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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) AND ARE “RESTRICTED SECURITIES” AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF THE ISSUER.

 

PROMISSORY NOTE

Due July 20, 2013

 

Staffing 360° Solutions, Inc.

 

Original Issue Date: ___________, 2013 $___________

 

FOR VALUE RECEIVED, Staffing 360° Solutions, Inc., a publicly held Nevada
company (OTCQB: STAF) (OTCBB: STAF) (“STAF” or the “Company”) hereby promises to
pay to _________________________ (“Buyer”), or its registered assigns (the
“Holder”), the principal sum of ____________________ ($_______), together with
interest thereon at the rate of 12% per annum, on the terms set forth below.
This Note (this “Note”) was issued pursuant to that certain Note Purchase
Agreement dated the Original Issue Date set forth above by and between the
Company and the Buyer (the “Note Purchase Agreement”). This Note is one of a
series of notes (the “Notes”) of like tenor in the aggregate principal amount of
up to $1,000,000. Unless otherwise defined herein, capitalized terms used in
this Note shall have the meanings ascribed to them in the Note Purchase
Agreement.

 

1.Payments

 

1.1 Interest. Interest shall accrue and be payable on the last day of every
fiscal quarter commencing March 31, 2013 _________ and on the Maturity Date.

 

1.2 Principal. Principal shall be due and payable on July 20, 2013 (the
“Maturity Date”).

 

1.3 Place and Form of Payment. Except as provided in Section 3, the Company
shall pay principal and interest in United States Dollars to the Holder at the
Holder’s address for notices or such other address at the Holder may designate
in writing.

 

1.4 Prepayment. The Company shall not have the right to prepay this Note.

 

 

 

 

2.Definitions

 

For purposes of this Note, the following capitalized terms shall have the
meanings set forth below:

 

“Acceleration Notice” shall have the meaning specified in Section 4.2.

 

“Common Stock Price” shall mean, with respect to the PIPE: (i) if the securities
sold in the PIPE consist solely of Common Stock, the per share price of the
Common Stock; (ii) if the securities sold in the PIPE consist solely Common
Stock and securities exercisable for (e.g. warrants) or convertible into (e.g.
convertible preferred stock or convertible debt) Common Stock, the lowest of the
per share price of the Common Stock and the exercise or conversion price of the
other securities; and (iii) if the securities sold in the PIPE consist solely of
securities exercisable for or convertible into Common Stock, the lowest of the
exercise price or conversion price of such securities. For this purpose, the
exercise or conversion price of any security shall be the exercise or conversion
price on as of the date sold in the PIPE, not as the same may be adjusted
thereafter pursuant to the terms thereof.

 

“Event of Default” shall have the meaning specified in Section 4.1.

 

“Holders” shall mean the Holder and all other holders of the Notes.

 

“Majority Holders” at any date shall mean the Holders of more than 50% of the
principal amount of the Notes outstanding at such date.

 

“Payment Date” shall mean the date on which occurs the later of the closing of
the PIPE and the closing of the Target Acquisition.

 

“Payment Price” shall mean an amount equal to 50% of the Common Stock Price with
respect to the PIPE.

 

“Payment Shares” shall mean that portion of the Shares that the Company delivers
to Holder to pay this Note pursuant to Section 3.

 

“Person” shall mean individual, partnership, corporation, trust, association or
other entity.

 

“PIPE” shall mean the issuance and sale by the Company of equity securities at
or around the time of the closing of the Target Acquisition to raise a portion
of the purchase price for the Target Acquisition.

 

“Pubco” shall mean Staffing 360° Solutions, Inc., a publicly held Nevada OTC
Bulletin Board and OTC Markets company with a stock symbol of STAF.

 

“Shares” shall mean the shares of the Common Stock of the Company.

 

“Target Acquisition” shall mean the acquisition by the Company of one or more
operating companies in the Staffing industry.

 

3.Payment with Payment Shares Prior to the Maturity Date

 

3.1 Payment of Note with Payment Shares. If the Payment Date occurs prior to the
Maturity Date, the Company shall pay this Note by delivering the Payment Shares
to the Holder as provided in this Section 3.

 

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3.2 Payment Date. As promptly as practicable following the Payment Date, the
Company shall give to the Holder written notice (the “Payment Notice”) setting
forth: (a) the Payment Date; (b) the number of Payment Shares and the
calculation of the number of Payment Shares; and (c) a copy of the investment
letter or other information required by the Company to permit the transfer of
the Payment Shares from the Company to the Holder. Interest shall cease to
accrue on this Note as of the Payment Date.

 

3.3 Payment Shares. The number of Payment Shares shall be an amount equal to the
principal amount of this Note plus accrued and unpaid interest on this Note
through the Payment Date, divided by the Payment Price, rounded up to the
nearest whole share. The Company will pay the Notes (principal amount and
accrued but unpaid interest) by delivering to the holders shares of common stock
of the Company at a value equal to 50% of the per share price that shares have
been sold in the PIPE financing.

 

3.4 Delivery of Payment Shares. As promptly as possible after delivery of the
Payment Notice, the Company shall transfer the Payment Shares to the Holder
against delivery to the Company of: (a) this Note, which shall be marked
“Cancelled”; and (b) the investment letter if required by The Company.

 

3.5 Legend on Certificates. If the Note and any accrued interest are converted
prior to an effective registration of the Payment Shares, each certificate
evidencing the Payment Shares will contain a restrictive legend as required
under the Securities Act until such time as the shares are registered. All costs
associated with the registration of the shares shall be borne by the Company and
the Company shall do all that is possible to expedite the registration process.

 

4.Events of Default and Remedies

 

4.1 Events of Default. Each of the following shall constitute an “Event of
Default”:

 

4.1.1 The failure of the Company to pay interest within 30 days following the
delivery to the Company of written notice of default signed by the Majority
based on the failure of the Company to pay interest when due;

 

4.1.2 Unless the Payment Date shall have occurred, the failure of the Company to
pay the principal amount and accrued and unpaid interest on the Maturity Date;

 

4.1.3 The material default by the Company under any of its material covenants or
representations under the Note Purchase Agreement, which default is not cured
within 30 days after receipt of written notice of such default delivered to the
Company by the Majority Holders;

 

4.1.4 A decree, judgment, or order by a court of competent jurisdiction shall
have been entered adjudging the Company as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization of the Company under any
bankruptcy or similar law, and such decree of order shall have continued
undischarged and unstayed for a period of 90 days; or a decree or order of a
court of competent jurisdiction ordering the appointment of a receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency of the Company, or
for the winding up or liquidation of the affairs of the Company, shall have been
entered, and such decree, judgment, or order shall have remained in force
undischarged and unstayed for a period of 60 days;

 

4.1.5 The Company shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy proceeding against it,
or shall file a petition or answer or consent seeking reorganization under any
bankruptcy or similar law or similar statute, or shall consent to the filing of
any such petition, or shall consent to the appointment of a custodian, receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency of it or any of its
assets or property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due.

 

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4.2 Acceleration of Maturity Date. If an Event of Default (other than an Event
of Default specified in Section 4.1.4 or Section 4.1.5) occurs and is
continuing, then, and in every such case, unless the principal of this Note
shall have already become due and payable, the Majority Holders by written
notice to the Company (an “Acceleration Notice”), may declare all of the
principal of the Note, together with accrued interest thereon, to be due and
payable immediately. If an Event of Default specified in Section 4.1.4 or
Section 4.1.5 occurs, all principal of and accrued interest on this Note ipso
facto shall become and be immediately due and payable without any declaration or
other act on the part of the Holder.

 

4.3 Foreclosure on Share. If an Event of Default occurs and is continuing, the
Holders may, by Majority Vote, assert all rights and remedies of a secured party
under the Nevada Uniform Commercial Code or other applicable law, including,
without limitation, the right to take possession of, hold, collect, sell, lease,
deliver, grant options to purchase or otherwise retain, liquidate or dispose of
all or any portion of the Shares. If notice prior to disposition of the Shares
or any portion thereof is necessary under applicable law, written notice mailed
to the Company at least ten days prior to the date of such disposition shall
constitute reasonable notice, but notice given in any other reasonable manner
shall be sufficient. So long as the sale of the Shares is made in a commercially
reasonable manner and in compliance with applicable securities laws, the Holders
may sell such Shares on such terms and to such purchaser(s) as the Secured Party
in its absolute discretion may choose, without assuming any credit risk and
without any obligation to advertise or give notice of any kind other than that
necessary under applicable law. The proceeds of any sale of the Shares shall be
distributed among the Holders as set forth in the Nevada Uniform Commercial
Code. Without precluding any other methods of sale, the sale of the Collateral
or any portion thereof shall have been made in a commercially reasonable manner
if conducted in conformity with reasonable commercial practices of creditors
disposing of similar property. The Company hereby waives and releases to the
fullest extent permitted by law any right or equity of redemption with respect
to the Shares, whether before or after sale hereunder, and all rights, if any,
of marshalling the Shares and any other security for the secured obligations or
otherwise. At any such sale, unless prohibited by applicable law, any Holder may
bid for and purchase all or any part of the Shares so sold free from any such
right or equity of redemption. The Holders shall not be liable for failure to
collect or realize upon any or all of the Collateral or for any delay in so
doing, nor shall it be under any obligation to take any action whatsoever with
regard thereto.

 

4.4 Waiver. No delay or omission by the Holders to exercise any right or remedy
arising upon any Event of Default shall impair the exercise of any such right or
remedy or constitute a waiver of any such Event of Default. Every right and
remedy given by this Section 4 or by law to the Holder may be exercised from
time to time, and as often as may be deemed expedient, by the Holder. No
provision of this Note may be waived unless in writing signed by Holder, and
waiver of any one provision of this Agreement shall not be deemed to be a waiver
of any other provision.

 

5.Transfer and Exchange.

 

When this Note is presented to the Company with a request to register the
transfer of this Note or to exchange such Note for an equal principal amount of
Notes of other authorized denominations (and assuming such transfer is in
compliance with the Note Purchase Agreement), the Company shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that this Note surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company, duly
executed by the Holder thereof or his attorney duly authorized in writing. No
service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection therewith.

 

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6.Replacement Note.

 

If a mutilated Note is surrendered to the Company or if the Holder claims and
submits an affidavit or other evidence, satisfactory to the Company, to the
Company to the effect that this Note has been lost, destroyed or wrongfully
taken, the Company shall issue a replacement Note if the Company’s reasonable
requirements are met, including, if required by the Company, provision by the
Holder of an indemnity bond or other indemnity, sufficient in the judgment of
the Company, to protect the Company from any loss which any of them may suffer
if the Note is replaced.

 

7.Miscellaneous

 

7.1 Successors. The terms and conditions of this Note shall be binding upon and
inure to the benefit of the parties to this Note and their respective
successors, heirs and personal representatives.

 

7.2 Governing Law. This Note shall be construed in accordance with the laws of
the State of Nevada without giving effect to the principles of conflicts of law
thereof.

 

7.3 Captions. The various captions of this Note are for reference only and shall
not be considered or referred to in resolving questions of interpretation of
this Note.

 

7.4 Notices. All notices, requests, demands and other communications
(collectively, “Notices”) given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission,
email transmission of a pdf format data file or by United States first class,
registered or certified mail, postage prepaid, addressed to the Company at its
principal executive offices or the Holder at its address as set forth on the
books and records of the Company. Any Notice, other than a Notice sent by
registered or certified mail, shall be effective when received; a Notice sent by
registered or certified mail, postage prepaid return receipt requested, shall be
effective on the earlier of when received or the third day following deposit in
the United States mails. Any party may from time to time change its address for
further Notices hereunder by giving notice to the other party in the manner
prescribed in this Section.

 

7.5 Amendment. The Notes may be amended with the consent of the Company and the
consent or approval of the Majority Holders, provided that no such amendment
shall reduce the interest rate or extend the Maturity Date without the consent
or approval of the Holder. In the event of such an amendment, at the request of
the Company, the Holder shall tender back to the Company its Note and the
Company shall substitute a replacement Note reflecting such amendment(s).

 

7.6 Severability. Whenever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be or become prohibited or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Note.

 

7.7 Attorneys’ Fees. If any action or proceeding is brought to enforce or
interpret any provision of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys’ fees to be fixed by the court.

 

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7.8 Solely Obligations of Company. The Holder acknowledges and agrees that the
obligations of the Company under this Note are obligations solely of the
Company, and are not obligations of any member, manager or officer of the
Company.

 

IN WITNESS WHEREOF, the Company has caused this Note to be dated, executed and
issued on its behalf by its officers thereto duly authorized.

 

 

  Staffing 360° Solutions, Inc.            By:     Alfonso J. Cervantes,
President      

 

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