Exhibit 10.3

AMENDMENT NO. 1 TO SUBORDINATION AGREEMENT

 

THIS AMENDMENT NO. 1 TO SUBORDINATION AGREEMENT (this “Amendment”) is made as of
this 5th day of April, 2017, by and among JACKSON INVESTMENT GROUP, LLC, a
Georgia limited liability company, as purchaser and holder of the Subordinated
Note (as defined below) and as secured party under the Subordinated Security
Documents (as defined below) (“Subordinated Lender”), STAFFING 360 SOLUTIONS,
INC., a Nevada corporation (“Parent”), certain of the Parent’s subsidiaries
party hereto, and MIDCAP FUNDING X TRUST, a Delaware statutory trust and
successor by assignment from MidCap Financial Trust, as Agent for the financial
institutions or other entities from time to time parties to the Senior Loan
Agreements (as hereinafter defined) (acting in such capacity, “Agent”), and as a
Lender, or such then present holder or holders of the Senior Loan (as
hereinafter defined) as may from time to time exist (the “Lenders,” and
collectively with the Agent, the “Senior Lenders”). Reference in this Agreement
to “Subordinated Lender”, “Subordinated Lenders”, “each Subordinated Lender” or
otherwise with respect to any one or more of the Subordinated Lenders shall mean
each and every person included from time to time in the term “Subordinated
Lender” and any one or more of the Subordinated Lenders, jointly and severally,
unless a specific Subordinated Lender is expressly identified.

 

RECITALS

 

A.PEOPLESERVE, INC., MONROE STAFFING SERVICES, LLC, PEOPLESERVE PRS, INC., FARO
RECRUITMENT AMERICA, INC., LIGHTHOUSE PLACEMENT SERVICES, INC. and any
additional borrower that may hereafter be added to the Senior Loan Agreement (as
hereinafter defined) (collectively, “Borrowers”), Parent, Agent and Senior
Lenders have entered into a Credit and Security Agreement dated as of April 8,
2015 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the “Senior Loan Agreement”) pursuant to which, among other
things, Senior Lenders have made certain loans and financial accommodations to
Borrowers and the other Credit Parties (as hereafter defined).  Parent has
guaranteed the obligations of Borrowers pursuant to that certain Payment
Guaranty dated April 8, 2015 (the “Parent Guaranty”).  All of Borrower’s
obligations to Senior Lenders under the Senior Loan Agreement and the other
Senior Loan Documents (as hereinafter defined) are secured by liens on and
security interests in substantially all of the now existing and hereafter
acquired personal property of Borrowers and Parent.

 

B.Subordinated Lender has extended to Parent, or may in the future extend to
Parent, loans and other financial accommodations or Parent may become obligated
to the Subordinated Lender for the payment of money.

 

C. Parent, certain of the Parent’s subsidiaries party hereto, Subordinated
Lender and Agent have entered into that certain Subordination Agreement dated
January 25, 2017 (as amended hereby and as it may be further amended, modified
and restated from time to time, the “Subordination Agreement”). All other
capitalized terms used but not defined herein shall have the meanings set forth
in the Subordination Agreement.

 

D. It is proposed that Parent shall enter into a 6% Subordinated Secured Note
dated the date hereof in an aggregate principal sum of $1,650,000 to be issued
by Parent in favor of Subordinated Lender in the form attached hereto as Exhibit
A (the “April 2017 Subordinated Note”) pursuant to the Subordinated Note
Agreement.

 

E.As an inducement to and as one of the conditions precedent to the agreement of
Agent and Senior Lenders to permit the April 2017 Subordinated Note under the
Senior Loan Agreement, Agent and Senior Lenders have required the execution and
delivery of this Amendment by Subordinated Lender,

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Parent and certain of the Parent’s subsidiaries party hereto.

 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, the terms and conditions set
forth in this Amendment, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Agent, Subordinated Lender,
Parent and certain of the Parent’s subsidiaries party hereto hereby agree as
follows:

 

1.Recitals.   The Recitals set forth above shall be construed as part of this
Amendment as if set forth fully in the body of this Amendment.

 

2.Amendment to Subordination Agreement.  

 

(a)Section 1 (Definitions) of the Subordination Agreement is hereby amended to
add the following defined term in its alphabetical order as follows:

 

“First Amendment Closing Date” shall mean April 5, 2017.

 

(b)The defined terms “Permitted Subordinated Debt Payments” and “Subordinated
Note” in Section 1 (Definitions) of the Subordination Agreement are hereby
amended and restated, respectively, in their entirety as follows:

 

“Permitted Subordinated Debt Payments” means payments of regularly scheduled
payments of principal and interest on the Subordinated Debt, in each case due
and payable on a non-accelerated basis in accordance with the terms of the
Subordinated Debt Documents in effect as of the First Amendment Closing Date.

“Subordinated Note” shall mean, collectively, (i) that certain 6% Subordinated
Secured Note dated as of January 25, 2017, in the principal amount of
$7,400,000, issued by Parent to Subordinated Lender pursuant to the Subordinated
Note Agreement, as amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement, and (ii) that
certain 6% Subordinated Secured Note dated as of April 5, 2017, in the principal
amount of $1,650,000, issued by Parent to Subordinated Lender pursuant to the
Subordinated Note Agreement, in each case as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms of this
Agreement together with any and all promissory notes at any time issued in
substitution, exchange or replacement thereof.

4.Limited Consent. At the request of and as an accommodation to the Subordinated
Lender, pursuant to the terms of Section 3.2 of the Subordination Agreement,
Agent hereby consents to (i) the April 2017 Subordinated Note and (ii) the
Omnibus Amendment and Reaffirmation Agreement in the form attached hereto as
Exhibit B, each as an amendment, modification or supplement to the terms of the
Subordinated Debt.  The limited consent set forth in this Section 4 is effective
solely for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (a) except as expressly provided herein, be a
consent to any amendment, waiver or modification of any term or condition of the
Subordination Agreement or of any other Senior Loan Document; (b) prejudice any
right that Agent or the Lenders have or may have in the future under or in
connection with the Senior Loan Agreement or any other Senior Loan Document; (c)
waive any Event of Default that exists as of the date hereof; or (d) establish a
custom or course of dealing among any of the Subordinated Lender on the one
hand, or Agent or any Lender, on the other hand.

 

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5.Affirmation.  Except as specifically amended pursuant to the terms hereof, the
Subordination Agreement (and all covenants, terms, conditions and agreements
therein) shall remain in full force and effect, and are hereby ratified and
confirmed in all respects by the parties hereto.

 

6.Miscellaneous.

 

(a)Headings.  Section headings in this Amendment are included for convenience of
reference only and shall not constitute a part of this Amendment for any other
purpose.

 

(b)Counterparts.  This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.  Signatures by facsimile or by
electronic mail delivery of an electronic version (e.g., .pdf or .tif file) of
an executed signature page shall be treated as delivery of an original and shall
bind the parties hereto. This Amendment constitutes the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.

 

   

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, intending to be legally bound, and intending that this
Agreement constitute an instrument executed and delivered under seal, the
parties have caused this Amendment to be executed under seal as of the date
first written above.

 

 

AGENT:

MIDCAP FUNDING X TRUST,

 

a Delaware statutory trust

 

 

 

By:          Apollo Capital Management, L.P.,

 

                its investment manager

 

 

 

By:          Apollo Capital Management GP, LLC,

 

 

its general partner

 

 

 

 

 

By:

/s/ Michael Levin

 

Name:  Michael Levin

 

Title:    Authorized Signatory

 

 

Agent’s Signature Page to Amendment No. 1 to Subordination Agreement

 

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SUBORDINATED LENDER:

 

 

JACKSON INVESTMENT GROUP, LLC

 

 

 

 

 

By:

/s/ Richard L. Jackson

(SEAL)

 

Name: Richard L. Jackson

 

Title:  Chief Executive Officer

 

 

 

Subordinated Lender’s Signature Page to Amendment No. 1 to Subordination
Agreement

 

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PARENT:

 

STAFFING 360 SOLUTIONS, INC.

 

 

 

 

 

By:

/s/ Brendan Flood

(Seal)

 

Name: Brendan Flood

 

Title:  Executive Chairman

 

SUBSIDIARIES:

 

MONROE STAFFING SERVICES, LLC

 

 

 

 

 

By:

/s/ Brendan Flood

(Seal)

 

Name: Brendan Flood

 

Title:  Executive Chairman

 

 

PEOPLESERVE, INC.

 

 

 

 

 

By:

/s/ Brendan Flood

(Seal)

 

Name: Brendan Flood

 

Title:  Executive Chairman

 

 

FARO RECRUITMENT AMERICA, INC.

 

 

 

 

 

By:

/s/ Brendan Flood

(Seal)

 

Name: Brendan Flood

 

Title:  Executive Chairman

 

 

LIGHTHOUSE PLACEMENT SERVICES, INC.

 

 

 

 

 

 

By:

/s/ David Faiman

(Seal)

 

Name: David Faiman

 

Title:  Secretary and Treasurer

 

 

PEOPLESERVE PRS, INC.

 

 

 

 

 

By:

/s/ Brendan Flood

(Seal)

 

Name: Brendan Flood

 

Title:  Executive Chairman