Exhibit 10.1


 





AMENDMENT
NO. 2 TO 


CREDIT
AND SECURITY AGREEMENT 


 


 


THIS
AMENDMENT NO. 2 TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) is made and effective as of the 31st
day of August, 2015, by and among PEOPLESERVE, INC., a Massachusetts corporation, MONROE STAFFING SERVICES, LLC,
a Delaware limited liability company, FARO RECRUITMENT AMERICA, INC., a New York corporation, and LIGHTHOUSE PLACEMENT
SERVICES, LLC, a Massachusetts limited liability company (each of the foregoing Persons and each Subsidiary joining the Credit
Agreement as hereinafter defined as a Borrower, individually, each a “Borrower” and collectively, “Borrowers”),
STAFFING 360 SOLUTIONS, INC., a Nevada corporation (as “Parent”), and MIDCAP FUNDING X TRUST, a
Delaware statutory trust, as successor-by-assignment to MidCap Financial Trust (as Agent for Lenders, “Agent”,
and individually, as a Lender), and the other financial institutions or other entities from time to time parties to the Credit
Agreement referenced below, each as a Lender.


 


RECITALS


 


A.        Borrowers,
Agent and Lenders are party to that certain Credit and Security Agreement dated as of April 8, 2015 (as amended by that certain
Amendment No. 1 and Joinder Agreement to Credit and Security Agreement dated as of July 13, 2015 (“Amendment No. 1”),
as amended hereby and as it may be further amended, modified and restated from time to time, the “Credit Agreement”).
Capitalized terms used but not otherwise defined in this Amendment shall have the meanings set forth in the Credit Agreement.


 


B.        Borrowers,
Agent and Lenders have agreed to amend the Credit Agreement as set forth herein.


 


 


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, Lenders and Borrowers hereby agree as follows:


 


1.        Recitals.
 This Amendment shall constitute a Financing Document and 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.        [Reserved].


 


 


3.        Amendment
to Credit Agreement. 


 


(a)     Article
6 of the Credit Agreement is hereby amended as follows:


 


(i)     Section
6.3 (Minimum Liquidity). Section 6.3 is hereby amended and restated in its entirety to read as follows:


 






     


     


    

 





Minimum
Liquidity. Commencing November 30, 2015 and until such time as all Obligations are paid, satisfied and discharged in full, the
Credit Parties shall, as of the end of any month, have Minimum Liquidity equal to or in excess of $3,000,000; provided, however,
if no Event of Default exists (x) upon repayment in full of the Term Loan, or (y) if the Fixed Charge Ratio, as determined in
Section 6.2, has been greater than 1.20x for three consecutive Defined Periods, Minimum Liquidity shall no longer be tested under
this Section 6.3.


 


(ii)     Section
6.4 (Minimum Adjusted EBITDA). Section 6.4 is hereby amended and restated in its entirety to read as follows:


 


Minimum
Adjusted EBITDA. For the Fiscal Months ending as of May 30, 2015, June 27, 2015, July 25, 2015 and November 28, 2015, the Credit
Parties shall not, as of the end of the applicable Fiscal Month, permit Minimum Adjusted EBITDA for (i) the nine-Fiscal-Month
period ending May 30, 2015 to be less than $560,000, (ii) the ten-Fiscal-Month period ending June 27, 2015 to be less than $625,000,
(iii) the eleven-Fiscal-Month period ending July 25, 2015 to be less than $775,000, and (iv) the Defined Period of T12M ending
November 28, 2015 to be less than $1,200,000.


 


(iii)     Section
6.5 (Evidence of Compliance). Section 6.5 is hereby amended and restated in its entirety to read as follows:


 


Evidence
of Compliance. Commencing November 30, 2015, Credit Parties shall furnish to Agent, together with the financial reporting required
of Credit Parties in Section 4.1 hereof, a Compliance Certificate as evidence of Credit Parties’ compliance with the covenants
in this Article and evidence that no Event of Default specified in this Article has occurred. The Compliance Certificate shall
include, without limitation, (a) a statement and report, on a form approved by Agent, detailing Credit Parties’ calculations,
and (b) if requested by Agent, back-up documentation (including, without limitation, invoices, receipts and other evidence of
costs incurred during such quarter as Agent shall reasonably require) evidencing the propriety of the calculations.


 


(iv)     Section
6.6 (Additional Borrower Financial Covenants). Section 6.6 is hereby amended and restated in its entirety to read as follows:


 


Commencing
November 30, 2015, if in any Fiscal Quarter the aggregate revenues of the Borrowers comprise less than 85% of the aggregate revenues
of the Parent and its Consolidated Subsidiaries, at the request of the Agent, the Borrower and the Agent shall negotiate in good
faith to amend this Agreement to add financial covenants based solely on the Borrowers on a combined basis. Notwithstanding the
foregoing, if the Borrowers and the Agent are not able to so negotiate such financial covenants at least thirty (30) days prior
the end of next applicable Fiscal Quarter and, if the Agent determines to do so, the Agent may in good faith establish such financial
covenants and, following the Borrowers’ receipt of notice from the Agent of such determination, such amendments shall be
effective.


 






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(b)     Section
4.1 (Financial Statements and Other Reports). Section 4.1 is hereby amended and restated in its entirety to read as follows:


 


Financial
Statements and Other Reports. Parent will deliver to Agent: (a) as available, but no later than thirty (30) days after the last
day of each month, a company prepared “flash report” covering Parent’s and its Consolidated Subsidiaries’
consolidated operations during the period, prepared in a manner, scope and detail consistent with the Parent’s flash reports
provided to Agent prior to the Closing Date, certified by a Responsible Officer and in a form acceptable to Agent, (b) as available,
but no later than thirty (30) days after the last day of each Fiscal Quarter of Parent, a company prepared consolidated balance
sheet, cash flow and income statement (including year-to-date results) covering Parent’s and its Consolidated Subsidiaries’
consolidated operations during the period, prepared under GAAP, consistently applied, setting forth in comparative form the corresponding
figures as at the end of the corresponding Fiscal Quarter of the previous Fiscal Year and the projected figures for such period
based upon the projections required hereunder, all in reasonable detail, certified by a Responsible Officer and in a form acceptable
to Agent; (c) together with the flash reports described in (a) above, evidence of payment and satisfaction of all payroll, withholding
and similar taxes due and owing by all Credit Parties with respect to the payroll period(s) occurring during such month; (d) as
soon as available, but no later than one hundred five (105) days after the last day of Parent’s Fiscal Year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements
from an independent certified public accounting firm acceptable to Agent in its reasonable discretion, provided, however, for
the Parent’s 2015 Fiscal Year only, the opinion may contain a going concern qualification that is based on the Parent’s
liquidity consistent with the financial information described in Section 3.5 and with the closing and fundings under the terms
of this Agreement; (e) within five (5) days of delivery or filing thereof, copies of all statements, reports and notices made
available to Parent’s security holders or to any holders of Subordinated Debt and copies of all reports and other filings
made by Borrower with any stock exchange on which any securities of any Borrower are traded and/or the SEC; (f) a prompt written
report of any legal actions pending or threatened against any Credit Party or any of its Subsidiaries that could reasonably be
expected to result in damages or costs to any Credit Party or any of its Subsidiaries of Fifty Thousand Dollars ($50,000) or more;
(g) prompt written notice of an event that materially and adversely affects the value of any Intellectual Property; and (h) budgets,
sales projections, operating plans and other financial information and information, reports or statements regarding the Credit
Parties, their business and the Collateral as Agent may from time to time reasonably request. Commencing November 30, 2015, Parent
will, within thirty (30) days after the last day of each month, deliver to Agent (i) with the first two monthly flash reports
described in clause (a) above and (ii) with quarterly financial statements described in clause (b) above, a duly completed Compliance
Certificate signed by a Responsible Officer setting forth calculations showing compliance with the financial covenants set forth
in this Agreement. Promptly upon their becoming available, Borrowers shall deliver to Agent copies of all Swap Contracts and Material
Contracts. Borrower Representative will, within ten (10) Business Days after the last day of each month, deliver to Agent a duly
completed Borrowing Base Certificate signed by a Responsible Officer, with aged listings of accounts receivable and accounts payable
(by invoice date). Credit Parties shall, every ninety (90) days on a schedule to be designated by Agent, and at such other times
as Agent shall request, deliver to Agent a schedule of Eligible Accounts denoting, for the thirty (30) largest Account Debtors
during such quarter, such Account Debtor’s credit rating(s), if any, as rated by A.M. Best Company, Standard & Poor’s
Corporation, Moody’s Investors Service, Inc., FITCH, Inc. or other applicable rating agent.


 






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4.        Confirmation
of Representations and Warranties; Reaffirmation of Security Interest. 


 


(a)     Each
Borrower hereby confirms that all of the representations and warranties set forth in Article 3 of the Credit Agreement are true
and correct in all material respects with respect to such Borrower as of the date of Amendment No. 1 except to the extent such
representations and warranties specifically relate to an earlier date and covenants to perform its respective obligations under
the Credit Agreement. To induce Agent and Lender to enter into this Agreement, Borrowers and Parent further represent and
warrant that:


 


(i)     no
Default or Event of Default has occurred or is continuing as of the date hereof; and


 


(ii)     the
execution, delivery and performance by Borrowers and Parent of this Amendment are within each of its corporate powers and have
been duly authorized by all necessary corporate action, and this Amendment is the legal, valid and binding obligation of Borrowers
and Parent enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other
similar laws relating to the enforcement of creditors’ rights generally and by equitable principles, and neither the execution,
delivery or performance by Borrowers and Parent of this Agreement (A) violates any Law, or any other rule or decree of any
Governmental Authority, (B) conflicts with or results in the breach or termination of, constitutes a default under or accelerates
any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Borrowers or
Parent is a party or by which Borrowers or Parent or any of its property is bound, except for such conflicts, breaches, terminations,
defaults or accelerations that would not reasonably be expected to have a Material Adverse Effect, (C) results in the creation
or imposition of any Lien upon any of the Collateral, (D) violates or conflicts with the by-laws or other organizational
documents of Borrowers and Parent, or (E) requires the consent, approval or authorization of, or declaration or filing with,
any other Person, except for those already duly obtained.


 


(b)     Each
Borrower and Parent confirms and agrees that all security interests and Liens granted to Agent continue in full force and effect,
and all Collateral remains free and clear of any Liens, other than those granted to Agent and Permitted Liens. Nothing herein
is intended to impair or limit the validity, priority or extent of Agent’s security interests in and Liens on the Collateral.
For the avoidance of any doubt, the Collateral secures repayment of the Obligations and the Affiliated Obligations, and in furtherance
thereof, Borrowers and Parent hereby reaffirm the grant to Agent, for the benefit of itself and Lenders, of a continuing first
priority Lien on and security interest in all of the Collateral as for the payment and performance of the Obligations, and for
the payment and performance of all obligations under the Affiliated Financing Documents.


 






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5.        Enforceability.
 This Amendment constitutes the legal, valid and binding obligation of each Borrower and Parent, and is enforceable against
each Borrower and Parent in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency
or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.


 


6.
        Costs and Fees. In consideration of Agent’s agreement to
enter into this Amendment, Borrowers shall pay to Agent a modification fee equal to Fifty Thousand and No/100 Dollars ($50,000.00),
which shall be due and payable with the next invoice provided to Borrowers by Agent for the month ended December 31, 2015 to be
capitalized to the Revolving Loans on January 1, 2016. Furthermore, Borrowers shall be responsible for the payment of all reasonable
costs and fees of Agent’s counsel incurred in connection with the preparation of this Amendment and any related documents.
If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable
charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or
such Lender for the work performed. Borrowers hereby authorize Agent to deduct all of such fees set forth in this Section 6 from
the proceeds of one or more Revolving Loans made under the Credit Agreement.


 


7.        Conditions
to Effectiveness. This Amendment shall become effective as of the date on which each of the following conditions has been
satisfied (the “Effective Date”):


 


(a)     Borrowers
and Parent shall have delivered to Agent this Amendment, duly executed by an authorized officer of each Credit Party; 


 


(b)     [Reserved];


 


(c)     all
representations and warranties of Borrowers contained herein shall be true and correct in all material respects as of the Effective
Date (and such parties’ delivery of their respective signatures hereto shall be deemed to be its certification thereof);


 


(d)     [Reserved];
and


 


(e)     Agent
shall have received from Borrowers of all of the fees owing pursuant to this Amendment and Agent’s reasonable out-of-pocket
legal fees and expenses.


 


8.        Release.
Each Borrower, voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf
of itself and all of its respective parents, subsidiaries, affiliates, members, managers, predecessors, successors, and assigns,
and each of their respective current and former directors, officers, shareholders, agents, and employees (collectively, “Releasing
Parties”), does hereby fully and completely release, acquit and forever discharge each Indemnitee of and from any and
all actions, causes of action, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands
of any kind whatsoever, at law or in equity, whether matured or unmatured, liquidated or unliquidated, vested or contingent, choate
or inchoate, known or unknown that the Releasing Parties (or any of them) has against the Indemnitees (or any of them), whether
directly or indirectly. Each Borrower acknowledges that the foregoing release is a material inducement to Agent’s and Lender’s
decision to enter into this Amendment and to agree to the modifications contemplated hereunder.


 






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9.        No
Waiver or Novation. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided
in this Amendment, operate as a waiver of any right, power or remedy of Agent, nor constitute a waiver of any provision of the
Credit Agreement, the Financing Documents or any other documents, instruments and agreements executed or delivered in connection
with any of the foregoing. Nothing herein is intended or shall be construed as a waiver of any existing Defaults or Events of
Default under the Credit Agreement or other Financing Documents or any of Agent’s rights and remedies in respect of such
Defaults or Events of Default. This Amendment (together with any other document executed in connection herewith) is not intended
to be, nor shall it be construed as, a novation of the Credit Agreement.


 


10.        Affirmation.
Except as specifically amended pursuant to the terms hereof, the Credit Agreement and all other Financing Documents (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 Borrowers. Each Borrower covenants and agrees to comply with all of the terms, covenants and conditions of
the Credit Agreement (as amended hereby) and the Financing Documents, notwithstanding any prior course of conduct, waivers, releases
or other actions or inactions on Agent’s or any Lender’s part which might otherwise constitute or be construed as
a waiver of or amendment to such terms, covenants and conditions.


 


11.        Miscellaneous.


 


(a)     Reference
to the Effect on the Credit Agreement.  Upon the effectiveness of this Amendment, each reference in the Credit Agreement
to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of similar import
shall mean and be a reference to the Credit Agreement, as amended by this Amendment. Except as specifically amended above, the
Credit Agreement, and all other Financing Documents (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 Borrowers.


 






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(b)     Incorporation
of Credit Agreement Provisions. The provisions contained in Section 11.6 (Indemnification), Section 12.8 (Governing Law; Submission
to Jurisdiction) and Section 12.9 (Waiver of Jury Trial) of the Credit Agreement are incorporated herein by reference to the same
extent as if reproduced herein in their entirety.


 


(c)     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.


 


(d)     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 PAGES]


 







    	 	7	 



     


    

 


 IN
WITNESS WHEREOF, intending to be legally bound, and intending that this document constitute an agreement executed under seal,
the undersigned have executed this Amendment under seal as of the day and year first hereinabove set forth.


 





	AGENT:	MIDCAP
    FUNDING X TRUST
	 	 	 
	 	By:	Apollo
    Capital Management, L.P.,
	 	 	its
    investment manager
	 	 	 
	 	By:	Apollo
    Capital Management GP, LLC,
			its
    general partner 
	 	 	 
	 	 	 
	 	By:	/s/
    Maurice Amsellem	(SEAL)
	 	Name:	Maurice
    Amsellem
	 	Title:	Authorized
    Signatory
	 	 	 
	 	 	 
	LENDER:	MIDCAP
    FUNDING X TRUST 
	 	 	 
	 	By:	Apollo
    Capital Management, L.P.,
	 	 	its
    investment manager
	 	 	 
	 	By:	Apollo
    Capital Management GP, LLC,
	 	 	its
    general partner
	 	 	 
	 	 	 
	 	By:	/s/
    Maurice Amsellem	(SEAL)
	 	Name:	Maurice
    Amsellem
	 	Title:	Authorized
    Signatory







 










    	 	Signature Page (1 of 2) to
Amendment No. 2 to Credit and Security Agreement
	 



     


    

 





	BORROWERS:
	MONROE
                                         STAFFING SERVICES, LLC, a Delaware limited liability company

	 	 
	 	By:	/s/
    Jeff R. Mitchell	(Seal)
	 	Name:	Jeff R. Mitchell
	 	Title: 	Treasurer
	 	 	 
	 	 
	 	PEOPLESERVE,
    INC., a Massachusetts corporation
	 	 
	 	By:	/s/
    Jeff R. Mitchell	(Seal)
	 	Name:	Jeff R. Mitchell
	 	Title: 	Secretary,
    Treasurer and Clerk
	 	 
	 	 
	 	FARO RECRUITMENT
    AMERICA, INC., a New York corporation
	 	 
	 	By:	/s/
    Jeff R. Mitchell	(Seal)
	 	Name:	Jeff R. Mitchell
	 	Title: 	Treasurer
	 	 
	 	 
	 	LIGHTHOUSE
    PLACEMENT SERVICES, LLC., a Massachusetts limited liability company
	 	 
	 	By: Staffing
    360 Solutions, Inc., as Managing Member
	 	 
	 	By:	/s/
    Jeff R. Mitchell	(Seal)
	 	Name:	Jeff R. Mitchell
	 	Title: 	Chief Financial
    Officer
	 	 
	 	 
	PARENT:	STAFFING
    360 SOLUTIONS, INC., a Nevada corporation
	 	 
	 	By:	/s/
    Jeff R. Mitchell	(Seal)
	 	Name:	Jeff R. Mitchell
	 	Title: 	Chief Financial
    Officer


 











    	 	Signature Page (2 of 2) to
Amendment No. 2 to Credit and Security Agreement