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

November 15, 2018

 

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.  

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Debt Exchange Agreement

 

On November 15, 2018 (the “Closing Date”), Staffing 360 Solutions, Inc. (the “Company”), entered into a Debt Exchange Agreement (the “Exchange Agreement”) with Jackson Investment Group, LLC (“Jackson”), pursuant to which, among other things, Jackson agreed to exchange $13,000,000 (the “Exchange Amount”) of indebtedness of the Company held by Jackson in exchange for 13,000 shares of a newly created class of preferred stock designated as the Series E Convertible Preferred Stock, par value $0.00001 per share, of the Company (the “Series E Preferred Stock”).

 

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Exchange Agreement, a copy of which is attached hereto as Exhibit 1.1 and incorporated herein by reference.

 

The Series E Preferred Stock ranks senior to the Company’s common stock and any other series or classes of preferred stock now or after issued or outstanding with respect to dividend rights and rights on liquidation, winding up and dissolution.  Each share of Series E Preferred Stock is initially convertible into 561 shares of common stock of the Company at any time after October 31, 2020 or the occurrence of a Preferred Default (as defined in the Certificate of Designation for the Series E Preferred Stock).  A holder of Series E Preferred Stock is not required to pay any additional consideration in exchange for conversion of such Series E Preferred Stock into the Company’s common stock.  Series E Preferred Stock is redeemable by the Company at any time at a price per share equal to the stated value ($1,000 per share) plus all accrued and unpaid dividends thereon.

 

The Series E Preferred Stock carries quarterly dividend rights of (a) cash dividends accruing (i) at an annual rate per share equal to 12% from the date of issuance and (ii) 17% after the occurrence of a Preferred Default, and (b) a dividend payable in shares of Series E-1 Convertible Preferred Stock.  The shares of Series E-1 Preferred Stock have all the same terms, preferences and characteristics as the Series E  Preferred Stock (including, without limitation, the right to receive cash dividends), except (i) Series E-1 Convertible Preferred Stock are mandatorily redeemable by the Company within thirty (30) days after written demand received from any holder at any time after the earlier of the occurrence of a Preferred Default or November 15, 2020, for a cash payment equal to the Liquidation Value (as defined in the Certificate of Designation for the Series E Preferred Stock) plus any accrued and unpaid dividends thereon, (ii) each share of Series E-1 Preferred Stock is initially convertible into 602 shares of the Company’s common stock, and (iii) Series E‑1 Convertible Preferred Stock may be cancelled and extinguished by the Company if all shares of Series E Preferred Stock are redeemed by the Company on or prior to October 31, 2020.  

 

The foregoing description of the Series E Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the complete text of the Certificate of Designation of Series E Convertible Preferred Stock, which is attached hereto as Exhibit 3.1.

 

Amendment to Warrant

 


 

 

On the Closing Date, in connection with the Jackson Omnibus (as defined below), the Company entered into Amendment No. 2 to the Amended and Restated Warrant Agreement (the “Warrant Amendment”) with Jackson.  The Warrant Amendment amended that certain Amended and Restated Warrant Agreement with Jackson, dated as of April 25, 2018, as amended by Amendment No. 1 dated as of August 27, 2018 (the “Warrant”), to reduce the exercise price of the Warrant from $3.50 per share to $1.66 per share and to extend the period within which the Warrant may be exercised from January 26, 2022 to January 26, 2024.

 

Limited Waiver

 

On November 12, 2018 pursuant to a letter agreement between the Company and Jackson, Jackson waived, on a one-time basis, the occurrence of a breach of financial covenant by the Company as of the fiscal quarter ended September 29, 2018, under that certain Amendment and Restated Note Purchase Agreement, dated as of September 15, 2017, as amended by that certain First Omnibus Amendment and Reaffirmation Agreement, dated as of August 27, 2018.

 

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

 

 

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

 

Jackson Omnibus Agreement

 

On the Closing Date, the Company, as borrower, and certain domestic subsidiaries of the Company, as guarantors, entered into a Second Omnibus Amendment, Joinder and Reaffirmation Agreement with Jackson, as lender (the “Jackson Omnibus”), which among other things amended that certain Amendment and Restated Note Purchase Agreement, dated as of September 15, 2017, as amended by that certain First Omnibus Amendment and Reaffirmation Agreement, dated as of August 27, 2018, and  pursuant to which Jackson amended and restated that certain 12% Senior Secured Promissory Note due September 15, 2020, dated September 15, 2017, in the principal amount of $40,000,000 (the “Original Note”), to reflect the satisfaction and cancellation of principal indebtedness under the Original Note in an amount equal to the $13,000,000 Exchange Amount, and the addition of principal indebtedness equal to the Closing Fee described below, resulting in a new principal amount of $27,312,000 (the “Amended and Restated Note”).

 

The maturity date for the amounts due under the Amended and Restated Note is September 15, 2020.  The Amended and Restated 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, 2019. Interest on any overdue payment of principal or interest due under the Amended and Restated Note will accrue at a rate per annum that is 5% in excess of the rate of interest otherwise payable thereunder.

 

From the proceeds of the Amended and Restated Note, the Company paid a closing fee of $312,000 (the “Closing Fee”), and in connection with its entry into the Jackson Omnibus agreed to issue 300,000 shares of the Company’s common stock as a closing commitment fee to Jackson (the “Commitment Fee Shares”).  The Closing Fee was comprised of a $250,000 cash commitment fee, with the remainder used to reimburse Jackson’s out-of-pocket fees and expenses (including attorneys’ fees).

 

The Jackson Omnibus contains representations, warranties and indemnification obligations of the parties customary for transactions similar to those contemplated by the Jackson Omnibus.  

 

The Jackson Omnibus also amended certain financial covenants applicable to the Company related to the Company’s total leverage ratio.  

  

 

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

 

 


 

As previously announced in a Current Report on Form 8-K filed on April 9, 2018, on April 3, 2018, the Company received a letter from the Listing Qualifications staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it is n o longer in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000 (the “Equity Requi rement”). In response, the Company submitted a plan of compliance to the Staff, which was accepted, and the Company was granted until July 31, 2018 to regain compliance with the Equity Requirement.

 

As previously announced in a Current Report on Form 8-K filed on August 22, 2018, on August 15, 2018, the Staff issued a letter to the Company in which it indicated that, since the Company had not regained compliance with the Equity Requirement, its common shares would be subject to delisting on August 24, 2018, unless the Company timely requests a hearing before a Nasdaq Hearings Panel (the “Panel”).  As disclosed in that same Current Report on Form 8-K, on August 22, 2018, the Company requested a hearing before the Panel. The hearing request automatically stayed any suspension or delisting action pending the hearing and the expiration of any additional extension granted by the Panel.

 

As of the filing date of this Current Report on Form 8-K, the Company has over $2.5 million in stockholders’ equity because of the conversion of the Company’s indebtedness in an amount equal to the $13,000,000 Exchange Amount into 13,000 shares of Series E Preferred Stock (as disclosed in Item 1.01 above).

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information set forth under Item 1.01 with respect to the issuance of an aggregate of 13,000 shares of Series E Preferred Stock and the information set forth under Item 2.03 above with respect to the issuance of an aggregate of 300,000 shares of the Company’s common stock to the Jackson pursuant to the Jackson Omnibus and the Amended and Restated Note are incorporated herein by reference. Such issuances were 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 3.03 Material Modifications to Rights of Security Holders.

 

The information set forth under Item 1.01 above with respect to the Series E Preferred Stock and Series E-1 Preferred Stock is incorporated herein by reference.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

The information set forth under Item 1.01 above with respect to the Series E Preferred Stock and Series E-1 Preferred Stock is incorporated herein by reference.

 

On November 15, 2018, the Company filed a certificate of correction to the Certificate of Designation of Series E Convertible Preferred Stock (the “Certificate of Correction”) with the Secretary of State of the State of Delaware to correct certain typographical errors.  Apart from the foregoing corrections of typographical errors, no changes were made the Certificate of Designation of Series E Convertible Preferred Stock.  

 

The foregoing description of the Certificate of Correction is qualified in its entirety by reference to the full text of the Certificate of Correction, a copy of which is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated by reference herein.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

 

 

 


 

 

Exhibit No.

Description

3.1

Certificate of Designation of Series E Convertible Preferred Stock, dated November 15, 2018

3.2

Certificate of Correction to Certificate of Designation of Series E Convertible Preferred Stock, dated November 15, 2018

10.1

Debt Exchange Agreement, dated November 15, 2018, by and between Staffing 360 Solutions, Inc. and Jackson Investment Group, LLC .

 

 


 


 

 

 

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:  November 15, 2018

STAFFING 360 SOLUTIONS, INC.

 

 

 

 

 

 

By:

/s/ Brendan Flood

 

 

Brendan Flood

 

 

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

Exhibit 3.1

CERTIFICATE OF DESIGNATION

OF

SERIES E CONVERTIBLE PREFERRED STOCK

OF

STAFFING 360 SOLUTIONS, INC.

Staffing 360 Solutions, Inc., a Delaware corporation (the “ Corporation ”), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the “ Board of Directors ”) has adopted the following resolution creating a new series of its previously authorized preferred stock, par value $.00001 per share, designated as Series E Convertible Preferred Stock (which shall include Series E and Series E-1 Convertible Preferred Stock):

RESOLVED , that a new series of the authorized preferred stock, par value $.00001 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences, and relative, participating, optional, and other special rights of the shares of such series, and the qualifications, limitations, or restrictions thereof are as follows:

1.

Designation and Amount .

The shares of the series of preferred stock created hereby shall be designated as the “Series E Convertible Preferred Stock” or the “Series E-1 Convertible Preferred Stock” (collectively, the “ Series E Convertible Preferred Stock ”) and the number of shares constituting such series shall be 19,500, consisting of 13,000 shares of Series E and 6,500 shares of Series E‑1 shares.  The initial liquidation preference of the Series E Convertible Preferred Stock shall be $1,000.00 per share (the “ Liquidation Value” ).

2.

Rank .

The Series E Convertible Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (i) senior to both the Corporation’s Common Stock and to the Corporation’s Series A, Series B, Series C and Series D Preferred Stock, as well as any other classes and series of stock of the Corporation now or hereafter authorized, issued or outstanding, which by their terms expressly provide that they are junior to the Series E Convertible Preferred Stock or which do not specify their rank (collectively with the Common Stock, the “ Junior Securities ”); (ii) on a parity with each other class of capital stock or series of preferred stock authorized or issued by the Corporation after the date hereof, the terms of which specifically provide that such class or series will rank on a parity with the Series E Convertible Preferred Stock as to dividend distributions and distributions upon the liquidation, winding up and dissolution of the Corporation, but only if such class or series has been approved by the holders of Series E Convertible Preferred Stock as provided in Subsection 5.2 below (collectively referred to as “ Parity Securities ”); and (iii) junior to each other class of capital stock or other series of Preferred Stock issued by the Corporation after the date hereof

 


 

the terms of which specifically provide that such class or series will rank senior to the Series E Convertible Preferred Stock as to dividend distributions or distributions upon the liquidation, winding up and dissolution of the Corporation, but only if such class or series has been approved by the holders of Series E Convertible Preferred Stock as provided in S ubs ection 5 .1 below (collectively referred to as “ Senior Securities ”).

3.

Dividends and Distributions .

3.1 Amount .  

3.1.1 Cash Dividends .  The holders of shares of Series E Convertible Preferred Stock, in preference to the holders of any Junior Securities, shall be entitled to receive, when, as and if declared by the Corporation’s Board of Directors out of funds of the Corporation legally available therefor, cash dividends on the Series E Convertible Preferred Stock, which shall accrue at an annual rate per share equal to (i) 12% from the date of issuance of the shares of Series E Convertible Preferred Stock (the “ Issue Date ”) until such time as there exists a default by the Corporation on any of its obligations hereunder, which shall include the failure to pay the dividend provided for herein within three (3) business days of the quarterly dividend payment dates specified below, or an Event of Default exists under Article 9 of the Amended and Restated Note Purchase Agreement among the Corporation and certain of its subsidiaries and Jackson Investment Group, LLC (“ JIG ”), dated as of September 15, 2017, and as amended on August 27, 2018 and on the Issue Date (as so amended and as such agreement may be further amended, restated or modified, the “ Note Purchase Agreement ”) (which default or Event of Default shall be referred to herein as a “ Preferred Default ”), and (ii) after the occurrence of a Preferred Default, 17% until such time as all shares of the Preferred Stock shall have been converted into Common Stock or repurchased by the Corporation or are otherwise no longer outstanding and all accrued dividends thereon have been paid in full (the “ Cash Dividend Rate ”), in either case with such applicable rate being paid on the Liquidation Value from and after the Issue Date and for so long any shares of Series E Convertible Preferred Stock remain outstanding.

3.1.2 PIK Dividends .   Subject to subsection 7.6 below, t he holders of shares of Series E Convertible Preferred Stock (other than Series E-1 Convertible Preferred Stock), in preference to the holders of any Junior Securities, shall also be entitled to receive dividends payable in shares of Series E-1 Convertible Preferred Stock of the Corporation having a Liquidation Value equal to 5% per annum of the Liquidation Value of the outstanding Series E Convertible Preferred Stock (such dividend, a “ PIK Dividend ” and together with Cash Dividends, “ Quarterly Dividends ”). Shares of Series E-1 Convertible Preferred Stock shall have all the same terms, preferences and characteristics as are provided for in this Certificate of Designation with respect to Series E Convertible Preferred Stock (including, without limitation, the right to receive Cash Dividends) and references herein to Series E Convertible Preferred Stock shall include Series E-1 Convertible Preferred Stock unless otherwise indicated.   Notwithstanding the foregoing, (i) Series E-1 Convertible Preferred Stock shall be mandatorily redeemable by the Corporation within thirty (30) days after written demand received from any holder at any time after the earlier of the occurrence of a Preferred Default or November 15, 2020, for a cash payment equal to the Liquidation Value plus any accrued and unpaid dividends thereon, (ii) the Series E‑1 Conversion Price shall be as provided in Subsection 6.1.1 , and (iii) Series E‑1 Converitble Preferred Stock may be cancelled and extinguished in accordance with Subsection 7.6 hereof.   If on the date of any such redemption, Delaware law governing distributions to

 

 

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stockholders prevents the Co rporation from redeeming all Series E-1 Convertible Preferred Stock to be redeemed, the Co rporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law and thereafter shall take all actions that it may legally take in order to cause the Co rporation to be able to redeem lawfully the remaining shares , and shall redeem the remaining shares as soon as it may lawfully do so. No fractional shares of Series E-1 Convertible Preferre d Stock shall be issued to any holder pursuant to this subs ection 3 .1.2 and in lieu of any such fractional share, the Corporation shall pay to such h older an amount in cash equal to the applicable fraction of a share of Series E-1 Convertible Preferred Stock multiplied by the Liquidation Value .   The Corporation shall deliver to each holder on each Quarterly Dividend Payment Date a share certificate evidencing Series E-1 Preferred Stock issued to such holder as a PIK Dividend, but the failure to so issue such certificate shall not impair the rights of such holder in respect of issued shares of Series E-1 Convertible Preferred Stock which shall be deemed issued and outstanding on each Quarterly Dividend Payment Date irrespective of whether a share certificate has been delivered to holder thereof and the Corporat i on shall make appropriate entry in its stock transfer records to reflect such issuance and outstanding shares of Series E-1 Convertible Preferred Stock on each Quarterly Dividend Payment Date.

3.2 Calculation and Payment. Quarterly Dividends shall be (i) calculated and compounded quarterly, and (ii) cumulative, whether or not declared or paid, and will accrue and be payable quarterly, in arrears, on January 1, April 1, July 1 and October 1 (each such date referred to herein as a “ Quarterly Dividend Payment Date ”), except that if any Quarterly Dividend Payment Date is not a Business Day, then they shall be payable on the next succeeding Business Day, commencing on the first Quarterly Dividend Payment Date following the Issue Date. Dividends payable on the Series E Convertible Preferred Stock will be computed on the basis of a 360-day year consisting of twelve 30-day months and the number of days actually elapsed, and will be deemed to accrue on a daily basis.

3.3 Priority .  No dividends shall be declared or paid nor funds set apart for the payment of dividends on any Junior Securities for so long as any Series E Convertible Preferred Stock is issued and outstanding.

4.

Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .

4.1 Preferential Payments to Holders of Series E Convertible Preferred Stock .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series E Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of any Junior Securities by reason of their ownership thereof, an amount per share equal to the Liquidation Value, plus any accrued but unpaid dividends.  If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series E Convertible Preferred Stock the full amount to which they shall be entitled under this Subsection 4.1 , the holders of shares of Series E Convertible Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in

 

 

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full.  The aggregate amount which a holder of a share of Series E Convertible Preferred Stock is entitled to receive under this Subsection 4 .1 is hereinafter referred to as the “ Series E Liquidation Amount .”

4.2 Deemed Liquidation Events .

4.2.1 Definition .  Each of the following events shall be considered a “ Deemed Liquidation Event ” unless the holders of at least a majority of the outstanding shares of Series E Convertible Preferred Stock elect otherwise by written notice sent to the Corporation at least 10 days prior to the effective date of any such event:

(a) a merger or consolidation in which the Corporation is a constituent party or a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

4.2.2 Effecting a Deemed Liquidation Event .

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 4.2.1(a) unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsection 4.1 .

(b) In the event of a Deemed Liquidation Event referred to in Subsection 4.2.1(a) or 4.2.1(b) , if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within thirty (30) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series E Convertible Preferred Stock no later than the thirtieth (30th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Series E Convertible Preferred Stock, and (iii) if the holders of at least a majority of the then outstanding shares of Series E Convertible Preferred Stock so request in a written

 

 

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instrument delivered to the Corporation not later than sixty (60) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “ Available Proceeds ”), on the ninetieth (90 th ) day after such Deemed Liquidation Event, to redeem all outstanding shares of Series E Convertible Preferred Stock at a price per share equal to the Liquidation Value plus any accrued but unpaid dividends on such shares .  Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series E Convertible Preferred Stock , the Corporation shall ratably redeem each holder’s shares of Series E Convertible Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders.    Provided, however, if the liquidation, dissolution or winding up of the affairs of the Corporation is not within the Corporation’s control, including not approved by its Board of Directors, a holder shall only be entitled to receive from the Corporation or any successor entity, as of the date of the liquidation, dissolution, or winding up of the affairs of the Corporation, the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of Common Stock of the Company in connection with the liquidation, dissolution, or winding up of the affairs of the Corporation, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration.    Prior to the distribution or redemption provided for in this Subsection 4.2.2(b) , the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

4.3 Amount Deemed Paid or Distributed .  The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.  The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

4.4 Allocation of Escrow and Contingent Consideration .  In the event of a Deemed Liquidation Event pursuant to Subsection 4.2.1(a) , if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “ Additional Consideration ”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsection 4.1 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsection 4.1 after taking into account the previous payment of the Initial Consideration as part of the same transaction.  For the purposes of this Section 4.4 , consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations

 

 

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in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

5.

Voting .

5.1 General.  Except as provided by law or by the other provisions of the Certificate of Incorporation and as provided in Section 5.2 below, holders of Series E Convertible Preferred Stock shall have no right to vote on any matter presented to the stockholders of the Corporation for their action or consideration.

5.2 Series E Convertible Preferred Stock Protective Provisions .  At any time that any shares of Series E Convertible Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series E Convertible Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

5.2.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

5.2.2 amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series E Convertible Preferred Stock;

5.2.3 create or authorize the creation of any new class or series of capital stock, or issue or authorize or commit to the issuance of any shares of any class or series of capital stock of the Corporation or any security convertible into or excisable for any such capital stock, including pursuant to grants to directors, employees or contractors (other than pursuant to binding agreements entered into prior to the Issue Date), business acquisitions or combinations, or otherwise; provided, however, this subsection 5.2.3 shall not prohibit the Corporation from (i) issuing shares of Common Stock upon the conversion or exercise of warrants, options, notes, preferred stock or other instruments that are convertible into or exercisable for shares of Common Stock in accordance with their terms and outstanding as of the Issue Date, (ii) selling shares of Common Stock in a public or private offering on or before the first (1 st ) anniversary of the Issue Date for gross proceeds up to $3,000,000, where proceeds are used for working capital purposes only (“ Permitted Financing ”), (iii) granting up to 75,000 shares of Common Stock on or before the second (2 nd ) anniversary of the Issue Date as part of one or more new management recruitment packages, and (iv) issuing up to 450,000 shares of Common Stock pursuant to a new long-term incentive plan providing for grants to management that would not vest or be payable until the later to occur of December 31, 2020 and the redemption in full of all Series E Convertible Preferred Stock pursuant to Section 7 hereof.  

5.2.4 reclassify, alter or amend (i) any existing Parity Securities if such reclassification, alteration or amendment would render such other security senior to the Series E Convertible Preferred Stock in respect of any such right, preference, or privilege, or (ii) any

 

 

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existing Junior Securities of the Corporation if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series E Convertible Preferred Stock in respect of any such right, preference or privilege;

5.2.5 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series E Convertible Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof; or

5.2.6 enter into any transaction with a “related person” as defined in Item 404 of Regulation S-K under the Securities Exchange Act of 1934, as amended, or with any director, officer, or employee of the Corporation or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of any such director, officer, or employee.

6.

Optional Conversion .

The holders of the Series E Convertible Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

6.1 Right to Convert .

6.1.1 Conversion Ratio .  Each share of Series E Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time from and after a Conversion Trigger (as defined below), and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series E Liquidation Value plus any accrued but unpaid dividends on such share by the Series E Conversion Price or the Series E‑1 Conversion Price (as defined below) in effect at the time of conversion.  The “ Series E Conversion Price ” shall initially be equal to $1.78.  The “ Series E‑1 Conversion Price ” shall initially be equal to 1.66.  Such initial Series E Conversion Price and Series E‑1 Conversion Price, and the rate at which shares of Series E and Series E‑1 Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

Conversion Trigger ” means the earlier of October 31, 2020 or the occurrence of a Preferred Default (as defined in Section 3.1 herein).

6.1.2 Termination of Conversion Rights .  In the event of a notice of redemption of any shares of Series E Convertible Preferred Stock pursuant to Section 7 , the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full business day preceding the Redemption Date (as defined below) for such shares, unless the Redemption Price (as defined below) is not fully paid on such Redemption Date, in which case the Conversion Rights for such shares shall continue until such price is paid in full.  In the event of a liquidation, dissolution or winding up of the

 

 

7


 

Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full business day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series E Convertible Preferred Stock .

6.2 Fractional Shares .  No fractional shares of Common Stock shall be issued upon conversion of the Series E Convertible Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series E Convertible Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

6.3 Mechanics of Conversion .

6.3.1 Notice of Conversion .  In order for a holder of Series E Convertible Preferred Stock to voluntarily convert shares of Series E Convertible Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Series E Convertible Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Series E Convertible Preferred Stock and, if applicable, any event on which such conversion is contingent, and (b) if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Series E Convertible Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series E Convertible Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent).  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing.  The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date.  The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Series E Convertible Preferred Stock, or to his, her or its nominees, a notice of issuance of uncertificated shares and may, upon written request, issue and deliver a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and may, if applicable and upon written request, issue and deliver a certificate for the number (if any) of the shares of Series E Convertible Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (ii) pay in cash such amount as provided in Subsection 6.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

 

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6.3.2 Reservation of Shares .  The Corporation shall at all times when the Series E Convertible Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series E Convertible Preferred Stock , such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series E Convertible Preferred Stock ; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series E Convertible Preferred Stock , the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.  Before taking any action which would cause an adjustment reducing the Series E Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series E Convertible Preferred Stock , the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Series E or Series E ‑1 Conversion Price.

6.3.3 Effect of Conversion .  All shares of Series E Convertible Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 6.2 and to receive payment of any dividends declared but unpaid thereon.  Any shares of Series E Convertible Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series E Convertible Preferred Stock accordingly.

6.3.4 No Further Adjustment .  Upon any such conversion, no adjustment to the Series E or Series E‑1 Conversion Price shall be made for any declared but unpaid dividends on the Series E Convertible Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

6.3.5 Taxes .  The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series E Convertible Preferred Stock pursuant to this Section 6 .  The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series E Convertible Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

6.4 Adjustments to Series E and Series E‑1 Conversion Price .

6.4.1 Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the Issue Date effect a subdivision of the outstanding

 

 

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Common Stock, the Series E and Series E ‑1 Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series E Convertible Preferred Stock shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Issue Date combine the outstanding shares of Common Stock, the Series E and Series E ‑1 Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of Series E Convertible Preferred Stock shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

6.4.2 Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series E and Series E‑1 Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series E and Series E‑1 Conversion Price then in effect by a fraction:

(a) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(b) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series E and Series E‑1 Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series E and Series E‑1 Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of Series E Convertible Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series E Convertible Preferred Stock had been converted into Common Stock on the date of such event.

6.4.3 Adjustments for Other Dividends and Distributions . In the event the Corporation at any time or from time to time after the Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Subsection 6.4.2 do not apply to such dividend or distribution, then and in each such event the holders of Series E Convertible Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other

 

 

10


 

distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series E Convertible Preferred Stock had been converted into Common Stock on the date of such event.

6.4.4 Adjustment for Reorganization, Reclassification, Merger or Reorganization . Subject to the provisions of Subsection 4.2 , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series E Convertible Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 6.4.1 , 6.4.2 or 6.4.3 ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series E Convertible Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series E Convertible Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Subsection 6.4.4 with respect to the rights and interests thereafter of the holders of the Series E Convertible Preferred Stock, to the end that the provisions set forth in this Subsection 6.4.4 (including provisions with respect to changes in and other adjustments of the Series E and Series E‑1 Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series E Convertible Preferred Stock. For the avoidance of doubt, nothing in this Subsection 6.4.4 shall be construed as preventing the holders of Series E Convertible Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the DGCL in connection with a merger triggering an adjustment hereunder, nor shall this Subsection 6.4.4 be deemed conclusive evidence of the fair value of the shares of Series E Convertible Preferred Stock in any such appraisal proceeding.

6.4.5 Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Series E and Series E‑1 Conversion Price pursuant to this Subsection 6.4 , the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series E Convertible Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series E Convertible Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series E Convertible Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series E and Series E‑1 Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series E Convertible Preferred Stock.

 

 

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6.5 Notice of Record Date . In the event :

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series E Convertible Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

then, and in each such case, the Corporation will send or cause to be delivered to the holders of the Series E Convertible Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series E Convertible Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series E Convertible Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) business days prior to the record date or effective date for the event specified in such notice.

7.

Redemption .

7.1 General . Unless prohibited by Delaware law governing distributions to stockholders, shares of Series E Convertible Preferred Stock may be redeemed by the Corporation at a per share price equal to the Liquidation Value, plus all accrued but unpaid dividends thereon (the “ Redemption Price ”), at any time on or after the Issue Date.  Notwithstanding the foregoing, all proceeds from sales of any equity securities by the Corporation after the Issue Date (other than the Permitted Financing) must be used exclusively to redeem shares of Series E Convertible Preferred Stock pursuant to the provisions of this Section 7 , unless otherwise agreed in writing in advance of the sale of such equity by holders of at least a majority of the outstanding shares of Series E Convertible Preferred Stock. For clarity, the Corporation shall not be required to use the proceeds of the Permitted Financing to redeem the Preferred Stock and the Corporation may use such proceeds for working capital purposes.

7.2 Redemption Notice . The Corporation shall send written notice of any redemption (the “ Redemption Notice ”) to each holder of record of Series E Convertible

 

 

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Preferred Stock not less than forty (40) days prior to the date that such shares are to be redeemed (the “ Redemption Date ”). Each Redemption Notice shall state:

(a) the number of shares of Series E Convertible Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

(b) the Redemption Date and the Redemption Price;

(c) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 6 ); and

(d) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series E Convertible Preferred Stock to be redeemed.

7.3 Surrender of Certificates; Payment . On or before the applicable Redemption Date, each holder of shares of Series E Convertible Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 6 , shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series E Convertible Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Series E Convertible Preferred Stock shall promptly be issued to such holder.

7.4 Rights Subsequent to Redemption . If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Series E Convertible Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Series E Convertible Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series E Convertible Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.

7.5 Redemption Prepayment Incentive .  So long as no Preferred Default exists, if on or prior to October 31, 2019 the Corporation completes an optional redemption of shares of Series E Convertible Preferred Stock in accordance with this Section 7 , then the Corporation shall be entitled to a two percent (2%) discount on the Liquidation Value payable for the shares to be redeemed (for example, if the Corporation desires to redeem shares with $1,000,000 in Liquidation Value during such period, the Corporation would only be required to pay to the

 

 

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holder $9 8 0,000 of such redemption amount, plus accrued and unpaid dividends on the Series E Convertible Preferred Stock, and $ 2 0,000 of such Liquidation Value of the shares being redeemed ( i.e. , 2%) shall not be required to be repaid by the Corporation to the holder); provided , however , that (A) the redemption notice required to be delivered by the Corporation to the holder under S ubs ection 7 .2 must (1) specify the full Liquidation Value of the shares proposed to be redeemed, (2) state that the discounted amount of such Liquidation Value will be withheld from the specified redemption amount in accordance with this S ubs ection 7.5 , and (3) certify to the holder that no Preferred Default exists and that all conditions to such discount have been met, (B) in connection with any redemption , the Corporation must pay to the holder all accrued but unpaid dividends on the full amount of the shares to be redeemed in accordance with Section 3 (without giving effect to any incentive discount provided for in this S ubs ection 7.5 ), and (C) any forgiveness of amounts owed provided for above in this S ubs ection 7.5 shall be deemed void ab initio if any payments of the Redemption Price or dividends on the Series E Convertible Preferred Stock received by the holders are required for any reason to be disgorged or turned over by the holder to any court, creditor, trustee, g overnmental a uthority or other p erson, and, in such case, the Corporation shall remain liable for the full payment of the entire original Liquidation Value of the Series E Convertible Preferred Stock redeemed, together with all accrued but unpaid dividends thereon, in accordance with the terms hereof.

7.6 PIK Dividend Shares .  If on or prior to October 31, 2020 the Corporation completes the redemption of all shares of Series E Convertible Preferred Stock in accordance with subsection 3.1.2 , then all shares of Series E-1 Convertible Preferred Stock previously issued as PIK Dividends shall be cancelled and extinguished without further action by the Corporation or any holder.  For the avoidance of doubt, such cancellation and extinguishment is not intended to nor shall it require any refund of any cash dividends previously paid on any shares of Series E-1 Convertible Preferred Stock prior to the date of such cancellation and extinguishment.

8.

Redeemed or Otherwise Acquired Shares .

Any shares of Series E Convertible Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series E Convertible Preferred Stock following redemption.


 

 

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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be duly executed by its du ly authorized officer on this 15th day of November, 2018 .

STAFFING 360 SOLUTIONS, INC.

By: /s/ Brendan Flood

Name: Brendan Flood

Title: Chairman and Chief Executive Officer

 

 

 

15

 

Exhibit 3.2

CERTIFICATE OF correction

TO THE

CERTIFICATE OF DESIGNATION

OF

SERIES E CONVERTIBLE PREFERRED STOCK

OF

STAFFING 360 SOLUTIONS, Inc.

 

Pursuant to Section 103 of the

General Corporation Law of the State of Delaware

 

___________________

 

 

The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does herby certify:  

 

FIRST . The name of the corporation is Staffing 360 Solutions, Inc. (the “Company” or the “Corporation” ).

 

SECOND. That a Certificate of Designation of Series E Convertible Stock (the “Certificate of Designation”) was filed by the Secretary of State of Delaware on November 15, 2018, and said Certificate of Designation requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.

 

THIRD. The inaccuracies or defects of said Certificate of Designation are:

 

(a) Section 3.1.2 contained a misspelling of the word “Convertible”; and

 

(b) the Series E-1 Conversion Price in Section 6.1.1 did not contain a dollar sign.

 

FOURTH.

 

(a) Section 3.1.2 of the Certificate of Designation is hereby amended to read as follows:  

 

 

3.1.2 PIK Dividends .   Subject to subsection 7.6 below, t he holders of shares of Series E Convertible Preferred Stock (other than Series E-1 Convertible Preferred Stock), in preference to the holders of any Junior Securities, shall also be entitled to receive dividends payable in shares of Series E-1 Convertible Preferred Stock of the Corporation having a Liquidation Value equal to 5% per annum of the Liquidation Value of the outstanding Series E Convertible Preferred Stock (such dividend, a “ PIK Dividend ” and together with Cash Dividends, “ Quarterly Dividends ”). Shares of Series E-1 Convertible Preferred Stock shall have all the same terms, preferences and characteristics as are provided for in this

D-


 

Certificate of Designation with respect to Series E Convertible Preferred Stock (including, without limitation, the right to receive Cash Dividends) and references herein to Series E Convertible Preferred Stock shall include Series E-1 Convertible Preferred Stock unless otherwise indicated.   Notwithstanding the foregoing, (i) Series E-1 Convertible Preferred Stock shall be mandatorily redeemable by the Corporation within thirty (30) days after written demand received from any holder at any time after the earlier of the occurrence of a Preferred Default or November 15, 2020, for a cash payment equal to the Liquidation Value plus any accrued and unpaid dividends thereon , (ii) the Series E ‑1 Conversion Price shall be as provided in Subsection 6.1.1 , and (iii) Series E ‑1 Convertible Preferred Stock may be cancelled and extinguished in accordance with Subsection 7.6 hereof .   If on the date of any such r edemption , Delaware law governing distributions to stockholders prevents the Co rporation from redeeming all Series E-1 Convertible Preferred Stock to be redeemed, the Co rporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law and thereafter shall take all actions that it may legally take in order to cause the Co rporation to be able to redeem lawfully the remaining shares , and shall redeem the remaining shares as soon as it may lawfully do so. No fractional shares of Series E-1 Convertible Preferred Stock shall be issued to any holder pursuant to this subsection 3.1.2 and in lieu of any such fractional share, the Corporation shall pay to such holder an amount in cash equal to the applicable fraction of a share of Series E-1 Convertible Preferred Stock multiplied by the Liquidation Value.    The Corporation shall deliver to each holder on each Quarterly Dividend Payment Date a share certificate evidencing Series E-1 Preferred Stock issued to such holder as a PIK Dividend, but the failure to so issue such certificate shall not impair the rights of such holder in respect of issued shares of Series E-1 Convertible Preferred Stock which shall be deemed issued and outstanding on each Quarterly Dividend Payment Date irrespective of whether a share certificate has been delivered to holder thereof and the Corporation shall make appropriate entry in its stock transfer records to reflect such issuance and outstanding shares of Series E-1 Convertible Preferred Stock on each Quarterly Dividend Payment Date.

 

(b) Section 6.1.1 of the Certificate of Designation is hereby amended to read as follows:  

 

6.1.1 Conversion Ratio .  Each share of Series E Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time from and after a Conversion Trigger (as defined below), and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series E Liquidation Value plus any accrued but unpaid dividends on such share by the Series E Conversion Price or the Series E‑1 Conversion Price (as defined below) in effect at the time of conversion.  The “ Series E Conversion Price ” shall initially be equal to $1.78.  The “ Series E‑1 Conversion Price ” shall initially be equal to $1.66.  Such initial Series E Conversion Price and Series E‑1 Conversion Price, and the rate at which shares of Series E and Series E‑1 Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to

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adjustment as provided below .

 

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IN WITNESS WHEREOF , the undersigned has executed this Certificate of Correction as of the 15 th day of November, 2018 .

 

 

STAFFING 360 SOLUTIONS, Inc.,

a Delaware corporation

 

 

By: /s/ Brendan Flood

     Brendan Flood,

     Chairman and Chief Executive Officer

D- 4

Exhibit 10.1

 

DEBT EXCHANGE AGREEMENT

 

THIS DEBT EXCHANGE AGREEMENT (this “ Agreement ”) is made and entered into as of November 15, 2018 by and among STAFFING 360 SOLUTIONS, INC., a Delaware corporation (“ Issuer ”), and JACKSON INVESTMENT GROUP, LLC, a Georgia limited liability company (“ Investor ”).

 

RECITALS

 

A. Issuer, certain subsidiaries of Issuer and Investor are parties to that certain Amended and Restated Note Purchase Agreement, dated as of September 15, 2017 (the “ Original Purchase Agreement ”), as amended pursuant to that certain (i) First Omnibus Amendment, Joinder and Reaffirmation Agreement, dated as of August 27, 2018 (the “ First Omnibus Amendment ”; the Original Purchase Agreement as amended by the First Omnibus Amendment is referred to herein as the “ Existing Purchase Agreement ”), and (ii) Second Omnibus Amendment and Reaffirmation Agreement dated as of the date hereof (the “ Second Omnibus Amendment ”; the Existing Purchase Agreement as amended by the Second Omnibus Amendment and as it may hereafter be amended, restated, supplemented or modified from time to time is referred to herein as the “ Purchase Agreement ”); capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Purchase Agreement.

 

B. Pursuant to the Existing Purchase Agreement, Issuer issued to Investor its (i) 12% Senior Secured Promissory Note due September 15, 2020, dated September 15, 2017, in the original principal amount of $40,000,000 (the “ Original Senior Note ”) in exchange for the purchase price therefore, and (ii) 12% Senior Secured Promissory Note due September 15, 2020, dated August 27, 2018, in the principal amount of $8,427,794 (the “ Second Senior Note ”) in exchange for the purchase price therefor.

 

C. As of the date hereof (i) immediately prior to giving effect to the Second Omnibus Amendment and the exchange contemplated by this Agreement, the outstanding principal balance under the Original Senior Note is $40,000,000, and (ii) the outstanding principal balance under the Second Senior Note is $8,427,794.

 

D. Issuer desires to cause $13,000,000 in outstanding principal amount (such outstanding principal amount being referred to herein as the “ Debt Exchange Amount ”) of the total outstanding principal amount of indebtedness under the Original Senior Note to be satisfied and cancelled in exchange for the issuance of Series E Convertible Preferred Stock of Issuer (“ Preferred Stock ”) to Investor, upon the terms and conditions as set forth herein.

 

E. Investor desires to acquire shares of Preferred Stock in exchange for the satisfaction and cancellation of the Debt Exchange Amount under the Original Senior Note, upon the terms and conditions as set forth herein.

 

 


F . Issuer and Investor are entering into this Agreement to set forth the terms and conditions applicable to the Debt Exchange (as defined below).

 

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by the parties hereto, the parties hereby agree as follows:

 

Article 1

 

THE DEBT EXCHANGE

 

1.1 Exchange .

 

(a) Investor hereby agrees, subject to the terms and conditions set forth herein, to exchange the Debt Exchange Amount under the Original Senior Note for thirteen thousand (13,000) shares of the Preferred Stock (the “ Exchange Shares ”) at an exchange price of One Thousand Dollars ($1,000) per share (the “ Debt Exchange ”), with such Debt Exchange Amount under the Original Senior Note being deemed fully satisfied and cancelled upon the consummation of the Debt Exchange in accordance with the terms of this Agreement.  

 

(b) Subject to the terms and conditions of this Agreement, the consummation of the Debt Exchange shall take place at a closing (the “ Closing ”) which shall be held on the date hereof (the “ Closing Date ”). At the Closing, the Issuer shall (i) issue to the Investor the Exchange Shares and shall deliver to the Investor certificates representing the Exchange Shares, and (ii) issue and deliver to the Investor that certain Amended and Restated 12% Senior Secured Promissory Note due September 15, 2020, dated the Closing Date, in the principal amount of $27,312,000, in the form attached hereto as Exhibit A (the “ Amended and Restated Note ”), which Amended and Restated Note by its terms will amend, restate and replace in its entirety the Original Senior Note in order to (i) reflect the cancellation and satisfaction of the Debt Exchange Amount under the Original Senior Note resulting from the Debt Exchange, (ii) to evidence $250,000 in principal amount of new indebtedness incurred by Issuer to Investor as payment of the commitment fee required to be paid under the Second Omnibus Amendment in connection with the Debt Exchange, and (iii) to evidence $62,000 in principal amount of new indebtedness incurred by Issuer to Investor as payment of certain legal fees and transaction expenses of Investor required to be paid by Issuer under Section 5.8 .

 

(c) The Exchange Shares will be issued by Issuer to Investor on the Closing Date in exchange for the full satisfaction and cancellation of the Debt Exchange Amount under the Original Senior Note as contemplated by the Debt Exchange, and from and after the consummation of the Debt Exchange, the payment obligations of Issuer to Investor in respect of the Original Senior Note shall be evidenced by the Amended and Restated Note, which shall amend, restate and replace the Original Senior Note in its entirety. If as a result of the Debt Exchange, fractional shares of Preferred Stock would be required to be issued, such fractional shares shall be rounded up or down to the nearest whole share. Issuer shall pay any documentary, stamp or similar issue or transfer tax due with respect to the Debt Exchange.

 

 


1.2 Legend . Any certificate or certificates representing the Exchange Shares (or any part thereof) will bear the following legend, together with any and all other legends as may be required pursuant to applicable law (and I ssuer may issue appropriate corresponding stop transfer instructions to any transfer agent for any of such securities):

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under any applicable state law and may not be transferred, sold or otherwise disposed of unless registered under such act and applicable state laws or unless an exemption from the registration requirements under such act or applicable state law requirements is available.”

 

Such legend and the stop transfer instructions shall be removed and Issuer shall issue a certificate representing such securities without such legend to the holder thereof if (i) such securities are registered under the Securities Act of 1933, or (ii) if such securities are sold pursuant to Rule 144 under the Securities Act of 1933, or (iii) if such securities are eligible for transfer under Rule 144(k) under the Securities Act of 1933, and, in the case of (ii) or (iii), when Investor has furnished to Issuer evidence to such effect that Issuer finds reasonably satisfactory which may include, without limitation, an opinion of counsel reasonably acceptable to Issuer (as to form and substance and counsel).

 

Article 2

 

REPRESENTATIONS AND WARRANTIES OF ISSUER

 

Issuer hereby represents and warrants to Investor that:

 

2.1 Corporate Status . Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate or other power and authority to carry on its business as now being conducted.

 

2.2 Capitalization . On the Closing date and upon the filing with the Secretary of State of the State of Delaware and effectiveness of the Certificate of Designation creating the Preferred Stock in the form of Exhibit B attached hereto (the “ Certificate of Designation ”), the authorized capital stock of Issuer consists of 60,000,000 shares, consisting of (a) 40,000,000 authorized shares of common stock, par value $0.00001 per share (the “ Common Stock ”), and (b) 20,000,000 authorized shares of preferred stock, of which (1) one million six hundred sixty three thousand eight (1,663,008) are designated as Series A Preferred Stock, (2) two hundred thousand (200,000) are designated as Series B Preferred Stock, (3) two million (2,000,000) are designated as Series C Preferred Stock, (4) thirteen thousand (13,000) shares are designated as Series E Convertible Preferred Stock.  As of the date of this Agreement and immediately prior to the Debt Exchange, 5,015,018 shares of Common Stock are issued and outstanding and no shares of preferred stock are issued or outstanding (other than the Preferred Stock to be issued to Investor pursuant to this Agreement).  

 

2.3 Power and Authority; Binding Agreement . Issuer has the requisite corporate power and authority to execute and deliver, and when the Certificate of Designation has been adopted and

 


filed with the Secretary of State of the State of Delaware, to perform its obligations under the Certificate of Designation and this Agreement, and Issuer has taken all necessary corporate action to authorize the execution, delivery and performance of the Certificate of Designation, this Agreement and the consummation of the Debt Exchange. This Agreement has been duly executed and delivered by Issuer and, assuming the due authorization, execution and delivery by Investor , constitutes the valid and binding agreement of Issuer enforceable against Issuer in accordance with its terms.

 

2.4 Non-Contravention . The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and the Certificate of Designation, and compliance with the provisions hereof and thereof, will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under the Certificate of Incorporation or By-laws of Issuer. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and the Certificate of Designation and the compliance with the provisions hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any lien or encumbrance upon any of the properties or assets of Issuer or any of its subsidiaries under, (i) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, obligation, instrument, permit, concession, franchise, license or similar authorization applicable to Issuer or any of its subsidiaries or their respective properties or assets or (ii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Issuer or any of its subsidiaries or their respective properties or assets, other than any such conflicts, violations, defaults, rights, losses, liens or encumbrances that, individually or in the aggregate, are not reasonably likely to have a material adverse effect on (x) the business condition of Issuer and its subsidiaries taken as a whole or (y) the ability of Issuer to perform its obligations under this Agreement, the Certificate of Designation, the Purchase Agreement, the Amended and Restated Note, the Warrant Amendment, the Second Senior Note or any other Transaction Document.

 

2.5 Consents and Governmental Approvals . No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission, body or authority or any non-governmental self-regulatory agency, commission, body or authority (each a “ Governmental Entity ”) is required by Issuer in connection with the execution and delivery of this Agreement by Issuer or the consummation by the Issuer of Debt Exchange or the other transactions contemplated by this Agreement, the Amended and Restated Note, the Certificate of Designation, the Omnibus Amendment and the Warrant Amendment, except for the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, and such other consents, approvals, orders or authorizations the failure of which to be made or obtained, individually or in the aggregate, is not reasonably likely to have a material adverse effect on the Issuer or the ability of Issuer to perform its obligations hereunder and thereunder.

 

2.6 Valid Issuance . When issued pursuant to this Agreement in connection with the Debt Exchange (a) the Exchange Shares will be duly authorized, validly issued, fully paid and non-

 


assessable, and Investor will receive good title to such shares, free and clear of any liens, claims, security interest or encumbrances , and (b) the Amended and Restated Note will be duly authorized and validly issued, free and clear of any liens, claims, security interest or encumbrances .

 

Article 3

 

REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

The Investor represents and warrants to the Issuer that:

 

3.1 Authority . Investor has all requisite power and authority to execute and deliver, and perform its obligations under, this Agreement. All acts required to be taken by Investor to enter into this Agreement and consummate the transactions contemplated hereby have been properly taken.

 

3.2 Title to the Original Senior Note . Investor is the record and beneficial holder of the Original Senior Note, and holds the Original Senior Note free and clear of all claims, liens, security interests, title defects and objections or any other encumbrances of any kind or nature whatsoever.

 

3.3 Investment Intent . Investor is acquiring the Exchange Shares being delivered to Investor under this Agreement for its own account and with no present intention of distributing or selling any of them in violation of the Securities Act of 1933 or any applicable state securities law. Investor will not sell or otherwise dispose of any of such Exchange Shares unless such sale or other disposition has been registered or is exempt from registration under the Securities Act of 1933 and has been registered or qualified or is exempt from registration or qualification under applicable state securities laws. Investor understands that the Exchange Shares it is acquiring under this Agreement have not been registered under the Securities Act of 1933 by reason of their contemplated issuance in transactions exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 and that the reliance of Issuer on this exemption is predicated in part on these representations and warranties of Investor. Investor acknowledges and agrees that a restrictive legend consistent with the foregoing has been or will be placed on the certificates for the Exchange Shares and related stop transfer instructions will be noted in the transfer records of the Issuer and/or its transfer agent for the Exchange Shares, and that such Investor will not be permitted to sell, transfer or assign any of the Exchange Shares acquired hereunder until such Exchange Shares are registered or an exemption from the registration and prospectus delivery requirements of the Securities Act of 1933 is available.

 

3.4 Investor Status . Investor (i) is either (x) a “Qualified Institutional Buyer” as such term is defined in Rule 144A under the Securities Act of 1933 or (y) an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933; (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investments to be made by it hereunder; (iii) has the ability to bear the economic risks of its investments for an indefinite period of time; and (iv) has sole investment discretion with respect to the Debt Exchange; and (v) has been given an opportunity to obtain such information from Issuer as Investor deems necessary or appropriate with respect to the Debt Exchange.

 


 

 

 

 

Article 4

 

CONDITIONS

 

4.1 Issuer’s Conditions . The obligations of Issuer to consummate the Debt Exchange and the other transactions contemplated by this Agreement shall be subject to fulfillment of the following conditions on or prior to the Closing Date:

 

(a) The representations and warranties of Investor set forth in Article 3 shall be true and correct on and as of the Closing Date.

 

(b) All proceedings, co mpany or otherwise, required to be taken by Investor on or prior to the Closing in connection with this Agreement, the Debt Exchange and the issuance of the Amended and Restated Note contemplated hereby, shall have been duly and validly taken, and all necessary consents, approvals or authorizations required to be obtained by Investor on or prior to the Closing shall have been obtained.

 

4.2 Investor’s Conditions . The obligations of Investor to consummate the Debt Exchange and the other transactions contemplated by this Agreement shall be subject to fulfillment of the following conditions on or prior to the date of Closing:

 

(a) The representations and warranties of Issuer set forth in Article 2 shall be true and correct on and as of the Closing Date;

 

(b) All proceedings, corporate or otherwise required to be taken by Issuer on or prior to the Closing in connection with (i) the consummation of the Debt Exchange, the issuance of the Exchange Shares, the issuance of the Amended and Restated Note, (ii) the execution, delivery and performance of the this Agreement, the Amended and Restated Note, the Second Omnibus Amendment and the Warrant Amendment (as defined below), and (ii) the adoption, approval and filing of the Certificate of Designation, in each case, shall have been duly and validly taken, and all necessary consents, approvals or authorizations required to be obtained by Issuer on or prior to the Closing shall have been obtained;

 

(c) A copy of the Certificate of Designation in the form of Exhibit B attached hereto, as filed with, and certified as of a recent date by, the Secretary of State of the State of Delaware, shall have been delivered to Investor, and such Certificate of Designation shall be in full force and effect and shall not have been amended, supplemented or modified from the form thereof attached hereto as Exhibit B hereto without the prior written consent of Investor;

 

(d) Issuer shall have issued the Exchange Shares to the Investor, and not later than three Business Days after the date hereof (or such later date as Investor may agree in writing) Issuer shall have executed and delivered to Investor, one or more original stock certificates, registered in

 


the name of Investor, representing duly authorized, validly issued, fully paid and non-assessable Exchange Shares ;

 

(e) Issuer shall have issued, executed and delivered to Investor the Amended and Restated Note in the form attached hereto as Exhibit A ;

 

(f) Issuer has, and has caused each of its subsidiaries party thereto to, execute and deliver to Investor the Second Omnibus Amendment in the form attached hereto as Exhibit C , and the conditions precedent to the effectiveness of the Second Omnibus Amendment set forth in Section 4 thereof shall have been satisfied in full (or waived in writing by the Investor);

 

(g) Issuer has executed and delivered to Investor the Amendment No. 2 (the “ Warrant Amendment ”) to the Existing Warrant Agreement in the form attached hereto as Exhibit D ;

 

(h) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened (in writing) 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 the consummation of the Debt Exchange contemplated hereby, the Certificate of Designation, the Amended and Restated Note, the Second Omnibus Amendment or the Warrant Amendment, or which, in Investor’s sole discretion, would make it inadvisable to consummate the transactions contemplated hereby and thereby;

 

(i) No Material Adverse Effect has occurred since June 30, 2018; and

 

(j) No Default or Event of Default shall exist.

 

Article 5

 

MISCELLANEOUS

 

5.1 Notices . All notices, requests and demands to or upon the respective parties hereto to be effective must be in writing and shall be delivered in the manner set forth in Section 10.1 of the Purchase Agreement.

 

5.2 Headings . The headings in this Agreement are for purposes of reference only and are not to be considered in construing this Agreement.

 

5.3 Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered (including by telecopy or other electronic transmissions, e.g. .pdf) constitutes an original and all together shall constitute one Agreement.  

 

5.4 Enforceability . Subject to the right of rescission in favor of Investor set forth in Section 5.8 , if any term or provision of this Agreement, or the application thereof to any person or circumstance, is, to any extent, invalid or unenforceable, the remaining terms and provisions of this Agreement or application to other Persons and circumstances are not invalidated thereby, and

 


each term and provision hereof is to be construed with all other remaining terms and provisions hereof to effect the intent of the parties hereto to the fullest extent permitted by law.

 

5.5 Law Governing . This Agreement is to be construed and enforced in accordance with and shall be governed by the laws of the State of New York applicable to contracts executed in and to be fully performed in that state.

 

5.6 Confidentiality . Until Issuer makes a press release or other public announcement or SEC filing about the Debt Exchange, Investor will maintain the confidentiality of the Debt Exchange and the terms of the Debt Exchange.

 

5.7 Investor’s Right of Rescission .  If Issuer has not received, within sixty (60) days of the Closing, a written communication from NASDAQ, in form and substance satisfactory to Investor, confirming its oral communications with Issuer prior to Closing to the effect that (i) Issuer has satisfied the conditions to continued listing contained in the letter from NASDAQ to the Issuer dated October 23, 2018 and that the Panel has determined to continue the listing of the Issuer’s common stock, and (ii) no shareholder approval by Issuer is required with respect to the consummation of the Debt Exchange (including, without limitation, the creation and/or issuance of the Preferred Stock in connection therewith), then (a) Investor shall have the option in its sole discretion (which option shall be exercised by written notice by Investor to Issuer making specific reference to this Section 5.7 ) to rescind the Debt Exchange and the transactions contemplated hereby and by the Amended and Restated Note, the Second Omnibus Amendment and the Warrant Amendment, and (b) if such option is exercised by Investor, then Issuer shall promptly (and in any event within five (5) Business Days thereafter), at its sole cost and expense, execute and deliver to Investor such documents and instruments and take such steps as shall be necessary or appropriate, in the reasonable judgment of Investor and its counsel, to rescind and cancel ab initio the Debt Exchange and the other transactions contemplated hereby and by the Amended and Restated Note, the Second Omnibus Amendment and the Warrant Amendment, so as to restore the parties hereto to the same position as if such Debt Exchange and such related transactions had not occurred, including, without limitation, the execution and delivery by Issuer to Investor of (i) a rescission agreement, in form and substance reasonably satisfactory to Investor and its counsel, and (ii) a new 12% Senior Secured Promissory Note due September 15, 2020 in the principal amount of $40,000,000, substantially in the form of the Original Senior Note as in effect immediately prior to the Closing.

 

5.8 Payment of Fees and Expenses of Investor .  Issuer hereby agrees to pay on the Closing Date all of the reasonable fees and transaction expenses incurred by Investor in connection with the Debt Exchange and the other transactions contemplated by this Agreement, the Amended and Restated Note, the Second Omnibus Amendment and the Warrant Amendment, including, without limitation, the payment of all reasonable attorneys’ fees and expenses of Investor’s counsel and other advisors.  The parties hereto hereby agree that the payment of all such fees and expenses is to be accomplished by adding the amount all such fees and expenses to the principal amount of the Amended and Restated Note to be issued on the Closing Date.

 

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IN WITNESS WHEREOF, the parties have caused this Debt Exchange Agreement to be duly executed and delivered as of the day and year first above written.

 

ISSUER:

 

STAFFING 360 SOLUTIONS, INC.

 

 

By: /s/ Brendan Flood

Name: Brendan Flood

Title:   Chairman and Chief Executive Officer

 

 

INVESTOR:

 

JACKSON INVESTMENT GROUP, LLC

 

 

By: /s/ Douglas B. Kline

Name:  Douglas B. Kline

Title:    Chief Financial Officer

 


 


EXHIBIT A

 

Form of Amended and Restated 12% Senior Secured Promissory Note

 

[Copy to be attached hereto]


 


EXHIBIT B

 

Form of Certificate of Designation

 

[Copy to be attached hereto]


 


EXHIBIT C

 

Form of Second Omnibus Amendment

 

[Copy to be attached hereto]


 


EXHIBIT D

 

Form of Amendment No. 2 to Existing Warrant Agreement

 

[Copy to be attached hereto]