Item 1.01 Entry into a Material Definitive Agreement.
Amendment to Note Purchase Agreement
On August 29, 2019, Staffing 360 Solutions, Inc. (the “Company”), as borrower, and certain subsidiaries of the Company, as guarantors, entered into a Fourth Omnibus Amendment and Reaffirmation Agreement with Jackson Investment Group, LLC (“Jackson”), as lender (the “Omnibus Amendment”), which, among other things, amends that certain Amended and Restated Note Purchase Agreement, dated as of September 15, 2017, as amended. Pursuant to the Omnibus Amendment, the Company agreed to issue and sell to Jackson a 18% Senior Secured Note due December 31, 2019 (the “Maturity Date”) in the aggregate principal amount of $2,538,000 (the “Term Note”).
The Term Note accrues interest on the outstanding principal amount at a rate of eighteen percent (18%) per annum. All accrued and unpaid interest on the outstanding principal balance of the Term Note will be due and payable monthly on the first day of each month, beginning on October 1, 2019, and on the Maturity Date. Pursuant to the terms of the Omnibus Amendment and the Term Note, if the Term Note is not repaid by the Maturity Date, the Company will be required to issue 100,000 shares of its common stock to Jackson on a monthly basis until the Term Note is fully repaid (the “Penalty Shares”), subject to certain exceptions to comply with Nasdaq listing standards. The Penalty Shares, if issued, will be issued under 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.
Pursuant to the terms of the Omnibus Amendment, the Company will use the proceeds from the Term Note to pay a portion of certain contingent consideration payments owed by the Company in connection with its prior acquisition of CBS Butler Holdings Limited, to pay transaction fees and expenses related to the transactions discussed herein and for working capital and general corporate purposes. The Omnibus Amendment contains representations and warranties of the parties customary for transactions similar to those contemplated by the Omnibus Amendment.
The foregoing description of the Omnibus Amendment and the Term Note is qualified in its entirety by reference to the full text of the Omnibus Amendment and the Term Note, copies of which are filed as Exhibit 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.
Amendment to Intercreditor Agreement
On August 29, 2019, the Company and certain of its subsidiaries, Jackson and MidCap Funding X Trust (“MidCap”) entered into a Third Amendment to Intercreditor Agreement (the “Intercreditor Amendment”), which amends that certain Intercreditor Agreement, dated September 15, 2017, by and among the Company and certain of its subsidiaries, Jackson and MidCap, to, among other things, permit the issuance of the Term Note.
The foregoing description of the Intercreditor Amendment is qualified in its entirety by reference to the full text of the Intercreditor Amendment, a copy of which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated by reference herein.