Item
1.01 Entry Into a Material Definitive Agreement.
Stock
Purchase Agreement
On
April 18, 2022, Staffing 360 Solutions, Inc., a Delaware corporation (the “Company”), entered into a Stock Purchase Agreement
(the “Stock Purchase Agreement”) with Headway Workforce Solutions, Inc., a Delaware corporation (“Headway”),
and Chapel Hill Partners, LP, as the representatives of all the stockholders (collectively, the “Sellers”) of Headway (the
“Sellers’ Representative”), pursuant to which, among other things, the Company agreed to purchase all of the issued
and outstanding securities of Headway in exchange for (i) a cash payment of $14,065.20, and (ii) 9,000,000 shares of the Company’s
Series H Convertible Preferred Stock, with a value equal to the Closing Payment, as defined in the Stock Purchase Agreement (the “Headway
Acquisition”). The Headway Acquisition is expected to close on the later of (i) the mutual agreement of the parties or (ii) on
the third business day that certain conditions as set forth in the Stock Purchase Agreement have been completed, subject to satisfaction
of customary closing conditions.
The
purchase price in connection with the Headway Acquisition is expected to be approximately $9.0 million, subject to adjustment as provided
in the Stock Purchase Agreement. Pursuant to certain covenants in the Stock Purchase Agreement, the Company may be subject to a Contingent
Payment based on the Adjusted EBITDA (such term as defined in the Stock Purchase Agreement) of Headway during the Contingent Period (such
term as defined in the Stock Purchase Agreement).
The
Stock Purchase Agreement also contains representations, warranties and indemnification obligations of the parties customary for transactions
similar to those contemplated by the Stock Purchase Agreement. Such representations and warranties are made solely for purposes of the
Stock Purchase Agreement and, in some cases, may be subject to qualifications and limitations agreed to by the parties in connection
with the negotiated terms of the Stock Purchase Agreement and may have been qualified by disclosures that were made in connection with
the parties’ entry into the Stock Purchase Agreement.
The
foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to
the full text of the Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
In
connection with the Headway Acquisition, the Sellers’ Representative and certain of the Sellers will enter into voting agreements
whereby each will agree to, at every meeting of the stockholders of the Company, and at every adjournment or postponement thereof, to
appear or issue a proxy to a third party to be present for purposes of establishing a quorum, and to vote all applicable shares in favor
of each matter proposed and recommended for approval by the Company’s board of directors either in person or by proxy, amongst
other provisions.
Pursuant
to the Stock Purchase Agreement, at the closing the Company intends to file a certificate of designation (the “Certificate of Designation”)
with the Secretary of State of Delaware designating the rights, preferences and limitations of the Series H Convertible Preferred Stock,
par value $0.00001 per share (the “Series H Preferred Stock”).
The
Series H Preferred Stock will have a stated value equal to $1.00 per share (the “Stated Value”) and will be convertible into
an aggregate of approximately 3,500,000 shares of common stock, par value $0.00001 (the “Common Stock”) of the Company, at
a conversion price of $2.5714 per share, subject to certain ownership limitations. The Series H Preferred Stock may be redeemed by the
Company through a cash payment at a per share price equal to the Stated Value (including, for the avoidance of doubt, all PIK Dividends
accredited thereto, as defined in the Certificate of Designation), plus all accrued but unpaid dividends thereon (the “Redemption
Price”), at any time on or after the date of issuance. Upon the third anniversary of the date of issuance, the Company shall redeem
all of the shares of the Series H Preferred Stock at the Redemption Price, subject to certain provisions in the Limited Consent (as defined
herein). The Series H Preferred Stock carries quarterly dividend rights of cash dividends accruing (i) at an annual rate per share equal
to 12% from the date of issuance and (ii) at an annual rate per share of 15%, if the Company has not redeemed all outstanding shares
of Series H Preferred Stock after the third anniversary from the date of issuance.
Subject
to certain beneficial ownership limitations, the Series H Preferred Stock shall vote on an “as converted” basis on all matters
submitted to the holders of Common Stock for approval. In addition, as long as any shares of the Series H Preferred Stock are outstanding,
the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series H Preferred
Stock, (a) alter or change adversely the powers, preferences or rights given to the Series H Preferred Stock, (b) amend its certificate
of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series H Preferred
Stock, or (c) increase the number of authorized shares of the Series H Preferred Stock, or (d) enter into any agreement with respect
to any of the foregoing.
The
foregoing description of the Series H Preferred Stock does not purport to be complete and may be subject to change and amendment at the
closing.
Limited
Consent and Waiver
On
April 18, 2022, the Company entered into a limited consent and wavier (the “Limited Consent”) to the Second Amended and Restated
Note Purchase Agreement, dated as of October 26, 2020 (the “Note Purchase Agreement”), with Jackson Investment Group, LLC.
The Limited Consent permits, among other things, the Headway Acquisition and issuance of Series H Preferred Stock, and additionally grants
one-time waivers under the Note Purchase Agreement of (i) the occurrence of a breach of a financial covenant as of the first fiscal quarter
ended March 31, 2022, and (ii) the delivery of certain audited financial statements until May 2, 2022. The foregoing description of the
Limited Consent does not purport to be complete and is qualified in its entirety by reference to the full text of the Limited Consent,
a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Amendment
to Credit Agreement
On
April 18, 2022, the Company and certain of its domestic subsidiaries entered into an amendment to the Credit and Security Agreement,
dated as of April 8, 2015, as amended, and entered into Amendment No. 20 (“Amendment No. 20”) to the Credit and Security
Agreement (as amended, the “Credit Agreement”), with MidCap Funding X Trust. Amendment No. 20 permits, among other things,
the Headway Acquisition and the issuance of the Series H Preferred Stock, and additionally grants one-time waivers under the Credit Agreement
of (i) the occurrence of a breach of a financial covenant as of the first fiscal quarter ended March 31, 2022, and (ii) the delivery
of certain audited financial statements until May 2, 2022. The foregoing description of Amendment No. 20 does not purport to be complete
and is qualified in its entirety by reference to the full text of Amendment No. 20, a copy of which is attached hereto as Exhibit 10.2
and incorporated herein by reference.