Exhibit 10.3

The indebtedness and securities evidenced hereby are subordinated in accordance
with and subject to the terms of that certain Subordination Agreement (as
amended, restated, supplemented or modified from time to time, the
“Subordination Agreement”), dated as of January 25, 2017, by and among Jackson
Investment Group, LLC, a Georgia limited liability company, (“Subordinated
Lender”), Staffing 360 Solutions, Inc., a Nevada corporation (“Parent”), certain
of the Parent’s subsidiaries party thereto and MidCap Funding X Trust, in its
capacity as agent (together with its affiliates and their respective successors
and assigns, “Senior Agent”) for the Senior Lenders (as defined in the
Subordination Agreement), and each holder and transferee of this instrument or
agreement, by its acceptance hereof, irrevocably agrees to be bound by the
provisions of the Subordination Agreement.

Execution Version

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as of
January 25, 2017, by and among STAFFING 360 SOLUTIONS, INC., a Nevada
corporation (the “Issuer”), FARO RECRUITMENT AMERICA, INC., a New York
corporation (“Faro”), MONROE STAFFING SERVICES, LLC, a Delaware limited
liability company (“Monroe”), PEOPLESERVE, INC., a Massachusetts corporation
(“PSI”), PEOPLESERVE PRS, INC., a Massachusetts corporation (“PRS”),  LIGHTHOUSE
PLACEMENT SERVICES, INC., a Massachusetts corporation (“Lighthouse” and together
with Faro, Monroe, PSI and PRS, collectively, the “US Subsidiary Guarantors” and
the US Subsidiary Guarantors, together with the Issuer, collectively, the
“Debtors”), in favor of JACKSON INVESTMENT GROUP, LLC, as the secured party (the
“Secured Party”).

WHEREAS, pursuant to and subject to the terms and conditions of that certain
Note and Warrant Purchase Agreement, dated as of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the “Purchase
Agreement”; capitalized terms used but not otherwise defined herein shall have
the meanings assigned thereto in the Purchase Agreement) by and among the
Debtors, certain other subsidiaries of the Issuer and the Secured Party, the
Issuer will issue and sell a Subordinated Secured Promissory Note, dated as of
the date hereof in the principal amount of $7,400,000 (together with any other
notes issued in substitution or replacement thereof, and as may be amended,
restated, supplemented or otherwise modified from time to time, the “Note”) and
a Warrant to purchase shares of Issuer’s Common Stock (“Warrant”) to the Secured
Party in exchange for $7,400,000 in aggregate purchase price consideration paid
by the Secured Party to the Issuer;

WHEREAS, each of the direct and indirect subsidiaries of the Issuer including,
without limitation, each of the US Subsidiary Guarantors are direct Domestic
Subsidiaries of the Issuer and will derive substantial direct and indirect
benefits from the transactions contemplated by the Purchase Agreement including
the funding of the Advance by the Purchaser to the Issuer and have therefore
guaranteed all of the obligations of the Issuer to the Secured Party under the
Purchase Agreement and the other Note Documents;

WHEREAS, as a condition to the effectiveness of the Purchase Agreement and the
Secured Party’s obligation to purchase the Note and make the extensions of
credit and other financial accommodations specified therein, the Debtors are
required to execute and deliver this Agreement for the benefit of the Secured
Party to secure all of the Secured Obligations (as defined below); and

 

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NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Debtor hereby agrees in favor of Secured Party as follows:

1. Security Interest. (a) Each Debtor hereby grants to Secured Party a present
and continuing security interest in and lien on all of the Collateral described
in Sections l(b) and l(c) below to secure the payment and performance of all of
the Secured Obligations described in Section 2 below.

(b) The term “Collateral” as used herein shall mean and include all now existing
or hereafter arising rights, titles and interests of each Debtor in, to or under
the following types or items of property of such Debtor, whether now owned or
hereafter existing or hereafter created, acquired or arising and wheresoever
located, and all cash and non‑cash proceeds thereof:

(i) all accounts;

(ii) all chattel paper and instruments, including but not limited to the
Intercompany Notes (as such term is defined in the Purchase Agreement);

(iii) all general intangibles, including but not limited to all payment
intangibles, contract rights and all Intellectual Property (as such term is
defined in the Purchase Agreement);

(iv) all letter-of-credit rights;

(v) all inventory, including but not limited to raw materials, work in process
and finished goods;

(vi) all equipment;

(vii) all fixtures;

(viii) all other goods;

(ix) all investment property, Investment Instruments and Intermediated
Securities;

(x) all deposit accounts and securities accounts other than (A) accounts used
exclusively for payroll, payroll taxes or other employee benefit or wage
payments or (B) any fiduciary or trust account held exclusively for the benefit
of an unaffiliated third party;

(xi) all commercial tort claims described on Schedule 2 attached hereto and made
a part hereof;

(xii) all money, cash and cash equivalents; and

(xiii) all Proceeds of any of the above property.

(c) Unless otherwise defined herein, all terms contained in this Agreement shall
have the meanings provided for by the Uniform Commercial Code as in effect in
the State of New York to the extent the same are used or defined therein.  

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2. Obligations Secured.

This Agreement and the security interest and lien granted hereunder to Secured
Party secure, without duplication the following obligations of the Debtors,
whether presently existing or hereafter incurred or arising: (i) all of the
Obligations (as such term is defined in the Purchase Agreement), (ii) all
obligations of the US Subsidiary Guarantors under their guaranty as set forth in
Article 4 of the Purchase Agreement and (iii) all reasonable out-of-pocket costs
and expenses incurred in connection with the enforcement and collection of the
obligations described in the immediately preceding clauses (i) and (ii), and the
enforcement of this Agreement, the Purchase Agreement, the Note and the other
Note Documents (as such term is defined in the Purchase Agreement against any
Debtor, including but not limited to the actual fees, charges and disbursements
of counsel to the Secured Party (all such obligations described in the foregoing
clauses (i), (ii) and (iii), the “Secured Obligations”).

3. Representations and Warranties.  Each Debtor hereby represents and warrants
to Secured Party that:

(a) Each Debtor has full power and authority, and has completed all proceedings
and obtained all approvals and consents necessary, to execute, deliver and
perform this Agreement and the transactions contemplated hereby.

(b) Such execution, delivery, and performance will not violate, or cause a
default under or result in a lien (other than Secured Party’s security interest
and lien hereunder) upon any property of Debtors pursuant to, any applicable
law, rule or regulation or any agreement, indenture, judgment, order, decree, or
instrument binding upon or affecting any Debtor or any of the Collateral.

(c) This Agreement constitutes the legal, valid, and binding obligation of each
Debtor, enforceable against such Debtor in accordance with its terms (except as
such enforceability may be limited by bankruptcy, insolvency, or other similar
laws affecting the enforcement of creditor’s rights or by general equitable
principles), and this Agreement grants to Secured Party a valid and enforceable
security interest in or other lien on the Collateral.

(d) As of the date hereof, each Debtor’s chief executive office, principal place
of business, organization identification number and, if applicable, federal
employer identification number are set forth on Schedule 3(d) attached hereto
and made a part hereof.

(e) Each Debtor has good and marketable title to the Collateral (or, in the case
of any after‑acquired Collateral, such Debtor will have good and marketable
title to the Collateral at the time such Debtor acquires rights in such
Collateral).  Schedule 3(e)(1) attached hereto and made a part hereof sets forth
as of the date hereof the locations of all inventory, goods, equipment and other
tangible assets of each Debtor (other than inventory in transit in connection
with a bona fide sales transaction).  Schedule 3(e)(2) attached hereto and made
a part hereof sets forth as of the date hereof the locations of all deposit
accounts and securities accounts of each Debtor, including the name and address
of the depository bank or securities intermediary, as applicable, and the
account number. Schedule 3(e)(3) attached hereto and made a part hereof sets
forth as of the date hereof all Intellectual Property of each Debtor that is
registered or recorded (or which is the subject of an application for
registration or recordation) in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or in any other country or any political subdivision thereof.  None of
the Debtors own any real property.

(f) The exact legal name and jurisdiction of organization of each Debtor is as
set forth in the preamble to this Agreement.

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(g) Except for the security interest and lien granted hereunder in favor of
Secured Party, no person has (or, in the case of any after‑acquired Collateral,
at the time any Debtor acquires rights therein, will have) any right, title,
claim, or other interest (whether in the nature of a security interest, other
lien or charge, or otherwise) in, against or to any Collateral or any interest
therein or than Permitted Liens.

(h) As of the date of this Agreement, no Debtor has any rights, titles or
interests in any commercial tort claims.  

All of the foregoing representations and warranties shall survive the execution,
delivery and acceptance of this Agreement by Secured Party and Debtors and the
closing of the transactions contemplated herein and in the Purchase Agreement.

4. Covenants and Agreements of Debtor.  Each Debtor hereby covenants and agrees
with the Secured Party as follows:

(a) Except to the extent not required under the Purchase Agreement, each Debtor
shall pay promptly when due all taxes, assessments, charges, encumbrances and
liens now or hereafter imposed upon or affecting any Collateral or Secured
Party’s security interest or other lien hereunder (including all property,
excise, intangible, use, sales, stamp and other such taxes).

(b) Each Debtor shall not sell, encumber, lease, rent or otherwise dispose of or
transfer any Collateral or any right or interest therein except as expressly
permitted by it hereunder or in the Purchase Agreement, and each Debtor shall
keep the Collateral free of all levies, security interests or other liens,
charges or encumbrances except for Permitted Liens or those approved in writing
by Secured Party.

(c) Except to the extent not required under the Purchase Agreement, each Debtor
shall comply in all material respects with all laws, rules and regulations
(including those governing environmental matters) relating to the possession,
operation, storage, maintenance, disposal, and control of the Collateral.

(d) If and to the extent requested by Secured Party on or after the occurrence
and during the continuance of any Event of Default, each Debtor shall account
fully for and promptly deliver to Secured Party, in the form received, all
documents, chattel paper, instruments, and agreements constituting Collateral
hereunder and all proceeds of the Collateral received, all endorsed to Secured
Party or in blank.  Each Debtor agrees that any and all intercompany loans shall
at all times be evidenced by that certain Global Intercompany Promissory Note
amongst the Debtors and dated the date hereof.

(e) Each Debtor shall keep records of the Collateral that are accurate and
complete in all material respects and shall provide Secured Party with such
records and such other reports and information relating to the Collateral as
Secured Party may reasonably request from time to time.

(f) Each Debtor shall keep, procure, execute, and deliver from time to time any
and all, indorsements, notifications, registrations, assignments, financing
statements, fixture filings, certificate of title applications, blank transfer
powers, and other writings deemed necessary by Secured Party to perfect,
maintain, and protect its security interest in or other lien on the Collateral
hereunder and the priority thereof, and each Debtor shall take such other
actions as Secured Party may reasonably request to protect the Secured Party’s
security interest in the Collateral, including, without limitation, using
commercially reasonable efforts to obtain such landlord waivers, mortgagee
waivers and other assurances from third parties regarding Secured Party’s access
to and right to foreclose on or sell the Collateral and right to

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realize the practical benefits of such foreclosure or sale as Secured Party may
request, in each case, at Debtors’ expense.  Unless prohibited by applicable
law, each Debtor hereby authorizes Secured Party to execute and file any
financing statement or fixture filing (or the equivalent thereof in any foreign
country) on each Debtor’s behalf and without such Debtor’s signature, and the
parties further agree that any carbon, photographic, or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.  In addition to and not in limitation of
the foregoing, the Secured Party may, at the Debtors’ expense, apply for any
registration of this Agreement if registration is necessary to: (i) perfect the
security interest granted in favor of the Secured Party; or (ii) to protect the
rights of Secured Party and the priority of the security interest of the Secured
Party in the Collateral.  

(g) Debtors shall reimburse Secured Party upon demand for all reasonable
documented out-of-pocket costs and expenses, including, without limitation,
reasonable documented out-of-pocket attorney’s fees and disbursements, Secured
Party may now or hereafter incur while exercising or enforcing any right, power,
or remedy provided to Secured Party by this Security Agreement or by law, all of
which costs and expenses shall constitute part of the Secured Obligations.

(h) Debtors shall give Secured Party not less than thirty (30) days prior
written notice of any change in any Debtor’s chief executive office or principal
place of business.  

(i) Debtors shall give Secured Party not less than thirty (30) days prior
written notice of any change to a Debtor’s legal name or its jurisdiction of
organization.

(j) Each Debtor shall promptly furnish Secured Party with such information
regarding the Collateral (and any account debtors thereunder) as Secured Party
from time to time may request.

(k) Each Debtor shall keep the Collateral in good condition and repair, ordinary
wear and tear excepted, and shall not cause or permit any material waste of any
of the Collateral.

(l) Debtors shall insure the Collateral as required pursuant to the Purchase
Agreement and shall cause Secured Party to be named as loss payee under all
property coverages and as an additional insured under all liability coverages,
and each Debtor hereby assigns all such policies and all proceeds thereof
(including returned premiums) to Secured Party, to secure the Secured
Obligations, agrees to appropriate insurance certificates and endorsements
evidencing such assignment to Secured Party at its request, and agrees that upon
the occurrence and during the continuance of any Event of Default, Secured Party
may make any claim thereunder, collect and receive payment and indorse any
instrument in payment of loss or return premium or other refund or return, and
apply such amounts received, at Secured Party’s election, to replacement of the
Collateral or to the Secured Obligations.  

(m) Each Debtor agrees that all risk of loss of the Collateral shall at all
times be and remain upon such Debtor irrespective of whether such Collateral is
then in such Debtor’s or Secured Party’s possession.

(n) Each Debtor shall permit Secured Party (or any person designated by Secured
Party) from time to time (but only once per Fiscal Quarter unless an Event of
Default then exists) to inspect the Collateral and to inspect, audit and make
copies of or extracts from all books and records maintained by or on behalf of
each Debtor pertaining to the Collateral (including computer records), all at
such reasonable times and places and upon reasonable advance notice (except no
such notice shall be required if any Default or Event of Default then exists) as
Secured Party may request from time to time.

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(o) The Debtors shall not establish any new deposit accounts or any securities
accounts on or after the date of this Agreement, unless such deposit account or
securities account is subject to a deposit account control agreement or a
securities account control agreement, as applicable, among the applicable
Debtor, the depository bank or securities intermediary, as applicable, and the
Secured Party, in form and substance reasonably satisfactory to the Secured
Party.

(p) No Debtor shall acquire any ownership interest in any real property (other
than a leasehold interest) without the prior written consent of the Secured
Party.

(q) At the end of each Fiscal Quarter during which any Debtor registered or
recorded any new Intellectual Property on or after the date hereof (including
any Intellectual Property which is the subject of an application for
registration or recordation) in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or in any other country or any political subdivision thereof, such
Debtor will execute an Intellectual Property Security Agreement (or, if
applicable, enter into an amendment of an existing Intellectual Property
Security Agreement) with respect to such Intellectual Property, in form and
substance reasonably satisfactory to the Secured Party, and take all other
actions and execute and deliver to Secured Party all other documents as
necessary or appropriate in the reasonably judgment of the Secured Party to
create, preserve, perfect and maintain the security interests granted in favor
of the Secured Party in such Intellectual Property.  Each Debtor shall conduct
its business and affairs without knowing infringement of or interference with
any Intellectual Property of any other Person in any material respect and shall
comply with the terms of any applicable license in respect of such Intellectual
Property, except where the failure to so comply could not reasonably be expected
to have a Material Adverse Effect.

(r) If any Collateral with a value in excess of $100,000 is at any time in the
possession or control of a warehouseman, bailee or any agent or processor of
such Debtor and the Secured Party so requests (i) notify such Person in writing
of the Secured Party’s security interest therein, and (ii) use commercially
reasonable efforts to obtain a Third Party Waiver Agreement.

(s) Each Debtor shall, upon obtaining any Commercial Tort Claims by or in favor
of such Obligor seeking damages in excess of $50,000 in any individual instance
or $100,000 in the aggregate, (i) promptly forward to the Secured Party an
updated Schedule 2 listing each such Commercial Tort Claim seeking damages in in
excess of $50,000 and all Commercial Tort Claims if the damages sought exceed
$100,000 in the aggregate, and (ii) execute and deliver such statements,
documents and notices and do and cause to be done all such things as may be
reasonably required by the Secured Party or required by law to create, preserve,
perfect and maintain the Secured Party’s security interest in such Commercial
Tort Claims set forth on Schedule 2.

(t) In addition and not in limitation of the foregoing covenants, each Debtor
agrees that from time to time, at the expense of such Debtor, that it shall
promptly execute and deliver all further instruments and documents, and take all
further action, that the Secured Party may reasonably request, in order to
create and/or maintain the validity, perfection or priority of and protect any
security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

5. Power of Attorney.  Each Debtor hereby agrees that from time to time, without
presentment, notice or demand, and without affecting or impairing in any way the
rights of Secured Party with respect to the Collateral, the obligations of such
Debtor hereunder or the other Secured Obligations, Secured Party may, but shall
not be obligated to and shall incur no liability to any Debtor or any third
party for failing to, take any action which any Debtor is obligated by this
Agreement to take, and each Debtor also hereby appoints (which appointment is
coupled with an interest and shall be irrevocable so long as this

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Agreement is in effect) Secured Party as its attorney-in-fact with full power
and authority at any time to take any of the following actions during the
existence of any Event of Default hereunder in either Debtors’ or Secured
Party’s name (but Secured Party shall have no obligation to and shall incur no
liability to any Debtor or any third party for failing to exercise any such
power or authority): (a) to collect by legal proceedings or otherwise and
indorse, receive and receipt for all dividends, interest, payments, proceeds,
and other sums and property now or hereafter payable on or on account of any of
the Collateral; (b) to enter into any extension, reorganization, deposit,
merger, consolidation, or other agreement pertaining to, or deposit, surrender,
accept, hold or apply other property in exchange for, any of the Collateral; (c)
to insure, process, and preserve any of the Collateral or to take any other
action which Debtor is obligated by this Agreement to take; (d) subject to
applicable law, to transfer upon foreclosure any of the Collateral to its own or
its nominee’s name; (e) to make any compromise or settlement, and take any
action it deems advisable, with respect to any of the Collateral; (f) to
prepare, file and sign any Debtor’s name to any proof of claim in bankruptcy (or
any similar document) against any account debtor on any of the Collateral; (g)
to indorse any Debtor’s name upon any checks or other proceeds of any Collateral
and deposit same to any account of Secured Party; (h) to indorse any Debtor’s
name on any other document, instrument or other agreement relating to any of the
Collateral; (i) to use the information recorded on or contained in any data
processing equipment, other computer hardware or any software relating to any
Collateral; (j) to make, adjust or enforce claims under any insurance policy
relating to any Collateral; (k) to do all other acts and things necessary, in
Secured Party’s reasonable credit judgment, to fulfill any Debtor’s obligations
under this Agreement; and (l) to pay any and all taxes, assessments, charges,
encumbrances or liens now or hereafter imposed upon or affecting any of the
Collateral.  The foregoing power of attorney may be exercised by Secured Party
in its discretion, in its name or any Debtor’s name, and without prior notice to
or demand upon any Debtor.  Each Debtor agrees to reimburse Secured Party on
demand for any reasonable, documented out-of-pocket sums advanced or expenses
incurred by Secured Party in exercising any of the foregoing rights and powers
together with interest accruing thereon daily at the highest rate the applicable
Debtor has contracted to pay on any of the Secured Obligations.  Debtors’
reimbursement obligations under this Section shall constitute part of the
Secured Obligations secured hereunder.

6. Events of Default.  An event of default under this Agreement shall be deemed
to exist upon the occurrence of any of the following event (each such event
being herein called an “Event of Default”):

(a) The occurrence of any Event of Default (as such term is defined in the
Purchase Agreement); or

(b) If any statement, representation, or warranty of any Debtor made in this
Agreement or in any other document furnished in connection herewith to Secured
Party proves to have been untrue, incorrect, misleading or incomplete in any
material respect as of the date made or deemed made; or

(c) Failure of any Debtor to punctually and fully perform, observe, discharge or
comply with any of the covenants set forth in subsections (a), (b), (d) or (i)
of Section 4; or

(d) Failure of any Debtor to punctually and fully perform, observe, discharge or
comply with any of the other covenants or agreements set forth in this
Agreement, which failure is not cured within thirty (30) days of the giving by
Secured Party to Issuer of written notice of same.

7. Secured Party’s Remedies.  Upon the occurrence and during the continuation of
any one or more of the foregoing Events of Default, Secured Party may, at its
option, and without notice to or demand on Debtors and in addition to all rights
and remedies available to Secured Party under any other agreement, at law, in
equity, or otherwise, do any one or more of the following:

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(a) Secured Party may declare any or all of the Secured Obligations to be
immediately due and payable and foreclose or otherwise enforce Secured Party’s
security interest in or other lien hereunder on any or all of the Collateral in
any manner permitted by law or provided for in this Agreement.

(b) Secured Party may recover from Debtors all documented out-of-pocket costs
and expenses, including, without limitation, documented out-of-pocket attorney’s
fees, incurred or paid by Secured Party in exercising or enforcing any right,
power, or remedy with respect to any or all of the Collateral provided to it by
this Agreement or by applicable law.

(c) Secured Party may require Debtors to assemble any or all of the Collateral
and make it available to Secured Party at such place or places as may be
designated by Secured Party.

(d) Secured Party may enter onto any property where any Collateral is located
and take possession thereof with or without judicial process.

(e) Prior to Secured Party’s disposition of any Collateral, Secured Party may
store, process, complete, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent Secured Party deems appropriate (but
Secured Party shall not be obligated to do so).

(f) Secured Party may vote all or any of the Collateral (and in connection
therewith each Debtor hereby grants to Secured Party a proxy to vote the
Collateral which proxy shall be irrevocable so long as this Agreement is in
effect); provided, however, that unless and until an Event of Default has
occurred hereunder and Secured Party has elected as a result thereof to exercise
its voting right and proxy under this subsection, Debtors shall be entitled to
vote the Collateral but no vote may be cast by any Debtor which would violate or
be inconsistent with any of the terms of this Agreement or any other agreement
between Debtors and Secured Party relating to the Collateral or the Secured
Obligations.

(g) Secured Party may transfer any of the Collateral into its name, notify any
account debtor under or other person obligated on any Collateral to make
payments thereunder directly to Secured Party, and otherwise collect or enforce
payment of any of the Collateral (but Secured Party shall have no obligation to
do any of the foregoing).

(h) Secured Party may sell or otherwise dispose of any of the Collateral at one
or more public or private sales at Debtors’ or Secured Party’s place of business
or any other place or places, including without limitation at any brokers board
or security exchange, in lots or in bulk, for cash or on credit, all as Secured
Party, in its discretion, may deem advisable.  Each Debtor agrees that seven (7)
days’ prior written notice from Secured Party to Issuer of any public sale of
any Collateral or the date after which any private sale of any Collateral will
be held shall constitute reasonable notice thereof and such sale may be held at
such locations as Secured Party may designate in each said notice.  Secured
Party shall have the right to conduct any such sale on any Debtor’s premises,
without any charge therefor, and any such sales may be adjourned from time to
time in accordance with applicable law.  Secured Party may purchase all or any
part of the Collateral at any public sale or, if permitted by law, any private
sale and, in lieu of actual payment of such purchase price, Secured Party may
set‑off the amount of such price against the Secured Obligations.

(i) Upon any sale or other disposition of any of the Collateral pursuant to this
Security Agreement, Secured Party shall have to the maximum extent permitted by
law the right to deliver, assign, and transfer to the purchaser thereof the
Collateral or the portion thereof so sold or disposed of and each purchaser at
any such sale or other disposition (including Secured Party) shall acquire such
Collateral free from any claim or right of whatever kind, including any equity
or right of redemption of any Debtor and

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each Debtor specifically waives (to the maximum extent permitted by law) all
rights of redemption, stay or appraisal with respect to the Collateral which any
Debtor has or may have under any applicable law, statute, or constitution now
existing or hereafter in effect.

8. Application of Proceeds. (a)  All monies and other proceeds received by
Secured Party upon any collection, sale or other disposition of any Collateral,
together with all other monies and other proceeds received by Secured Party
hereunder, shall be applied as follows:

First, to the payment of the reasonable costs and expenses of such sale,
collection or other disposition which may have been incurred by Secured Party,
including without limitation attorney’s fees as provided in Section 7(b) above
and all other reasonable expenses, liabilities and advances made or incurred by
Secured Party in connection therewith;

Second, to the payment of all other Secured Obligations then due in such order
as Secured Party may elect; and

Third, after payment in full of all Secured Obligations then due, any surplus
then remaining from such proceeds shall be paid to Debtors.

(b) Each Debtor shall remain liable to Secured Party for any deficiency owing on
the Secured Obligations after the application of the proceeds of the Collateral
as provided above.

9. Indemnity.  Each Debtor hereby agrees to indemnify Secured Party and hold
Secured Party harmless from and against any claim, liability, loss, damage,
expense, suit, action or proceeding which may now or hereafter be suffered or
incurred by Secured Party as a result of any Debtor’s failure to observe,
perform or discharge any Debtor’s duties or obligations hereunder or Secured
Party’s holding or administering this Agreement or any Collateral unless with
respect to any of the above Secured Party is finally determined to have acted
with gross negligence or to have engaged in willful misconduct.  Without
limiting the generality of the foregoing, this indemnity shall extend to any
claims asserted against Secured Party by any person under any environmental,
occupational safety and hazard, or other similar laws, rules or regulations by
reason of any Debtor’s or any other person’s failure to comply with any such
laws, rules or regulations.  The indemnity obligations of Debtors under this
Section shall constitute a part of the Secured Obligations secured hereunder and
shall survive the termination of this Agreement.

10. Miscellaneous.  (a) Any waiver, forbearance or failure or delay by Secured
Party in exercising any of its rights, powers, or remedies hereunder shall not
preclude the further exercise thereof, and every right, power, or remedy of
Secured Party hereunder shall continue in full force and effect until such
right, power or remedy is specifically waived in a writing executed by Secured
Party.  Each Debtor waives any right to require Secured Party to proceed against
any person or to exhaust any Collateral or to pursue any remedy in Secured
Party’s power.  

(b) This Agreement may be executed in any number of several counterparts, each
of which when so executed shall be deemed to be an original and all of which
counterparts taken together shall constitute one and the same instrument.

(c) This Agreement contains the entire agreement between Secured Party and
Debtors with respect to the Collateral and supersedes all prior agreements,
commitments, understandings, negotiations or correspondence between them with
respect thereto.  If any provision of this Agreement shall be held invalid or
prohibited under applicable law, this Agreement shall be invalid or ineffective
only to the extent of such invalidity or prohibition, without invalidating the
remainder of this Agreement.

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(d) The rights, powers, and remedies of Secured Party under this Agreement shall
be in addition to all other rights, powers, or remedies given to Secured Party
by applicable law or by any other agreement, all of which rights, powers and
remedies shall be cumulative and may be exercise successively or concurrently
without impairing Secured Party’s security interest in or other lien on any of
the Collateral.

(e) All singular terms used herein shall include the plural and vice versa.  If
more than one person executes this Agreement as Debtor, the term “Debtor” as
used herein shall be deemed to refer to each such person individually and all
such persons collectively, and their obligations and agreements hereunder shall
be joint and several.  All pronouns used herein shall be deemed to cover all
genders.  All headings used herein are for convenience of reference only and
shall not constitute a substantive part of this Agreement.

(f) This Agreement may not be amended or modified except by a written instrument
signed by each of the parties hereto.

(g) All notices required or permitted to be given under this Agreement shall be
in conformance with Section 10.1 of the Purchase Agreement, provided that any
notice so given by Secured Party to the Issuer shall be deemed to be given to
all Debtors and each US Subsidiary Guarantor hereby designates the Issuer as its
agent for receipt of any and all such notices.

(h) All rights of Secured Party under this Agreement shall inure to the benefit
of its successors and assigns, and all obligations of each Debtor hereunder
shall bind its heirs, legal representatives, successors, and assigns, provided
that no Debtor may assign any of its rights, duties or obligations under this
Agreement without the prior written consent of the Secured Party.

(i) This Agreement and all security interests and other liens granted or
conveyed hereunder shall remain in full force and effect and shall be
irrevocable until the time at which all of the Secured Obligations (other than
contingent indemnification obligations so long as no claim or demand for
indemnification then exists or has then been made) have been indefeasibly paid
in full, at which time this Agreement and all such security interests and other
liens will terminate, subject to reinstatement as provided below.  Each Debtor
hereby waives any right such Debtor may have upon payment in full of the Secured
Obligations to require Secured Party to terminate its security interest in the
Collateral or any financing statement relating thereto until this Agreement is
terminated in accordance with the foregoing terms. Effective upon the
consummation of a disposition of any Collateral to any Person (other than the
Debtors) to the extent such disposition is expressly permitted under the
Purchase Agreement and the application of proceeds thereof in conformity with
the provisions of this Agreement and the Purchase Agreement, the security
interest granted under the Transactions Documents in such Collateral (but not
any of the proceeds thereof) so disposed of will terminate and the Secured Party
shall, upon Issuer’s request and at Issuer’s sole cost and expense, promptly
deliver such releases as may be appropriate to give public notice of such
release, provided, however, the security interest granted under the Note
Documents in all remaining Collateral will remain in full force and
effect.  Each Debtor agrees that, if any payment made by any Debtor or other
Person and applied to the Secured Obligations is at any time annulled, avoided,
set aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any Collateral
are required to be returned by Secured Party to such Debtor, its estate,
trustee, receiver or any other party, including any Debtor, under any bankruptcy
law, state or federal law, common law or equitable cause, then, to the extent of
such payment or repayment, any lien or other Collateral securing such liability
shall be and remain in full force and effect, as fully as if such payment had
never been made.  If any lien or other Collateral securing such Debtor’s
liability shall been released or terminated by virtue of this Agreement, such
lien, other Collateral or provision shall be reinstated in full force and effect
and such prior release, termination, cancellation or

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surrender shall not diminish, release, discharge, impair or otherwise affect the
obligations of any such Debtor in respect of any lien or other Collateral
securing such obligation or the amount of such payment.  

(j) Time is of the essence of this Agreement.

(k) Nothing in this Agreement shall affect or modify the demand nature of any
portion of the Secured Obligations expressly made payable on demand by the Note
Purchase Agreement or by any other instrument or agreement evidencing or
securing the same and the occurrence of an Event of Default hereunder shall not
be a prerequisite to Secured Party’s right to demand immediate payment thereof.

(l) On and after the effective time of the consummation of the Reincorporation,
all references herein to the “Company” shall be deemed to refer to Staffing 360
Solutions, Inc., a Delaware corporation, as successor by merger to the Company.

 

11.GOVERNING LAW; CONSENT TO SERVICE OF PROCESS; WAIVER OF JURY TRIAL.  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS
OF LAWS). THE TERMS OF SECTIONS 10.6, 10.12 AND 10.13 OF THE PURCHASE AGREEMENTS
WITH RESPECT TO GOVERNING LAW, consent to service of process AND WAIVER OF JURY
TRIAL ARE INCORPORATED HEREIN BY REFERENCE, MUTATIS MUTANDIS, AND THE PARTIES
HERETO AGREE TO SUCH TERMS. EACH DEBTOR HEREBY WAIVES ANY AND ALL RIGHTS IT MAY
HAVE TO NOTICE OR HEARING PRIOR TO SEIZURE BY SECURED PARTY OF ANY OF THE
COLLATERAL, WHETHER BY WRIT OF POSSESSION OR OTHERWISE.  

12. MidCap Intercreditor Agreement; Possession and Control of Collateral.

(a) Notwithstanding anything herein to the contrary, the priority of the liens
granted to the Secured Party pursuant to this Agreement and the exercise of the
rights and remedies of the Secured Party hereunder and under any other Note
Document, are subject to the provisions of the MidCap Intercreditor
Agreement.  In the event of any conflict between the terms of the MidCap
Intercreditor Agreement and this Agreement or any other Note Document, the terms
of the MidCap Intercreditor Agreement shall govern and control.  Notwithstanding
anything to the contrary herein, the Secured Party acknowledges and agrees that
no Debtor shall be required to take or refrain from taking any action at the
request of the Secured Party with respect to the Collateral if such action or
inaction would violate the express terms of the MidCap Intercreditor Agreement.

(b) Subject to (but without limiting) the foregoing, at any time prior to the
discharge of the Senior Loans (as defined in the MidCap Intercreditor
Agreement), any provision hereof requiring Debtors to deliver possession of any
Collateral (as defined in the MidCap Intercreditor Agreement) to the Secured
Party or its representatives, or to cause the Secured Party or its
representatives to control any Collateral (as defined in the MidCap
Intercreditor Agreement), shall be deemed to have been complied with if and for
so long as the Agent (as defined in the MidCap Intercreditor Agreement) shall
have such possession or control for the benefit of the Secured Party and as
bailee or sub-agent of the Secured Party as provided in the MidCap Intercreditor
Agreement

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(c) Furthermore, at all times prior to the discharge of the Senior Loans (as
defined in the MidCap Intercreditor Agreement), the Secured Party is authorized
by the Debtors to effect transfers of possessory Collateral (as defined in the
MidCap Intercreditor Agreement) at any time in its possession (and to execute
any "control" or similar agreements with respect thereto and deliver the same
to) the Agent (as defined in the MidCap Intercreditor Agreement) for purposes of
perfection.

 

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IN WITNESS WHEREOF, Debtors and Secured Party have executed and delivered this
Security Agreement and each Debtor has affixed its seal hereto, all as of the
day and year first above set forth.

DEBTORS:

STAFFING 360 SOLUTIONS, INC.

 

By:     /s/ Brendan Flood

Name: Brendan Flood

Title:   Executive Chairman

FARO RECRUITMENT AMERICA, INC.

 

By:     /s/ Brendan Flood

Name: Brendan Flood

Title:   Executive Chairman

 

 

MONROE STAFFING SERVICES, LLC

 

By:     /s/ Brendan Flood

Name: Brendan Flood

Title:   Executive Chairman

PEOPLESERVE, INC.

 

By:     /s/ Brendan Flood

Name: Brendan Flood

Title:   Executive Chairman

 

 

PEOPLESERVE PRS, INC.

 

By:     /s/ Brendan Flood

Name: Brendan Flood

Title:    Executive Chairman

 

 

 

LIGHTHOUSE PLACEMENT SERVICES, INC.

 

By:     /s/ David Faiman

Name: David Faiman

Title:   Secretary and Treasurer

 

 

 

SECURED PARTY:

JACKSON INVESTMENT GROUP, LLC

 

By:     /s/ Douglas B. Kline

Name: Douglas B. Kline

Title:   Chief Financial Officer