Item
1.01 Entry Into a Material Definitive Agreement.
Note
Purchase Agreement with Jackson Investment Group, LLC
On
October 27, 2022, Staffing 360 Solutions, Inc. (the “Company”) entered into a Third Amended and Restated Note
Purchase Agreement (the “Amended Note Purchase Agreement”) with Jackson Investment Group, LLC (“Jackson”)
which amended and restated the Second Amended and Restated Note Purchase Agreement, dated October 26, 2020, as amended, by and between
the Company and Jackson, and issued to Jackson the Third Amended and Restated Senior Secured 12% Promissory Note, with a remaining outstanding
principal balance of approximately $9.0 million (the “Jackson Note”). In connection with the Amended Note Purchase
Agreement, the Company paid, or agreed to pay, to Jackson certain fees, including reasonable fees of Jackson’s legal counsel and
its other advisors.
Under
the terms of the Amended Note Purchase Agreement and Jackson Note, the Company is required to pay interest on the Jackson Note at a per
annum rate of 12% and in the event the Company has not repaid in cash at least 50% of the outstanding principal balance of the Jackson
Note by October 27, 2023, then interest on the outstanding principal balance of the Jackson Note shall continue to accrue at 16% per
annum of the outstanding principal balance of the Jackson Note until the Jackson Note is repaid in full. The Amended Note Purchase Agreement
also extends the maturity date of the Jackson Note from October 28, 2022 to October 14, 2024.
In
addition, pursuant to the terms of the Amended Note Purchase Agreement, until all principal interest and fees due pursuant to the
Amended Note Purchase Agreement and the Jackson Note (or any other senior promissory note delivered by the Company to Jackson in
substitution, replacement or exchange for the Jackson Note) (together with the other documents executed in connection with the
Amended Note Purchase Agreement, collectively, the “Note Documents”) are paid in full by the Company and
are no longer outstanding, Jackson shall have a first call over 50% of the net proceeds from all common stock equity raises the
Company conducts, which shall be used to pay down any outstanding obligations due pursuant to the Note Documents. The Jackson Note
continues to be secured by substantially all of the Company and its subsidiaries’ assets pursuant to the Amended and Restated
Security Agreement with Jackson, dated September 15, 2017, as amended, and as further amended by the Omnibus Agreement (as defined
below) on October 27, 2022.
The
Amended Note Purchase Agreement contains customary events of default for a senior secured loan including, among other events of default,
(i) failure to timely pay interest and principal, (ii) other breaches and violation of the Amended Note Purchase Agreement, (iii) bankruptcy
and insolvency events affecting the Company and/or its subsidiaries, and (iv) the occurrence of a material adverse effect on the Company.
In addition to customary remedies for senior secured lenders following an event of default, Jackson has the right to cause the Company
to engage a financial advisor to provide valuation analyses of the Company as a going concern and analyses of strategic alternatives
that may be available to the Company. The Company will be obligated to provide all such analyses to Jackson.
The
Amended Note Purchase Agreement also contains restrictions against incurrence of additional debt, payment of dividend or other distribution
(whether in cash, securities or other property) on any of our equity interest or repayment of debt, consolidations, mergers, sales of
assets or change in control and financial covenants.
The
foregoing descriptions of the Amended Note Purchase Agreement and the Jackson Note do not purport to be complete and are qualified in
their entirety by reference to the full text of the Amended Note Purchase Agreement and the Jackson Note, copies of which are attached
hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated herein by reference.
Omnibus
Amendment and Reaffirmation Agreement with Jackson
On
October 27, 2022, in connection with the Amended Note Purchase Agreement, the Company entered into an Omnibus Amendment and Reaffirmation
Agreement (the “Omnibus Agreement”) with Jackson, which, among other things, amends (i) the Amended and Restated
Pledge Agreement, dated as of September 15, 2017, as amended and (ii) the Amended and Restated Pledge Agreement, dated as of September
15, 2017, as amended, to reflect certain of the terms as updated and amended by the Amended Note Purchase Agreement.
The
foregoing description of the Omnibus Agreement does not purport to be complete is qualified in its entirety by reference to the full
text of the Omnibus Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
Amendment
to Warrant Agreement with Jackson
On
October 27, 2022, in connection with the entry into the Amended Note Purchase Agreement, the Company entered into Amendment No. 4 (“Amendment
No. 4”) to the Amended and Restated Warrant Agreement, dated April 25, 2018 (as amended prior to Amendment No. 4, the “Existing
Warrant”), with Jackson. Pursuant to the Existing Warrant and after giving effect to the 1-for-6 reverse stock split, effectuated
by the Company on June 30, 2021 and the 1-for-10 reverse stock split, effectuated by the Company on June 23, 2022, Jackson was entitled
to purchase 15,093 shares of common stock at an exercise price of $60.00 per share. Pursuant to Amendment No. 4, the exercise price of
the Existing Warrant was reduced to $3.06 per share and the term extended to January 26, 2028.
The
foregoing description of Amendment No. 4 does not purport to be complete and is qualified in its entirety by reference to the full text
of Amendment No. 4, a copy of which is attached hereto as Exhibit 10.4 and incorporated herein by reference.
Amendment
to Credit and Security Agreement with MidCap
On
October 27, 2022, the Company entered into Amendment No. 27 and Joinder Agreement to the Credit and Security Agreement (“Amendment
No. 27”) with MidCap Funding IV Trust as successor by assignment to MidCap Funding X Trust, dated April 8, 2015 (“MidCap”),
which amended the Credit and Security Agreement, dated April 8, 2015 (as amended, the “Credit and Security Agreement”).
Amendment No. 27, among other things, (i) increases the revolving loan commitment amount from $25 million to $32.5 million (the “Loan”),
(ii) extends the commitment expiry date from October 27, 2022 to September 6, 2024, and (iii) modifies certain of the financial covenants.
Pursuant to Amendment No. 27, as long as no default or event of default under the Credit and Security Agreement as amended by Amendment
No. 27 exists, upon written request by the Company and with the prior written consent of the agent and lenders, the Loan may be increased
by up to $10 million in minimum amounts of $5 million tranches each, for an aggregate loan commitment amount of $42.5 million.
In
addition, Amendment No. 27 increases the applicable margin (the “Applicable Margin”) from 4.0% to 4.25%, with
respect to the Loan (other than Letter of Credit Liabilities (as defined in the Credit and Security Agreement)), and from 3.5% to 3.75%
with respect to the Letter of Credit Liabilities. Amendment No. 27 also replaces the interest rate benchmark from LIBOR to SOFR and provides
that the Loan shall bear interest at the sum of a term-based SOFR rate (plus a SOFR adjustment of 0.11448%) plus the Applicable Margin,
subject to certain provisions for the replacement of SOFR with an alternate benchmark in connection with SOFR no longer being provided
by its administrator. Notwithstanding the foregoing, the SOFR interest rate shall not be at any time less than 1.00%.
In
connection with Amendment No. 27, the Company paid to MidCap a modification fee of $135,000, after deducting certain credits and fees
paid in connection with previous amendments to the Credit and Security Agreement and certain waiver agreements, and agreed to pay reasonable
costs and fees of MidCap’s legal counsel in connection with Amendment No. 27. On October 27, 2022, the Company drew down approximately
$8 million on the Loan to pay off in full certain outstanding existing debt of the Headway Workforce Solutions (“Headway”)
and its subsidiaries with to White Oak Commercial Finance, LLC, which were acquired in April 2022 pursuant to the Stock Purchase Agreement
by and between the Company, Headway, and Chapel Hill Partners, LP, as representatives of all the stockholders of Headway, as previously
disclosed.
The
foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment
No. 27, a copy of which is attached hereto as Exhibit 10.5 and incorporated herein by reference.
Amendment
to Intercreditor Agreement with Jackson and MidCap
On
October 27, 2022, in connection with the Amended Note Purchase Agreement, the Jackson Note and Amendment No. 27, the Company, Jackson
and MidCap entered into the Fifth Amendment to Intercreditor Agreement (the “Fifth Amendment”), which amended
the Intercreditor Agreement, dated September 15, 2017, by and between the Company, Jackson and MidCap, as amended. The Fifth Amendment,
among other things, permits the increase of the credit commitments under the Credit and Security Agreement as amended by Amendment No.
27 to $32.5 million.
The
foregoing description of the Fifth Amendment does not purport to be complete and is qualified in its entirety by reference to the full
text of the Fifth Amendment, a copy of which is attached hereto as Exhibit 10.6 and incorporated herein by reference.