall accrue on such unpaid principal or other Obligation from the due date until and including the date on which such principal is paid in full at a rate per annum that is five percent (5%) in excess of the rate of interest otherwise payable hereunder (the “ Default Rate ”). Interest calculated at the Default Rate shall be due and payable upon demand by the Purchaser.

Section 3.5 Calculation of Interest .  Interest payable on the Senior Note shall be calculated on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.  If the date for any payment of principal is extended (whether by operation of this Agreement, any provision of law or otherwise), interest shall be payable for such extended time at the rates provided herein.  Whenever any


payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be due on the next succeeding Business Day and interest shall continue to accrue on such obligation until so paid .

Section 3.6 Usury .  In no event shall the amount of interest due or payable on any Obligation, when aggregated with all amounts payable by the Company under any of the Transaction Documents that are deemed or construed to be interest, exceed the maximum rate of interest allowed by Applicable Law and, in the event any such payment is paid by the Company or received by the Purchaser, then such excess sum shall be credited as a payment of principal, unless the Company, as applicable, shall notify the Purchaser in writing that it elects to have such excess sum returned to it forthwith.  It is the express intent of the parties hereto that the Company not pay, and the Purchaser not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Company under Applicable Law.

Article 4.

GUARANTY

Section 4.1 The Guaranty .  Each Subsidiary Guarantor hereby, jointly and severally, guarantees to the Purchaser, as primary obligor and not as surety, the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof.  Each Subsidiary Guarantor hereby further agrees that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, or otherwise), the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal.

Section 4.2 Obligations Unconditional .  The obligations of the Subsidiary Guarantors under this Article 4 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Note Documents, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor (other than the payment in full of the Obligations), it being the intent of this Section 4.2 that the obligations of the Subsidiary Guarantors hereunder shall be absolute and unconditional under any and all circumstances.  Each Subsidiary Guarantor agrees that it shall have no right of subrogation, indemnity, reimbursement or contribution against the Company or any other guarantor for amounts paid under this Article 4 until such time as the Purchaser has been paid in full in respect of all Obligations, and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Purchaser in connection with monies received under the Note Documents.  Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of each Subsidiary Guarantor hereunder which shall remain absolute and unconditional as described above:

(a) at any time or from time to time, without notice to any Subsidiary Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived;


(b) any of the acts mentioned in any of the provisions of any of the Note Document s, or any other agreement or instrument referred to in the Note Document s shall be done or omitted;

(c) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Note Documents, or any other agreement or instrument referred to in the Note Documents shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with; or

(d) any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Subsidiary Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Subsidiary Guarantor).

With respect to its obligations hereunder, each Subsidiary Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Purchaser exhaust any right, power or remedy or proceed against any Person under any of the Note Documents, or any other agreement or instrument referred to in the Note Documents, or against any other Person under any other guarantee of, or security for, any of the Obligations.

Section 4.3 Reinstatement .  The obligations of the Subsidiary Guarantors under this Article 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Subsidiary Guarantor agrees that it will indemnify the Purchaser on demand for all reasonable costs and expenses (including, without limitation, the reasonable and documented out of pocket fees and expenses of counsel) incurred by the Purchaser in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

Section 4.4 Certain Additional Waivers .  Each Subsidiary Guarantor further agrees that it shall have no right of recourse to security for the Obligations except, following the payment in full of all Obligations, through the exercise of rights of subrogation pursuant to Section 4.2 and through the exercise of rights of contribution pursuant to Section 4.7 .

Section 4.5 Remedies .  Each Subsidiary Guarantor agrees that, to the fullest extent permitted by law, as between the Subsidiary Guarantor, on the one hand, and the Purchaser, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2 ) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of this Article 4 .

Section 4.6 Guarantee of Payment; Continuing Guarantee .  The guarantee in this Article 4 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Obligations whenever arising.

Section 4.7 Limitations on Guaranty .


(a) Each Guarantor and the Purchaser hereby confirms that it is its intention that th e g uarantee provided for in this Article 4 not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar Federal or state law .   To effectuate the foregoing intention, each Guarantor and the Purchaser hereby irrevocably agrees that the guarantee of the Obligations by each such Guarantor provided for in this Article 4 shall be limited to an amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws and after giving effect to any rights to contribution provided in Section 4.7 or pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantors, result in the Obligations guaranteed by such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any comparable Federal or state law .  

Section 4.8 Contribution .  At any time a payment in respect of the Obligations guaranteed by the Guarantors under the Article 4 (the “ Guaranteed Obligations ”) is made under this Article 4 , the right of contribution of each Guarantor against each other Guarantor shall be determined as provided in the immediately following sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a “ Relevant Payment ”) is made on the Guaranteed Obligations under this Article 4 .  At any time that a Relevant Payment is made by a Guarantor that results in the aggregate payments made by such Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant Payment exceeding such Guarantor’s Contribution Percentage (as defined below) of the aggregate payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date of the Relevant Payment (such excess, the “ Aggregate Excess Amount ”), each such Guarantor shall have a right of contribution against each other Guarantor who has made payments in respect of the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Guarantor’s Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed Obligations (the aggregate amount of such deficit, the “ Aggregate Deficit Amount ”) in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such other Guarantor.  A Guarantor’s right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment to the time of each computation; provided that no Guarantor may take any action to enforce such right until the Guaranteed Obligations have been paid in full in cash, it being expressly recognized and agreed by all parties hereto that any Guarantor’s right of contribution arising pursuant to this Section 4.7 against any other Guarantor shall be expressly junior and subordinate to such other Guarantor’s obligations and liabilities in respect of the Guaranteed Obligations and any other Obligations owing under this Agreement or the other Note Documents.  As used in this Section 4.7, (i) each Guarantor’s “ Contribution Percentage ” shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “ Adjusted Net Worth ” of each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero; and (iii) the “ Net Worth ” of each Guarantor shall mean the amount by which the fair saleable value of such Guarantor’s assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any Guaranteed Obligations arising under this Article 4 ) on such date.  All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 4.7 , each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment until all of the Obligations have been irrevocably and paid in full in cash.  Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution.  In this connection, each Guarantor has the right to waive its contribution right against any Guarantor to the extent


that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Purchaser.

Article 5.

CONDITIONS PRECEDENT TO EFFECTIVENESS AND CLOSING

Section 5.1 This Agreement and the obligations of the Purchaser to purchase the Senior Note and to pay the Purchase Price therefore are subject to the satisfaction (or waiver by the Purchaser in its sole discretion, which such waiver must be in writing signed by Purchaser and specifically reference this Section 5.1 ) to Purchaser’s satisfaction of each of the following conditions:

(A) No Injunction, etc.   No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of, this Agreement or any other Transaction Document, the Subject Acquisitions or the Subject Acquisition Documents, or the consummation of the transactions contemplated hereby or thereby, or which, in Purchaser’s sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement.

(B) Documentation .  Purchaser shall have received, on or prior to the Closing Date, the following, each in the form and substance satisfactory to Purchaser and its counsel:

(1) duly executed counterparts of this Agreement by each of the Obligors party hereto, together with all Schedules hereto;

(2) a Senior Note in the principal amount of Forty Million Dollars ($40,000,000) duly executed and issued by the Company to the Purchaser;

(3) the Security Agreement, duly executed by each of the Obligors, together with all schedules thereto;

(4) the Pledge Agreement, duly executed by each of the Obligors, which for avoidance of doubt includes, among other collateral specified therein, a pledge of 65% of the equity of all first-tier Foreign Subsidiaries of the Obligors (other than any Excluded Subsidiaries), together with all schedules thereto;

(5) Post-Closing Letter Agreement, duly executed by the Company;

(6) a Closing Certificate, duly executed by the Company, certifying as to no default and the consummation of the Subject Acquisitions and certain other matters, and attaching true, correct and complete copies of all Acquisition Documents and Existing Debt Documents;

(7) [intentionally deleted];

(8) Pay Proceeds Letter, duly executed and delivered by the Company, directing application of the proceeds of the Purchase Price to (i) the payment of all fees and expenses owed by the Company to the Purchaser, including, without limitation, the payment of the non-refundable closing fee due to the Purchaser in the amount of $1,000,000, and all attorneys’ fees and expenses of the Purchaser’s counsel and other advisors, (ii) the payment of a portion of the purchase price consideration due at closing pursuant to the Subject Acquisition Agreements as in effect on the date


hereof, (iii) the repayment in full of all Existing Subordinated Notes, together with all accrued and unpaid interest thereon, (iv) the repayment in full of all outstanding debts and other amounts owing by the Company and/or any of its Subsidiaries in respect of the debt described on Schedule 8.1 that is designated as to be paid off at Closing, including, without limitation (A) all loans, debt and other amounts owing to the Sterling National Bank, including all outstanding amounts under the Sterling Facility Agreement, and (B) all principal, interest and other amounts owing to MidCap Funding X Trust (or any affiliate thereof) solely in respect of all outstanding term loans, and (vi) the payment of certain fees and other amounts as specified in the Funds Flow Statement in the form attached as Exhibit A to the Pay Proceeds Letter (the “ Funds Flow ”) , all in form and substance satisfactory to the Purchaser ;

(9) UCC-1 Financing Statements for filing in each appropriate jurisdiction naming each of the Obligors (including, without limitation, S360 Georgia) as “debtor” and the Purchaser as “secured party” covering the Collateral;

(10) Copies of all stock certificates evidencing any certificated Equity Interests pledged to the Purchaser pursuant to the Pledge Agreement, together with duly executed in blank, undated stock powers attached thereto, including without limitation any and all stock certificates previously delivered by the Company to MidCap Senior Agent; with the originals of such stock certificates and stock powers to follow by no later than the date required for such delivery as set forth in the Post-Closing Letter Agreement;  

(11) UCC, tax, judgment and lien search results with respect to each Obligor, the Butler Entities and the “Sellers” as defined under the FirstPro Acquisition Agreement, from all appropriate jurisdictions and filing offices as requested by the Purchaser, with results satisfactory to the Purchaser, together with executed originals of such termination statements, releases and cancellations of mortgages required by the Purchaser in connection with the removal of any Liens (other than Permitted Liens) against the assets of the Obligors and the assets and equity interests being acquired pursuant to the Subject Acquisition Agreements;

(12) Secretary Certificate for each Obligor, together with attached copies of the certificate of formation, organization or jurisdictional equivalent of each Obligor and all amendments thereto certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, together with the bylaws, operating agreement or equivalent document, in each case, certified by the relevant secretary or manager of such Obligor as of a recent date; and (b) good standing certificates or jurisdictional equivalent for each Obligor, issued by the relevant Secretary of State and or equivalent governmental authority in which such Obligor is organized, in each case as of a recent date; (c) a copy of resolutions adopted by the governing board of each Obligor, authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which such Obligor is a party certified as true, complete and correct by the relevant secretary of manager of such Transaction as of a recent date; and (d) specimen signatures of the officers or members of each Obligor executing the Agreement and the other Transaction Documents, certified as genuine by the relevant secretary or manager of such Obligor;

(13) favorable legal opinion of (i) Haynes & Boone, LLP, counsel to the Obligors, and (ii) Law Offices of Keith A. Minoff, P.C., special Massachusetts counsel to the Obligors, each addressed to the Purchaser, covering such matters relating to the transactions contemplated hereby as the Purchaser may reasonably request, and in form and scope reasonably satisfactory to Purchaser and its counsel;


(14) copies of all consents and waivers, if any, required by any Governmental Authorities or required under any of the Company’s Material Contracts in connection with the transactions contemplated hereby, including, without limitation, co nsents or waivers with respect to any agreements prohibiting (A) the grant of any security inter est on any Collateral , (B) the payment of the Commitment Fee Shares , and (C) t he incurrence of the Obligations, any guaranty thereof by any Guarantor , and any security or pledge by the Obligors in favor of Purchaser, including without limitation any required consent of the MidCap Senior Agent under MidCap ABL Credit Agreement to the incurrence of Debt under the Senior Note, the guarantees by the Guarantors and the grant of Liens in favor of the Purchaser, shall be delivered as condition to the Closing ;

(15) certified copies of (A) the audited annual consolidated financial statements of the Company for the fiscal years ending December 31, 2016, (B) the internally prepared monthly and year-to-date consolidated financial statements of the Company as of July 29, 2017, and (C) three years of preliminary financial projections for the Company and its consolidated subsidiaries, each in form and substance satisfactory to the Purchaser, copies of which are attached as Exhibit C hereto;

(16) a duly executed solvency certificate from the Company as to solvency of each the Obligors, the Company and the Guarantors, taken as a whole, after giving effect to the transactions contemplated hereunder to occur on the Closing Date, including, without limitation, the incurrence of the Debt evidenced by the Senior Note, the consummation of the Subject Acquisitions and the payment of the purchase price consideration under the Subject Acquisition Agreements, each in form and substance satisfactory to the Purchaser;

(17) each other Transaction Document and closing item specified as an item to be delivered on or prior to the Closing Date on the Closing Checklist prepared by Purchaser’s counsel and furnished to the Company and its counsel shall have been executed and delivered to Purchaser or otherwise satisfied, as applicable, in each case, as determined by the Purchaser;

(18) evidence of cancellation of the Global Intercompany Note, dated January 25, 2017, among the Company and the Subsidiaries party thereto;

(19) copies of the Longbridge Intercompany Note, duly executed by S360 Ltd., together with a duly executed allonge by the Company endorsing said note in blank to Purchaser; with originals of such note and allonge to be delivered to Purchaser by no later than the date required for such delivery as set forth in the Post-Closing Letter Agreement; and

(20)

Collateral Assignment of Acquisition Documents, duly executed by the Company and S360 Georgia.

(C) No Material Adverse Effect .  No Material Adverse Effect has occurred since December 31, 2016.

(D) No Default, Etc .  No Default or Event of Default shall exist;

(E) Representations Accurate .  All representations and warranties made by the Obligors contained herein or in any other Transaction Document shall be true and correct in all material respects on and as of the Closing Date.

( F )

Delivery of Note Documents to MidCap .  Company shall have furnished to Purchaser evidence satisfactory to Purchaser that (i) Company has delivered true, correct and complete copies of all


Note Documents to MidCap Senior Agent and (ii) MidCap Senior Agent has acknowledged (by electronic email or otherwise) receipt of same.

(G)

Repayment of Certain Existing Debt/Payoff Letters .  Substantially contemporaneously with the funding of the Purchase Price on the Closing Date, all Debt and other obligations on Schedule 8.1 that are designated as to be paid off at Closing shall have been paid in full and all Liens securing such Debt and other obligations shall have been terminated and released, and the Purchaser shall have received payoff letters from each of the applicable creditors/secured party agents in respect of all such debt, together with UCC 3 termination statements and other Lien releases as necessary with respect to any financing statements or security instruments evidencing any Liens securing such Debt and other obligations, all in form and substance reasonably satisfactory to Purchaser.  

( H )

Payment of Fees and Expenses .  The Company shall have paid to the Purchaser all fees and other amounts due and payable to the Purchaser, including but not limited to the payment of the closing fee in the amount of $1,000,000 (the “ Closing Fee ”) and all reasonable and documented out-of-pocket fees and expenses of legal counsel and other advisors to the Purchaser in connection with the transactions contemplated by the Transaction Documents and the preparation, negotiation, execution and delivery of the Transaction Documents.  The Company hereby authorizes the Purchaser to deduct from the proceeds of the Purchase Price to be paid for the Senior Note all such fees and expenses to the extent not paid directly by the Company on or prior to the Closing Date, as well as all amounts owing under the Existing Subordinated Notes.  The Closing Fee shall be fully earned and non-refundable when paid.

(K)

MidCap Intercreditor Agreement/MidCap Approval .  The Purchaser shall have received the MidCap Intercreditor Agreement, in form and substance satisfactory to it, duly executed by the Purchaser, the MidCap Senior Agent, the Company and other Obligors party thereto.  Purchaser shall have received evidence satisfactory to it of the consent of MidCap Funding X Trust to the incurrence of Debt under the Senior Note and the grant of Liens in favor of the Purchaser to the extent required under the under MidCap ABL Credit Agreement.

(L)

Commitment Fee Shares .  The Company shall have instructed its stock transfer agent to reflect the issuance of the Commitment Fee Shares to the Purchaser on the Closing Date and to deliver a share certificate to the Purchaser as required pursuant to Section 7.15.  Purchaser shall have received copies of said instructions, in form and substance reasonably satisfactory to it.

(M)

Consummation of the Subject Acquisitions .  All conditions to the closing of the Subject Acquisitions as set forth in the Subject Acquisition Agreements (other than the payment of the cash consideration due at closing) shall have been satisfied, and all third party and governmental consents and approvals necessary or required in order to consummate the Subject Acquisitions have been obtained.  There shall be no lawsuit, injunction, order or similar legal proceeding or process existing that challenges or seeks to challenge the validity or consummation of any of any the Subject Acquisitions, or otherwise relating to any of the Subject Acquisitions or any of the Subject Acquisition Documents.  Substantially contemporaneously with the funding of the Purchase Price, the Subject Acquisitions shall have been consummated on the Closing Date in accordance with the terms of the Subject Acquisition Documents as in effect on the Closing Date.  

Article 6.

REPRESENTATIONS AND WARRANTIES

Section 6.1 Representations and Warranties Generally .  Each Obligor hereby represents and warrants to the Purchaser that the following statements set forth in Section 6.2 through and including


Section 6.3 0 are true and correct , which are made after giving effect to the consummation of the Subject Acquisitions on the Closing Date :

Section 6.2 Corporate Existence; Subsidiaries .  Each Obligor is an entity as specified on Schedule 6.2 , is duly organized, validly existing and in good standing under the laws of the jurisdiction specified on Schedule 6.2 and no other jurisdiction, has the same legal name as it appears in such Obligor’s Organizational Documents and an organizational identification number (if any), in each case as specified on Schedule 6.2 , and has all powers and all Permits necessary or desirable in the operation of its business as presently conducted or as proposed to be conducted, except where the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect. Each Obligor is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which jurisdictions as of the Closing Date are specified on Schedule 6.2 , except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 6.2 , no Obligor (a) has had, over the five (5) year period preceding the Closing Date, any name other than its current name, or (b) was incorporated or organized under the laws of any jurisdiction other than its current jurisdiction of incorporation or organization.

Section 6.3 Organization and Governmental Authorization; No Contravention . The execution, delivery and performance by each Obligor Party of the Transaction Documents (including, without limitation (a) the issuance and sale, on the terms and subject to the conditions set forth herein, of (i) the Senior Note in the aggregate issue amount of Forty Million Dollars ($40,000,000), and (ii) the Existing Warrant, and (b) the issuance of the Commitment Fee Shares to which it is a party are within its powers, have been duly authorized by all necessary action pursuant to its Organizational Documents, require no further action by or in respect of, or filing with, any Governmental Authority and, except as set forth on Schedule 6.3 , do not violate, conflict with or cause a breach or a default under (a) any law applicable to any Obligor or any of the Organizational Documents of any Obligor, (b) any Existing Senior Secured Debt Document, or any other material indenture, agreement or other to which any Obligor is a party or by which the Obligors or any of their respective properties is bound, except for such violations, conflicts, breaches or defaults as could not, with respect to this clause (b), reasonably be expected to have a Material Adverse Effect.  The execution, delivery and performance of the Transaction Documents by the Obligors will not result in or require the creation of any material Lien upon or with respect to any of the properties of any Obligor, other than Liens granted in favor of Purchaser pursuant to the Transaction Documents.  

Section 6.4 Binding Effect .  Each of the Transaction Documents to which any Obligor is a party constitutes a valid and binding agreement or instrument of such Obligor, enforceable against such Obligor in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

Section 6.5 Capitalization .  

(a) The authorized equity securities of each of the Obligors as of the Closing Date are as set forth on Schedule 6.5 . All issued and outstanding equity securities of each of the Obligors are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of the Purchaser and Permitted Liens, and such equity securities were issued in compliance with all applicable laws. With the exception of the Existing Warrant Documents, the identity of the holders of the equity securities of each of the Obligors and the percentage of their fully-diluted ownership of the equity securities of each of the Obligors as of the Closing Date is set forth on Schedule 6.5 .  The common shares reserved for issuance by the Company pursuant to any existing contractual commitment is as set forth on Schedule 6.5 . No shares of the capital stock or other equity securities of any Obligors, other than those described above, are issued and outstanding


as of the Closing Date. Except as set forth on Schedule 6.5 , as of the Closing Date there are no (i) preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Obligor of any equity securities of any such entity , and (ii) s tockholder agreements (or equivalent), subscription agreements, voting trust agreements or any other similar agreements relating to the Equity Interests of any of the Obligors.

(b) The Common Stock of the Company underlying the Existing Warrant and the Commitment Fee Shares has been duly and validly authorized and when issued, will be duly and validly issued, fully paid and non-assessable, and such shares of Common Stock of the Company will not be issued in violation of any preemptive or other rights of stockholders of the Company and will be free from all taxes, liens, and charges with respect to the issuance thereof.

Section 6.6 Financial Information .  All information delivered to the Purchaser and pertaining to the financial condition of any Obligor fairly presents the financial position of such Obligor as of such date in conformity with GAAP (and as to unaudited financial statements, subject to normal year-end adjustments and the absence of footnote disclosures). Since December 31, 2016, there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of any Obligor.

Section 6.7 Litigation .  Except as set forth on Schedule 6.7 as of the Closing Date, and except as hereafter disclosed to the Purchaser in writing, there is no Litigation pending against, or to such the Company’s knowledge threatened against or affecting, any Obligor or, to the Company’s knowledge, any party to any Transaction Document other than an Obligor. There is no Litigation pending in which an adverse decision could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of any of the Transaction Documents.

Section 6.8 Ownership of Property .  Each Obligor and each of its Subsidiaries is the lawful owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties and other assets (real or personal, tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person.

Section 6.9 No Default .  No Event of Default, or to the Company’s knowledge, Default, has occurred and is continuing. No Obligor is in breach or default under or with respect to any contract (including any Material Contract), agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.

Section 6.10 Labor Matters .  As of the Closing Date, there are no strikes or other labor disputes pending or, to the Company’s knowledge, threatened against any Obligor. Hours worked and payments made to the employees of the Obligors have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Obligors, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case may be. The consummation of the transactions contemplated by the Transaction Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which it is a party or by which it is bound.

Section 6.11 Regulated Entities .  No Obligor is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.


Section 6.12 [Reserved].

Section 6.13 Compliance With Laws; Anti-Terrorism Laws .

(a) Each Obligor is in compliance with the requirements of all Applicable Laws, except for such laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.

(b) None of the Obligors and, to the knowledge of the Company, no Affiliate of any Obligor (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No Obligor nor, to the knowledge of the Company, any of Affiliates of any Obligor or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order, any similar executive order or other Anti-Terrorism Law.

Section 6.14 Taxes .  All federal, state and local tax returns, reports and statements required to be filed by or on behalf of each Obligor have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed and, except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. Except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, all state and local sales and use Taxes required to be paid by each Obligor have been paid. All federal and state returns have been filed by each Obligor for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made..

Section 6.15 Compliance with ERISA .

(a) Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with, has been administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Obligor has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.

(b) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Obligor and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date, (i) except as set forth in Schedule 6.15 , no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has occurred with respect to any Pension Plan


sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by any Obligor of any material liability, fine or penalty. No Obligor has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Obligor or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable Law; no Obligor nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan, and no Obligor nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

Section 6.16 Consummation of Transaction Documents; Brokers .  Except for fees payable to the Purchaser or as set forth on Schedule 6.16 , no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Transaction Documents, and no Obligor has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.

Section 6.17 [ Reserved ].

Section 6.18 Material Contracts .  Except for the Existing Senior Secured Debt Documents, the Subject Acquisition Documents and the other agreements set forth on Schedule 6.18 as of the Closing Date, there are no (a) employment agreements covering the management of any Obligor, (b) collective bargaining agreements or other similar labor agreements covering any employees of any Obligor, (c) agreements for managerial, consulting or similar services to which any Obligor is a party or by which it is bound, (d) agreements regarding any Obligor, its assets or operations or any investment therein to which any of its equity holders is a party or by which it is bound, (e) real estate leases, Intellectual Property licenses or other lease or license agreements to which any Obligor is a party, either as lessor or lessee, or as licensor or licensee (other than licenses arising from the purchase of “off the shelf” products), (f) customer, distribution, marketing or supply agreements to which any Obligor is a party, in each case with respect to the preceding clauses (a) through (e) requiring payment of more than $250,000 in any year, (g) partnership agreements to which any Obligor is a general partner or joint venture agreements to which any Obligor is a party, (h) third party billing arrangements to which any Obligor is a party, or (i) any other agreements or instruments to which any Obligor is a party, and the breach, nonperformance or cancellation of which, or the failure of which to renew, could reasonably be expected to have a Material Adverse Effect. Each of the Material Contracts is in full force and effect on the date hereof and the consummation of the transactions contemplated by the Transaction Documents and the Subject Acquisition Documents will not give rise to a right of termination in favor of any party (other than any Obligor) to any Material Contract, except for such Material Contracts the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.  

Section 6.19 [ Reserved ].

Section 6.20 Intellectual Property . Each Obligor owns, is licensed to use or otherwise has the right to use, all Intellectual Property that is material to the condition (financial or other), business or operations of such Obligor. All Intellectual Property existing as of the Closing Date which is issued,


registered or pending with any United States or foreign Governmental Authority (including, without limitation, any and all applications for the registration of any Intellectual Property with any such United States or foreign Governmental Authority) and all licenses under which any Obligor is the licensee of any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person are set forth on Schedule 6.20 . Such Schedule 6.20 indicates in each case whether such registered Intellectual Property (or application therefor) is owned or licensed by such Obligor , and in the case of any such licensed registered Intellectual Property (or application therefor), lists the name and address of the licensor and the name and date of the agreement pursuant to which such item of Intellectual Property is licensed and whether or not such license is an exclusive license and indicates whether there are any purported restrictions in such license on the ability to such Obligor to grant a security interest in and/or to transfer any of its rights as a licensee under such license. Except as indicated on Schedule 6.20 , the applicable Obligor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each such registered Intellectual Property (or application therefor) purported to be owned by such Obligor , free and clear of any Liens and/or licenses in favor of third parties or agreements or covenants not to sue such third parties for infringement. All registered Intellectual Property of each Obligor is duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. No Obligor is party to, nor bound by, any material license or other agreement with respect to which any Obligor is the licensee that prohibits or otherwise restricts such Obligor from granting a security interest in such Obligor ’s interest in such license or agreement or other property. To the Company ’s knowledge, each Obligor conducts its business without infringement or claim of infringement of any Intellectual Property rights of others and there is no infringement or claim of infringement by others of any Intellectual Property rights of any Obligor , which infringement or claim of infringement could reasonably be expected to have a Material Adverse Effect.

Section 6.21 Solvency .  After giving effect to the incurrence of Debt under the Senior Note, the consummation of the transactions under the Transaction Documents and the Subject Acquisition Documents on the Closing Date, the liabilities and obligations of the Company and each Obligor under the Transaction Documents, taken as a whole, are Solvent.

Section 6.22 Full Disclosure .  None of the written information (financial or otherwise) furnished by or on behalf of any Obligor to the Purchaser in connection with the consummation of the transactions contemplated by the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. All financial projections delivered to Purchaser by the Company (or their agents) have been prepared on the basis of the assumptions stated therein. Such projections represent the Company’s best estimate of the future financial performance of the Company and the other Obligors, as applicable, and such assumptions are believed by the Company to be fair and reasonable in light of current business conditions; provided, however, that the Company can give no assurance that such projections will be attained.

Section 6.23 Interest Rate .  The rate of interest paid under the Senior Note and the method and manner of the calculation thereof do not violate any usury or other law or Applicable Laws, or any of the Organizational Documents.

Section 6.24 Subsidiaries .  Except as set forth on Schedule 6.24 , the Company does not own any stock, partnership interests, limited liability company interests or other equity securities or Subsidiaries except for Permitted Investments.  As of the Closing Date, (i) there is no Subsidiary of the Company that is not an Obligor other than the Excluded Subsidiaries, and (ii) the Company does not own any Subsidiaries other than the Subsidiaries identified on Schedule 6.24 .


Section 6.25 [Reserved] .

Section 6.26 Approvals .  No consent of any Person and no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforcement of any Transaction Document (including, without limitation, the issuance of the Senior Note, the Existing Warrant and the Commitment Fee Shares) which has not been obtained or made as of the date hereof.  No approval of the stockholders of the Borrower shall be required under Nasdaq rules and regulations or otherwise due to the execution and performance under the Transaction Documents, including, without limitation, the issuance of the Commitment Fee Shares at the Closing.

Section 6.27 Insurance .  Each Obligor has in place, with financially sound and reputable insurance companies or associations, casualty, public liability and other insurance, including without limitation, product liability insurance, in such amounts and covering such risks as are customarily maintained by other companies operating similar businesses in similar locations and will furnish to the Purchaser on the Closing Date, information presented in reasonable detail as to the insurance so carried, including (i) endorsements to (A) all “All Risk” policies naming the Purchaser as loss payee and (B) all general liability and other liability policies naming the Purchaser as additional insured and (ii) legends providing that no cancellation, material reduction in amount or material change in insurance coverage thereof shall be effective until at least thirty (30) days after receipt by the Purchaser of written notice thereof.

Section 6.28 Continuing Business of Company .  There exists no actual or, to the knowledge of any Obligor, threatened in writing termination, cancellation or material limitation of, or any material modification or change in, (i) the business relationships of any Obligor with any customer or group of customers of such Obligor whose business individually or in the aggregate is material to the operations or financial condition of such Obligor, (ii) the business relationships of any Obligor with any of its material suppliers or (iii) any Material Contract; and each Obligor reasonably anticipates that after the consummation of the transactions contemplated by this Agreement, all such customers and suppliers will continue a business relationship with such Obligor on a basis no less favorable to such Obligor than as heretofore conducted.

Section 6.29 [ Reserved ].

Section 6.30 No General Solicitation .  Except as set forth in Schedule 6.16 , neither the Company, nor any of its officers, employees, agents, directors, stockholders or partners has engaged the services of a broker, investment banker or finder to contact any potential investor nor has the Company or any of the Company’s officers, employees, agents, directors, stockholders or partners, agreed to pay any commission, fee or other remuneration to any third party to solicit or contact any potential investor, in either case with respect to the issuance of the Senior Note or the Existing Warrant.  The Company and its officers, directors, employees, agents, stockholders and representatives have not published, distributed, issued, posted or otherwise used or employed, and shall not publish, distribute, issue, post or otherwise use or employ, any form of general solicitation or general advertising, including, without limitation, via mass publication (including via mass e-mail to persons or entities with whom the Company has no substantial and pre-existing relationship), television, radio, the Internet or any other form of mass media (“ General Solicitation ”) within the meaning of Rule 502(c) under the Securities Act or any General Solicitation that constitutes a written communication within the meaning of Rule 405 under the Securities Act in connection with the offer and sale of the Senior Note and the Existing Warrant.  The Company shall conduct the offering of the Senior Note, and has conducted the offering of the Existing Warrant, in a manner so as to allow the offering to qualify for a private placement exemption from registration under the Securities Act, including Rule 506(b) thereunder.


Section 6.31 Representations and Warranties of the Purchaser .  The Purchaser hereby represents and warrants to the Company as of the Closing Date that:

(a) Authorization .  The Purchaser has the requisite legal capacity, power and/or authority to enter into and perform under the Transaction Agreements.  The Transaction Agreements, when executed and delivered by each Purchaser, will constitute valid and legally binding obligations of such Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (b) to the extent the indemnification provisions contained in any Existing Warrant Documents may be limited by applicable federal or state securities laws.

(b) Purchase Entirely for Own Account .  The Senior Note to be acquired by the Purchaser on the Closing Date is being acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof; it being understood that Purchaser may after the Closing Date assign or transfer all or any part of the Senior Note in accordance with the terms of this Agreement.

(c) Disclosure of Information .  The Purchaser further represents that it has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Senior Note and the business, properties, prospects and financial condition of the Company.  The foregoing, however, does not limit or modify the representations and warranties of the Company in Article 6 of this Agreement or the right of the Purchaser to rely on such representations and warranties.

(d) Restricted Securities .  The Purchaser understands that the Senior Note and the Commitment Fee Shares may be characterized as “restricted securities” under the federal securities laws, inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations they may not be resold without registration under the Securities Act, except in certain limited circumstances.  In this connection, the Purchaser represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.  The Purchaser acknowledges that the Company shall have no obligation to register or qualify the Senior Note, except as set forth in this Agreement.  The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the applicable securities, and on requirements relating to the Company that are outside the Purchaser's control, and which the Company is under no obligation (except as otherwise set forth in Section 7.14 hereof) and may not be able to satisfy.

(e) Legends .  The Purchaser understands that the Existing Warrant, and any securities issued in respect of or exchange for the Existing Warrant, may bear one or all of the following legends:

 

( i )

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF


 

COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

( ii )

Any legend set forth in or required by the other Transaction Agreements.

 

( iii )

Any legend required by the securities laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

(f) Accredited Investor .  The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

(g) ERISA . The Purchaser is not acquiring the Senior Note and warrant with the assets of any employee benefit plan, which is subject to Title I of ERISA or any “plan” which is subject to Section 4975 of the Code.

Each of the foregoing representations and warranties shall be deemed made by each Obligor on and as of the Closing Date and shall survive the execution and delivery of this Agreement and the Closing.

Article 7.

AFFIRMATIVE COVENANTS

So long as the Senior Note or any other Obligations (other than contingent obligations to the extent that no claim giving rise thereto has been asserted) shall remain outstanding pursuant to the Note Documents, unless the Purchaser shall otherwise consent in the manner set forth in Section 10.4 , each Obligor shall, and shall cause each of its Subsidiaries to, comply with each of the following covenants:

Section 7.1 Financial Statements and Other Reports . The Company will deliver to the Purchaser: (a) as available, but no later than thirty (30) days after the last day of each month, a company prepared “flash report” covering the Company’s and its Consolidated Subsidiaries’ consolidated operations during the period, prepared in a manner, scope and detail satisfactory to the Purchaser, certified by a Responsible Officer and in a form acceptable to the Purchaser, (b) as available, but no later than forty five (45) days (unless further extended to sixty (60) days pursuant to the grant of a valid extension to the filing deadline of the related 10-Q from the SEC) after the last day of each Fiscal Quarter of the Company, a company prepared consolidated balance sheet, cash flow and income statement (including year-to-date results) covering the Company’s and its Consolidated Subsidiaries’ consolidated operations during the period, prepared under GAAP, consistently applied, setting forth in comparative form the corresponding figures as at the end of the corresponding Fiscal Quarter of the previous Fiscal Year and the projected figures for such period based upon the projections required hereunder, all in reasonable detail, certified by a Responsible Officer and in a form acceptable to the Purchaser; (c) together with the flash reports described in (a) above, evidence of payment and satisfaction of all payroll, withholding and similar taxes due and owing by all Obligors with respect to the payroll period(s) occurring during such month, subject to Section 7.2; (d) as soon as available, but no later than one hundred five (105) days after the last day of the Company’s Fiscal Year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to the Purchaser in its reasonable discretion; (e) within five (5) days of delivery or filing thereof, copies of all statements, reports (other than borrowing base reports delivered pursuant thereto) and notices made available to the Company’s security holders or to any agents or lenders under any Existing Senior Secured Debt Documents and copies of all reports and other filings made by the Company with any stock exchange on which any securities of any Obligor are traded and/or the SEC; (f) a prompt written report of any legal actions pending or threatened against any Obligor or any of its


Subsidiaries that could reasonably be expected to result in damages or costs to any Obligor or any of its Subsidiaries of One Hundred Fifty Thousand Dollars ($ 1 50,000) or more; (g) prompt written notice of an event that materially and adversely affects the value of any Intellectual Property; (h) budgets, sales projections, operating plans and other financial information and information, reports or statements regarding the Obligors , their business and the Collateral (including, without limitation, copies of any borrowing base reports delivered pursuant to any of the Existing Senior Secured Debt Documents) as the Purchaser may from time to time reasonably request. The Company will, within thirty (30) days after the last day of each month, deliver to the Purchaser (i) with the first two monthly flash reports described in clause (a) above and (ii) with quarterly financial statements described in clause (b) above, a duly completed Compliance Certificate signed by a Responsible Officer setting forth calculations showing compliance with the financial covenants set forth in this Agreement ; (i) promptly upon receipt thereof, copies of all financial statements of, and all reports and management letters submitted by, independent public accountants to any of the Obligors in connection with each annual, interim, or special audit of any Obligor’s financial statements; (j) within sixty (60) days following the end of the Company’s F iscal Y ear, the Company shall deliver to the Purchaser the annual budget for both the Company and any of its Subsidiaries, including forecasts of the income statement, the balance sheet and a cash flow statement for the immediately succeeding year on a quarterly basis and thereafter, shall promptly deliver any amendment thereto; (k) p romptly upon their becoming available, the Company shall deliver to the Purchaser copies of all Material Contracts or material amendments thereto entered into after the Closing Date .

Section 7.2 Payment and Performance of Obligations .  Each Obligor (a) will pay and discharge, and cause each Subsidiary to pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities (i) that may be the subject of a Permitted Contest, and (ii) the nonpayment or nondischarge of which could not reasonably be expected to have a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (b) without limiting anything contained in the foregoing clause (a), pay all amounts due and owing in respect of Taxes (including without limitation, payroll and withholdings tax liabilities) on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, other than in connection with any tax payment plan with the applicable Governmental Authority on terms consistent with past practices, provided that Purchaser has been furnished with a copy of such payment plan (or if such payment plan is not in writing, the Company shall either (i) provide the Purchaser with a certificate of a Responsible Officer setting forth the material terms and conditions of such payment plan or (ii) for any such plans existing on the Closing Date, disclose the material terms and conditions of such plan on Schedule 6.14 ), (c) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of all of their respective obligations and liabilities, and (d) will not breach or permit any Subsidiary to breach, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, except for such breaches or defaults which could not reasonably be expected to have a Material Adverse Effect.

Section 7.3 Maintenance of Existence .  Each Obligor will preserve, renew and keep in full force and effect and in good standing, and will cause each Subsidiary to preserve, renew and keep in full force and effect and in good standing, their respective existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business.

Section 7.4 Maintenance of Property; Insurance .

(a) Each Obligor will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. If all or any part of the Collateral useful or necessary in its business becomes damaged or destroyed,


each Obligor will, and will cause each Subsidiary to, promptly and completely repair and/or restore the affected Collateral in a good and workmanlike manner.

(b) Upon completion of any Permitted Contest, Obligors shall, and will cause each Subsidiary to, promptly pay the amount due, if any, and deliver to the Purchaser proof of the completion of the contest and payment of the amount due, if any, following which the Purchaser shall return the security, if any, deposited with the Purchaser pursuant to the definition of Permitted Contest.

(c) Each Obligor will maintain with financially sound and reputable insurance companies or associations casualty, public liability and other insurance in such amounts and covering such risks as are customarily maintained by other companies operating similar businesses in similar locations, and, at the written request of the Purchaser, provide evidence of compliance with this covenant to the Purchaser in the form of certificates of insurance naming the Purchaser as an additional insured, assignee and lender loss payee, as applicable, on each insurance policy required to be maintained pursuant to this Section 7.4 pursuant to endorsements in form and substance reasonably acceptable to the Purchaser.

Section 7.5 Compliance with Laws and Material Contracts .  Each Obligor will comply, and cause each Subsidiary to comply, with the requirements of all Applicable Laws and Material Contracts, except to the extent that failure to so comply could not reasonably be expected to (a) have a Material Adverse Effect, or (b) result in any Lien upon a material portion of the assets of any such Obligor in favor of any Governmental Authority.

Section 7.6 Inspection of Property, Books and Records .  Each Obligor will keep, and will cause each Subsidiary to keep, proper books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Obligor or any applicable Subsidiary, representatives of the Purchaser to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the Collateral, to verify the amount and age of the accounts, the identity and credit of the respective account debtors, to review the billing practices of Obligors and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired. Notwithstanding the foregoing, in the absence of a Default or an Event of Default, the Purchaser exercising any rights pursuant to this Section 7.6 shall give the applicable Obligor or any applicable Subsidiary commercially reasonable prior notice of such exercise and (ii) Obligors shall only be required to reimburse the costs of the Purchaser for one such audit, inspection, verification or examination per Fiscal Year. No notice shall be required during the existence and continuance of any Default or Event of Default or any time during which the Purchaser reasonably believes a Default or an Event of Default exists.

Section 7.7 Use of Proceeds .  The Company shall use the proceeds from the sale of the Senior Note solely for (i) the payment of the purchase price for the Subject Acquisitions, (ii) the repayment in full of the Existing Subordinated Notes, together with the Debt on Schedule 8.1 that is designated as to be paid off at Closing on the Closing Date, (iii) to pay on the Closing Date the transaction fees and expenses incurred by the Company in connection with the transactions contemplated by this Agreement and the other items, in each case, as indicated on Funds Flow, and (iv) the remainder for working capital and the general corporate purposes of the Company, and none of such proceeds will be used, directly or indirectly, (a) for the purpose of purchasing or carrying any “margin security” or “margin stock” or for the purpose of reducing or retiring any debt that originally was incurred to purchase or carry a “margin security” or “margin stock” or for any other purpose that might constitute this transaction a “purpose credit” within the


meaning of the regulations of the Board of Governors of the Federal Reserve System , (b) for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of any Anti-Corruption Laws, or (c) to fund any activities or business of or with any Designated Person or in any country or territory that at the time of such funding is itself the subject of any sanctions under any Anti-Terrorism Laws or any sanctions program administered by (x) OFAC or (y) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom in violation of any Anti-Terrorism Laws.  Neither the purchase of the Senior Note hereunder nor the use of the proceeds thereof, will result in a violation of any Anti-Terrorism Laws or any sanctions program administered by (x) OFAC or (y) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom , or otherwise in violation of any Anti-Corruption Laws.

Section 7.8 [Reserved].

Section 7.9 Notices of Litigation and Defaults .  Obligors will give prompt written notice to the Purchaser (a) of any litigation or governmental proceedings pending or threatened (in writing) against any Obligor which would reasonably be expected to have a Material Adverse Effect or which in any manner calls into question the validity or enforceability of any Transaction Document or any Subject Acquisition Document, (b) upon any Obligor becoming aware of the existence of any Default or Event of Default together with a certificate of a Responsible Officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto, (c) if any Obligor is in breach or default under or with respect to any Material Contract, or if any Obligor is in breach or default under or with respect to any other contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default in each case or in the aggregate could reasonably be expected to have a Material Adverse Effect, (d) of any strikes or other labor disputes pending or, to the Company’s knowledge, threatened against any Obligor, (e) if there is any infringement or claim of infringement by any other Person with respect to any Intellectual Property rights of any Obligor that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any Obligor in the conduct of its business is infringing on the Intellectual Property Rights of others, and (f) of all returns, recoveries, disputes and claims that involve more than $250,000. Obligors represent and warrant that Schedule 7.9 sets forth a complete list of all matters existing as of the Closing Date for which notice could be required under this Section and all litigation or governmental proceedings pending or threatened (in writing) against any Obligor as of the Closing Date.

Section 7.10 Further Assurances; Additional Guarantors .

(a) Each Obligor will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as the Purchaser may from time to time reasonably request in order to carry out the intent and purposes of the Transaction Documents and the transactions contemplated thereby, including all such actions to establish, create, preserve, protect and perfect a first priority Lien (subject only to Permitted Liens) in favor of the Purchaser on the Collateral (including Collateral acquired after the date hereof).

(b) Upon receipt of an affidavit of an authorized representative of the Purchaser as to the loss, theft, destruction or mutilation of the Senior Note or any other Transaction Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Senior Note or other applicable Transaction Document, Obligors will issue, in lieu thereof, a replacement Senior Note or other applicable Transaction Document, dated the date


of such lost, stolen, destroyed or mutilated Senior Note or other Transaction Document in the same principal amount thereof and otherwise of like tenor.

(c) Within ten (10) Business days (or such later date as the Purchaser may agree in its sole discretion) after any Person becomes a direct or indirect Domestic Subsidiary of the Company or any other Obligor (other than any the Excluded Subsidiaries), whether by formation, acquisition or otherwise, the Company shall cause such Person to (i) become a Subsidiary Guarantor and to grant a lien on its assets by becoming a “Debtor” party to the Security Agreement and a “Pledgor” party to the Pledge Agreement, by executing and delivering to the Purchaser a Joinder Agreement in form and substance satisfactory to the Purchaser, (ii) the Company shall, and shall cause the applicable direct parent company of such new Domestic Subsidiary, to execute and deliver to the Purchaser a Joinder Agreement to such new Domestic Subsidiary as a “Pledged Entity” under the Pledge Agreement and pledge all of the equity interests of such new Domestic Subsidiary as security for the Obligations, in form and substance satisfactory to the Purchaser, and (iii) deliver to the Purchaser such charter documents, resolutions and favorable opinions of counsel reasonably requested by the Purchaser with respect to such new Domestic Subsidiary (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in the immediately preceding clauses (i) through (ii)), all in form, content and scope reasonably satisfactory to Purchaser.

Section 7.11 [Reserved]

Section 7.12 Maintenance of Management .  The Company will cause its business to be continuously managed by its present executive chairman, chief executive officer and chief financial officer or such other individuals serving in such capacities as shall be appointed by the board of directors of the Company. The Company will notify the Purchaser promptly in writing of any change in its board of directors or executive officers.

Section 7.13 [Reserved].

Section 7.14 Registration Rights; Indemnification .

(a) Registration Rights . The Commitment Fee Shares will be included in an existing Form S-3 Shelf Registration Statement with a resale prospectus through an amendment to such registration statement if permitted or through a new resale registration statement, either of which shall be filed by the Company with the SEC at the Company’s sole expense not later than forty-five (45) days after the Closing Date. The Company shall use its best efforts to cause such amendment to be declared effective by the SEC at the earliest practicable time and to remain effective for the period of the distribution contemplated thereby. The Company shall also (i) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period of the distribution and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement in accordance with the Purchaser’s intended method of disposition, (ii) use its commercially reasonable efforts to register or qualify the securities covered by such registration statement under the securities or blue sky laws of such jurisdictions as the sellers of securities or, in the case of an underwritten public offering, the managing underwriter, may reasonably request; and (iii) notify each seller when the prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, of any request by the SEC for amendments or supplements to such registration statement or to amend or to supplement such prospectus or for additional information, of the issuance by the


SEC of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose.

(b) Indemnification .  To the extent permitted by law, the Company shall indemnify and hold harmless the Purchaser, and any of its members, officers, managers, legal counsel and accountants, underwriter (as defined in the Securities Act), against any expenses, losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act or other applicable federal or state law, insofar as such expenses, losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “ Violation ”):

(i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

(ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading;

(iii) any violation or alleged violation by the Company of the Securities Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act or any federal or state securities law in connection with the offering covered by such registration statement;

and the Company shall reimburse the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person for any legal or other expenses reasonably incurred by it, as incurred, in connection with investigating or defending any such loss, claim, damage liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in any such registration statement in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use in preparation thereof.  Lender agrees to promptly notify the Company in writing of any such claim or suit that the pleading, demand letter, or other notice is served upon Lender; and agrees to cooperate in a reasonable manner with the Company and at the Company’s expense, with respect to the defense and disposition of such claim. The Company shall have control of the defense or settlement of any such claim; provided, however, that the Company shall not enter into any settlement that obligates the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person to take any action or incur any expense without such person’s prior written consent, and further provided that the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person shall have the right to be represented by independent counsel of their own choosing, at their own expense, in connection with such claim or suit. If the Company fails to defend such suit, then the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person, through counsel of their own choice, shall, at the expense of the Company, have the right to conduct the defense of such claim; provided however that the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person shall not enter into any settlement that obligates the Company to take any action or incur any expense without the Company’s prior written consent.

Section 7.15 Closing Commitment Fee .  The Company shall issue to the Purchaser two million two hundred and fifty thousand (2,250,000) shares of the Company's Common Stock (the " Commitment Fee Shares ") as a closing commitment fee, which fee shall be fully earned on the Closing Date. Such shares shall be issued in the name of JIG on the Closing Date and the related share certificate shall be delivered to


the Purchaser not later than five (5) days after the Closing Date . The Commitment Fee Shares shall be evidenced by an original share certificate duly executed, and validly issued and delivered by the Company to the Purchaser, representing 2,250 ,000 shares of C ommon Stock of the Company.    Such share certificate shall contain any restrictive legend comparable to the legend in Section 6.13€(i), provided however, the Company shall promptly cause such legend to be removed at any time that there is an effective registration statement covering the resale of such shares. The Purchaser agrees that it shall return such share certificate to the Company for its prompt inclusion of a restrictive legend comparable to the legend in Section 6.31(e)(i) if the Company provides written notice to the Purchaser that the registration statement referenced in Section 7.14 has ceased to be effective under applicable SEC rules and regulations.

Section 7.16 Post-Closing Covenants; Segregated Account Covenant .

(a) Post-Closing Letter Agreement .  The Company shall fully and timely comply with any and all covenants set forth in the Post-Closing Letter Agreement.

(b) Segregated Account Covenants .  On or prior to the time required for such in the Post-Closing Letter Agreement, the Company shall have established and shall maintain at all times thereafter a deposit account with a bank reasonably acceptable to the Purchaser (together with any replacement deposit account or additional deposit account of the Company approved in writing by the Purchaser, referred to herein the “ Segregated Account ”), which account shall not at any time be subject to any deposit account control agreement in favor of any Person (other than the Purchaser) and shall not be an account designated as an ABL Priority Deposit Account (as such term is defined in the MidCap Intercreditor Agreement or otherwise subject to a deposit account control agreement in favor of MidCap Senior Agent or any other Person (other than the Purchaser)).  The Company and the applicable depository bank shall have entered into a Deposit Account Control Agreement in favor of the Purchaser with respect to the Segregated Account within the time required for such in the Post-Closing Letter Agreement, and such Deposit Account Control Agreement shall remain in effect at all times after the date of execution and delivery by all parties thereto.  On and at all times after the establishment of the Segregated Account as required above, the Company will, and will cause each Subsidiary to, deposit into the Segregated Account (i) any and all dividends or distributions made by any Subsidiary to the Company or to any other Obligor on or after the date such Segregated Account is established, (ii) any and all payments of principal or interest under of the Longbridge Intercompany Note received by the Company on or after the date such Segregated Account is established, (iii) any and all cash proceeds received by the Company or any Subsidiary from the sale or issuance of any Equity Interests on or after the date such Segregated Account is established, (iv) any and all cash proceeds received by the Company or any other Obligor from the sale of any assets or equity interests of the Company or any Subsidiary on or after the date such Segregated Account is established other than ABL Priority Subsidiary Asset Sale Proceeds (as such term is defined in the MidCap Intercreditor Agreement), it being understood that the items described in the immediately preceding clauses (i) through (iv) inclusive shall not at any time on or after the date hereof be (A) deposited into any deposit account which is subject to a deposit account control agreement with MidCap Senior Agent or (B) otherwise commingled with any proceeds or other collateral in which MidCap has a first priority Lien in pursuant to the terms of the MidCap Intercreditor Agreement.  The Company will promptly upon request furnish Purchaser with copies of all bank statements with respect to the Segregated Account.  The Company shall have the right to make withdrawals from the Segregated Account from time to time to pay expenses in the Ordinary Course of Business, to make payments of principal and interest due under the MidCap ABL Credit Agreement and otherwise to use such monies for lawful purposes not otherwise prohibited under this Agreement, in each case, so long as no Event of Default has occurred and is continuing or would result therefrom.  This Section 7.16(b) is in addition to and not in limitation of Section 8.14.  Upon the establishment of the


Segregated Account (or any additional Segregated Account which has been approved by the Purchaser in writing ) , the Parent shall promptly (and in any event within two (2) Business Days thereafter ) deliver notice thereof to the MidCap Senior Agent in accordance with the terms of the MidCap Intercreditor Agreement, together with a supplement to Schedule 2 to the MidCap Intercreditor Agreement designating and/or adding such Segregated Account as a “Term Debt Priority Deposit Account” (as such term is defined in the MidCap Intercreditor Agereement) , in a form and substance reasonably satisfactory to the Purchaser; it being understood that the Company shall not deliver any such notice to MidCap Senior Agent of the designation of any Segregated Account or any supplement to Schedule 2 to the MidCap Intercreditor Agreement adding or changing any Segregated Account, in each case without the prior written consent of the Purchaser.

(c)

Upon the exercise by the Purchaser at any time of any purchase option under the MidCap Intercreditor Agreement, the Company shall promptly (and in any event within five (5) Business Days following demand therefore by the Purchaser) reimburse the Purchaser in full for any prepayment fee or premium paid by the Purchaser to the MidCap Senior Agent in connection with the exercise of any such purchase option. Nothing in the immediately preceding sentence is intended to obligate, nor shall it be construed as obligating, the Purchaser at any time and under any circumstances to exercise such purchase option, it being understood that any decision by the Purchaser to exercise such purchase option shall be made by the Purchaser in its sole and absolute discretion.

Article 8.

NEGATIVE COVENANTS AND FINANCIAL COVeNANTS

For so long as the Senior Note or any other Obligations shall remain outstanding (other than contingent obligations to the extent that no claim giving rise thereto has been asserted), unless the Purchaser shall otherwise consent in the manner set forth in Section 10.4 , each Obligor agrees to comply with the following covenants:

Section 8.1 Debt; Contingent Obligations .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt. No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any Contingent Obligations, except for Permitted Contingent Obligations.

Section 8.2 Liens .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.

Section 8.3 Restricted Distributions .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Distribution, except, provided there exists no Default or Event of Default, for Permitted Distributions.

Section 8.4 Restrictive Agreements .  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) enter into or assume any agreement (other than (w) the Transaction Documents (x) any agreements for purchase money debt permitted under clause (c) of the definition of Permitted Debt and (y) the Existing Senior Secured Debt Documents as in effect on the date hereof) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind (except as provided by the Existing Senior Secured Debt Documents) on the ability of any Subsidiary


to: (i) pay or make Restricted Distributions to any Obligor or any Subsidiary; (ii) pay any Debt owed to any Obligor or any Subsidiary (other than to another Excluded Subsidiary); (iii) make loans or advances to any Obligor or any Subsidiary; or (iv) transfer any of its property or assets to any Obligor or any Subsidiary.

Section 8.5 Payments and Modifications of Subordinated Debt .  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) declare, pay, make or set aside any amount for payment in respect of any Subordinated Debt, except for payments made in full compliance with and expressly permitted under a subordination agreement in form and substance satisfactory to Purchaser (other than by a Subordinated Debt Permitted Refinancing), (b) amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full compliance with the Subordination Agreement, (c) declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by separate agreement, is subordinated to the Obligations, except for payments made in full compliance with and expressly permitted under the subordination provisions applicable thereto, or (d) amend or otherwise modify the terms of any such Debt if the effect of such amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount of, such Debt, (iii) change in a manner adverse to any Obligor or the Purchaser any event of default or add or make more restrictive any covenant with respect to such Debt, (iv) change the prepayment provisions of such Debt or any of the defined terms related thereto, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Debt in a manner adverse to any of the Obligors or the Purchasers. The Obligors shall, prior to entering into any such amendment or modification, deliver to the Purchaser reasonably in advance of the execution thereof, any final or execution form copy thereof.  For the avoidance of doubt, nothing contained in this Section is intended to restrict the Company from making payments of principal and interest with respect to any Permitted ABL Senior Debt in accordance with the terms of the Existing Senior Secured Debt Documents and the Midcap Intercreditor Agreement; it being understood that Permitted ABL Senior Debt is not Subordinated Debt.

Section 8.6 Consolidations, Mergers and Sales of Assets; Change in Control .  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) consolidate or merge or amalgamate with or into any other Person (provided that (i) any Subsidiary may merge into the Company so long as the Company is the surviving entity, (ii) any Domestic Subsidiary may merge with and into any Obligor, provided that in the case of any merger with the Company, the Company is the surviving entity, and (iii) any Foreign Subsidiary may merge with and into any other Foreign Subsidiary of the Company or any Obligor, provided that in the case of a merger of a Foreign Subsidiary with and into any Obligor, such Obligor is the surviving entity, or (b) consummate any Asset Dispositions other than Permitted Asset Dispositions. No Obligor will suffer or permit to occur any Change in Control with respect to itself, any Subsidiary or any Guarantor, except any Change of Control with respect to a Subsidiary resulting from a merger or consolidation of the type expressly permitted under clauses (i) through (ii) of the proviso above in this Section 8.6 .

Section 8.7 Purchase of Assets, Investments .  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) acquire or enter into any agreement to acquire any assets (other than in the Ordinary Course of Business), or acquire all or substantially all of the assets or Equity Interests of any Person (whether by merger, asset purchase, stock purchase or otherwise), except as permitted under clause (h) or clause (i) of the definition of Permitted Investments; (b) engage or enter into any agreement to engage in any joint venture or partnership with any other Person; or (c) acquire or own or enter into any agreement to acquire or own any Investment in any Person other than Permitted Investments.

Section 8.8 Transactions with Affiliates .  Except as otherwise disclosed on Schedule 8.8 or as otherwise expressly permitted pursuant to this Agreement with respect to transactions between any


Subsidiary and any other Subsidiary or the Company , no Obligor will, or will permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Obligor except, provided there exists no Default or Event of Default, for transactions that are disclosed to the Purchaser in advance of being entered into and which contain terms that are no less favorable to the applicable Obligor or any Subsidiary, as the case may be, than those which might be obtained from a third party not an Affiliate of any Obligor (collectively, “ Permitted Intercompany Transactions ”).   Notwithstanding anything to the contrary herein or in any Schedule, the Company and the Obligors may not pay any management fees to any Subsidiary or other Person that is not an Obligor.

Section 8.9 Modification of Organizational Documents .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.

Section 8.10 Modification of Certain Agreements .  (a) No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Existing Senior Secured Debt Documents (other than the MidCap ABL Credit Agreement) or any other Material Contract, which amendment or modification in any case: (i) is contrary to the terms of this Agreement or any other Transaction Document; (ii) could reasonably be expected to be materially adverse to the rights, interests or privileges of the Purchaser or their ability to enforce the same; (iii) results in the imposition or expansion in any material respect of any obligation of or restriction or burden on any Obligor or any Subsidiary; or (iv) reduces in any material respect any rights or benefits of any Obligor or any Subsidiaries (it being understood and agreed that any such determination shall be in the discretion of the Purchaser). Each Obligor shall, prior to entering into any amendment or other modification of any of the foregoing documents, deliver to the Purchaser reasonably in advance of the execution thereof, any final or execution form copy of amendments or other modifications to such documents, and such Obligor agrees not to take, nor permit any of its Subsidiaries to take, any such action with respect to any such documents.  No Obligor will, or will permit any Subsidiary to, (i) forgive any Debt evidenced by, or extend, postpone, defer or waive any required payments to be made under the Longbridge Intercompany Note as in effect on the Closing Date, (ii) amend or otherwise modify any of the terms of the Longbridge Intercompany Note as in effect on the Closing Date, (iii) sell, assign, transfer or otherwise dispose of the Longbridge Intercompany Note or any rights, duties or obligations thereunder, (iv) or pledge or grant a Lien upon the Longbridge Intercompany Note or any rights to payment thereunder (other than Liens in favor of (x) Purchaser or (y) MidCap Senior Agent so long as any such Lien in favor of MidCap Senior Agent is subject to the MidCap Intercreditor Agreement) in each case under clauses (i) through (iv) hereof, without the prior written consent of the Purchaser.

(b)

No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any MidCap ABL Credit Agreement or any related document thereto except for amendments or modifications made in full compliance of the MidCap Intercreditor Agreement.

Section 8.11 Conduct of Business .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, engage in any line of business other than those businesses engaged in on the Closing Date and described on Schedule 8.11 and businesses reasonably related thereto.

Section 8.12 Lease Payments .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments except in the Ordinary Course of Business.

Section 8.13 Limitation on Sale and Leaseback Transactions .  No Obligor will, or will permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person whereby, in a


substantially contemporaneous transaction, any Obligor or any Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.

Section 8.14 Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts .  No Obligor will, or will permit any Subsidiary (except in the case of any Foreign Subsidiary in the Ordinary Course of Business) to, directly or indirectly, establish any new deposit account or securities account without prior written notice to the Purchaser, and, subject to the terms of the MidCap Intercreditor Agreement, unless the Purchaser, such Obligor or such Subsidiary and the bank, financial institution or securities intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement concurrently with the establishment of such deposit account or securities account. Each Obligor represents and warrants that Schedule 8.14 lists all of the deposit accounts and securities accounts of each Obligor as of the Closing Date. The provisions of this Section requiring Deposit Account Control Agreements shall not apply to any Excluded Accounts; provided , however , that at all times that any Obligations remain outstanding, the Obligors shall maintain one or more separate deposit accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other deposit account.

Section 8.15 Compliance with Anti-Terrorism Laws . No Obligor will, or will permit any Subsidiary to, directly or indirectly, knowingly enter into any Material Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each Obligor shall immediately notify the Purchaser if such Obligor has knowledge that any Obligor or any of their respective Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Obligor will, or will permit any Subsidiary to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

Section 8.16 Sale or Discount of Receivables .  No Obligor shall sell with recourse or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable, except for up to $100,000 in the aggregate in discounts in any Fiscal Year of the Company.

Section 8.17 Financial Covenants .  Each of the Obligors shall at all times during the term of this Agreement, comply with the following financial covenants and ratios as at the dates and for the fiscal periods indicated below:  

(a) Fixed Charge Coverage Ratio .  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors shall not, as of the end of any Fiscal Month, permit the Fixed Charge Coverage Ratio for the period of 12 consecutive Fiscal Months (“ T12M ”) ended on the last day of such Fiscal Month (each such measurement period herein referred to as a “ Defined Period ”) to be less than 1.0x.

(b) Minimum Liquidity .  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors


shall, as of the end of any month, have Minimum Liquidity equal to or in excess of $3,000,000; provided, however, if no Event of Default exists and if the Fixed Charge Ratio, as determined in Section 8.17(a) , has been greater than 1.20x for three consecutive Defined Periods, Minimum Liquidity shall no longer be tested under this Section 8.17(b) .

(c) Total Leverage Ratio .  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors will not, as of the end of any Fiscal Month, permit the Total Leverage Ratio, calculated on a trailing T12M basis, to be greater than the ratio set forth in the table below for the corresponding Fiscal Month end set forth in the table below:

Fiscal Month

Total Leverage Ratio

September 30, 2017

5.5 to 1.00

October 31, 2017

5.3 to 1.00

November 30, 2017

5.1 to 1.00

December 31, 2017

4.8 to 1.00

January 31, 2018

February 28, 2018

March 31, 2018

4.8 to 1.00

April 30, 2018

May 31, 2018

June 30, 2018

4.6 to 1.00

July 31, 2018

August 31, 2018

September 30, 2018

4.4 to 1.00

October 31, 2018

November 30, 2018

December 31, 2018

4.6 to 1.00

January 31, 2019

February 28, 2019

March 31, 2019

4.0 to 1.00

April 30, 2019

May 31, 2019

June 30, 2019

3.7 to 1.00

July 31, 2019

August 31, 2019

September 30, 2019

3.6 to 1.00


October 31, 2019

November 30, 2019

December 31, 2019

3.4 to 1.00

January 31, 2020

February 29, 2020

March 31, 2020

3.1 to 1.00

April 30, 2020

May 31, 2020

June 30, 2020

2.8 to 1.00

July 31, 2020 and

each Fiscal Month thereafter

 

2.6 to 1.00

 

(d) Evidence of Compliance . Commencing with the Fiscal Month ending September 30, 2017, Obligors shall furnish to the Purchaser, together with the monthly financial reporting required of Obligors in Section 7.1 hereof, a monthly Compliance Certificate as evidence of Obligors’ compliance with the covenants in this Section 8.17 and evidence that no Event of Default has occurred. The Compliance Certificate shall include, without limitation, (a) a statement and report, on a form approved by the Purchaser, detailing Obligors’ calculations, and (b) if requested by the Purchaser, back-up documentation (including, without limitation, invoices, receipts and other evidence of costs incurred during such fiscal period as the Purchaser shall reasonably require) evidencing the propriety of the calculations.

(e) Additional Defined Terms .  The following additional definitions are hereby appended to Section 1.1 of this Agreement:

Adjusted EBITDA ” means EBITDA (with reference in the definition of EBITDA to “Defined Period” being deemed to be references to “measurement period” for all purposes of this definition) plus (x) EBITDA during the applicable measurement period, but prior to the consummation of such acquisition, of businesses, assets or entities acquired through Permitted Acquisitions or other acquisitions to the extent expressly permitted under this Agreement plus (y) the amount of net “run rate” cost savings, operating expense reductions, other operating improvements and synergies resulting from acquisitions, dispositions, restructurings, cost savings initiatives and other operational initiatives projected by the Company in good faith to be realized after the end of the applicable measurement period but within twelve (12) months after the consummation of the acquisition, disposition, operational change or other applicable event, which is expected to result in such cost savings, expense reductions or synergies (calculated, in the case of each of the foregoing clauses (x) and (y), on a pro forma basis as though such items had been realized on the first day of such period) as a result of actions taken, including consummated acquisitions permitted under this Agreement, by any of the Obligors or any of their Subsidiaries, any operational changes (including, without limitation, operational changes arising out of the modification of contractual arrangements (including, without limitation, renegotiation of lease agreements, utilities and logistics contracts and insurance policies, as well as purchases of leased real properties)) or headcount reductions, net of the amount of actual benefits realized during such period that are otherwise included in the calculation of EBITDA from such actions (it being agreed that “run rate” means the full recurring benefit for a period that is associated with any action taken), provided that (A) a duly completed certificate signed by a Responsible Officer of the Company shall be delivered to the Purchaser together with the Compliance Certificate required to be delivered pursuant to Section 7.1, certifying that (x) such cost savings, operating expense reductions and


synergies are reasonably expected and factually supportable, and (y) such actions have been taken and the results with respect thereto have been achieved or are reasonably expec ted to be achieved within twelve ( 12 ) months after the consummation o f the acquisition, disposition, operational change or other applicable event, which is expected to result in such cost savings, expense reductions or synergies, (B) no cost savings, operating expense reductions and synergies shall be added pursuant to t his subclause (y) to the extent duplicative of any expenses or charges otherwise ad ded to EBITDA, whether through a pro forma adjustment or otherwise, for such period, (C) the aggregate amount of add backs made pursuant to this subclause (y) shall not exceed an amount equal to 50% of E BITDA for the period of four consecutive fiscal quarters most recently ended prior to the determination date and (D) such cost savings, operating expense reductions and synergies are reasonably expected and factually s upportable as determined in the Purchaser’s sole discretion .   

 

EBITDA ” has the meaning provided in the Compliance Certificate.

Fixed Charge Coverage Ratio ” means the ratio of Operating Cash Flow (as defined in the Compliance Certificate) to Fixed Charges (as defined in the Compliance Certificate) for each Defined Period.  For the avoidance of doubt, the Fixed Charge Coverage Ratio shall be calculated on a pro forma basis with respect to any Permitted Acquisitions, with (i) pro forma adjustments relating to EBITDA of any target assets or entity acquired in connection with a Permitted Acquisition being made in accordance with clauses (x) and (y) of the definition of Adjusted EBITDA and (ii) and any interest or principal payments in respect of any Debt assumed or acquired in connection with such Permitted Acquisition being included for purposes of calculating Fixed Charges.

Fixed Charges ” has the meaning provided in the Compliance Certificate.

Minimum Liquidity ” means the sum of Revolving Loan Availability (as such term is defined in the MidCap ABL Credit Agreement) plus cash and cash equivalents that are (a) owned by any Obligor, and (b) not subject to any Lien other than a Lien in favor of the Purchaser and the MidCap Senior Agent, excluding, however, any cash and cash equivalents in a specified amount pledged to or held by the MidCap Senior Agent to secure a specified Obligation (as such term is defined in the MidCap ABL Credit Agreement) in that amount. For the avoidance of doubt, cash and cash equivalents that in accordance with this Agreement secure the Senior Note or the obligations of the Obligors owing under the MidCap ABL Credit Agreement generally are not excluded except to the extent so specified above in this definition.

Total Net Debt ” means as of any date of determination, (a) an amount equal to the total aggregate principal amount of Debt of the Company and its Subsidiaries for borrowed money (including, without limitation, the principal amount of Obligations hereunder, the principal amount of Debt under the Existing Senior Secured Debt Documents, Debt of the type described under clauses (a) through (e) of the definition of Debt, and clauses (m) through (p) of the definition of Permitted Debt, capitalized leases and the outstanding balance of the Subordinated Debt) as of such date, less (b) (i) any unrestricted cash and cash equivalents that are (A) owned by any Obligor or any direct or indirect Foreign Subsidiary thereof as of such date, and (B) not subject to any Lien (other than a Lien in favor of the MidCap Senior Agent or Purchaser, but excluding, however, any cash and cash equivalents in a specified amount pledged to or held by the MidCap Senior Agent or the Purchaser to secure a specified Obligation in that amount), as of such date, and (ii) cash of the Company in an amount not to exceed $1,405,380 which is pledged as of such date by the Company as cash collateral for the Company’s reimbursement obligations in respect of a surety bond posted by the Company to stay enforcement of a judgment in the CSI related litigation described on


Schedule 4.7 so long as (A) such reimbursement obligations of the Company in respect of such surety bond constitute Debt of a type that would otherwise be included in clause (a) above of this definition and (B) such cash collateral remains in effect and has not been applied in satisfaction of such reimbursement obligation or released . For purposes of calculating Total Net Debt the amount of any revolving Debt outstanding as of any Fiscal Month end test date shall be deemed to be the average daily balance of such revolving Debt outstanding during such Fiscal Month .

Total Leverage Ratio ” means for any measurement period the ratio of (a) Total Net Debt of Company and its Subsidiaries as of the last date of such period to (b) annualized Adjusted EBITDA of the Company and its Subsidiaries for the trailing twelve month period ending on such date.  For the avoidance of doubt, the Total Leverage Ratio shall be calculated on a pro forma basis with respect to any Permitted Acquisition, with (i) pro forma adjustments relating to EBITDA of any target assets or entity acquired in connection with a Permitted Acquisition being made in accordance with clauses (x) and (y) of the definition of Adjusted EBITDA and (ii) any Debt assumed or acquired in connection with such Permitted Acquisition being included in the calculation of Total Net Debt.  

Section 8.18 Excluded Subsidiaries .  Unless an Excluded Subsidiary becomes a Guarantor hereunder in accordance with terms of 7.10 of this Agreement, no Obligor shall make any additional Investment (other than any Investments otherwise expressly permitted to be made to an Excluded Subsidiary in the definition of “Permitted Investments”) or other transfer, assignment or conveyance of any type of asset of any kind whatsoever to such Excluded Subsidiary.  

Article 9.

EVENTS OF DEFAULT

Section 9.1 Events of Default .  Each of the following shall constitute an Event of Default, whatever the reason for such event and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule, or regulation of any governmental or nongovernmental body:

(a) (i) failure of the Company to pay any principal on any of the Senior Note when due; or (ii) failure of the Company to pay any interest on any of the Senior Note or to pay any other amount payable hereunder or under any other Note Documents and such failure to pay continues for three days after the due date thereof; or

(b) failure on the part of any Obligor to perform or observe any covenant contained in Article 4 , Article 8 , Sections 7.1, 7.2(b), 7.3, 7.6, 7.7, 7.10, 7.14, 7.15 or 7.16 hereof; or

(c) failure on the part of any Obligor to perform or observe any other term, covenant or agreement contained in this Agreement or in any other Note Document to which it is a party, not specifically referred to elsewhere in this Article 9, and any such failure remains unremedied for thirty (30) days after the earlier of (i) the discovery thereof by the Company or any other Obligor, or (ii) written notice thereof to the Company by the Purchaser; or

(d) any warranty, representation or other written statement made by or on behalf of any Obligor contained herein or in any other Transaction Document or in any instrument furnished in compliance with or in reference to this Agreement is false or misleading in any material respect on the date as of which made; or


(e) any Obligor shall fail to pay its debts generally as they come due, or shall file any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or

(f) an involuntary petition shall be filed under any bankruptcy statute against any Obligor, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) shall be appointed to take possession, custody, or control of the properties of any Obligor, unless such petition or appointment is set aside or withdrawn or ceases to be in effect within sixty (60) days from the date of said filing or appointment or an order for relief shall be entered in any such involuntary action; or

(g) any Obligor: (i) fails to may any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any principal, interest or other amount under any of the Existing Senior Secured Debt Documents, taking into account any applicable grace and cure periods provided for therein (provided, however, if (1) any such failure to pay relates to a borrowing base or appraisal deficiency or to the repurchase of assigned accounts and (2) the applicable creditor is permitting the repayment of such deficiency or repurchase over time, no Event of Default shall arise on account of such failure unless the Obligor subsequently fails to make such repayment when due); or (ii) breaches or fails to maintain compliance with any financial covenant contained in, or fails to perform or observe any other agreement, term or condition contained in, any Existing Senior Secured Debt Documents, or if any other event shall occur and be continuing thereunder, and the effect of such failure or other event as described above in this clause (ii) results in the holders thereof causing the maturity date of the Debt thereunder to be accelerated and become due prior to any stated maturity except to the extent waived by the holders thereof; or

(h) a Change of Control shall occur; or

(i) any order or judgment for the payment of money (unless fully covered by insurance as to which the relevant insurance company has not denied coverage) in excess of $250,000 shall be rendered against any Obligor, and such order or judgment shall continue unsatisfied and unstayed for more than the time permitted by applicable law for an appeal of such judgment to be filed; or

(j) any Obligor shall disavow, revoke or terminate any Transaction Document to which it is a party or shall otherwise challenge or contest in any action, suit or proceeding in any court or before any arbitrator or governmental body the validity or enforceability of this Agreement, any Note Document or any other Transaction Document; or

(k) a warrant or writ of attachment or execution or similar process shall be issued against any property of any Obligor which exceeds, individually or together with all other such warrants, writs and processes since the Closing Date, $250,000 in amount and such warrant, writ or process shall not be discharged, vacated, stayed or bonded for the time permitted by applicable law for an appeal of such judgment to be filed; provided, however, that in the event a bond has been issued in favor of the claimant or other Person obtaining such attachment or writ, the issuer of such bond shall execute a waiver or subordination agreement in form and substance satisfactory to the Purchaser pursuant to which the issuer of such bond subordinates its right of reimbursement, contribution or subrogation to the Obligations and waives or subordinates any Lien it may have on the assets of the Obligors; or


(l) any Obligor is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for more than the time permitted by applicable law for an appeal of such judgment to be filed; or

(m) the loss, suspension or revocation of, or failure to renew, any license, permit or Material Contract now held or hereafter acquired by any Obligor, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect; or

(n) any order, judgment or decree is entered against any Obligor decreeing the dissolution or split up of such Obligor and such order remains undischarged or unstayed for a period in excess of sixty (60) days; or

(o) the occurrence of (i) any material default or event of default under the terms of any of Existing Warrant Documents, or (ii) any default or event of default under the terms of any Material Contract (other than the Existing Senior Secured Debt Documents), to the extent such default or event of default would give the non-defaulting party thereto the right to terminate, cancel, or suspend its performance under, such contract and such default or event of default under such Material Contract, as the case may be, could reasonably be expected to have a Material Adverse Effect.

Section 9.2 Remedies on Default .  (a)  Upon the occurrence and continuation of an Event of Default (other than an Event of Default described in Section 9.1 (e) and (f)), the Purchaser may, in its sole discretion, but shall not be obligated to, declare all amounts payable under the Senior Note and the other Note Documents to be forthwith due and payable, including, without limitation, costs of collection (including reasonable attorneys’ fees if collected by or through an attorney at law or in bankruptcy, receivership or other judicial proceedings) and the same shall thereupon become immediately due and payable without demand, presentment, protest or further notice of any kind, all of which are hereby expressly waived, and may exercise all of its rights and remedies under the Transaction Documents or under applicable law.

(b) Upon the occurrence of any Event of Default set forth in Section 9.1(e) or (f) above, without any notice to the Company or any other act by the Purchaser, all amounts payable under the Senior Note and the other Note Documents, including, without limitation, all costs of collection (including reasonable attorneys’ fees if collected by or through an attorney at law or in bankruptcy, receivership or other judicial proceedings) shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Company and each other Obligor.

(c) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement and each other Transaction Document or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to exercise any remedy reserved to the Purchaser in this Agreement or any other Transaction Document, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.


Article 10.

MISCELLANEOUS

Section 10.1 Notices .  All notices, requests and other communications to any party hereunder shall be in writing (including telecopier) and shall be effective (a) if given by mail, when deposited in the mails or (b) if given by telecopier, when so telecopied.  Notices hereunder shall be mailed or telecopied as follows:

If to the Company or any other Obligor:

Staffing 360 Solutions, Inc.

3A London Wall Buildings

London Wall

London EC2M 5SY

United Kingdom

Attn:  Brendan Flood, Executive Chairman

Telephone No.:+44 20 7464 1999

 

with a copy to:

Staffing 360 Solutions, Inc.

641 Lexington Avenue, 27th Floor

New York, NY 10022

Attention: General Counsel

Telephone Number: 646-507-5718

 

and

 

Haynes and Boone, LLP

30 Rockefeller Plaza

26th Floor

New York, New York 10112

Attention: Rick A. Werner and Greg Kramer

Telephone Number: 212-659-7300

 

If to the Purchaser:

Jackson Investment  Group, LLC

2655 Northwinds Parkway

Alpharetta, Georgia 30009

Attn:  Richard L. Jackson

Telecopy Number:   678-495-5356

Telephone Number: 770-643-5605

with a copy to:

Kilpatrick Townsend & Stockton LLP

1100 Peachtree Street, N.E.

Atlanta, GA 30309

Attn:  David Stockton, Esq.


Telecopy Number:  (404) 815- 541-3402

Telephone Number:  (404) 815-6444

Section 10.2 No Waiver .  No delay or failure on the part of the Purchaser or any holder of the Senior Note and the exercise of any right, power or privilege granted under this Agreement or any other Transaction Document or available at law or in equity, shall impair any such right, power or privilege or be construed as a waiver of any Event of Default or any acquiescence therein.  No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege.  No waiver shall be valid against the Purchaser unless made in writing and signed by the Purchaser, and then only to the extent expressly specified therein.

Section 10.3 Expenses .

(1) The Company agrees to pay on demand all costs, expenses, taxes and fees (i) incurred by the Purchaser in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents, including the reasonable and documented out-of-pocket fees and disbursements of counsel for the Purchaser, in each case, irrespective of whether or not the Closing has occurred or has failed to occur, (ii) incurred by Purchaser in connection with the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Purchaser relating to any of the Transaction Documents, including the reasonable costs and fees of counsel for the Purchaser; and (iii) incurred by the Purchaser, including the reasonable costs and fees of its counsel, in connection with the enforcement of the Transaction Documents.

(2) The Company agrees to indemnify, pay and hold the Purchaser and any holder of any of the Senior Note and the Existing Warrant and the officers, directors, employees and agents of the Purchaser and such holders (the “ Indemnified Persons ”) harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Person in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnified Person shall be designated a party thereto) which may be incurred by any Indemnified Person, relating to or arising out of this Agreement, the Senior Note, the Existing Warrant or any other Transaction Document, the transactions contemplated hereby or under any other Transaction Documents, and any actual or proposed use of proceeds of the Senior Note; provided , that no Indemnified Person shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction.

Section 10.4 Amendments, Etc .  Any provision of this Agreement, the Senior Note, or any other Note Document to which the Company is a party may be amended or waived, if such amendment or waiver is in writing and is signed by the Company and the Purchaser.  Any provision of any other Note Document to which the Company is not a party may be amended or waived, if such amendment or waiver is in writing and is signed by the Obligor(s) party thereto and the Purchaser.

Section 10.5 Successors and Assigns .  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided , that (a) no Obligor may assign or otherwise transfer any of its rights or obligations under this Agreement, the Senior Note or any other Note Document to any Person without the prior written consent of the Purchaser (it being understood that the foregoing restriction is not intended to restrict the consummation of the Reincorporation on the Closing Date), and (b) so long as no Default or Event of Default has occurred and is continuing, any such assignment or transfer by the Purchaser of its rights or obligations under this Agreement or the Senior Note shall be subject to the consent of the Company, which consent shall not be unreasonably withheld,


delayed or conditioned . Any assignee or transferee of the Purchaser shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, obligations and benefits as it would have if it were the Purchaser hereunder and under the other Note Document s.  Notwithstanding the foregoing, the Purchaser may sell or otherwise grant participations in all or any part of the Senior Note, provided , that so long as no Default or Event of Default has occurred and is continuing, any such sale or participation by the Purchaser of its rights or obligations under this Agreement or the Senior Note shall be subject to the consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned .   

Section 10.6 Governing Law .  THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS SHALL (OTHER THAN THE MIDCAP INTERCREDITOR AGREEMENT) BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS).

Section 10.7 Survival of Representations and Warranties .  All representations and warranties contained herein or made by or furnished on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Closing.

Section 10.8 Severability .  If any part of any provision contained in this Agreement shall be invalid or unenforceable under applicable law, said part shall be ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provision or the remaining provisions.

Section 10.9 Counterparts .  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.10 Set-Off .  Upon the occurrence and during the continuation of an Event of Default, each Obligor authorizes the Purchaser, without notice or demand, to apply any indebtedness due or to become due to such Obligor from the Purchaser in satisfaction of any of the indebtedness, liabilities or obligations of such Obligor under this Agreement or under any other Note Document, including, without limitation, the right to set-off against any deposits or other cash collateral of the Company held by the Purchaser or an Affiliate thereof.

Section 10.11 Termination of Agreement.   This Agreement shall terminate upon the payment in full of the Senior Note and all other Obligations (subject to Section 4.3 hereof); provided that Sections 3.2, 7.13, 7.14, 10.3, 10.6, 10.12 and 10.13 shall survive the termination of this Agreement.

Section 10.12 Consent to Service of Process .  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01.  EACH OF THE OBLIGORS (OTHER THAN THE COMPANY) HEREBY irrevocably ACKNOWLEDGES AND AGREES TO THE APPOINTMENT BY EACH SUCH OBLIGOR OF THE COMPANY AS its NON-EXCLUSIVE AGENT FOR SERVICE OF PROCESS ON BEHALF OF EACH SUCH OBLIGOR IN ANY SUIT, ACTION or PROCEEDING brought by the purchaser arising out of or relating to THIS AGREEMENT, THE SENIOR NOTE or any of the OTHER Transaction documents.  Nothing in this Agreement or any other Transaction Document will affect the right of any party hereto or thereto to serve process in any other manner permitted by law .


Section 10.13 W AIVER OF JURY TRIAL .  EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY, INTENTIONALLY , AND IRREVOCABLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN CONTRACT OR TORT, AT LAW OR EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR PURCHASER ENTERING INTO THIS AGREEMENT.  FURTHER, EACH OBLIGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER, NOR THE PURCHASER’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT PURCHASER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION, NO REPRESENTATIVE OR AGENT OF THE PURCHASER, NOR THE PURCHASER’S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

Section 10.14 Entire Agreement .  This Agreement, the Senior Note and the other Transaction Documents to which the Company is a party, together with any exhibits and schedules attached hereto and thereto, constitute the entire understanding of the parties with respect to the subject matter hereof and thereof, and any other prior or contemporaneous agreements, whether written or oral, with respect hereto or thereto are expressly superseded hereby.  The execution of this Agreement, the Senior Note and the other Transaction Documents to which the Company is a party by the Company was not based upon any facts or materials provided by the Purchaser, nor was the Company induced to execute this Agreement, the Senior Note or the other Transaction Documents to which the Company is a party by any representation, statement or analysis made by the Purchaser.

Section 10.15 Publicity .  The Company and the Purchaser agree to consult with each other before issuing any press release or public announcement regarding the transactions contemplated hereby or by the other Transaction Documents, and shall not issue any such press release or public announcement without the consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that while the Company will consult with the Purchaser with regards to any form 8-k filing with respect to the transactions contemplated hereby, nothing herein shall restrict the Company from so filing any such 8-k in accordance with the terms and requirements (including timing requirement) of the SEC.

Section 10.16 Further Assurances .  At any time or from time to time after the date hereof, each party agrees to cooperate with the others, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. Without limiting the foregoing, the Obligors shall execute such documents and take such actions as Purchaser may reasonably request from time to time in order to perfect and/or maintain the perfection of its Liens on the Collateral.

Section 10.17 Subordination of Intercompany Indebtedness and Management Fees .  Each Obligor (a “ Subordinating Obligor ”) agrees that the payment of all obligations and indebtedness, whether principal, interest, fees (including, without limitation, any management fees) and other amounts and whether now owing or hereafter arising, owing to such Subordinating Obligor by any other Obligor is expressly subordinated to the payment in full in cash of the Obligations.  If the Purchaser so requests after the occurrence and during the continuance of any Default or Event of Default, any such obligation or indebtedness shall be enforced and performance received by the Subordinating Obligor as trustee for the holders of the Obligations and the proceeds thereof shall be paid over to the holders of the Obligations on account of the Obligations, but without reducing or affecting in any manner the liability of the


Subordinating Obligor under this Agreement or any other Note Document.  Without limitation of the foregoing, so long as no Default has occurred and is continuing, the Obligors may make and receive payments with respect to any such obligations and indebtedness, provided , that in the event that any Obligor receives any payment of any such obligations and indebtedness at a time when such  payment is prohibited by this Section, such payment shall be held by such Obligor, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the Purchaser .

Section 10.18 Effect of Amendment and Restatement .  Effective upon satisfaction of the conditions set forth in Section 5.1, this Agreement shall be amend and restated the Existing Note Purchase Agreement in its entirety. The parties hereto acknowledge and agree that (a) this Agreement and the other Note Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation or termination of the “Obligations” (as defined in the Existing Note Purchase Agreement) under the Existing Note Purchase Agreement as in effect immediately prior to the Closing Date and which remain outstanding; and (b) except for any “Obligations” (as defined in the Existing Note Purchase Agreement) which are expressly contemplated to be repaid on the Closing Date and to the extent are in fact so repaid, the “Obligations” (as amended and restated hereby and which are hereinafter subject to the terms herein) are in all respects continuing.  Without limiting the foregoing, the parties hereto acknowledge and confirm that (i) the Company previously issued and sold to the Purchaser, and the Purchaser previously purchased, the Existing Warrant pursuant to the terms of the Existing Note Purchase Agreement and the Existing Warrant Documents, in reliance on the representations and warranties contained in the Existing Note Purchase Agreement, and (ii) on and after the Closing Date, and after giving effect to this Agreement, the Existing Warrant Documents shall remain in full force and effect and shall continue to be binding on and enforceable against the Company in accordance with their terms.  Notwithstanding the foregoing, the parties acknowledge and agree that the Purchaser irrevocably releases and discharges each Foreign Subsidiary from their obligations under any guarantee previously given in connection with the Existing Note Purchase Agreement and releases any and all liens and security interests previously granted by any Foreign Subsidiary to the Purchaser in connection with the Existing Note Purchase Agreement; it being understood that no Foreign Subsidiary is guaranteeing any of the Obligations or granting any security interest or pledge on its assets as security for the Obligations.

 

[Signatures on Following Pages]

 


 

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Note Purchase Agreement to be executed by their authorized officers or members, as the case may be, all as of the day and year first above written.

 

COMPANY:

 

STaffing 360 solutions, inc.

 

 

By: _ /s/ Brendan Flood _______

Name: Brendan Flood

Title:   Executive Chairman

 

 

 

 

 

 

SUBSIDIARY GUARANTORS:

 

 

 

FARO RECRUITMENT AMERICA, INC.

 

 

By: _ /s/ Brendan Flood _______

Name: Brendan Flood

Title:   Executive Chairman

 

 

MONROE STAFFING SERVICES, LLC

 

 

By: _ /s/ Brendan Flood _______

Name:  Brendan Flood

Title:    Executive Chairman

 

 


 

 

PEOPLESERVE, INC.

 

 

By: _ /s/ Brendan Flood _______

Name:  Brendan Flood

Title:    Executive Chairman

 

 

PEOPLESERVE PRS, INC.

 

 

By: _ /s/ Brendan Flood _______

Name:  Brendan Flood

Title:    Executive Chairman

 

 

 

LIGHTHOUSE PLACEMENT SERVICES, INC.

 

 

By: _ /s/ David Faiman ________

Name:  David Faiman

Title:    Secretary and Treasurer

 

 

STAFFING 360 GEORGIA, LLC

 

 

By: _ /s/ Brendan Flood _______

Name:  Brendan Flood

Title:    Executive Chairman

 

 

 

PURCHASER:

 

JACKSON INVESTMENT GROUP, LLC

 

 

By: _ /s/ Douglas B. Kline _______

Name:  Douglas B. Kline

Title:    Chief Financial Officer

[SIGNATURE PAGE TO THE

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT]

Exhibit 10.4

INTERCREDITOR AGREEMENT

 

THIS INTERCREDITOR AGREEMENT (this “ Agreement ”) is entered into as of September 15, 2017, among JACKSON INVESTMENT GROUP, LLC , a Georgia limited liability company, as purchaser and holder of the Term Note (as defined below) and as secured party under the Term Debt Documents (as defined below) (“ Term Note Purchaser ”), STAFFING 360 SOLUTIONS, INC., a Delaware corporation (“ Parent ”), certain of the Parent’s subsidiaries party hereto, and MIDCAP FUNDING X TRUST , a Delaware statutory trust and successor by assignment from MidCap Financial Trust, as Agent for the financial institutions or other entities from time to time parties to the ABL Loan Agreement (as hereinafter defined) (acting in such capacity, “ Agent ”), and as a “Lender” under the ABL Loan Agreement, or such then present holder or holders of the ABL Loans (as hereinafter defined) as may from time to time exist (as the “Lenders” under the ABL Loan Agreement; collectively with the Agent, the “ ABL Lenders ”).  Reference in this Agreement to “Term Note Purchaser”, “Term Note Purchasers”, “each Term Note Purchaser” or otherwise with respect to any one or more of the Term Note Purchasers shall mean each and every person included from time to time in the term “Term Note Purchaser” and any one or more of the Term Note Purchasers, jointly and severally, unless a specific Term Note Purchaser is expressly identified.

 

RECITALS

 

A. PEOPLESERVE, INC., MONROE STAFFING SERVICES, LLC, PEOPLESERVE PRS, INC., FARO RECRUITMENT AMERICA, INC., LIGHTHOUSE PLACEMENT SERVICES, INC. , STAFFING 360 GEORGIA, LLC and any additional borrower that may hereafter be added to the ABL Loan Agreement (as hereinafter defined) (collectively, “ Borrowers ”), Parent, Agent and ABL Lenders have entered into a Credit and Security Agreement dated as of April 8, 2015 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ ABL Loan Agreement ”) pursuant to which, among other things, ABL Lenders have made certain loans and financial accommodations to Borrowers.  Parent has guaranteed the obligations of Borrowers pursuant to that certain Payment Guaranty dated April 8, 2015 ( as amended, restated, modified, substituted, extended and renewed from time to time , the “ Parent Guaranty ”).  Borrowers, Parent and any other Credit Party (as defined in the ABL Loan Agreement) may each be referred to herein as a “ Credit Party ” and collectively as “ Credit Parties.”

 

B. All of Credit Parties’ obligations to ABL Lenders under the ABL Loan Agreement and the other ABL Loan Documents (as hereinafter defined) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired personal property of the Credit Parties.

 

C. Term Note Purchaser has made a $40,000,000 senior debt secured investment in Parent that is guaranteed by the Borrowers pursuant to the Term Debt Documents (as defined below). All of the Credit Parties’ obligations to Term Note Purchaser under the Term Note Agreement and the other Term Debt Documents (as hereinafter defined) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired personal property of the Credit Parties.

 

D. Pursuant to the terms of the ABL Loan Agreement and the Term Debt Documents, ABL Lenders and Term Note Purchaser require the execution and delivery of this Agreement in order to set forth the relative rights and priorities of ABL Lenders and Term Note Purchaser under the ABL Loan Documents and the Term Debt Documents (as hereinafter defined) in the Common Collateral (as hereinafter defined).

 

AGREEMENT

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby covenant and agree as follows:


 

1. Definitions.   The following terms which are defined in the Uniform Commercial Code are used herein as so defined:  Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Records, Securities Accounts, Security, Security Entitlements and Supporting Obligations.

 

In addition, the following terms shall have the following meanings in this Agreement:

 

ABL Enforcement Action ” shall have the meaning as set forth in Section 17.1.

 

ABL Debt ” shall mean all obligations, liabilities and indebtedness (including, without limitation, the ABL Loans and all “Obligations” (as that term is defined in the ABL Loan Agreement) ) of every nature of any Grantor from time to time owed to ABL Lenders, evidenced by or incurred with respect to the ABL Loan Documents, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses evidenced by or incurred with respect to the ABL Loan Documents, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof; provided , however , that (i) in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser, and (ii) such amendments, modifications, renewals or extensions are not in violation of Section 7.1.  To the extent any payment with respect to any ABL Debt (whether by or on behalf of any Grantor, as Proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any Term Debt Secured Party, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the ABL Secured Parties and the Term Debt Secured Parties, be deemed to be reinstated and outstanding as if such payment had not occurred.

 

ABL Debt Cap ” with respect to the ABL Loans, means the aggregate principal amount of the following (all as determined exclusive of all interest, fees (including attorneys’ fees) and expenses, amounts (including, without limitation, attorneys’ fees and fees, expenses and obligations in respect of returned items and overdrafts or reversed payment orders, and fees and expenses in respect of cash management and treasury management services in line with the customary fees and expenses of a third-party provider of such services or, if the Agent or an affiliate of the Agent is the provider, in line with the reasonable and customary fees and expenses of such provider) expended by Agent or ABL Lenders and remitted to Persons other than the Credit Parties to enforce its rights and remedies in respect of the Collateral, the ABL Loans, or both, and all indemnity obligations): (i) $25,000,000, plus (ii) during a Proceeding of any Credit Party, incremental principal amount not to exceed (if funded pursuant to an ABL DIP Financing) to 15% of the sum of the aggregate principal amount funded and outstanding under the immediately preceding clause (i) as of the day immediately preceding the commencement of such Proceeding, minus (iii) the amount of all payments of principal on (x) term loans (except for term loans intended to be repaid on or about the date of this Agreement) and (y) revolving loan obligations under the ABL Loan Agreement that result in a permanent reduction of the revolving credit commitments under the ABL Loan Agreement (other than (A) payments of such revolving loan obligations in connection with a refinancing thereof, including any Permitted Refinancing, (B) any commitment reduction occurring as a result of a default under the ABL Loan Documents that does not constitute a permanent commitment reduction and (C) any portion of the ABL DIP Financing used to refinance or “roll up” the ABL Loans.

 

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ABL Debt Collateral ” shall mean all assets , real property, personal property (including, but not limited to, Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Pro perty, Letter of Credit, Letter-of- Credit Rights, Payment Intangibles, Records , Securities Accounts, Security Entitlements, Supporting Obligations , money, cash or cash equivalents , insurance policies, rights arising under insurance policies, and   accessions to, substitutions for, replacements for , and Proceeds and products of the foregoing ) , whether now owned or hereafter acquired by any Grantor or in which such Grantor now or hereafter has an interest, or as to which such Grantor now or hereafter has rights or the power to transfer rights, and wherever situated, all whether now owned or existing or hereafter acquired or arising, in which a Lien is granted or purported to be granted at any time to any ABL Secured Party as security for any ABL Debt .

 

ABL Debt Payment Date ” shall mean the first date on which (a) all ABL Debt have been Paid in Full, (b) all commitments to extend credit under the ABL Loan Documents have been terminated, (c) there are no outstanding letters of credit or similar instruments issued under the ABL Loan Documents, except for such items that have been fully cash collateralized to the satisfaction of the ABL Lenders, (d) so long as the Term Debt Payment Date shall not have occurred, the Agent has delivered a written notice to the Term Note Purchaser stating that the events described in clauses (a), (b) and (c) have occurred to the satisfaction of the ABL Secured Parties.

 

ABL DIP Financing ” shall have the meaning set forth in Section 5.2(a).

 

ABL Lenders ” shall have the meaning set forth in the preamble hereto; provided, that upon the consummation of any Permitted Refinancing, the ABL Lenders shall be the “ABL Lenders” (or like term) as specified in the applicable Permitted Refinancing of ABL Loan Documents.

 

ABL Liens ” shall mean means any Lien created, or intended to be created, pursuant to the ABL Security Documents.

 

ABL Loan Documents ” shall mean (a) the ABL Loan Agreement, the Parent Guaranty, together with any promissory note or other instruments evidencing or securing the ABL Loans or the obligation to pay the ABL Loans, any guaranty with respect to the ABL Loans, any security agreement or other collateral document securing the ABL Loans (including, without limitation, the ABL Loan Agreement and Parent Guaranty) and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the ABL Loans (as any of the same may be amended, restated, supplemented or otherwise modified from time to time) and (b) after the consummation of any Permitted Refinancing, the Permitted Refinancing Documents; provided, however , that in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser.

 

ABL Loans ” shall mean the loans and other extensions of credit, to the extent the aggregate principal of which do not at any time exceed the ABL Debt Cap, made by the ABL Lenders to the Grantors pursuant to the ABL Loan Documents, together with all obligations, liabilities and indebtedness of every nature of any Grantor from time to time owed to ABL Lenders under the ABL Loan Documents or otherwise, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims, reimbursement obligations, and indebtedness, accrued and unpaid interest and all fees, costs, indemnities and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable pursuant to the ABL Loan Documents, whether before or after the filing of a Proceeding under the Bankruptcy Code, together with (a) any amendments, modifications, renewals or extensions thereof to the extent such amendments, modifications, renewals or extensions are not in violation of Section 7.1 or in case of any increases in principal in excess of the ABL Debt Cap, and (b) any interest accruing thereon after the commencement of

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a Proceeding, without regard to whether or not such interest is an allowed claim ; however , that in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser.

 

ABL Priority Collateral ” shall mean all ABL Debt Collateral consisting of the following (including for the avoidance of doubt, any such assets, interests or rights that, but for the application of Section 552 of the Bankruptcy Code, or any similar provision of any other Debtor Relief Laws, would be ABL Priority Collateral):

 

(a) (i) all Accounts, (ii)  other rights to payment, however evidenced, of a monetary obligation, whether or not earned by performance, in each case, for goods provided or to be provided or services rendered or to be rendered by a Borrower, and (iii) payment intangibles (except to the extent any of the foregoing arise under contracts for the sale of, or constitute identifiable Proceeds of, Term Debt Priority Collateral), to include, without limitation, tax refunds and refunds, reimbursements and indemnifications for current expenses and those with respect to contracts, business interruption insurance to the extent the proceeds of which are attributable to a diminution in the volume of revenue, and rights to the extent set forth in Section 3.4 to use or access Term Loan Priority Collateral during the Access Period;

 

(b) cash, money and cash equivalents constituting collections and proceeds of the items described in the preceding clause (a) (other than identifiable proceeds of Term Debt Priority Collateral) including, without limitation, ABL Priority Subsidiary Asset Sale Proceeds;

 

(c) all ABL Priority Deposit Accounts and, in each case, all cash, money, cash equivalents, checks and other property held therein or credited thereto (other than identifiable net proceeds of Term Debt Priority Collateral); provided, however, that Section 2.9 of this Agreement shall govern to the extent that identifiable Proceeds of Term Debt Priority Collateral are deposited in any such ABL Priority Deposit Accounts and to the extent any identifiable Proceeds of ABL Priority Collateral are deposited in any Term Debt Priority Accounts;

 

(d) to the extent relating to or arising from, evidencing or governing any of the items referred to in the preceding clauses (a) through (c) constituting ABL Priority Collateral, all Documents, General Intangibles (including all rights under contracts but excluding any intellectual property), Instruments (including promissory notes), Chattel Paper (including tangible Chattel Paper and electronic Chattel Paper) and Commercial Tort Claims; provided that to the extent any of the foregoing also relates to Term Debt Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (c) shall be included in the ABL Priority Collateral;

 

(e) to the extent relating to any of the items referred to in the preceding clauses (a) through (d) constituting ABL Priority Collateral, all Supporting Obligations and Letter-of-Credit Rights; provided that to the extent any of the foregoing also relates to Term Debt Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (d) shall be included in the ABL Priority Collateral;

 

(f) all books and Records relating to the items referred to in the preceding clauses (a) through (e) constituting ABL Priority Collateral (including all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the items referred to in the preceding clauses (a) through (e) constituting ABL Priority Collateral); provided that to the extent any of the foregoing also relates to Term Debt

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Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (e) shall be included in the ABL Priority Collateral; and

 

(g) all Proceeds of any of the items referred to in the preceding clauses (a) through (f).

 

ABL Priority Deposit Accounts ” shall mean all Deposit and Securities Accounts in which collections and other cash Proceeds of ABL Priority Collateral or advances under the ABL Loan Agreement are required to be deposited in accordance with the ABL Loan Documents (including any related lockboxes associated with such deposit accounts) and all other Deposit and Securities Accounts other than a Term Debt Priority Deposit Accounts.  As of the date hereof, the ABL Priority Deposit Accounts are listed on Schedule 1 attached hereto.  Agent and Parent agree to promptly notify Term Note Purchaser in writing of any additional ABL Priority Deposit Accounts established after the date hereof with Agent or which are subject to a deposit account or securities account control agreement in favor of Agent and to provide a written supplement to Schedule 1 hereto reflecting the addition of such ABL Priority Deposit Accounts; it being understood that any such supplement to Schedule 1 may not remove any Deposit Accounts or Securities Accounts set forth on Schedule 1 unless consented to in writing by Agent.

 

ABL Priority Subsidiary Asset Sale Proceeds ” shall mean, with respect to Subsidiary Asset Sale Proceeds, an amount equal to equal to 100% of the uncollected face amount of Eligible Accounts (as that term is defined in the ABL Loan Agreement) of such Subsidiary.

 

ABL Secured Parties ” shall mean the Agent, any of the other ABL Lenders and any other holders of the ABL Debt.

 

ABL Security Documents ” shall mean any ABL Loan Documents and any other documents that create Liens to secure the ABL Debt.

 

Access Period ” shall mean, with respect to each parcel or item which constitutes Term Debt Priority Collateral, the period, following the commencement of any Enforcement Action, which begins on the earlier of (a) the day on which the Agent provides the Term Note Purchaser with the notice of its election to request access to such parcel or item of Term Debt Priority Collateral pursuant to Section 3.4(b) and (c) the fifth Business Day after the Term Note Purchaser provides the Agent with notice that the Term Note Purchaser (or its agent) has obtained possession or control of such parcel or item of Term Debt Priority Collateral and ends on the earliest of (i) the day which is 180 days after the date (the “ Initial Access Date ”) on which the Agent initially obtains the ability to take physical possession of, remove any associated ABL Priority Collateral, or otherwise control physical access to, or actually uses, such parcel or item of Term Debt Priority Collateral plus such number of days, if any, after the Initial Access Date that it is stayed or otherwise prohibited by law or court order from exercising remedies with respect to associated ABL Priority Collateral, (ii) the date on which all or substantially all of the ABL Priority Collateral associated with such parcel or item of Term Debt Priority Collateral is sold, collected or liquidated, (iii) the ABL Debt Payment Date and (iv) the date on which the default which resulted in such Enforcement Action has been cured or waived in writing.

 

Agent ” has the meaning set forth in the preamble hereto; provided, that upon the consummation of any Permitted Refinancing, the Agent shall be the “Agent” or “Administrative Agent” (or like term) as specified in the applicable Permitted Refinancing of ABL Loan Documents.

 

Bankruptcy Code shall mean United States Bankruptcy Code (11 U.S.C. §101 et seq.), as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.

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Business Day ” shall mean means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on which commercial banks in Washington, DC and New York City are authorized by law to close.

 

Buy-Out Notice ” shall have the meaning as set forth in Section 17.2.

 

Collateral ” shall mean any property or assets (whether real or personal and whether now existing or hereafter acquired or arising) of any Grantor or subsidiary thereof that is now or hereafter subject to any lien, mortgage, security interest or other encumbrance granted in favor of any of the ABL Lenders or the Term Note Purchaser, respectively, to secure the obligations of any Grantor to any of the ABL Lenders under any ABL Loan Documents or the Term Note Purchaser under any Term Debt Documents.

 

Common Collateral ” shall mean, all Collateral that constitutes both ABL Debt Collateral and Term Debt Collateral.

 

Comparable Security Document ” shall mean, in relation to any Senior Collateral subject to any Senior Security Document, that Junior Security Document that creates a security interest in the same Senior Collateral, granted by the same Grantor, as applicable.

 

Debtor Relief Laws ” shall mean the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

Demand/Exercise Event ” shall have the meaning as set forth in Section 17.1.

 

Demand/Exercise Event Notice ” shall have the meaning as set forth in Section 17.1.

 

Deposit and Securities Accounts ” shall mean all Deposit Accounts, Securities Accounts, collection accounts and lockbox accounts (and all related lockboxes) of the Grantors.

 

Enforcement Action ” shall mean, with respect to the ABL Debt or the Term Debt, the exercise of any rights and remedies with respect to any Common Collateral securing such obligations or the commencement or prosecution of enforcement of any of the rights and remedies with respect to any Common Collateral under, as applicable, the ABL Loan Documents or the Term Debt Documents, or applicable law, including without limitation the exercise of any rights of setoff or recoupment, and the exercise of any rights or remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction or under the Bankruptcy Code.

 

Equity Interests ”  means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

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Excluded Accounts ” means deposit accounts of any Grantor exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Grantor s employees.

 

Exigent Circumstance ” shall mean an event or circumstance that in the judgment of Agent imminently threatens the ability of Agent to realize upon all or any material portion of the ABL Priority Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of the Credit Parties after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Agent, could result in a material diminution in value of the Collateral.

 

Grantor ” shall mean Parent, each other Credit Party and any other direct or indirect Subsidiary of Parent that is now or hereafter becomes a party to any ABL Document or Term Note Document.  All references in this Agreement to any Grantor shall include such Grantor as a debtor-in-possession and any receiver or trustee for such Grantor in any Proceeding.

 

Indemnifiable Matters ” shall have the meaning set forth in Section 17.2.

 

Junior Collateral ” shall mean with respect to any Junior Secured Party, any Collateral on which it has a Junior Lien.

 

Junior Debt ” shall mean (a) with respect to any ABL Priority Collateral, all Term Debt and (b) with respect to any Term Debt Priority Collateral, all ABL Debt.

 

Junior Documents ” shall mean, collectively, with respect to any Junior Obligation, any provision pertaining to such Junior Obligation in any Secured Debt Document or any other document, instrument or certificate evidencing or delivered in connection with such Junior Obligation.

 

Junior Liens ” shall mean (a) with respect to any ABL Priority Collateral, all Liens securing the Term Debt and (b) with respect to any Term Debt Priority Collateral, all Liens securing the ABL Debt.

 

Junior Obligations ” shall mean (a) with respect to any ABL Priority Collateral, all Term Debt and (b) with respect to any Term Debt Priority Collateral, all ABL Debt.

 

Junior Obligations Payment Date ” shall mean shall mean (a) with respect to ABL Debt, the Term Debt Payment Date and (b) with respect to any Term Debt, the ABL Debt Payment Date, as the context applies.  

 

Junior Representative ” shall mean (a) with respect to any ABL Priority Collateral, the Term Note Purchaser and (b) with respect to any Term Debt Priority Collateral, the Agent.

 

Junior Secured Parties ” shall mean (a) with respect to the ABL Priority Collateral, all Term Debt Secured Parties and (b) with respect to the Term Debt Priority Collateral, all ABL Secured Parties.

 

Junior Security Documents ” shall mean with respect to any Junior Secured Party, the Security Documents that secure the Junior Debt.

 

Junior Standstill Period ” shall have the meaning as set forth in Section 3.2.

 

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Lien ” shall mean , with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset, whether arising before or after the commencement of a Proceeding.  For the purposes of this Agreement, any Grantor shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

Lien Priority ” shall mean with respect to any Lien of the Agent or Term Note Purchaser in the Common Collateral, the order of priority of such Lien specified in Section 2.1.

 

Notice of Commingling ” shall mean a written notice delivered by either (a) the Term Note Purchaser to the Agent (i) stating that certain identifiable cash proceeds have been or will be deposited in an ABL Priority Deposit Account constitute Term Debt Priority Collateral, and reasonably identifying the amount of such proceeds and specifying the origin thereof, or (b) the Agent to the Term Note Purchaser stating that certain identifiable cash proceeds have been or will be deposited in a Term Debt Priority Deposit Account constitute ABL Priority Collateral, and reasonably identifying the amount of such proceeds and specifying the origin thereof.

 

Paid in Full ” or “ Payment in Full ” shall mean (a) with respect to the ABL Loans, the payment in full in cash and satisfaction in full of all of the obligations under the ABL Loan Documents (other than Unasserted Contingent Indemnification Obligations), and the termination of all obligations of Agent and ABL Lenders under the ABL Loan Documents (including, without limitation, any commitment to lend), and (b) with respect to the Term Debt, the payment in full in cash and satisfaction in full of all of the obligations under the Term Debt Documents (other than Unasserted Contingent Indemnification Obligations), and the termination of all obligations of Term Note Purchaser under the Term Debt Documents (including, without limitation, any commitment to lend).

 

Permitted Refinancing ” shall mean any refinancing or replacement (whether before or after the commencement of a Proceeding), as applicable, of (a) the ABL Loans under the then existing ABL Loan Documents, provided that the financing documentation entered into by the Credit Parties in connection with such Permitted Refinancing constitutes Permitted Refinancing Documents, and (b) the Term Debt under the then existing Term Debt Documents, provided that the applicable financing documentation entered into by the Credit Parties in connection with such Permitted Refinancing constitutes Permitted Refinancing Documents and the assignee or other lender and any administrative agent for such lenders has agreed in writing that it is subject to the provision of this Agreement as one of the ABL Lenders and ABL Secured Parties or the Term Note Purchaser and the Term Note Secured Parties, as applicable.

 

Permitted Refinancing Documents ” shall mean any financing documentation which replaces the then existing ABL Loan Documents or Term Debt Documents and pursuant to which the ABL Loans under the then existing ABL Loan Documents or the Term Debt under the then existing Term Debt Documents are refinanced or replaced, as such documentation may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in compliance with this Agreement but specifically excluding any such financing documentation to the extent it contains, either initially or by amendment or other modification, any material terms or conditions other than those which (a) exist in the then existing ABL Loan Documents or Term Debt Documents, as applicable, (b) could be included in the then existing ABL Loan Documents or Term Debt Documents, as applicable by an amendment or other modification that would not be prohibited by the terms of this Agreement (including, without limitation, any provision that would cause the ABL Debt Cap or the Term Debt Cap to be exceeded) or (c) are otherwise approved in writing by the ABL Lenders or Term Note Purchaser, as applicable.

 

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Person ” shall mean any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

 

Post-Petition Interest ” shall mean any interest or entitlement to fees or expenses or other charges that accrues after the commencement of any Proceeding (or would accrue but for the commencement of a Proceeding), whether or not allowed or allowable in any such Proceeding.

 

Priority Collateral ” shall mean, collectively, the ABL Priority Collateral and the Term Debt Priority Collateral.

 

Proceeding ” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

 

Purchase Option Closing Date ” shall have the meaning as set forth in Section 17.3.

 

Recovery ” shall have the meaning as set forth in Section 5.5.

 

Secured Debt Documents ” shall mean, collectively, the ABL Loan Documents and the Term Debt Documents.

 

Secured Parties ” shall mean the ABL Secured Parties and the Term Debt Secured Parties.

 

Security Documents ” shall mean, collectively, the ABL Security Documents and the Term Debt Security Documents.

 

Senior Collateral ” shall mean with respect to any Senior Secured Party, any Collateral on which it has a Senior Lien.

 

Senior Documents ” shall mean, collectively, with respect to any Senior Obligation, any provision pertaining to such Senior Obligation in any Secured Debt Document or any other document, instrument or certificate evidencing or delivered in connection with such Senior Obligation.

 

Senior Liens ” shall mean (a) with respect to the ABL Priority Collateral, all Liens securing the ABL Debt and (b) with respect to the Term Debt Priority Collateral, all Liens securing the Term Debt.

 

Senior Obligations ” shall mean (a) with respect to any ABL Priority Collateral, all ABL Debt and (b) with respect to any Term Debt Priority Collateral, all Term Debt.

 

Senior Obligations Payment Date ” shall mean (a) with respect to ABL Debt, the ABL Debt Payment Date and (b) with respect to any Term Debt, the Term Debt Payment Date.

 

Senior Representative ” shall mean (a) with respect to any ABL Priority Collateral, the Agent and (b) with respect to any Term Debt Priority Collateral, the Term Note Purchaser.

 

Senior Secured Parties ” shall mean (a) with respect to the ABL Priority Collateral, all ABL Secured Parties and (b) with respect to the Term Debt Priority Collateral, all Term Debt Secured Parties.

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Senior Security Documents ” shall mean with respect to any Senior Secured Party, the Security Documents that secure the Senior Obligations.

 

Subsidiary ” shall mean, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

 

Subsidiary Asset Sale Proceeds ” shall mean all Proceeds with respect to the sale of all or substantially all of the assets of a Grantor that is a direct or indirect Subsidiary of the Parent.

 

Term Debt ” shall mean all obligations, liabilities and indebtedness of every nature of any Grantor from time to time owed under, evidenced by or incurred with respect to the Term Note or any other Term Note Document, including, without limitation, all “Obligations” (as such term is defined in the Term Note Agreement), whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses evidenced by or incurred with respect to the Term Debt Documents, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof; provided, however , that (i) in no event shall the aggregate outstanding principal amount due under the Term Debt exceed the Term Debt Cap without the prior written consent of the Agent, and (ii) such amendments, modifications, renewals or extensions are not in violation of Section 7.2.  To the extent any payment with respect to any Term Debt (whether by or on behalf of any Grantor, as Proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any ABL Secured Party, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the ABL Secured Parties and the Term Debt Secured Parties, be deemed to be reinstated and outstanding as if such payment had not occurred.  For the avoidance of doubt, Term Debt does not and shall not include any indebtedness, duties, liabilities and obligations of any Grantor under any Equity Interests issued by such Grantor.

 

Term Debt Cap ” with respect to the Term Note, means the aggregate principal amount of the following (all as determined exclusive of all interest, fees (including attorneys’ fees) and expenses, expended by the Term Note Purchaser and remitted to Persons other than the Credit Parties to enforce its rights and remedies in respect of the Collateral, the Term Note, or both, and all indemnity obligations): (i) $40,000,000 in aggregate advances, minus (ii) the amount of all payments of principal on the Term Note.

 

Term Debt Collateral ” shall mean all assets, real property, personal property (including, but not limited to, Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Rights, Payment Intangibles, Records, Securities Accounts, Security Entitlements, Supporting Obligations, money, cash or cash equivalents, insurance policies, rights arising under insurance policies, and all accessions to, substitutions for, replacements for, and Proceeds and products of the foregoing), whether now owned or hereafter acquired by any Grantor or in which such Grantor now or hereafter has an interest, or as to which such Grantor now or hereafter has rights or the power to transfer rights, and wherever situated, all whether now owned or existing or hereafter acquired or arising, in which a Lien

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is granted or purported to be granted at any time to any Term Debt Secured Party as security for any Term Debt .   For the avoidance of doubt, Term Debt Collateral does not and may not secure any payment obligations, duties, liabilities or other obligations arising under any Equity Interest, including, without limitation, any warrants and convertible instruments held be or issued to the Term Note Purchaser .

 

Term Debt Documents ” shall mean the Term Note, the Term Note Agreement, any other promissory note, lease or other instrument evidencing the Term Debt or the obligation to pay the Term Debt, any guaranty with respect to the Term Debt, any security agreement or other collateral document securing the Term Debt and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Term Debt (as any of the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement).

Term Debt Payment Date ” shall mean the first date on which (a) all Term Debt (other than those that constitute Unasserted Contingent Indemnification Obligations) has been Paid in Full, (b) all commitments to extend credit under the Term Debt Documents have been terminated, and (c) so long as the ABL Debt Payment Date shall not have occurred, the Term Note Purchaser has delivered a written notice to the Agent stating that the events described in clauses (a) and (b) have occurred to the satisfaction of the Term Debt Secured Parties.

Term Debt Priority Collateral ” shall mean all Term Debt Collateral other than ABL Priority Collateral, including, without limitation, (a) the Term Debt Priority Deposit Accounts and all cash and other amounts from time to time on deposit therein, (b) all Term Debt Priority Equity Interests and all Proceeds thereof, (c) the Term Debt Priority Longbridge Note and all payments made by Longbridge thereunder and all Proceeds thereof, and (d) Term Debt Priority Subsidiary Asset Sale Proceeds and all Proceeds thereof, in each case, together with all Proceeds thereof.  Without implying any limitation on the foregoing, the parties agree that the following items and proceeds that now or at any time hereafter are deposited into a Term Debt Priority Deposit Account are Proceeds of Term Debt Priority Collateral and are not ABL Priority Collateral:

 

(a)  all cash dividends and distributions (including, without limitation, all dividends and distributions from any direct or indirect Subsidiaries of Parent organized under the laws of the United Kingdom of Great Britain and Northern Ireland , England and Wales, Scotland or Northern Ireland) with respect to Term Debt Priority Equity Interests received by the Parent or any Grantor,

 

(b)  all Proceeds received by the Parent or any Grantor from any the sale or disposition of any Term Debt Priority Equity Interests,

 

(c)  all cash payments of principal, interest or otherwise Proceeds received by the Parent with respect to the Term Debt Priority Longbridge Note,  

 

(d)  all cash payments received by a Grantor with respect to Term Debt Priority Subsidiary Asset Sale Proceeds,

 

(e) all cash Proceeds received by any Grantor with respect to the issuance of any Equity Interests .

 

“Term Debt Priority Deposit Accounts ” shall mean one or more other Deposit Accounts or Securities Accounts now or hereafter established or maintained by any Grantor for the sole purpose of holding the Proceeds of any collection, sale or other disposition of any Term Debt Priority Collateral that

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the Term Note Purchaser require s to be held in such account or accounts pursuant to the terms of any Term Debt Document .  As of the date hereof, the Term Debt Priority Deposit Accounts are listed on Schedule 2 attached hereto.  Term Note Purchaser and Parent agree to promptly notify Agent in writing of any additional Term Debt Priority Deposit Accounts established after the date hereof which are or will be subject to a deposit account or securities account control agreement in favor of Term Note Purchaser and to provide a supplement to Schedule 2 reflecting the addition of such Term Debt Priority Deposit Accounts; it being understood that any such supplement to Schedule 2 may not remove any Deposit Accounts or Securities Accounts set forth on Schedule 2 unless consented to in writing by Term Note Purchaser.  

 

Term Debt Priority Equity Interests ” shall mean all Equity Interests owned by any Grantor (including, without limitation, all Equity Interests in any direct or indirect Subsidiaries of such Grantor), irrespective of whether or not such Equity Interests have been pledged as security for or are otherwise subject to a Lien granted in favor of the Term Note Purchaser to secure the Term Debt.  

 

Term Debt Priority Longbridge Note ” shall mean that certain Promissory Note dated the date hereof, in the principal amount of $16,316,941.05 issued by Longbridge Recruitment 360 Limited to the Parent, as amended, restated, supplemented, modified or extended from time to time.

 

Term Debt Priority Subsidiary Asset Sale Proceeds ” shall mean all Subsidiary Asset Sale Proceeds (excluding ABL Priority Subsidiary Asset Sale Proceeds).

 

Term Debt Secured Parties ” shall mean the Term Note Purchaser and its successors and assigns.

 

Term Debt Security Documents ” shall mean any Term Debt Documents and any other documents that create Liens to secure the Term Debt.

 

Term Note Agreement ” shall means that certain Amended and Restated Note and Warrant Purchase Agreement dated as of the date hereof among, the Parent, certain subsidiaries of the Parent and the Term Note Purchaser, as any of the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement.

 

Term Note ” shall mean, the Parent’s $40,000,000 12% Senior Secured Promissory Note dated the same date as this Agreement payable to Term Note Purchaser, together with any and all promissory notes at any time issued in substitution, exchange or replacement thereof.

Term Note Lien ” shall mean the lien and security interest held by each Term Note Purchaser in and to all or a portion of the Collateral; provided that the Term Note Lien shall only secure the Term Debt.

Term Note Post-Petition Assets ” shall have the meaning as set forth in Section 5.2(a).

Unasserted Contingent Indemnification Obligations ” shall mean, at any time, contingent indebtedness, duties, liabilities and obligations for indemnifications in respect of which no claim or demand for payment has been made, no notice for indemnification has been issued, or can reasonably be expected to be issued, by the indemnitee at such time; provided, however, notwithstanding the foregoing, contingent indebtedness, duties, liabilities and obligations with respect to any undrawn letters of credit issued by ABL Lenders, shall in no event be considered Unasserted Contingent Indemnification Obligations .

 

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Uniform Commercial Code ” shall mean the Uniform Commercial Code of the State of Maryland or of any other state the laws of which are require d to be applied in connection with the perfection of security interests in any Collateral .

2. Lien Priorities.

 

2.1  Subordination.    Notwithstanding (a) the date, time or order of grant, attachment or perfection of any Liens granted to the ABL Lenders in respect of all or any portion of the Collateral or of any Liens granted to the Term Note Purchaser in respect of all or any portion of the Collateral and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (b) the order, date or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the ABL Lenders or the Term Note Purchaser in any Collateral, (c) any provision of the Uniform Commercial Code, Debtor Relief Laws or any other applicable law, or of the ABL Loan Documents or the Term Debt Documents governing the priority of the Liens in favor of the Secured Parties, (d) whether the ABL Lenders or the Term Note Purchaser, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral (except to the extent that taking control over such Collateral is necessary to perfect Liens in such Collateral), or (e) the date on which the ABL Debt or the Term Debt is incurred, advanced or made available to the Credit Parties, the Agent, on behalf of itself and the other ABL Lenders, and the Term Note Purchaser, hereby agree that:

 

(1) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Term Note Purchaser that secures all or any portion of the Term Debt shall in all respects be junior and subordinate to all Liens granted to the Agent and/or any of the other ABL Lenders in such ABL Priority Collateral to secure all or any portion of the ABL Debt;

 

(2) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Agent and/or the other ABL Lenders that secures all or any portion of the ABL Debt shall in all respects be senior and prior to all Liens granted to the Term Note Purchaser in such ABL Priority Collateral to secure all or any portion of the Term Debt;

 

(3) any Lien in respect of all or any portion of the Term Debt Priority Collateral now or hereafter held by or on behalf of the Agent and/or any of the other ABL Lenders that secures all or any portion of the ABL Debt shall in all respects be junior and subordinate to all Liens granted to the Term Note Purchaser and the Term Note Purchaser in such Term Debt Priority Collateral to secure all or any portion of the Term Debt; and

 

(4) any Lien in respect of all or any portion of the Term Debt Priority Collateral now or hereafter held by or on behalf of the Term Note Purchaser that secures all or any portion of the Term Debt shall in all respects be senior and prior to all Liens granted to the Agent and/or any of the other ABL Lenders in such Term Debt Priority Collateral to secure all or any portion of the ABL Debt.

 

2.2  Consents.   The Term Note Purchaser acknowledges and agrees that, concurrently herewith, the Agent, for the benefit of itself and the other ABL Lenders, has been, or may be, granted Liens upon all of the Collateral in which the Term Note Purchaser has been granted Liens and the Term Note Purchaser, for and on behalf of itself and the Term Note Purchaser, hereby consents thereto. The Agent, for and on behalf of itself and the other ABL Lenders, acknowledges and agrees that, concurrently herewith, the Term Note Purchaser has been, or may be, granted Liens upon all of the Collateral in which the Agent and/or any of the other ABL Lenders have been granted Liens and the Agent, for and on behalf of itself

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and the other ABL Lenders, hereby consents thereto. The subordination of Liens by the Term Note Purchaser and the Agent in favor of one another as set forth herein shall not be deemed to subordinate the Term Note Purchaser’s Liens or the Agent’s Liens to the Liens of any other Person, nor shall such subordination be affected by the subordination of such Liens to any Lien of any other Person.

 

2.3 Prohibition on Contesting Liens . In respect of any Collateral, the Junior Representative, on behalf of each Junior Secured Party, in respect of such Collateral agrees that it shall not, and hereby waives any right to:

(a) contest, or support any other Person in contesting, in any proceeding (including any Proceeding), the priority, validity or enforceability of any Senior Lien on such Collateral; or

 

(b) demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or similar right which it may have in respect of such Collateral or the Senior Liens on such Collateral, except to the extent that such rights are expressly granted in this Agreement.

 

2.4  Nature of Obligations .  Each of the Term Note Purchaser and the Agent, on behalf of itself and the other ABL Lenders, acknowledges that a portion of the ABL Debt and the Term Debt either does now or may in the future represent debt that is revolving in nature and that the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the ABL Debt and the Term Debt, as the case may be, may be modified, extended or amended from time to time, and that (x) the aggregate amount of the ABL Debt may be increased, replaced or refinanced, in each event, subject to the ABL Debt Cap and the applicable provisions hereof with respect to a Permitted Refinancing and without notice to or consent by the Term Note Purchaser and without affecting the provisions hereof and (y) the aggregate amount of the Term Debt may be increased, replaced or refinanced, in each event, subject to the Term Debt Cap and the applicable provisions hereof with respect to a Permitted Refinancing and without notice to or consent by the ABL Lenders and without affecting the provisions hereof.  The Lien Priorities provided in Section 2.1 shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of either the ABL Debt or the Term Debt, or any portion thereof.

 

2.5  No New Liens .

 

(a) Until the ABL Debt Payment Date, the Term Note Purchaser shall not acquire or hold any Lien on any assets of any Grantor securing any Term Debt which assets are not also subject to the Lien of the Agent under the ABL Loan Documents, subject to the Lien Priority set forth herein.  If any Term Debt Secured Party shall control for the purposes of perfection, acquire or hold any Lien on any assets of any Grantor securing any Term Debt which assets are not also subject to the Lien of the Agent under the ABL Loan Documents, subject to the Lien Priority set forth herein, then the Term Note Purchaser (or the relevant Term Debt Secured Party) shall, without the need for any further consent of any other Term Debt Secured Party and notwithstanding anything to the contrary in any other Term Debt Document be deemed to also control or hold such Lien on such Collateral as gratuitous bailee and as a non-fiduciary representative for perfection for the benefit of the ABL Lenders and shall endeavor to notify the Agent promptly in writing of the existence of such Lien.

 

(b) Until the Term Debt Payment Date, no ABL Lender shall acquire or hold any Lien on any assets of any Grantor securing any ABL Debt which assets are not also subject to the Lien of the Term Note Purchaser under the Term Debt Documents, subject to the Lien Priority set forth herein.  If any ABL Lender shall control for the purposes of perfection, acquire or hold any Lien on any assets of

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any Grantor Party securing any ABL Debt which assets are not also subject to the Lien of the Term Note Purchaser under the Term Debt Documents , subject to the Lien Priority set forth herein, then the Agent (or the relevant ABL Secured Party ) shall, without the need for any further consent of any other ABL Lender and notwithstanding anything to the contrary in any other ABL Loan Document be deemed to also control or hold such Lien on such Collateral as gratuitous bailee and as a non-fiduciary representative for perfection for the benefit of the Term Note Purchaser and shall endeavor to notify the Term Note Purchaser promptly in writing of the existence of such Lien.

 

(c) The rights and obligations of the parties under subsections (b) and (c) above are also subject to the provisions of Section 2.7(b).

 

2.6  Separate Grants of Security and Separate Classification . The Agent, on behalf of each ABL Secured Party, and the Term Note Purchaser, acknowledge, agree and intend that that (a) the respective grants of Liens pursuant to the ABL Security Documents and the Term Debt Security Documents constitute two separate and distinct grants of Liens and (b) because of, among other things, their differing rights in the Collateral, the Term Debt is fundamentally different from the ABL Debt and, in each case must be separately classified in any plan of reorganization proposed or similar restructuring plan adopted, confirmed (or approved) in a Proceeding.  To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the ABL Lenders and the Term Note Purchaser in respect of the Collateral constitute claims in the same class (rather than at least two separate classes of senior and junior secured claims with the priorities described in Section 2.1), then the ABL Lenders and the Term Note Purchaser hereby acknowledge and agree that all distributions shall be made as if there were two separate classes of ABL Debt claims, on the one hand, and Term Debt claims, on the other (with the effect being that, (i) to the extent that the aggregate value of the ABL Priority Collateral is sufficient (for this purpose ignoring all claims held by the Term Note Purchaser thereon), the ABL Lenders shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from each pool of ABL Priority Collateral, before any distribution is made in respect of the Term Debt with respect to such ABL Priority Collateral, with the Term Note Purchaser hereby acknowledging and agreeing to turn over to the Agent amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries of the Term Note Purchaser, and (ii) to the extent that the aggregate value of the Term Debt Priority Collateral is sufficient (for this purpose ignoring all claims held by the ABL Lenders thereon), the Term Note Purchaser shall be entitled to receive, in addition to amounts distributed to it in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from each pool of Term Debt Priority Collateral, before any distribution is made in respect of the ABL Debt with respect to such Term Debt Priority Collateral, with the ABL Lenders hereby acknowledging and agreeing to turn over to the Term Note Purchaser amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries of the ABL Lenders).

 

2.7  Agreements Regarding Actions to Perfect Liens .  (a) The Agent agrees, on behalf of itself and the other ABL Lenders, with respect to the ABL Security Documents, on the one hand, and the Term Note Purchaser agrees with respect to the Term Debt Security Documents, on the other hand, that each such Security Document granting any security interest in the Collateral will contain the following legend (or a legend substantially similar thereto):

 

“Reference is made to that certain Intercreditor Agreement, dated as of September 15, 2017  (as amended, restated, supplemented or modified from time to time, the “Intercreditor Agreement”), by and among Jackson Investment Group, LLC, a Georgia limited liability company, (“Term Note

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Purchaser”), Staffing 360 Solutions, Inc., a Delaware corporation (“Parent”), certain of the Parent’s subsidiaries party thereto and MidCap Funding X Trust, in its capacity as agent (together with its affiliates and their respective successors and assigns, “Agent”) for the ABL Lenders (as defined in the Intercreditor Agreement), and each holder and transferee of this instrument or agreement, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Intercreditor Agreement.  Each Person that benefits from the security hereunder, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to authorize) the [Agent] [Term Note Purchaser] on behalf of such Person to enter into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Person.

 

Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement.  In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.”

 

(b) Each of the Agent and the Term Note Purchaser hereby acknowledges that, to the extent that it holds, or a third party holds on its behalf, physical possession of or “control” (as defined in the Uniform Commercial Code) over Common Collateral pursuant to the ABL Security Documents or the Term Debt Security Documents (including, without limitation, under any deposit account or securities account control agreements), as applicable, whether as gratuitous bailee and as a non-fiduciary representative for perfection or otherwise, such possession or control is also for the benefit of the Term Note Purchaser or the Agent and the other ABL Lenders, as applicable, solely to the extent required to perfect their security interest in such Common Collateral.  Nothing in the preceding sentence shall be construed to impose any duty on the Agent or the Term Note Purchaser (or any third party acting on either such Person’s behalf) with respect to such Common Collateral or provide the Term Note Purchaser, the Agent or any other ABL Lender, as applicable, with any rights with respect to such Common Collateral beyond those specified in this Agreement, the ABL Security Documents and the Term Debt Security Documents, as applicable, provided that after the ABL Debt Payment Date (so long as the Term Debt Payment Date shall not have sooner occurred), the Agent shall (i) deliver to the Term Note Purchaser, at the Credit Parties’ sole cost and expense, the Common Collateral in its possession or control together with any necessary endorsements to the extent required by the Term Debt Documents, and assign its rights as secured party (without representation or warranty) under any deposit account or securities account control agreement, or (ii) direct and deliver such Common Collateral as a court of competent jurisdiction otherwise directs; provided, further, that after the Term Debt Payment Date (so long as the ABL Debt Payment Date shall not have sooner occurred), the Term Note Purchaser shall (i) deliver to the Agent, at the Credit Parties’ sole cost and expense, the Common Collateral in its possession or control together with any necessary endorsements to the extent required by the ABL Loan Documents, and assign its rights as secured party (without representation or warranty) under any deposit account or securities account control agreement or (ii) direct and deliver such Common Collateral as a court of competent jurisdiction otherwise directs.  The provisions of this Agreement are intended solely to govern the respective Lien Priorities as between the ABL Lenders and the Term Note Purchaser and shall not impose

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on the ABL Lenders or the Term Note Purchaser any obligations in respect of the disposition of any Common Collateral (or any Proceeds thereof) that would conflict with prior perfected Liens or any claims thereon in favor of any other Person that is not a Secured Party.

 

2.8    Tracing of and Priorities in Proceeds

.   

 

(a) With respect to any funds that are identifiable proceeds of Term Debt Priority Collateral credited to any ABL Priority Deposit Account which funds in respect of which the Agent has received a Notice of Commingling or other written notice by the Term Note Purchaser that proceeds of Term Debt Priority Collateral are to be or should have been deposited into a Term Debt Priority Account and passage of a reasonable time to act on such notice, the Agent shall turn over any misdirected proceeds of the Term Debt Priority Collateral to the Term Note Purchaser.

 

(b) With respect to any funds that are identifiable proceeds of ABL Priority Collateral credited to any Term Debt Priority Deposit Account which funds in respect of which the Term Note Purchaser has received a Notice of Commingling or other written notice by the Agent that proceeds of ABL Priority Collateral are to be or should have been deposited into an ABL Priority Account and passage of a reasonable time to act on such notice, the Term Note Purchaser shall turn over any misdirected proceeds of the ABL Priority Collateral to the Agent.  

 

(c) The ABL Loan Agreement provides that all proceeds of the ABL Priority Collateral are to be deposited into an ABL Priority Deposit Account; and any funds that are identifiable proceeds of ABL Priority Collateral credited to or otherwise received by the Term Note Purchaser or other Term Debt Secured Parties shall be turned over by the receiving Term Note Purchaser or other Term Debt Secured Parties to the Agent.  

 

(d) The Term Note Agreement provides that all proceeds of the Term Priority Collateral are to be deposited into a Term Debt Priority Deposit Account; and any funds that are identifiable proceeds of Term Debt Priority Collateral credited to or otherwise received by the Agent or other ABL Secured Parties shall be turned over by the receiving Agent or other ABL Secured Parties to the Term Note Purchaser.

 

2.9   Further Agreements of the ABL Lender.   The ABL Lenders agree that:

 

(a)  Without the prior written consent of the Term Note Purchaser in each instance, the ABL Lenders shall not enter into a deposit account control agreement or a securities account control agreement with respect to any Term Debt Priority Deposit Account,

 

(b) All stock and other certificates evidencing Equity Interests of any Grantor which now or hereafter have been pledged as security for or are otherwise subject to a Lien granted in favor of the Term Note Purchaser to secure the Term Debt, shall be held by Term Note Purchaser and to the extent Agent or any other ABL Secured Party receives possession of such certificates it shall promptly deliver said certificates to Term Note Purchaser, and until the time of delivery of possession of such certificates to Term Note Purchaser shall hold such certificates as gratuitous bailee agent for perfection on behalf of Term Note Purchaser in accordance with Section 2.7(b).  

 

(c) Provided that there exists no Default or Event of Default (as such terms are defined in the ABL Loan Agreement) and none could reasonably be expected to result with respect to a sale of substantially all of the assets of a Grantor that is a direct or indirect Subsidiary of the Parent, the ABL Lenders will release their ABL Priority Lien on Grantor’s Accounts included in such sale simultaneously with the Agent’s receipt of the ABL Priority Subsidiary Asset Sale Proceeds from such sale, provided that

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this clause (c) shall not apply to any series of asset sales, or multiple sales of all or substantially all of the assets of more than one Grantor occurring at the same time or as part of a related transaction, unless consented to in writing by ABL Lenders, of multiple Grantors; it being understood that this Section 2.10 is in addition to and not in limitation of Section 4.2; and

 

(d)  The ABL Lenders acknowledge and agree that the Term Note Purchaser has the right under certain circumstances as provided in the Term Note Agreement and/or in any deposit account control agreement entered into with respect to any Term Debt Priority Deposit Account to restrict the use of any cash or Proceeds in any Term Debt Priority Deposit Account, and the ABL Lenders acknowledge and agree that they are not entitled to consent to any such restriction or to receive notice from Term Note Purchaser as to the existence or imposition of any such restrictions; it being understood that any such restrictions shall not impair or diminish the rights of the ABL Lenders as provided for in this Agreement to receive all ABL Priority Subsidiary Asset Sale Proceeds contained in any Term Debt Priority Deposit Account. The Term Note Purchaser acknowledges and agrees that the ABL Lenders may receive and retain for application to the ABL Debt in accordance with the terms of the ABL Loan Documents, any payments from the Grantor that come from any Term Debt Priority Deposit Account notwithstanding the fact that Grantor may have made such payment in violation of such restrictions, provided that if Term Note Purchaser has notified Agent by delivery of a Notice of Commingling that such payments constitute Term Debt Priority Collateral and Agent has had a reasonable time to act on such notice then to the extent (i) such payments are identifiable proceeds of Term Debt Priority Collateral and (ii) such payments have not yet been applied by the ABL Lenders to the repayment of any ABL Debt prior to receipt of such Notice of Commingling, ABL Lenders agree to turn over such misdirected payments in accordance with Section 2.8

 

3. Enforcement Rights.

 

3.1  Exclusive Enforcement.   Until the Senior Obligations Payment Date has occurred, whether or not a Proceeding has been commenced by or against any Grantor, the Senior Secured Parties shall have the exclusive right to take and continue any Enforcement Action (including the right to credit bid their debt) with respect to the Senior Collateral, without any consultation with or consent of any Junior Secured Party, but subject to the proviso set forth in Section 5.1.  Upon the occurrence and during the continuance of a default or an event of default under the Senior Documents, the Senior Representative and the other Senior Secured Parties may take and continue any Enforcement Action with respect to the Senior Obligations and the Senior Collateral in such order and manner as they may determine in their sole discretion in accordance with the terms and conditions of the Senior Documents, subject to Section 3.4.

 

3.2  Standstill and Waivers.   Each Junior Representative, on behalf of itself and the other Junior Secured Parties, agrees that, until the Senior Obligations Payment Date has occurred, but subject to the proviso set forth in Section 5.1 and the last sentence in this Section 3.2:

 

(i) they will not take or cause to be taken any action, the purpose or effect of which is to make any Lien on any Senior Collateral that secures any Junior Obligation pari passu with or senior to, or to give any Junior Secured Party any preference or priority relative to, the Liens on the Senior Collateral securing the Senior Obligations;

 

(ii) they will not contest, oppose, object to, interfere with, hinder or delay, in any manner, whether by judicial proceedings (including without limitation the filing of a Proceeding) or otherwise, any foreclosure, sale, lease, exchange, transfer or other disposition of the Senior Collateral by any Senior Secured Party or any other Enforcement Action taken (or any forbearance from taking any Enforcement Action) in respect of the Senior Collateral by or on behalf of any Senior Secured Party;

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(iii) they have no right to (x) direct either the Senior Representative or any other Senior Secured Party to exercise any right, remedy or power with respect to the Senior Collateral or pursuant to the Senior Security Documents in respect of the Senior Collateral or (y) consent or object to the exercise by the Senior Representative or any other Senior Secured Party of any right, remedy or power with respect to the Senior Collateral or pursuant to the Senior Security Documents with respect to the Senior Collateral or to the timing or manner in which any such right is exercised or not exercised (or, to the extent they may have any such right described in this clause (iii), whether as a junior lien creditor in respect of the Senior Collateral or otherwise, they hereby irrevocably waive such right);

 

(iv) they will not institute any suit or other proceeding or assert in any suit, Proceeding or other proceeding any claim against any Senior Secured Party seeking damages from or other relief by way of specific performance, instructions or otherwise, with respect to, and no Senior Secured Party shall be liable for, any action taken or omitted to be taken by any Senior Secured Party with respect to the Senior Collateral or pursuant to the Senior Documents in respect of the Senior Collateral;

 

(v) they will not commence judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of any Senior Collateral, exercise any right, remedy or power with respect to, or otherwise take any action to enforce their interest in or realize upon, the Senior Collateral; and

 

(vi) they will not seek, and hereby waive any right, to have the Senior Collateral or any part thereof marshaled upon any foreclosure or other disposition of the Senior Collateral.

 

Notwithstanding the foregoing, any Junior Representative may, but shall not be required to, (i) take all such actions as it shall deem necessary to (A) perfect or continue the perfection of its Junior Liens or (B) create or preserve (but not enforce) the Junior Liens on any Collateral, and (ii) subject at all times to the provisions of Section 5 of this Agreement, enforce or exercise any or all such rights and remedies as to any Junior Collateral commencing one hundred eighty (180) days after the date of the receipt by the Senior Representative of written notice from the Junior Representative of the declaration by the Junior Secured Parties of an event of default under the applicable Junior Documents in accordance with the terms of such Junior Documents that is continuing and the written demand by the Junior Secured Parties of the immediate Payment in Full of all of the applicable Junior Debt (such 180-day period being referred to herein as the “ Junior Standstill Period ”), provided that

 

(i) in the event that at any time after the Junior Representative has sent a notice to the Senior Representative to commence the Junior Standstill Period, the event of default that was the basis for such notice is cured or waived or otherwise ceases to exist and no other events of default under the applicable Junior Documents have occurred and are then continuing, then the notice shall automatically and without further action of the parties be deemed rescinded and no Junior Standstill Period shall be deemed to have been commenced;

 

(ii) the Junior Standstill Period shall be tolled for any period during which the Senior Representative is stayed from exercising rights or remedies pursuant to a Proceeding or court order, so long as the Senior Representative has used its commercially reasonable efforts to have such stay lifted;

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(iii) prior to taking any action to enforce or exercise any or all such rights and remedies after the end of the Junior Standstill Period, the Junior Representative shall give the Senior Representative not more than ten (10) Business Days’ and not less than five (5) Business Days’ prior written notice of the intention of Junior Representative to exercise its rights and remedies, including specifying the rights and remedies that it intends to exercise, which notice may be sent prior to the end of the Junior Standstill Period and in the event that Junior Representative shall not take any action to enforce or exercise any or all of such rights within ninety (90) days after the end of the Junior Standstill Period, then the notice to commence such Junior Standstill Period shall automatically and without further action of the parties be deemed rescinded and no Junior Standstill Period shall be deemed to have been commenced; and

 

(iv) notwithstanding anything to the contrary contained in this Section 3.2, the Junior Representative and the other Junior Secured Parties may not exercise any rights and remedies against any specific item or items of Junior Collateral after the end of the Junior Standstill Period, if and for so long as the Senior Representative or any other Senior Secured Party is diligently pursuing in good faith the exercise of its enforcement rights or remedies against the Grantors and/or all or any material portion of the Senior Collateral.

 

3.3  Judgment Creditors.   In the event that any Term Debt Secured Party becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subject to the terms of this Agreement for all purposes (including in relation to the ABL Liens and the ABL Debt) to the same extent as all other Liens securing the Term Debt are subject to the terms of this Agreement.  In the event that any ABL Secured Party becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subject to the terms of this Agreement for all purposes (including in relation to the Term Note Liens and the Term Debt) to the same extent as all other Liens securing the ABL Debt are subject to the terms of this Agreement.

 

3.4  Cooperation; Sharing of Information and Access.

 

(a) The Term Note Purchaser, on behalf of itself and the other Term Debt Secured Parties, agrees that each of them shall take such actions as the Agent shall request in writing in connection with the exercise by the ABL Secured Parties of their rights set forth herein in respect of the ABL Priority Collateral.  The Agent, on behalf of itself and the other ABL Secured Parties, agrees that each of them shall take such actions as the Term Note Purchaser shall request in writing in connection with the exercise by the Term Debt Secured Parties of their rights set forth herein in respect of the Term Debt Priority Collateral.

 

(b) In the event that the Agent shall, in the exercise of its rights under the ABL Security Documents or otherwise, receive possession or control of any books and Records of any Grantor which contain information identifying or pertaining to any of the Term Debt Priority Collateral, the Agent shall promptly notify the Term Note Purchaser of such fact and, upon request from the Term Note Purchaser and as promptly as practicable thereafter, either make available to the Term Note Purchaser such books and Records for inspection and duplication or provide to the Term Note Purchaser copies thereof.  In the event that the Term Note Purchaser shall, in the exercise of its rights under the Term Debt Security Documents or otherwise, receive possession or control of any books and Records of any Grantor which contain information identifying or pertaining to any of the ABL Priority Collateral, the Term Note Purchaser shall promptly notify the Agent of such fact and, upon request from the Agent and as promptly as practicable thereafter, either make available to the Agent such books and Records for inspection and duplication or provide the Agent copies thereof.  The Term Note Purchaser hereby irrevocably grants the Agent a non-exclusive worldwide license or right to use, to the maximum extent permitted by applicable law and to the

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extent of the Term Note Purchaser’s interest therein, exercisable without payment of royalty or other compensation, to use any of the intellectual property now or hereafter owned by, licensed to, or otherwise used by the Grantors in order for Agent and ABL Secured Parties to purchase, use, market, repossess, possess, store, assemble, manufacture, process, sell, transfer, distribute or otherwise dispose of any asset included in the ABL Priority Collateral in connection with the liquidation, disposition or realization upon the ABL Priority Collateral in accordance with the terms and conditions of the ABL Security Documents and the other ABL Loan Documents.  Until the ABL Debt Payment Date, the Term Note Purchaser agrees that any sale, transfer or other disposition of any of the Grantors’ intellectual prop erty (whether by foreclosure or otherwise) will be subject to the Agent’s rights as set forth in this Section 3.4 (b) . The ABL Lenders hereby irrevocably grants the Term Note Purchaser a non-exclusive worldwide license or right to use, to the maximum extent permitted by applicable law and to the extent of the ABL Lenders’ interest therein, exercisable without payment of royalty or other compensation, to use any of the intellectual property now or hereafter owned by, licensed to, or otherwise used by the Grantors in order for Term Note Purchaser to purchase, use, market, repossess, possess, store, assemble, manufacture, process, sell, transfer, distribute or otherwise dispose of any asset included in the Term Debt Priority Collateral in connection with the liquidation, disposition or realization upon the Term Debt Priority Collateral in accordance with the terms and conditions of the Term Debt Security Documents and the other Term Debt Documents.  Until the Term Debt Payment Date, the ABL Lenders agree that any sale, transfer or other disposition of any of the Grantors’ intellectual prop erty (whether by foreclosure or otherwise) will be subject to the Term Note Purchaser ’s rights as set forth in this Section 3.4 . ( b ) .   If the Term Note Purchaser, or any agent or representative of the Term Note Purchaser, or any receiver, shall, after the commencement of any Enforcement Action, obtain possession or physical control of any of the ABL Debt Priority Collateral , the Term Note Purchaser shall promptly notify the Agent in writing of that fact, and the Agent shall, within thirty (30) Business Days thereafter, notify the Term Note Purchaser in writing as to whether the Agent desires to exercise access rights under this Agreement.  In addition, if the Agent, or any agent or representative of the Agent, or any receiver, shall obtain possession or physical control of any of the Term Debt Priority Collateral in connection with an Enforcement Action, then the Agent shall promptly notify the Term Note Purchaser that the Agent is exercising its access rights under this Agreement.  Upon delivery of such notice by the Agent to the Term Note Purchaser, the parties shall confer in good faith to coordinate with respect to the Agent’s exercise of such access rights, with such access rights to apply to any parcel or item of Term Debt Priority Collateral access to which is reasonably necessary to enable the Agent during normal business hours:  (i) to convert ABL Priority Collateral consisting of raw materials and work-in-process into saleable finished goods; (ii) to complete any service or project required for the practical realization of the benefits of the ABL Priority Collateral; (iii) to transport such ABL Priority Collateral to a point where such conversion can occur; (iv) to otherwise prepare ABL Priority Collateral for sale; and/or (v) to arrange or effect the sale of ABL Priority Collateral, all in accordance with the manner in which such matters are completed in the ordinary course of business , and at Borrowers’ expense .

 

(c) Consistent with the definition of Access Period, access rights will apply to differing parcels of real property and differing items (including, without limitation, equipment) constituting Term Debt Priority Collateral at differing times, in which case, a differing Access Period will apply to each such parcel and items.  During any pertinent Access Period, the Agent and its agents, representatives and designees shall have an irrevocable, non-exclusive right to have access at reasonable times to, and a rent-free right to use, the relevant parcel or item of Term Debt Priority Collateral for the purposes described above in Section 3.4(b).  The Agent shall take proper and reasonable care under the circumstances of any Term Debt Priority Collateral that is used by the Agent during the Access Period and repair and replace any damage (ordinary wear-and-tear excepted) caused by the Agent or its agents, representatives or designees and the Agent shall comply with all applicable laws in all material respects in connection with its use or occupancy or possession of the ABL Priority Collateral.  The Agent shall indemnify and hold harmless the Term Note Purchaser for any injury or damage to Persons or property (ordinary wear-and-tear excepted) caused by the acts or omissions of Persons under its control; provided, however, that the Agent and the

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ABL Lenders will not be liable for any diminution in the value of Term Debt Priority Collateral caused by the absence of the ABL Priority Collateral therefrom.  The Agent and the Term Note Purchaser shall cooperate and use reasonable efforts to ensure that their activities during the Access Period as described above do not interfere materially with the activities of the other as described above, including the right of Term Note Purchaser to show the Term Debt Priority Collateral to prospective purchasers and to ready the Term Debt Priority Collateral for sale.  Consistent with the definition of the term Access Period , if any order or injunction is issued or stay is granted or is otherwise effective by operation of law that prohibits the Agent from exercising any of its rights hereunder, then the Access Period granted to the Agent under this Section 3.4 shall be stayed during the period of such prohibition and shall continue thereafter for the number of days remaining as required under this Section 3.4 .   This Section 3.4 will not restrict the rights of the Term Note Purchaser to sell, assign or otherwise transfer the related Term Debt Priority Collateral prior to the expiration of any applicable Access Period if either (i) such Term Debt Priority Collateral is not reasonably necessary to enable the Agent to convert, transport or arrange to sell any associated ABL Priority Collateral as described above , or (ii) the purchaser, assignee or transferee thereof agrees to be bound by the access provisions of this Section 3. 4 .

 

3.5  No Additional Rights For the Grantors Hereunder .  Except as provided in Section 3.6 hereof, if any ABL Secured Party or Term Debt Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, no Grantor shall be entitled to use such violation as a defense to any action by any ABL Secured Party or Term Debt Secured Party, nor to assert such violation as a counterclaim or basis for set off or recoupment against any ABL Secured Party or any Term Debt Secured Party.

 

3.6  Actions Upon Breach

.  

 

(a) If any ABL Secured Party or any Term Debt Secured Party, contrary to this Agreement, commences or participates in any action or proceeding against any Grantor or the Common Collateral, such Grantor, with the prior written consent of the Agent or the Term Note Purchaser, as applicable, may interpose as a defense or dilatory plea the making of this Agreement, and any ABL Secured Party or Term Debt Secured Party, as applicable, may intervene and interpose such defense or plea in its or their name or in the name of such Grantor.

 

(b) Should any ABL Secured Party or Term Debt Secured Party, contrary to this Agreement, in any way take, attempt to or threaten to take any action with respect to the Common Collateral (including, without limitation, any attempt to realize upon or enforce any remedy with respect to this Agreement), or fail to take any action required by this Agreement, any ABL Secured Party or any Term Debt Secured Party (in its own name or in the name of the relevant Grantor), as applicable, may obtain relief against such ABL Secured Party or Term Debt Secured Party, as applicable, by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by each of the Agent on behalf of each ABL Secured Party and the Term Note Purchaser on behalf of each Term Debt Secured Party that (i) the ABL Secured Parties’ or Term Debt Secured Parties’, as applicable, damages from its actions may at that time be difficult to ascertain and may be irreparable, and (ii) each Term Debt Secured Party or each ABL Secured Party, as applicable, waives any defense that the Grantors and/or the Term Debt Secured Parties and/or ABL Secured Parties, as applicable, cannot demonstrate damage and/or be made whole by the awarding of damages.

 

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4. Application of Proceeds of Senior Collateral; Dispositions and Releases of Lien; Notices and Insurance.

 

4.1 Application of Proceeds

.

 

(a) Application of Proceeds of Senior Collateral .  The Senior Representative and Junior Representative hereby agree that, whether or not a Proceeding has been commenced by or against any Grantor, all Senior Collateral, and all Proceeds thereof, received by either of them in connection with the collection, sale or disposition of Senior Collateral in an Enforcement Action shall be applied,

 

first , to the payment of costs and expenses (including reasonable attorneys’ fees and expenses and court costs) of the Senior Representative in connection with such Enforcement Action,

second , to the payment of the Senior Obligations in accordance with the Senior Documents until the Senior Obligations Payment Date,

third , to the payment of costs and expenses (including reasonable attorneys’ fees and expenses and court costs) of the Junior Representative in connection with such Enforcement Action,

fourth , to the payment of the Junior Debt in accordance with the Junior Documents until the Junior Obligations Payment Date, and

fifth , the balance, if any, to the Grantors or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Nothing in this Section 4.1 is intended to or shall limit the right of the Agent and ABL Lenders, in the exercise of their sole and absolute discretion from time to time, from administering their revolving credit facility in the manner described in subsection (d) below despite the existence of an event of default under the ABL Loan Agreement.

(b) Limited Obligation or Liability .  In exercising remedies, whether as a secured creditor or otherwise, the Senior Representative shall have no obligation or liability to the Junior Representative or to any Junior Secured Party, regarding the adequacy of any Proceeds or for any action or omission, save and except solely for an action or omission that breaches the express obligations undertaken by each party under the terms of this Agreement.

 

(c) Segregation of Collateral .  Until the occurrence of the Senior Obligations Payment Date, any Senior Collateral that may be received by any Junior Secured Party in violation of this Agreement shall be segregated and held in trust and promptly paid over to the Senior Representative, for the benefit of the Senior Secured Parties, in the same form as received, with any necessary endorsements, and each Junior Secured Party hereby authorizes the Senior Representative to make any such endorsements as agent for the Junior Representative (which authorization, being coupled with an interest, is irrevocable).

 

(d) Revolving Nature of ABL Loans . The Term Note Purchaser acknowledges and agrees that (i) the ABL Loan Agreement includes a revolving commitment, that in the ordinary course of business the ABL Lenders will apply payments and make advances thereunder, and that no application of any ABL Priority Collateral or the release of any Lien by the Agent upon any portion of the ABL Priority Collateral in connection with a disposition permitted by the Credit Parties under the ABL Loan

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Agreement shall not constitute an Enforcement Action or the pursuit of a collection action under this Agreement; (ii) the amount of the ABL Loans that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, subject to the ABL Debt Cap, (iii) from time to time the Agent and the other ABL Lenders may modify (or have the effect of a modification of) advance rates, sub-limits, borrowing base components, eligibility criteria or reserves, or provide for special advances, overadvances, protective advances and other changes that would increase or decrease the amount available to be borrowed under the ABL Loan Agreement as in effect on the date hereof, and no such modification and no provision for the repayment off ABL Loans as a result of such modification, shall constitute an Enforcement Action or the pursuit of a collection action under this Agreement; (iv) subject to Section 7.1 , the terms of the ABL Loans may be modified, amended and restated, extended or amended from time to time, and that the aggregate amount of the ABL Loans may be increased, replaced or refinanced, in each event, without notice to or consent by the Term Secured Parties and without affecting the provisions hereof; and (v) all ABL Priority Collateral received by the Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL Loans at any time.

 

4.2  Releases of Liens.   Upon any release, sale or disposition of Senior Collateral that is permitted pursuant to the terms of the Senior Documents or is effected by any sale or other disposition pursuant to any Enforcement Action, and that results in the release of the Senior Lien on any Senior Collateral (other than release of the Senior Lien due to the occurrence of the Senior Obligations Payment Date), the Junior Lien on such Senior Collateral (excluding any portion of the Proceeds of such Senior Collateral remaining after the Senior Obligations Payment Date occurs, which shall continue to be subject to the Junior Liens) shall be automatically and unconditionally released with no further consent or action of any Person, it being specifically agreed and acknowledged by the Senior Representative that the automatic release of any such Junior Lien on the Senior Collateral will not impair the security under the ABL Loan Documents or Term Debt Documents, as applicable, in contravention of the provisions thereof, provided that the proceeds of any such sale or disposition pursuant to an Enforcement Action must be applied in accordance with Section 4.1 and to permanently repay the Senior Obligations (with a corresponding commitment reduction in the case of any repayment of ABL Loans). The Junior Representative shall promptly execute and deliver such release documents and instruments and shall take such further actions as the Senior Representative shall request to evidence any release of the Junior Lien described in this Section 4.2 .  The Junior Representative hereby appoints the Senior Representative and any officer or duly authorized person of the Senior Representative, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the Junior Representative and in the name of the Junior Representative or in the Senior Representative’s own name, from time to time, in the Senior Representative’s sole discretion, for the purposes of carrying out the terms of this Section 4.2 , to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this Section 4.2 , including, without limitation, any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).

 

4.3 Insurance.   Proceeds of Common Collateral include insurance proceeds and therefore the Lien Priority shall govern the ultimate disposition of casualty insurance proceeds.  The Agent shall be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to ABL Priority Collateral and the Term Note Purchaser shall be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to Term Debt Priority Collateral.  Prior to the ABL Debt Payment Date, the Agent shall have the sole and exclusive right, as between the Term Note Purchaser on the one hand and the Agent on the other hand, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of ABL Priority Collateral.  Prior to the Term Debt Payment Date, the Term Note Purchaser shall have the sole and exclusive right, as between the Agent on the one hand and the Term Note Purchaser on the other hand, to adjust settlement of insurance claims in

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the event of any covered loss, theft or destruction of Term Debt Priority Collateral .  All proceeds of such insurance shall be remitted to the Agent or the Term Note Purchaser , as the case may be, and each of the Term Note Purchaser and Agent shall cooperate (if necessary) in a reasonable manner in effecting the payment of insurance proceeds in accordance with Section 4.1.

 

5. Proceedings.

 

5.1  Filing of Motions.   Until the Senior Obligations Payment Date has occurred, the Junior Representative agrees on behalf of itself and the other Junior Secured Parties that no Junior Secured Party shall, in or in connection with any Proceeding, file any pleadings or motions, take any position at any hearing or proceeding of any nature, or otherwise take any action whatsoever, in each case in respect of any of the Senior Collateral, including, without limitation, with respect to the determination of any Liens or claims held by the Senior Representative (including the validity and enforceability thereof) or any other Senior Secured Party in respect of any Senior Collateral or the value of any claims of such parties under Section 506(a) of the Bankruptcy Code or otherwise; provided that the Junior Representative may (i) file a proof of claim in a Proceeding, and (ii) file any necessary responsive or defensive pleadings in opposition of any motion or other pleadings made by any Person objecting to or otherwise seeking the disallowance of the claims of the Junior Secured Parties on the Senior Collateral, subject to the limitations contained in this Agreement and only if consistent with the terms and the limitations on the Junior Representative imposed hereby.

 

5.2  Financing Matters

.  

 

(a) If any Grantor becomes subject to any Proceeding in the United States at any time prior to the ABL Debt Payment Date, and if the Agent or other ABL Secured Parties desire to consent (or not object) to the use of cash collateral under the Bankruptcy Code constituting ABL Priority Collateral or to provide financing to any Grantor under the Bankruptcy Code or to consent (or not object) to the provision of such financing to any Grantor by one or more of the ABL Lenders or by any third party provided the provisions of the financing provided by such third party qualifies as a Permitted Refinancing (any such financing, “ ABL DIP Financing ”), then the Term Note Purchaser agrees, on behalf of itself and the other Term Debt Secured Parties, that each Term Debt Secured Party (i) will be deemed to have consented to, will raise no objection to, nor support any other Person objecting to, the use of such cash collateral constituting ABL Priority Collateral or to such ABL DIP Financing on the grounds of a failure to provide “adequate protection” for the Term Debt Secured Parties’ Lien on the Term Debt Collateral to secure the Term Debt (except as provided in clause (z) below) or on any other grounds (and will not request any adequate protection solely as a result of such ABL DIP Financing, except as provided in clause (z) below) and (ii) will subordinate (and will be deemed hereunder to have subordinated) the Term Note Liens on any ABL Priority Collateral (A) to such ABL DIP Financing on the same terms as the ABL Liens are subordinated thereto (and such subordination will not alter in any manner the terms of this Agreement), (B) to any adequate protection provided to the ABL Secured Parties and (C) to any “carve-out” in respect of fees and expenses of professionals retained by any debtor or committee and administrative expenses as agreed to by the Agent or the other ABL Secured Parties, in each case, under the immediately preceding clauses (i) and (ii), so long as (x) the following conditions are met: (1) the financing is not made in conjunction with the use of cash collateral consisting of Term Debt Priority Collateral and the Term Debt Secured Parties retain their Lien on the Term Debt Collateral to secure the Term Debt (in each case, including Proceeds thereof arising after the commencement of the case under the Bankruptcy Code) and (2) as to the Term Debt Priority Collateral only, such Lien has the same priority as existed prior to the commencement of the case under the Bankruptcy Code and any Lien securing such ABL DIP Financing, together with any adequate protection Liens granted to any ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) on any Term Debt Priority Collateral (and all obligations relating to such ABL DIP Financing, including any “carve-out”),

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shall be junior and subordinate to the Lien of the Term Debt Secured Parties on the Term Debt Priority Collateral , (y) all Liens on ABL Priority Collateral securing any such ABL DIP Financing shall be senior to or on a parity with the Liens of the Agent and the other ABL Secured Parties securing the ABL Debt on ABL Priority Collateral and (z) if the Agent or any other ABL Secured Party (or any third party under a Permitted Refinancing of ABL Debt) receives a replacement or adequate protection Lien on post-petition assets of the debtor to secure the ABL Debt, and such replacement or adequate protection Lien is on any of the Term Debt Priority Collateral , (1) such replacement or adequate protection Lien on such post-petition assets which are part of the Term Debt Priority Collateral (the “ Term Note Post-Petition Assets ”) is junior and subordinate to the Lien in favor of the Term Debt Secured Parties on the Term Debt Priority Collateral and (2) the Term Debt Secured Parties also receive a replacement or adequate protection Lien on such Term Note Post- Petition Assets of the debtor to secure the Term Debt senior in priority to any adequate protection or replacement Lien granted to Agent or any other ABL Secured Party (or any third party under a Permitted Refinancing of ABL Debt) , and the Agent and ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) shall not oppose any motion by any of the Term Debt Secured Parties with respect to the granting of any such adequate or replacement Lien on such Term Note Post-Petition Assets .  In no event will (i) the terms of such DIP Financing or use of c ash c ollateral order either require any of the Term Debt Secured Parties to extend additional credit pursuant to such DIP Financing or authorize the use of c ash c ollateral consisting of Term Debt Priority Collateral , (ii) any of the ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) seek to obtain a priming Lien on any of the Term Debt Priority Collateral and nothing contained herein shall be deemed to be a consent by Term Debt Secured Parties to any adequate protection payments using Term Debt Priority Collateral .    If the ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) offer to provide DIP Financing that meets the requirements set forth above in this Section 5.2(a) and, to the extent of any modifications to the ABL Debt Documents meet the requirements for a Permitted Refinancing , then, for so long as such offer by such ABL Secured Parties remains in effect and has not terminated or been withdrawn, the Term Debt Secured Parties will not provide, participate in, or join in or support any other Person in any manner in providing or supporting the use of cash collateral constituting ABL Priority Collateral under the Bankruptcy Code or financing to any Grantor under the Bankruptcy Code .   The foregoing provisions of this Section 5.2(a) shall not prevent the Term Debt Secured Parties from objecting to any provision in any c ash c ollateral order or DIP Financing documentation relating to any provision or content of a plan of reorganization or similar dispositive re-structuring plan that is inconsistent with the terms of this Agreement, including, without limitation, the lien priorities in respect of the Collateral and Proceeds thereof as set forth in this Agreement .

 

(b) All Liens granted to the Term Note Purchaser or the Agent in any Proceeding, whether as adequate protection or otherwise, are intended to be and shall be deemed to be subject to the Lien Priority and the other terms and conditions of this Agreement.

 

5.3  Relief From the Automatic Stay

.   Until the ABL Debt Payment Date, the Term Note Purchaser agrees, on behalf of itself and the other Term Debt Secured Parties, that none of them will seek relief from the automatic stay or from any other stay in any Proceeding or take any action in derogation thereof, in each case in respect of any ABL Priority Collateral, without the prior written consent of the Agent.  Until the Term Debt Payment Date, the Agent agrees, on behalf of itself and the other ABL Secured Parties, that none of them will seek relief from the automatic stay or from any other stay in any Proceeding or take any action in derogation thereof, in each case in respect of any Term Debt Priority Collateral, without the prior written consent of the Term Debt Secured Parties.   Notwithstanding the foregoing, Junior Secured Parties may seek such relief to the extent it is conditioned and coextensive with the relief sought and granted to the Senior Secured Parties and the exercise of such relief to the Junior Secured Parties is subject to the continuing terms of this Agreement.

 

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5.4  No Contest .  The Junior Representative, on behalf of itself and the Junior Secured Parties, agrees that, prior to the Senior Obligations Payment Date, none of them shall contest (or support any other Person contesting) (a) any request by the Senior Representative or any Senior Secured Party for adequate protection of its interest in the Senior Collateral (unless in contravention of Section 5.2(a) or (b) , as applicable), or (b) any objection by the Senior Representative or any Senior Secured Party to any motion, relief, action, or proceeding based on a claim by the Senior Representative or any Senior Secured Party that its interests in the Senior Collateral (unless in contravention of Section 5.2 (a) or (b) , as applicable) are not adequately protected (or any other similar request under any law applicable to a Proceeding), so long as any Liens granted to the Senior Representative as adequate protection of its interests are subject to this Agreement.

 

5.5  Avoidance Issues.   If any Senior Secured Party is required in any Proceeding or otherwise to disgorge, turn over or otherwise pay to the estate of any Grantor, because such amount was avoided or ordered to be paid or disgorged for any reason, including without limitation because it was found to be a fraudulent or preferential transfer, any amount (a “ Recovery ”), whether received as Proceeds of security, enforcement of any right of set-off or otherwise, then the Senior Obligations shall be reinstated to the extent of such Recovery and deemed to be outstanding as if such payment had not occurred and the Senior Obligations Payment Date shall be deemed not to have occurred.  If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto.

 

5.6  Asset Dispositions in a Proceeding.   Neither the Junior Representative nor any other Junior Secured Party shall, in a Proceeding or otherwise, oppose any motion under Section 363 of the Bankruptcy Code (and otherwise) relating to the sale or disposition of any Senior Collateral that is supported by the Senior Secured Parties, and the Junior Representative and each other Junior Secured Party will be deemed to have consented under Section 363 of the Bankruptcy Code (and otherwise) to any sale of any Senior Collateral supported by the Senior Secured Parties and to have released their Liens on such assets, provided that (i) such motion does not impair, subject to the priorities set forth in this Agreement, the rights of such party under Section 363(k) of the Bankruptcy Code or any similar Bankruptcy Law (so long as the right of any Junior Secured Party to offset its claim against the purchase price for any Senior Collateral exists only after the Senior Obligations have been paid in full in cash, (ii) the terms of any proposed order approving such transaction provide for the respective Liens of the Secured Parties to attach to the proceeds of the Senior Collateral that is the subject of such Disposition, subject to the Lien priorities set forth in Section 2.1 of this Agreement, and (iii) the proceeds received by the Senior Secured Parties from any such sale or disposition are applied in accordance with Section 4.1.  Each of the Agent on behalf of the ABL Secured Parties and the Term Debt Secured Parties further agrees that it will not oppose, or support any party in opposing, the right of the other party to credit bid under Section 363(k) of the Bankruptcy Code or any similar Bankruptcy Law, subject to the provisions of the immediately preceding sentence.

 

5.7  Other Matters.   To the extent that the Senior Representative or any Senior Secured Party has or acquires rights under Section 363 or Section 364 of the Bankruptcy Code with respect to any of the Junior Collateral, the Senior Representative agrees, on behalf of itself and the other Senior Secured Parties, not to assert any of such rights without the prior written consent of the Junior Representative; provided that if requested by the Junior Representative, the Senior Representative shall timely exercise such rights in the manner requested by the Junior Representative, including any rights to payments in respect of such rights.

 

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5.8  Effectiveness in Proceedings .   This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under section 510(a) of the Bankruptcy Code, shall be effective before, during and after the commencement of a Proceeding.

 

6. Reliance; Waivers; etc.

 

6.1  Reliance.   The ABL Loan Documents are deemed to have been executed and delivered, and all extensions of credit thereunder are deemed to have been made or incurred, in reliance upon this Agreement.  The Term Note Purchaser, on behalf of it itself and the other Term Debt Secured Parties, expressly waives all notice of the acceptance of and reliance on this Agreement by the Agent and the other ABL Secured Parties.  The Term Debt Documents are deemed to have been executed and delivered, and all extensions of credit thereunder are deemed to have been made or incurred, in reliance upon this Agreement.  The Agent, on behalf of itself and the other ABL Secured Parties, expressly waives all notices of the acceptance of and reliance on this Agreement by the Term Note Purchaser and the other Term Debt Secured Parties.

 

6.2 No Warranties or Liability .  The Term Note Purchaser and the Agent acknowledge and agree that neither has made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any other ABL Loan Document or any other Term Debt Document.  Except as otherwise provided in this Agreement, the Term Note Purchaser and the Agent will be entitled to manage and supervise the respective extensions of credit to any Grantor in accordance with law and their usual practices, modified from time to time as they deem appropriate.

 

6.3  No Waivers.   No right or benefit of any party hereunder shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of such party or any other party hereto or by any noncompliance by any Grantor with the terms and conditions of any of the ABL Loan Documents or the Term Debt Documents.

 

7. Modifications.

 

7.1.  Modifications to ABL Loan Documents.   ABL Lenders may at any time and from time to time without the consent of or notice to Term Note Purchaser, without incurring liability to Term Note Purchaser and without impairing or releasing the obligations of Term Note Purchaser under this Agreement, (a) change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the ABL Loans, or (b) increase or decrease the amount of the ABL Loans; provided, however , that in no event shall the increase provide that the aggregate outstanding principal amount due under the ABL Loans may exceed the ABL Debt Cap, or (c) amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the ABL Loans, or (d) accept collateral security or guaranties for the ABL Loans and sell, exchange, fail to perfect, release or otherwise deal with all or any part of any such collateral or guaranties, (e) release any party primarily or secondarily obligated on the ABL Loans, (f) grant indulgences and take or refrain from taking any action with regard to the collection or enforcement of the ABL Loans, and (g) take any action which might otherwise constitute a defense to or a discharge of any Credit Party; provided however that that no such amendment or modification shall do any of the following without the prior written consent of the Term Note Purchaser:

(i) provide for an outstanding principal amount of, without duplication, ABL Loans in the aggregate in excess of the ABL Debt Cap;

(ii) increase the interest rate or yield provisions applicable to the ABL Loans by more than 4.00% per annum in the aggregate (excluding increases (A) resulting from increases in

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the underlying reference rate or (B) resulting from the accrual of interest at the default rate of interest (as calculated in the ABL Loan Documents as of the date hereof);

(iii) extend by more than one (1) year the scheduled maturity date or facility termination date of any loan or extension of credit or credit facility provided for in the ABL Loan Documents beyond the scheduled final maturity and/or termination date, as applicable, set forth in the ABL Loan Documents as in effect on the date hereof;

(iv) change any covenant, default or event of default (including the addition of any covenant, default or event of default not contained in the ABL Loan Documents as in effect on the date hereof) to restrict the payment of any Term Debt) that would otherwise be permitted hereunder or under the ABL Loan Documents as in effect on the date hereof (for the avoidance of doubt, however, nothing in this Section 7.1 or otherwise shall (A) limit the ABL Lenders’ right to modify advance rates, sub-limits, borrowing base components, eligibility criteria or reserves, or provide for special advances, overadvances, protective advances and other changes that would increase (subject to the limitations in clause (i) above) or decrease the amount of credit available under ABL Loan Agreement, (B) limit the effect, or  prohibit the Senior Secured Parties from agreeing to any addition, amendment or modification, of the provisions of the Senior Documents that has the indirect effect of restricting the ability of the Credit Party to pay Junior Obligations or otherwise restricts such payments in accordance with the terms of this Agreement by restricting the use the Senior Collateral or the use of loan proceeds to pay Junior Obligations during the continuance of an event of default under the Senior Documents, or (C) give the Term Note Purchaser any rights in or under, or make the Term Note Purchaser a third party beneficiary of, the ABL Loan Documents),

 

(v) changes any redemption or prepayment provisions so as to require any new payments or accelerate (except as permitted under the ABL Debt Documents during the continuance of an event of default or as described in clause (ii) of Section 4.1) or increase any existing payments or shorten the stated maturity of the ABL Debt, or

(vi) contravene the provisions of this Agreement.

 

7.2.   Modifications to Term Debt Documents.  

 

(a) Until the ABL Debt Payment Date, and notwithstanding anything to the contrary contained in the Term Debt Documents, Term Note Purchaser shall not, without the prior written consent of Agent, agree to any amendment, modification or supplement to the terms of the Term Debt or the Term Debt Documents if such amendment, modification or supplement would:

(i) increase the principal amount in excess of the Term Debt Cap or increase interest rate of the Term Debt by more than 4.00% per annum in the aggregate (excluding increases (A) resulting from increases in the underlying reference rate or (B) resulting from the accrual of interest at the default rate of interest (as calculated in the Term Debt Documents as of the date hereof, or (C) resulting from any payment-in-kind,  non-cash interest) other than as set forth in the Term Debt Documents in effect on the date hereof,

(ii) changes any redemption or prepayment provisions so as to require any new payments or accelerate (except as permitted under the Term Debt Documents during the continuance of an event of default) or increase any existing payments or shorten the stated maturity of the Term Debt,

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(iv) change any covenant, default or event of default (including the addition of any covenant, default or event of default not contained in the Term Debt Documents as in effect on the date hereof) to restrict the payment of any ABL Debt that would otherwise be permitted hereunder or under the Term Debt Documents as in effect on the date hereof , or

(v) contravene the provisions of this Agreement.

 

Nothing herein, including the provisions of this Agreement pertaining to subordination of liens on the Collateral, shall be construed to imply (i) Agent’s or ABL Lenders’ consent to any Term Debt Document which grants a lien upon any of the Collateral (other than the Term Note Lien), or (ii) Term Note Purchaser’ consent to any ABL Debt Document which grants a lien upon any of the Collateral (other than the ABL Liens).

 

8. Construction.    The terms of this Agreement were negotiated among business persons sophisticated in the area of business finance, and accordingly, in construing the terms of this Agreement, no rule or law which would require that this instrument be construed against the party who drafted this instrument shall be given any force or effect.

  

9. Modification of this Agreement.   Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and Term Note Purchaser to be bound thereby, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

 

10. Further Assurances.   Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

 

11. Continuing Agreement.    This Agreement is a continuing agreement and will remain in full force and effect until all of the obligations under the ABL Loan Documents or the Term Note Documents have been Paid in Full, subject to reinstatement as provided for below, and without limiting any claim or cause of action that may have arisen against the Term Note Purchaser, Agent or any ABL Lender under the terms of this Agreement or applicable law prior to the date of termination. This Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any claim or demand for indemnification or payment with respect thereto has been made or payment of all or any part of the ABL Debt or the Term Debt is rescinded or must otherwise be returned by Agent and/or ABL Lenders or the Term Note Purchaser, as applicable, upon any Proceeding with respect to any Grantor or otherwise, all as though such payment had not been made.

 

12. Notices. Any notice or other communication required or permitted under this Agreement shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested and postage prepaid), sent by facsimile (with a confirming copy sent by regular mail), or sent by prepaid overnight courier service, and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Agreement:

 

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If to ABL Lenders, to Agent at:

 

c/o MidCap Financial Services, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, MD  20814

Attention:  Portfolio Management – Staffing 360 transaction

Facsimile:  (301) 941-1450

 

with a copy to:

 

c/o MidCap Financial Services, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, MD  20814

Attention:  General Counsel

Facsimile:  (301) 941-1450

 

If to Parent or any other Credit Party, at:

 

c/o Staffing 360 Solutions, Inc.

641 Lexington Avenue, 27th Floor

New York, NY 10022

Attention:  David Faiman

Facsimile:  (509) 694-8692

 

If to Term Note Purchaser, at:

 

 

the address set forth on the signature pages attached hereto.

 

 

If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery, facsimile or prepaid courier, notice shall be deemed to be given when delivered.

 

13. Successors and Assigns.   This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of ABL Lenders, Term Note Purchaser and the Credit Parties; provided, however , that no Credit Party may assign this Agreement in whole or in part without the prior written consent of Agent and the Term Note Purchaser.   ABL Lenders may, from time to time, without notice to Term Note Purchaser, assign or transfer any or all of the ABL Loans or any interest therein to any Person and Term Note Purchaser may, from time to time, without notice to ABL Lenders, assign or transfer any or all of the Term Debt or any interest therein to any Person, provided in each case the assignee or transferee (and each subsequent assignee or transferee) has been bound in writing to the same terms and conditions of this Agreement as the assignor or transferor, Notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Obligations and the Junior Obligations shall, subject to the terms hereof, be and remain the Senior Obligations or the Junior Obligations for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Obligations and the Junior Obligations or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Obligations or the Junior Obligations, be entitled to rely upon the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto.

 

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14 . No Waiver or Novation.   No waiver shall be deemed to have been made by any party to this Agreement of any of its rights under this Agreement unless the same shall be in writing and duly signed by its duly authorized officers or representatives, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of any party to this Agreement in any other respect at any time.  No executory agreement shall be effective to change, modify or to discharge, in whole or in part, this Agreement, unless such executory agreement is in writing and duly signed by the duly authorized officers or representatives of each party to this Agreement.

 

15. CONSENT TO JURISDICTION.    EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF MARYLAND AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SECURED PARTY AND EACH OF THE CREDIT PARTIES AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

16. WAIVER OF JURY TRIAL. EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE TERM DEBT DOCUMENTS OR ANY OF THE ABL LOAN DOCUMENTS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE APPLICABLE ABL LOAN DOCUMENTS AND NOTE DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

17. Term Note Purchaser Purchase Option .

 

17.1   Agent agrees that it shall give Term Note Purchaser written notice (a  “ Demand/Exercise Event Notice ”) of any proposed demand by Agent or any other ABL Lenders with respect to all of the ABL Loans outstanding under the ABL Loan Agreement and the other ABL Loan Documents, any proposed acceleration of the maturity of the ABL Loans or any proposed taking of any Enforcement Action against any of the Common Collateral (including, without limitation, any proposed private or public foreclosure sale in respect of all or any portion of the Collateral securing the ABL Loans) (each a “ Demand/Exercise Event ”):  (a) in the absence of an Exigent Circumstance, not less than two (2) Business Days prior to such demand or the issuance of such foreclosure notice or taking of any of Enforcement Actions (each referred to herein as an “ ABL Enforcement Action ”); or (b) if, in the judgment of Agent, Exigent Circumstances exist, concurrently with or as promptly as reasonably practicable after the taking of such action; provided, however, that the Agent’s failure to provide the notice of a ABL Enforcement Action to the Term Note Purchaser shall not impair any of the Agent’s rights hereunder or under the ABL  Loan Agreement and the

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other ABL Loan Documents as against the Credit Parties , provided, further that it shall not impair the Term Note Purchaser’s remedies with respect to any such violation for failure to send such notice.  

17.2   Upon the occurrence and during the continuance of a Demand/Exercise Event, Term Note Purchaser shall have the option at any time upon five (5) Business Days’ prior written notice (the “ Buy-Out Notice ”) from Term Note Purchaser to Agent to purchase (at par and without discount) all (but not less than all) of the ABL Loans outstanding under the ABL Loan Agreement and the other ABL Loan Documents from the ABL Lenders (other than any rights to indemnification that any ABL Lender has against any Credit Party under any ABL Loan Agreement or other ABL Loan Document as to matters and circumstances (“ Indemnifiable Matters ”) whether known or unknown to Term Note Purchaser on the closing date of such purchase, which may result in any loss, cost, damage or expense (including reasonable attorneys’ fees and expenses)) for the purchase price specified below.  Any Buy-Out Notice given by Term Note Purchaser to Agent shall be irrevocable.  

17.3   On the closing date (the “ Purchase Option Closing Date ”) specified by Term Note Purchaser in the Buy-Out Notice (which shall not be less than five (5) Business Days, nor more than fifteen (15) days, after the receipt by Agent on behalf of the ABL Lenders of the Buy-Out Notice), the ABL Lenders shall (a) sell to the Term Note Purchaser, and Term Note Purchaser shall purchase from the ABL Lenders, all (but not less than all) of the ABL Loans (other than Unasserted Contingent Indemnification Obligations) outstanding under the ABL Loan Agreement and the other ABL Loan Documents and held by the ABL Lenders, including any and all prepayment fees or premium (whether or not the same are then due from any Credit Party) and Indemnifiable Matters asserted as of the Purchase Option Closing Date and (b) the Agent and the ABL Lenders shall assign to the Term Note Purchaser (or its designee) all of their rights and interests under the ABL Loan Documents (including all rights and interests with respect to the Collateral securing the ABL Loans (other than unasserted Indemnifiable Matters as of the Purchase Option Closing Date) in accordance with the terms and conditions of this Section 17.  The Credit Parties and the Term Note Purchaser acknowledge and agree that, after the Purchase Option Closing Date, the Credit Parties shall continue to be liable to the ABL Lenders for all Indemnifiable Matters that have not been paid in full in cash or secured, in each such instance to the satisfaction of each the ABL Lenders in the exercise of its sole and absolute discretion from time to time.

17.4   On the Purchase Option Closing Date, Term Note Purchaser shall (i) pay to Agent for the ratable benefit of the ABL Lenders as the purchase price for sale and assignment contemplated by Section 17.2, in immediately available funds the full amount of all ABL Loans (at par and without discount) then outstanding and unpaid under the ABL Loan Agreement and the other ABL Loan Documents (including outstanding principal, accrued and unpaid interest, fees and expenses, including (A) any prepayment fees or premium specified in the ABL Loan Agreement or any other ABL Loan Documents (even though the ABL Loans are being assigned and not repaid and the prepayment fees or premium may not be then due from the Credit Parties) and (B) any Indemnifiable Matters asserted as of the Purchase Option Closing Date, in each case on a dollar for dollar basis), and (ii) furnish such amount of cash collateral in immediately available funds as the Agent determines is reasonably necessary to secure ABL Lenders in connection with (x) any known Indemnifiable Matters and (y) any outstanding letters of credit issued under the ABL Loan Agreement but not, in any event, in an amount greater than 110% of the aggregate undrawn amount of all such outstanding letters of credit (and any excess of such cash collateral for such letters of credit remaining at such time when there are no longer any such letters of credit outstanding and there are no unreimbursed amounts then owing in respect of such drawings under such letters of credit shall be promptly paid over to the Term Note Purchaser), and Agent and ABL Lenders execute and delivery to the Term Note Purchaser (or its designee) a written assignment agreement in form mutually satisfactory to Agent, ABL Lenders and the Term Note Purchaser evidencing the assignment by Agent and ABL Lenders all of their rights with respect to the ABL Loans so purchased and the ABL Loan Documents.  Such purchase price shall be remitted by wire transfer in federal funds to such bank account of Agent as Agent (individually or on behalf

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of such ABL Lender ) may designate in writing to Term Note Purchaser for such purpose.  Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by Term Note Purchaser to the bank account designated by Agent for the benefit of ABL Lenders are received in such bank account prior to 1:00 p.m., New York City time and interest shall be calculated to and including such Business Day if the amounts so paid by Term Note Purchaser to the bank account designated by Agent are received in such bank account later than 1:00 p.m., New York City time.

17.5   Such purchase shall be expressly made without representation or warranty of any kind by Agent or any of the ABL Lenders as to any of the ABL Loans or otherwise and without recourse to Agent or any of the ABL Lenders, except that each ABL Lender shall represent and warrant:  (i) the amount of the ABL Loans being purchased from such ABL Lender, (ii) that such ABL Lender owns such ABL Loans being sold by it and has not created any Lien on any such ABL Loans, (iii) that such ABL Lenders has the right to assign such ABL Loans being assigned by it and the assignment is duly authorized, and (iv) Agent is the current collateral agent and administrative agent under the ABL Loan Documents and has not resigned or assigned its rights, duties or obligations as such to any other person or entity.

17.6   Upon the delivery by Agent to Term Note Purchaser of a notice of Demand/Exercise Event, Agent and ABL Lenders will forbear from instituting judicial proceedings or otherwise pursuing collection actions of the ABL Loans, foreclosing on any lien or security interest on any of the Collateral or from taking any other Enforcement Action (other than actions taken by Agent in connection with the collection of accounts receivable through lockbox or blocked account arrangements, regardless of whether such collection occurs prior to or following any Demand/Exercise Event Notice), until the earlier of (i) the second Business Day following the date of such delivery if a Buy-Out Notice then shall not have been delivered to Agent on or before such second Business Day or (ii) after delivery of a Buy-Out Notice to Agent, the fifteenth day following the date of the delivery of such Buy-Out Notice if the purchase and sale of the ABL Loans contemplated by Section 17.2 hereof pursuant to such Buy-Out Notice and this Section 17 shall have not occurred on or before such fifteenth day; provided, however, that nothing herein is intended to or shall restrict Agent’s right to limit, suspend or terminate advances under the ABL Loan Agreement or Agent’s collection rights under Section 9-607 of the Uniform Commercial Code with respect to the proceeds of Collateral, including, without limitation, the collection and application of proceeds of Accounts.  Nothing in this Agreement, however, shall limit Agent’s rights under the ABL Loan Documents to require that the Credit Parties cause Account Debtors (as defined in the ABL Loan Agreement) to make payments to a lockbox or to a blocked account or that proceeds of Collateral be deposited in or remitted to a blocked account and to apply such proceeds to the ABL Loans.

 

17.7   Each Credit Party hereby consents to any assignment to the Term Note Purchaser set forth in this Section 17.

 

17.8   The transfer of the ABL Loans shall be effected by an assignment agreement, endorsements and such other documents as Term Note Purchaser may reasonably request from time to time, all in form and substance reasonably satisfactory to Agent and the Term Note Purchaser, whereby the Term Note Purchaser will have all rights of the ABL Lenders (except to the extent control agreements and other agreements require the consent of persons who are not party to this Agreement; provided that ABL Lenders agree to reasonably cooperate with Term Note Purchaser in obtaining any such consents) under the ABL Loan Documents and assume the obligations of ABL Lenders under the ABL Loan Documents and Agent will convey all right, title and interest of the Agent in and to the ABL Loans.

 

18. Miscellaneous .   

 

18.1. Conflict. Subject to the applicable provisions of Section 18.6, in the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of

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the Term Debt Documents or the ABL Documents , the provisions of this Agreement shall control and govern.

 

18.2. Headings.   The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

 

18.3. Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, but in making proof hereof, it shall only be necessary to produce one such counterpart containing signatures pages signed by each party.  Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page to this Agreement shall bind the parties hereto.

 

18.4. Severability.   In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

 

18.5. Governing Law.   This Agreement shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of Maryland, without regard to conflicts of law principles.

 

18.6. Relative Rights. This Agreement shall define the relative rights of ABL Lenders and Term Note Purchaser.  Nothing in this Agreement shall (a) impair, as between the Grantors and ABL Lenders, on the one hand, and the Grantors and the Term Note Purchaser on the other hand, the obligation of the Grantors with respect to the payment of the ABL Loans and the Term Debt and performance of their obligations under the ABL Loan Documents and the Term Debt Documents, respectively, in accordance with their respective terms, or (b) affect the relative rights of ABL Lenders or Term Note Purchaser with respect to any other creditors of the Grantors.

 

18.7. Entire Agreement.   This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes and replaces all other prior agreements (including, without limitation, that certain Subordination Agreement dated as of January 25, 2017 between Term Note Purchaser, Agent, Parent and certain of Parent’s Subsidiaries, as amended) and understandings, both written and oral, among the parties with respect to the subject matter hereof.  

 

18.8. Representations and Warranties . The Agent and the Term Note Purchaser each represents and warrants to the other that it has been authorized by ABL Lenders or holders of Term Note, as applicable, under the ABL Loan Agreement or the Term Note Agreement, as applicable, to enter into this Agreement, and the agreements of the Agent set forth herein shall be binding on the ABL Lenders and the agreements of the Term Note Purchasers set forth herein shall be binding on the holders of the Term Note.

 

18.9. Subrogation.    With respect to (a) any payments or distributions in cash, property or other assets that any Term Note Purchaser pays over to the Agent or any ABL Lender under the terms of this Agreement, the Term Note Purchaser, shall on the ABL Debt Payment Date be subrogated to the rights of the Agent and the ABL Lenders and (b) with respect to any payments or distributions in cash, property or other assets that Agent or any ABL Lender pays over to the Term Note Purchaser under the terms of this Agreement, the Agent and the ABL Lenders, as applicable, shall on the Term Debt Payment Date be subrogated to the rights of the Term Note Purchaser. Any payments or distributions in cash, property or

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other assets received by the Agent or the ABL Lenders that are paid over to the Term Note Purchaser pursuant to this Agreement shall not reduce any of the ABL Debt . Any payments or distributions in cash, property or other assets received by the Term Note Purchaser that are paid over to the Agent or the ABL Lenders pursuant to this Agreement shall not reduce any of the Term Debt . Notwithstanding the foregoing provisions of this Section 18.9 , none of the Agent or ABL Lenders shall have any claim against the Term Note Purchaser for any impairment of any subrogation rights herein granted to the Term Note Purchaser, and the Term Note Purchaser shall not have any claim against the Agent or any of the ABL Lenders for any impairment of any subrogation rights herein granted to the Agent or the ABL Lenders .

 

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this Intercreditor Agreement constitute an instrument executed and delivered under seal, the parties have caused this Agreement to be executed under seal as of the date first written above.

 

 

AGENT:

 

MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment from MidCap Financial Trust

 

By:       Apollo Capital Management, L.P.,

            its investment manager

 

By:       Apollo Capital Management GP, LLC,

its general partner

 

 

By: _ /s/ Maurice Amsellem ______________(SEAL)

Name:  Maurice Amsellem

Title:    Authorized Signatory

 

 

Agent’s Signature Page to Intercreditor Agreement

 


 

 

TERM NOTE PURCHASER:

 

 

JACKSON INVESTMENT GROUP, LLC

 

 

 

By: _ /s/ Douglas B. Kline _______________ (SEAL)

Name: Douglas B. Kline

Title: Chief Financial Officer

 

 

Address for Notice to Term Note Purchaser:

 

 

Jackson Investment  Group, LLC

2655 Northwinds Parkway

Alpharetta, Georgia 30009

Attn:  Richard L. Jackson

Telecopy Number:   678-495-5356

Telephone Number: 770-643-5605

 

with a copy to:

 

Kilpatrick Townsend & Stockton LLP

1100 Peachtree Street, N.E.

Atlanta, GA 30309

Attn:  David Stockton, Esq.

Telecopy Number:  (404) 815-541-3402

Telephone Number:  (404) 815-6444

 

 

 

 

Term Note Purchaser’s Signature Page to Intercreditor Agreement


 

PARENT: STAFFING 360 SOLUTIONS, INC. , a Delaware corporation

 

 

By:_ /s/ Brendan Flood ___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

SUBSIDIARIES:

 

MONROE STAFFING SERVICES, LLC , a Delaware limited liability company

 

 

By:_ /s/ Brendan Flood ___________(Seal)

 

Name:  Brendan Flood
Title:  Executive Chairman

 

PEOPLESERVE, INC. , a Massachusetts corporation

 

By:_ /s/ Brendan Flood ___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

FARO RECRUITMENT AMERICA, INC. , a NY corp.

 

 

By:_ /s/ Brendan Flood ___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

  

LIGHTHOUSE PLACEMENT SERVICES, INC. , a Massachusetts corporation

 

 

By:_ /s/ David Faiman ____________(Seal)

Name:  David Faiman
Title:  Secretary and Treasurer

 

PEOPLESERVE PRS, INC. , a Massachusetts corporation

 

 

By:_ /s/ Brendan Flood ___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

  

STAFFING 360 GEORGIA, LLC , a Georgia limited liability company

 

 

By:_ /s/ Brendan Flood ___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

Borrowers’ Signature Page to Intercreditor Agreement

Exhibit 99.1

Staffing 360 Solutions Announces Transformative $40 Million Refinancing and Closes Two New Acquisitions

 

$40 Million Refinancing of Entire Balance Sheet;

Acquisition of CBS Butler Holdings (UK) and first PRO Georgia (US);

Expected to Boost Revenue 50% and Increase Adjusted EBITDA 125%

 

New York, NY – September 19, 2017 – Staffing 360 Solutions, Inc. (Nasdaq: STAF), a company executing an international buy-and-build strategy through the acquisition of staffing organizations in the United States and in the United Kingdom, today announced a number of transformative developments, including a significant refinancing of the Company’s balance sheet and the closing of two material acquisitions.

 

In line with management’s emphasis on improving the financial health of the Company and reinvigorating its highly focused M&A program, Staffing 360 Solutions is pleased to announce:

 

 

Execution of a comprehensive refinancing of Staffing 360’s balance sheet with current lenders:

 

o

$40 million 12% senior note with a three-year term and zero amortization prior to maturity.

 

o

Renegotiated terms of the existing receivable facility for a more attractive $25 million revolver and accordion to $50 million as the business grows, resulting in lower financing costs and increased availability.

 

Simultaneous closing of two material acquisitions:

 

o

CBS Butler Holdings Limited

 

UK-based firm specializing in engineering and IT staffing services.

 

o

first PRO Georgia

 

US-based company with an emphasis on IT staffing and finance & accounting.

 

On an aggregate basis, the above acquisitions are expected to add approximately $85 million to the top line, resulting in $265 million of annualized revenue, and more than double the pro forma Adjusted EBITDA of Staffing 360’s overall business to $12 million on an annualized basis.

 

“These developments are a game-changer for our company, vaulting us much closer to our goal of becoming a $300 million annualized revenue business,” said Brendan Flood, Executive Chairman of Staffing 360 Solutions.  “While our team has been working diligently behind the scenes to make these complex transactions a reality,


w e understand our investors have been very patient as we have executed a multi-year strategy of driving operational improvement s and financial governanc e.   We believe this refinancing of our balance sheet and simultaneous closing of two acquisitions will help us unlock significant value, especially as we leverage our projected positive operating cash flow from these transactions to drive additional organic and acquisitive growth.”

 

Matt Briand, President and CEO, added, “With two acquisitions officially closed, our team is looking forward to adding these outstanding organizations. CBS Butler is an award-winning staffing firm in the UK specializing in the engineering and IT space. The group brings a wealth of management talent and client relationships as a complement to our existing UK businesses. In addition, first PRO Georgia brings strong accounting, finance and IT depth while expanding our geographic footprint. These firms are leaders in their respective fields and we are thrilled to welcome them to the Staffing 360 family.”

 

“We are significantly improving the overall financial strength of our company, as well as our day-to-day operational facilities,” said David Faiman, Chief Financial Officer. “The $40 million refinancing provides us with a financial platform to drive further improvements and operational cash flow. In addition, the enhancements to our receivable facility will help streamline the operational efficiency of our U.S. businesses as we continue to grow and achieve economies of scale.”

 

Staffing 360 Solutions will provide additional details to investors regarding these transformative events through forthcoming SEC filings and press releases.

 

More information about Staffing 360 Solutions, including investor materials, presentations, white papers, and webcasts, can be found at:

www.staffing360solutions.com/res.html .  

 

About Staffing 360 Solutions, Inc.

 

Staffing 360 Solutions, Inc. (Nasdaq: STAF) is a public company in the staffing sector engaged in the execution of an international buy-and-build strategy through the acquisition of domestic and international staffing organizations in the United States and in the United Kingdom.  The Company believes that the staffing industry offers opportunities for accretive acquisitions that will drive its annual revenues to $300 million.  As part of its targeted consolidation model, the Company is pursuing acquisition targets in the finance and accounting, administrative, engineering, IT, and light industrial staffing space.  For more information, please visit: www.staffing360solutions.com .

 

Follow Staffing 360 Solutions on Facebook , LinkedIn and Twitter .

 

Non-GAAP Financial Measures

 

Staffing 360 Solutions uses financial measures which are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in evaluating its financial and operational decision making regarding potential acquisitions, as well as a means to evaluate period-to period comparison. The Company presents these non-GAAP financial measures because it believes


them to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We refer you to the reconciliations below.

 

Forward-Looking Statements

 

This press release contains forward-looking statements, which may be identified by words such as "expect," "look forward to," "anticipate" "intend," "plan," "believe," "seek," "estimate," "will," "project" or words of similar meaning.  Although Staffing 360 Solutions, Inc. believes such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.  Actual results may vary materially from those expressed or implied by the statements herein, including the goal of achieving annualized revenues of $300 million, due to the Company’s ability to successfully raise sufficient capital on reasonable terms or at all, to consummate additional acquisitions, to successfully integrate newly acquired companies, to organically grow its business, to successfully defend potential future litigation, changes in local or national economic conditions, the ability to comply with contractual covenants, including in respect of its debt, as well as various additional risks, many of which are now unknown and generally out of the Company’s control, and which are detailed from time to time in reports filed by the Company with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.  Staffing 360 Solutions does not undertake any duty to update any statements contained herein (including any forward-looking statements), except as required by law.

 

Corporate Investor Contact:

 

Staffing 360 Solutions, Inc.

Brendan Flood, Executive Chairman

+1.646.507.5715

brendan.flood@staffing360solutions.com

 

Financial Contact:

 

Staffing 360 Solutions, Inc.

David Faiman, Chief Financial Officer

+1.646.507.5711

info@staffing360solutions.com