Document:

staf-ex103_7.htm

Exhibit 10.3

US2008 13324827 3  

 

 

 
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
 

Dated as of September 15, 2017

by and among

 STAFFING 360 SOLUTIONS, INC.,
 as the Company,

and

FARO RECRUITMENT AMERICA, INC.,

MONROE STAFFING SERVICES, LLC,

PEOPLESERVE, INC.,

PEOPLESERVE PRS, INC.,

LIGHTHOUSE PLACEMENT SERVICES, INC.,

STAFFING 360 GEORGIA, LLC, and 

the other SUBSIDIARY GUARANTORS from time to time party hereto,

 
as the Subsidiary Guarantors, 

and

Jackson Investment Group, LLC,
as the Purchaser

 

 

TABLE OF CONTENTS

	
Article 1.
	
DEFINITIONS2
	
 

	
 
	
Section 1.1
	
Definitions2
	
 

	
Article 2.
	
ISSUANCE AND PURCHASE OF SENIOR NOTE20
	
 

	
 
	
Section 2.1
	
Purchase and Sale of Senior Note20
	
 

	
 
	
Section 2.2
	
Interest on the Senior Note20
	
 

	
 
	
Section 2.3
	
Maturity of Senior Note; Voluntary Prepayments; Funding Losses20
	
 

	
Article 3.
	
OTHER PROVISIONS RELATING TO THE SENIOR NOTE21
	
 

	
 
	
Section 3.1
	
Making of Payments21
	
 

	
 
	
Section 3.2
	
Increased Costs22
	
 

	
 
	
Section 3.3
	
Tax Gross Up and Indemnity22
	
 

	
 
	
Section 3.4
	
Default Rate of Interest22
	
 

	
 
	
Section 3.5
	
Calculation of Interest23
	
 

	
 
	
Section 3.6
	
Usury23
	
 

	
Article 4.
	
GUARANTY23
	
 

	
 
	
Section 4.1
	
The Guaranty23
	
 

	
 
	
Section 4.2
	
Obligations Unconditional23
	
 

	
 
	
Section 4.3
	
Reinstatement24
	
 

	
 
	
Section 4.4
	
Certain Additional Waivers24
	
 

	
 
	
Section 4.5
	
Remedies24
	
 

	
 
	
Section 4.6
	
Guarantee of Payment; Continuing Guarantee25
	
 

	
 
	
Section 4.7
	
Limitations on Guaranty25
	
 

	
 
	
Section 4.8
	
Contribution25
	
 

	
Article 5.
	
CONDITIONS PRECEDENT TO EFFECTIVENESS AND CLOSING26
	
 

	
 
	
Section 5.1
	
26
	
 

	
Article 6.
	
REPRESENTATIONS AND WARRANTIES30
	
 

	
 
	
Section 6.1
	
Representations and Warranties Generally30
	
 

	
 
	
Section 6.2
	
Corporate Existence; Subsidiaries30
	
 

	
 
	
Section 6.3
	
Organization and Governmental Authorization; No Contravention30
	
 

	
 
	
Section 6.4
	
Binding Effect30
	
 

	
 
	
Section 6.5
	
Capitalization31
	
 

	
 
	
Section 6.6
	
Financial Information31
	
 

	
 
	
Section 6.7
	
Litigation31
	
 

	
 
	
Section 6.8
	
Ownership of Property31
	
 

	
 
	
Section 6.9
	
No Default31
	
 

	
 
	
Section 6.10
	
Labor Matters31
	
 

	
 
	
Section 6.11
	
Regulated Entities32
	
 

	
 
	
Section 6.12
	
[Reserved]32
	
 

	
 
	
Section 6.13
	
Compliance With Laws; Anti-Terrorism Laws32
	
 

	
 
	
Section 6.14
	
Taxes32
	
 

	
 
	
Section 6.15
	
Compliance with ERISA32
	
 

	
 
	
Section 6.16
	
Consummation of Transaction Documents; Brokers33
	
 

	
 
	
Section 6.17
	
[Reserved]33
	
 

 

	
 
	
Section 6.18
	
Material Contracts33
	
 

	
 
	
Section 6.19
	
[Reserved]34
	
 

	
 
	
Section 6.20
	
Intellectual Property34
	
 

	
 
	
Section 6.21
	
Solvency34
	
 

	
 
	
Section 6.22
	
Full Disclosure34
	
 

	
 
	
Section 6.23
	
Interest Rate35
	
 

	
 
	
Section 6.24
	
Subsidiaries35
	
 

	
 
	
Section 6.25
	
[Reserved]35
	
 

	
 
	
Section 6.26
	
Approvals35
	
 

	
 
	
Section 6.27
	
Insurance35
	
 

	
 
	
Section 6.28
	
Continuing Business of Company35
	
 

	
 
	
Section 6.29
	
[Reserved]35
	
 

	
 
	
Section 6.30
	
No General Solicitation35
	
 

	
 
	
Section 6.31
	
Representations and Warranties of the Purchaser36
	
 

	
Article 7.
	
AFFIRMATIVE COVENANTS37
	
 

	
 
	
Section 7.1
	
Financial Statements and Other Reports37
	
 

	
 
	
Section 7.2
	
Payment and Performance of Obligations38
	
 

	
 
	
Section 7.3
	
Maintenance of Existence39
	
 

	
 
	
Section 7.4
	
Maintenance of Property; Insurance39
	
 

	
 
	
Section 7.5
	
Compliance with Laws and Material Contracts39
	
 

	
 
	
Section 7.6
	
Inspection of Property, Books and Records39
	
 

	
 
	
Section 7.7
	
Use of Proceeds40
	
 

	
 
	
Section 7.8
	
[Reserved]40
	
 

	
 
	
Section 7.9
	
Notices of Litigation and Defaults40
	
 

	
 
	
Section 7.10
	
Further Assurances; Additional Guarantors40
	
 

	
 
	
Section 7.11
	
[Reserved]41
	
 

	
 
	
Section 7.12
	
Maintenance of Management41
	
 

	
 
	
Section 7.13
	
[Reserved]41
	
 

	
 
	
Section 7.14
	
Registration Rights; Indemnification41
	
 

	
 
	
Section 7.15
	
Closing Commitment Fee43
	
 

	
 
	
Section 7.16
	
Post-Closing Covenants; Deposit Account Arrangements43
	
 

	
Article 8.
	
NEGATIVE COVENANTS AND FINANCIAL COVeNANTS44
	
 

	
 
	
Section 8.1
	
Debt; Contingent Obligations44
	
 

	
 
	
Section 8.2
	
Liens44
	
 

	
 
	
Section 8.3
	
Restricted Distributions44
	
 

	
 
	
Section 8.4
	
Restrictive Agreements44
	
 

	
 
	
Section 8.5
	
Payments and Modifications of Subordinated Debt44
	
 

	
 
	
Section 8.6
	
Consolidations, Mergers and Sales of Assets; Change in Control45
	
 

	
 
	
Section 8.7
	
Purchase of Assets, Investments45
	
 

	
 
	
Section 8.8
	
Transactions with Affiliates45
	
 

	
 
	
Section 8.9
	
Modification of Organizational Documents45
	
 

	
 
	
Section 8.10
	
Modification of Certain Agreements45
	
 

	
 
	
Section 8.11
	
Conduct of Business46
	
 

	
 
	
Section 8.12
	
Lease Payments46
	
 

	
 
	
Section 8.13
	
Limitation on Sale and Leaseback Transactions46
	
 

	
 
	
Section 8.14
	
Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts46
	
 

	
 
	
Section 8.15
	
Compliance with Anti-Terrorism Laws46
	
 

	
 
	
Section 8.16
	
Sale or Discount of Receivables47
	
 

	
 
	
Section 8.17
	
Financial Covenants47
	
 

	
 
	
Section 8.18
	
Excluded Subsidiaries49
	
 

	
Article 9.
	
EVENTS OF DEFAULT49
	
 

	
 
	
Section 9.1
	
Events of Default49
	
 

	
 
	
Section 9.2
	
Remedies on Default51
	
 

	
Article 10.
	
MISCELLANEOUS52
	
 

	
 
	
Section 10.1
	
Notices52
	
 

	
 
	
Section 10.2
	
No Waiver53
	
 

	
 
	
Section 10.3
	
Expenses53
	
 

	
 
	
Section 10.4
	
Amendments, Etc53
	
 

	
 
	
Section 10.5
	
Successors and Assigns54
	
 

	
 
	
Section 10.6
	
Governing Law54
	
 

	
 
	
Section 10.7
	
Survival of Representations and Warranties54
	
 

	
 
	
Section 10.8
	
Severability54
	
 

	
 
	
Section 10.9
	
Counterparts54
	
 

	
 
	
Section 10.10
	
Set-Off54
	
 

	
 
	
Section 10.11
	
Termination of Agreement54
	
 

	
 
	
Section 10.12
	
Consent to Service of Process54
	
 

	
 
	
Section 10.13
	
Waiver of Jury Trial55
	
 

	
 
	
Section 10.14
	
Entire Agreement55
	
 

	
 
	
Section 10.15
	
Publicity55
	
 

	
 
	
Section 10.16
	
Further Assurances55
	
 

	
 
	
Section 10.17
	
Subordination of Intercompany Indebtedness and Management Fees55
	
 

	
 
	
Section 10.18
	
Effect of Amendment and Restatement56
	
 

 

Exhibits and Schedules

Exhibit A-Form of Senior Note

Exhibit B-Form of Compliance Certificate

Exhibit C -Financial Statements and Projections

Exhibit D-Form of Joinder Agreement

 

Schedule 6.2 -Subsidiaries

Schedule 6.3 -No Violation

Schedule 6.5 -Capitalization

Schedule 6.7 -Litigation

Schedule 6.16-Taxes

Schedule 6.16-Brokers Fees

Schedule 6.18-Material Contracts

Schedule 6.20-Intellectual Property

Schedule 6.24-Joint Ventures/Minority Equity Interests

Schedule 7.9-Disputes

Schedule 8.1-Existing Debt and Contingent Obligations 

Schedule 8.2 -Permitted Liens

Schedule 8.7 -Permitted Investments

Schedule 8.8 -Transactions with Affiliates 

Schedule 8.11-Conduct of Business

Schedule 8.14 -Deposit Accounts/Securities Accounts

 

 

 

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of September 15, 2017, by and among STAFFING 360 SOLUTIONS, INC., a Delaware corporation (the “Company”), as issuer of the Senior Note (as defined below), the Subsidiaries of the Company listed on the signature pages hereto and any Subsidiary of the Company added hereto from time to time, as Subsidiary Guarantors, and Jackson Investment Group, LLC, as the Purchaser.

WHEREAS, the Company, Faro Recruitment America, Inc., a New York corporation (“Faro”), Monroe Staffing Services, LLC, a Delaware limited liability company (“Monroe”), Staffing 360 Solutions Limited, a company organized under the laws of England and Wales (“S360 Ltd”), Longbridge Recruitment 360 Limited, a company organized under the laws of England and Wales (“Longbridge”), The JM Group (IT Recruitment) Limited, a company organized under the laws of England and Wales (“JM”), PeopleServe, Inc., a Massachusetts corporation (“PSI”), PeopleServe PRS, Inc., a Massachusetts corporation (“PRS”), Lighthouse Placement Services, Inc., a Massachusetts corporation (“Lighthouse” and together with each of Faro, Monroe, S360 Ltd., Longbridge, JM, PSI and PRS, collectively, the “Existing Subsidiary Guarantors”), and the Purchaser entered into that certain Note and Warrant Purchase Agreement dated as of January 25, 2017, as amended by that certain (a) Omnibus Amendment and Reaffirmation Agreement dated as of April 5, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser, (b) Second Omnibus Amendment and Reaffirmation Agreement dated as of August 2, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser, and (c) Third Omnibus Amendment and Reaffirmation Agreement dated as of September 1, 2017 among the Company, the Existing Subsidiary Guarantors and the Purchaser (as so amended, the “Existing Note Purchase Agreement”), pursuant to which, among other things, the Purchaser made (i) a certain subordinated debt investment of $7,400,000 in the Company in the form of a purchase of that certain  Subordinated Secured Note dated January 25, 2017, in the principal amount of $7,400,000 (the “Original Subordinated Note”) and the Existing Warrant (as defined herein), (ii) a certain subordinated debt investment of $1,650,000 in the form of a purchase of that certain Subordinated Secured Promissory Note, dated April 5, 2017, in the principal amount of $1,650,000 (the “Second Subordinated Note”), (iii) a certain subordinated debt investment of $1,600,000 in the form of a purchase of that certain 10% Subordinated Secured Promissory Note, dated August 2, 2017, in the principal amount of $1,600,000 (the “Third Subordinated Note”), and (iv) a certain subordinated debt investment of $515,000 in the form of a purchase of that certain 12% Subordinated Secured Promissory Note, dated September 1, 2017, in the principal amount of $515,000 (the “Fourth Subordinated Note”; together with the Original Subordinated Note, the Second Subordinated Note and the Third Subordinated Note referred to herein collectively as the “Existing Subordinated Notes”); and

WHEREAS, the obligations of the Company to Purchaser under the Existing Notes and the Note Documents (as defined in the Existing Note Purchase Agreement) are guaranteed by the Existing Guarantors pursuant to the provisions of Article 4 of the Existing Note Purchase Agreement (such guarantee being referred to herein as the “Existing Guarantee”);

WHEREAS, the obligations of the Company to Purchaser under the Existing Notes and the Note Documents (as defined in the Existing Note Purchase Agreement), and the obligations of the Existing Guarantors (other than S360 Ltd, Longbridge and JM) to Purchaser under the Existing Guarantee, are secured by that certain (a) Security Agreement, dated as of January 25, 2017 (as amended prior to the date hereof, the “Existing Security Agreement”), by and among the Company, the Existing Guarantors (other than S360 Ltd, Longbridge and JM) and the Purchaser, and (b) that certain Pledge Agreement, dated as of January 25, 2017 (as amended prior to the date hereof, the “Existing Pledge Agreement”), by and among the Company, the Existing Guarantors (other than S360 Ltd, Longbridge and JM) and the Purchaser;

 

WHEREAS, the Company has requested that the Purchaser make a senior debt investment of Forty Million Dollars ($40,000,000) in the Company in the form of a purchase of a Senior Secured Note in the principal amount of Forty Million Dollars ($40,000,000), the proceeds of which will be used by the Company to repay the Existing Subordinated Notes and certain other indebtedness of the Company, to fund a portion of the purchase price consideration for the Subject Acquisitions (as defined herein) and for working capital and other purposes of the Company as specified in this Agreement; 

WHEREAS, in connection with the making of such senior debt investment, the parties desire to amend and restate the Existing Note Purchase Agreement (including, without limitation, the Existing Guarantee) in its entirety as more fully described below, and to amend and restate the Existing Security Agreement and the Existing Pledge Agreement; and 

WHEREAS, the parties hereto agree that the Existing Note Purchase Agreement (including, without limitation, the Existing Guarantee) shall be and hereby is amended and restated in its entirety as set forth herein.

 

NOW, THEREFORE, for and in consideration of the mutual premises, covenants and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

Article 1.

DEFINITIONS

Section 1.1Definitions.  In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ABN Amro Agreements for the Purchase of Debt” means, collectively, (a) that certain Agreement for the Purchase of Debts, having a commencement date of January 8, 2013, between ABN Amro Commercial Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment (Technology Solutions) Limited), (b) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment (Sales & Marketing) Limited), (c) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a Longbridge Recruitment Technical Limited), and (d) that certain Agreement for the Purchase of Debts, having a commencement date of July 26, 2011, between Venture Finance PLC and Longbridge Recruitment 360 Limited (f/k/a ASA Law Limited). 

“ABN Amro Term Loan Agreement” means that certain Loan Agreement dated as of November 4, 2015 by and between The JM Group (IT Recruitment) Limited and ABN AMRO Commercial Finance PLC, in each case, as amended, restated, supplemented or otherwise modified from time to time.

“Advance” has the meaning set forth in Section 2.1.

“Affiliate” shall mean, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided that the holding by the Purchaser of the Existing Warrant (or the Equity Interests into which such Existing Warrant is converted) or the Commitment Fee Shares shall not be deemed to constitute the Purchaser as an Affiliate of the Company hereunder. The term “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies 

of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto. 

“Agreement” means this Amended and Restated Note Purchase Agreement, as the same may be amended, restated, supplemented or modified from time to time in accordance with the terms hereof.

“Anti-Corruption Laws” means all laws, rules and regulations of any jurisdiction applicable to any of the Obligors or their respective Subsidiaries from time to time concerning or relating to bribery or corruption, including without limitation, the United States Foreign Corrupt Practices Act of 1977, as amended.

“Anti-Terrorism Laws” means any laws with respect to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing effective September 24, 2001 (the “Executive Order”) and the PATRIOT Act.

“Applicable Law” means all applicable provisions of constitutions, statutes, rules, regulations and orders of all governmental bodies and all orders and decrees of all courts, tribunals and arbitrators including, without limitation, all Environmental Laws.

“Asset Disposition” means any sale, lease, license, transfer, assignment or other consensual disposition by any Obligor or any Subsidiary thereof of any asset.

 “Bankruptcy Code” means The Bankruptcy Code of 1978, as amended and in effect from time to time (11 U.S.C. § 101 et seq.). Section references to the Bankruptcy Code are to the Bankruptcy Code, as in effect at the date of this Agreement, and any subsequent provisions of the Bankruptcy Code, amendatory thereof, supplemental thereto or substituted therefor.

“Blocked Person” means any Person that is a blocked person described in Section 1 of the Executive Order.

“Business Day” means any day on which commercial banks located in New York, New York are required or permitted by law to be open for the purpose of conducting a commercial banking business other than a Saturday or Sunday.

“Butler Acquisition” means the acquisition by Longbridge of all of the outstanding capital stock of Butler Holdings, pursuant to the Butler Acquisition Agreement, whereupon the Butler Entities will become wholly-owned Subsidiaries of Longbridge.

“Butler Acquisition Agreement” means that certain Agreement dated as of September 2017, among Longbridge, the Company, David Rhys Leyshon, David John Kennedy, Alison Leyshon, John Docherty, Simon Bartington and the other Persons party thereto as “Sellers”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

“Butler Acquisition Documents” means, collectively, the Butler Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Company and/or Longbridge to the any of the Sellers (as such term is defined in the Butler Acquisition Agreement) in connection with the Butler Acquisition.

“Butler Entities” means, collectively, Butler Holdings and CBS Butler.

“Butler Holdings” means CBS Butler Holdings Limited, a company organized under the laws of England and Wales.

“CBS Butler” means CBS Butler Limited, a company organized under the laws of England and Wales, a wholly-owned Subsidiary of Butler Holdings.

“Change in Control” means any of the following events: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of or control over, voting stock of the Company (or other securities convertible into such voting stock) representing 40% or more of the combined voting power of all voting stock of the Company or (b) the Company ceases to own, directly or indirectly, 100% of the outstanding capital stock of S360 Ltd., Longbridge, JM, any of the Butler Entities or any of the Guarantors, except in connection with any merger or consolidation in respect of any such Person expressly permitted under Section 8.6; or (c) the occurrence of any “Change of Control”, “Change in Control”, or terms of similar import under any document or instrument governing or relating to Debt of or equity in such Person. As used herein, “beneficial ownership” shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934.

“Closing” shall mean the closing of the purchase and sale of the Senior Note and the payment of the Purchase Price therefor, as contemplated by this Agreement and the other Transaction Documents.

 “Closing Date” shall mean September 15, 2017, or, if later, the date upon which all conditions in Section 5.1 have been satisfied (or waived in writing by Purchaser in its sole discretion) and the Closing has occurred.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

“Collateral” shall mean all of the property and assets of the Obligors now or hereafter securing the Obligations pursuant to the Security Agreement, the Pledge Agreement, the Intellectual Property Security Agreements and the other Security Documents. 

“Commitment Fee Shares” has the meaning set forth in Section 7.15.

“Common Stock” means the Company’s common stock, par value $0.00001 per share.

“Company” has the meaning set forth in the introductory paragraph hereof and shall include the Company’s successors and permitted assigns.  

“Compliance Certificate” means a certificate, duly executed by a Responsible Officer of the Company, appropriately completed and substantially in the form of Exhibit B hereto.

 “Consolidated Subsidiary” means, at any date, any Subsidiary the accounts of which would be consolidated with those of the Purchaser (or any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.

“Contingent Obligation” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of another Person (a “Third Party Obligation”) if the purpose or intent 

of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so Guaranteed or otherwise supported.

“Controlled Group” means all members of any group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Obligor, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

“Debt” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business, (d) all capital leases of such Person, (e) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (f) all equity securities of such Person subject to repurchase or redemption other than at the sole option of such Person, (g) all obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (h) profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts, (i) all Debt of others Guaranteed by such Person, (j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan liabilities of such Person, (k) obligations arising under non-compete agreements, and (l) all obligations arising under bonus, deferred compensation, incentive compensation or similar arrangements in each case under this clause (l) other than those arising in the Ordinary Course of Business. Without duplication of any of the foregoing, Debt of Obligors as of any date of determination shall include the outstanding principal amount of the Senior Note.

“Default” shall mean any event that, with notice or lapse of time or both, would constitute an Event of Default. 

“Deposit Account Control Agreement” shall mean any deposit account control agreement entered into on or after the Closing Date by the applicable depository bank, the applicable Obligor, and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time. 

“Designated Person” means (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (e) a Person that is named as a “specially designated national and blocked person” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list.

“Dollar” and the sign “$” shall mean the lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of any state of the United States or the District of Columbia.

“Environmental Laws” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other governmental directives or requirements, as well as common law, pertaining to the environment, natural resources, pollution, health (including any environmental clean-up statutes and all regulations adopted by any local, state, federal or other Governmental Authority, and any statute, ordinance, code, order, decree, law rule or regulation all of which pertain to or impose liability or standards of conduct concerning medical waste or medical products, equipment or supplies), safety or clean-up that apply to any Obligor and relate to hazardous materials.

“Equity Interests”  means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Plan” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Plan), which any Obligor maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Obligor or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

“Event of Default” means any of the events specified in Section 9.1.

“Excluded Accounts” means any of the following deposit accounts (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Obligors’ employees and identified to the Purchaser by the Company as such on Schedule 8.14 or otherwise identified in a writing delivered by the Company to the Purchaser after the Closing Date, and (ii) for so long as the MidCap Intercreditor Agreement remains in effect, any deposit accounts that constitute ABL Priority Deposit Accounts (as such term is defined in the MidCap Intercreditor Agreement). 

“Excluded Subsidiaries” means, collectively, Control Solutions International Inc., a Florida corporation, and Canada Control Solutions International, Inc., a company organized under the laws of British Columbia.

“Executive Order” has the meaning specified in the definition of Anti-Terrorism Laws.

“Existing Note Purchase Agreement” has the meaning set forth in the first Whereas clause of this Agreement.

“Existing Senior Secured Debt Documents” means, collectively, (a) the Existing Senior Secured ABL Credit Agreements, and (b) any promissory notes or other instruments, guarantees, security agreements, pledge agreements, mortgages or other documents or agreements evidencing, guaranteeing or securing the obligations of any Obligors under any of the Senior Secured ABL Credit Agreements.

“Existing Senior Secured ABL Credit Agreements” means, collectively, (a) the MidCap ABL Credit Agreement, (b) ABN Amro Agreements for the Purchase of Debt, and (c) the HSBC Agreement for the Purchase of Debt, in each case, as amended, restated, supplemented or otherwise modified from time to time.

“Existing Subordinated Notes” has the meaning set forth in the first Whereas clause of this Agreement.

“Existing Warrant” shall mean, collectively, (i) the Warrant to purchase Common Stock of the Company, together with the exhibits thereto, dated on or about January 25, 2017 issued by the Company to the Purchaser on the Original Closing Date pursuant to the Existing Note Purchase Agreement, and (ii) any warrant issued and delivered by the Company to the Purchaser (or any successors or assigns of the Purchasers) on or after the Closing Date in substitution, replacement or exchange of the Existing Warrant referred to in clause (i) of this definition, in each case as amended, restated, supplemented or modified from time to time.

“Existing Warrant Agreement” shall mean that certain Warrant Agreement, dated on or about January 25, 2017, by and between the Purchaser and the Company, as amended, restated, supplemented or modified from time to time. 

“Existing Warrant Documents” shall mean, collectively, the Existing Warrant and the Existing Warrant Agreement.

“FirstPro Acquisition” means the acquisition by S360 Georgia of substantially all of the assets used in the Atlanta-based staffing and recruitment services business of Firstpro Inc., a Georgia corporation, and Firstpro Georgia LLC, a Georgia limited liability company, pursuant to the FirstPro Acquisition Agreement.

“FirstPro Acquisition Agreement” means that certain Asset Purchase Agreement dated as of September 15, 2017, among S360 Georgia, Firstpro Inc., a Georgia corporation and Firstpro Georgia LLC, a Georgia limited liability company, the other Persons party thereto as “Principals”, together with all schedules, exhibits and annexes thereto, as amended, restated, supplemented or modified from time to time.

“FirstPro Acquisition Documents” means, collectively, the FirstPro Acquisition Agreement and all other agreements, documents and instruments executed and delivered by the Company and/or S360 Georgia to the any of the “Sellers” (as such term is defined in the FirstPro Acquisition Agreement) in connection with the FirstPro Acquisition.

“Fiscal Month” means, with respect each Fiscal Year of the Company and each of its Consolidated Subsidiaries, each of twelve calendar fiscal months.

“Fiscal Quarter” means, with respect each Fiscal Year of the Company and each of its Consolidated Subsidiaries, each calendar quarter ending on the Saturday closest to March 31st, June 30th, September 

30th and December 31st in each year.  For example, the fourth calendar quarter of 2017 shall be deemed to have ended on December 30, 2017 (the Saturday immediately preceding Sunday, December 31, 2017).

“Fiscal Year” means with respect to the Company and each of its Consolidated Subsidiaries, a fiscal year ending on December 31st in each year.

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States, a State thereof or the District of Columbia.  

“Funds Flow” has the meaning set forth in Section 5.1(B)(8).

“GAAP” shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or any successor authority) that are applicable to the circumstances as of the date of determination, consistently applied and maintained through the periods indicated.

“Governmental Authority” shall mean the government of the United States, any foreign country or any multinational authority, or any state, commonwealth, protectorate or political subdivision thereof, and any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the Pension Benefit Guaranty Corporation and other quasi-governmental entities established to perform such functions.

“Guarantors” shall mean, collectively, (a) the Subsidiary Guarantors and (b) any other Person that now or hereafter executes a guaranty in favor of the Purchaser in connection with the transactions contemplated by this Agreement and the other Note Documents.  For the avoidance of doubt, none of the Foreign Subsidiaries are Guarantors.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term “Guarantee” used as a verb has a corresponding meaning.

“HSBC Agreement for the Purchase of Debt” means that certain Agreement for the Purchase of Debts, dated January 27, 2009, between HSBC Invoice Finance (UK) Ltd. and CBS Butler. 

“Intellectual Property” means, with respect to any Person, all patents, patent applications and like protections, including improvements divisions, continuation, renewals, reissues, extensions and continuations in part of the same, trademarks, trade names, trade styles, trade dress, service marks, logos and other business identifies and, to the extent permitted under applicable law, any applications therefore, whether registered or not, and the goodwill of the business of such Person connected with and symbolized thereby, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative works, whether published or unpublished, technology, know-how and processes, operating manuals, trade secrets, computer hardware and software, rights to unpatented inventions and all applications and licenses therefore, used in or necessary for the conduct of business by 

such Person and all claims for damages by way of any past, present or future infringement of any of the foregoing. 

“Intellectual Property Security Agreements” means, collectively, each Intellectual Property Security Agreement entered into by any Obligors in favor of the Purchaser as security for the Obligations, as may be amended, restated, supplemented or otherwise modified from time to time.

“Investment” means any investment in any Person, whether by means of acquiring (whether for cash, property, services, securities or otherwise), making or holding Debt, securities, capital contributions, loans, time deposits, advances, Guarantees or otherwise. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto.

 

“JM” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns.

 

“Joinder Agreement” means a Joinder Agreement and Pledge Agreement Supplement substantially in the form of Exhibit D hereto.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset. For the purposes of this Agreement and the other Transaction, any Obligor shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. 

“Litigation” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority. 

“Longbridge” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns. 

“Longbridge Intercompany Note” means that certain Promissory Note, dated as of even date herewith, issued by Longbridge to the Company in the principal amount of $16,316,941.05, as amended, restated, supplemented or otherwise modified from time to time.

“Material Adverse Effect” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, (a) a material adverse change in, or a material adverse effect upon, any of (i) the financial condition, operations, business or properties of the Obligors, taken as a whole, (ii) the rights and remedies of the Purchaser under any of the Transaction Documents or the ability of the Purchaser to enforce the Obligations or realize upon the Collateral, or the ability of the Obligors to perform any of their obligations under any Transaction Document, (iii) the legality, validity or enforceability of any Transaction Document, (iv) the existence, perfection or priority of any security interest granted in any Note Document, (v) the value of any material Collateral; or (b) the imposition of a fine against or the creation of any liability of any Obligor to any Governmental Authority in excess of $200,000 which is not satisfied or discharged in full within thirty (30) days after the imposition thereof.

“Material Contract” means (a) the Existing Senior Secured Debt Documents, (b) the Subject Acquisition Documents, (c) the Longbridge Intercompany Note, (d) the other agreement described on 

Schedule 6.18, and (e) any other agreement or instruments to which any Obligor now or hereafter is a party if the breach, nonperformance or cancellation of which, or the failure of which to renew, could reasonably be expected to have a Material Adverse Effect.

“Maturity Date” means September 15, 2020, or such earlier date upon the acceleration thereof pursuant to Section 9.2 hereof.

“MidCap ABL Credit Agreement” means that certain Credit and Security Agreement dated as of April 8, 2015, by and among PeopleServe, Inc., PeopleServe PRS, Inc., Faro Recruitment America, Inc., Lighthouse Placement Services, Inc., and Monroe Staffing Services, LLC, as borrowers, any additional borrowers from time to time party thereto, the Company, MidCap Funding X Trust (as successor by assignment to MidCap Financial Trust), as administrative agent and a lender, and the financial institutions or other entities from time to time party thereto as lenders, providing for revolving and term loan credit facilities to the borrowers thereunder, as amended, restated, supplemented or otherwise modified from time to time.

“MidCap Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the date hereof, among the Purchaser, the MidCap Senior Agent, the Company and the Domestic Guarantors party thereto, as amended, restated, supplemented or otherwise modified from time to time.

“MidCap Priority Collateral” means the “ABL Priority Collateral” as such term is defined in the MidCap Intercreditor Agreement.

“MidCap Senior Agent” means, collectively, MidCap Funding X Trust (as successor by assignment to MidCap Financial Trust) in its capacity as administrative agent under the MidCap ABL Credit Agreement, together with its successors and assigns in such capacity.

“Multiemployer Plan” means “Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Obligor or any other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made contributions.

“Note Documents” shall mean, collectively, each of the Transaction Documents (other than the Existing Warrant Documents), in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted.

“Obligations” shall mean all present and future debt, liabilities and obligations of the Company owing to the Purchaser, or any Person entitled to indemnification hereunder, or any of their respective successors, permitted transferees or permitted assigns, arising under or in connection with this Agreement, the Senior Note or any other Note Document.

“Obligors” means, collectively, the Company and the Subsidiary Guarantors. 

“OFAC” means the U.S. Treasury Department Office of Foreign Assets Control.

“Ordinary Course of Business” means, in respect of any transaction involving any Person, the ordinary course of business of such Person, as conducted by such Person in a manner consistent in all material respects with past practices.

“Organizational Documents” means, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such as by-laws, a partnership agreement or an operating, limited liability company or members agreement), including any and all stockholder agreements or voting agreements relating to the capital stock or other equity interests of such Person.

“Original Closing Date” means January 25, 2017.

“Pay Proceeds Letter” means that certain Pay Proceeds Letter, dated the Closing Date, executed by the Company and addressed to the Purchaser.

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA. 

“Permits” means all governmental licenses, authorizations, provider numbers, supplier numbers, registrations, permits, drug or device authorizations and approvals, certificates, franchises, qualifications, accreditations, consents and approvals of a Obligor required under all applicable laws and required for such Obligor in order to carry on its business as now conducted.

“Permitted Acquisition Other Debt” means Debt, incurred by a Foreign Subsidiary in connection with a Permitted Acquisition.

“Permitted Acquisitions” means (a) the Subject Acquisitions, (b) those other acquisitions as the Purchaser and Company may mutually agree upon in writing from time to time, (c) Permitted Foreign Acquisitions and (d) Permitted Domestic Acquisitions; provided that, in respect of the foregoing clauses (c) and (d), (i) immediately prior to the consummation of such acquisition, no Default or Event of Default then exists or would result therefrom, (ii) with respect to each such acquisition, prior to the closing thereof, the Purchaser has received pro forma financial statements, (iii) with respect to each such acquisition, Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17, and the Purchaser shall have received a certificate from a Responsible Officer of the Company, dated the consummation date of such acquisition, certifying and demonstrating that (A) after giving effect to such acquisition (and taking into account any and all Debt incurred, issued or assumed by any Obligor or Subsidiary thereof in connection therewith, and any continuing Debt of any target entity being acquired in connection therewith, including, without limitation, any Debt of the type described under clauses (m) through (p), inclusive, of the definition of Permitted Debt), the Obligors are in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each other financial covenant in Section 8.17, and (B) no Default or Event of Default exists as of such date or would result after giving effect to such acquisition, and (iv) in the case of any Permitted Domestic Acquisition, compliance with Section 7.10(c). 

“Permitted Asset Dispositions” means the following Asset Dispositions: (a) dispositions of furniture, fixtures and equipment in the Ordinary Course of Business that the applicable Obligor or Subsidiary thereof determines in good faith is no longer used or useful in the business of such Obligor or Subsidiary; provided, however, that at the time of such Asset Disposition, no Default or Event of Default exists or would result from such Asset Disposition, and (b) dispositions approved in writing by the Purchaser.

“Permitted Contest” means, with respect to any tax obligation or other obligation allegedly or potentially owing from any Obligor or its Subsidiary to any governmental tax authority or other third party, 

a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made on the books and records and financial statements of the applicable Obligor; provided, however, that (a) compliance with the obligation that is the subject of such contest is effectively stayed during such challenge; (b) such Obligor’s and its Subsidiaries’ title to, and its right to use, the Collateral is not adversely affected thereby and the Purchaser’s Lien and priority on the Collateral are not adversely affected, altered or impaired thereby; (c) Company has given prior written notice to the Purchaser of an Obligor’s or its Subsidiary’s intent to so contest the obligation; (d) the Collateral or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by such Obligor or its Subsidiaries; (e) the Company has given the Purchaser notice of the commencement of such contest and upon request by the Purchaser, from time to time, notice of the status of such contest by the applicable Obligors and/or confirmation of the continuing satisfaction of this definition; and (f) upon a final determination of such contest, such Obligor and its Subsidiaries shall promptly comply with the requirements thereof.

“Permitted Contingent Obligations” means, without duplication: (a) Contingent Obligations arising in respect of the Debt under the Note Documents; (b) Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business; (c) Contingent Obligations outstanding on the date of this Agreement and set forth on Schedule 8.1 (including any refinancings, extensions, increases or amendments to the indebtedness underlying such Contingent Obligations to the extent constituting (i) Refinancing Debt or (ii) extensions of the maturity thereof without any other change in terms); (d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed $250,000 in the aggregate at any time outstanding; (f) Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to the Purchaser mortgagee title insurance policies; (g) Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Section 8.6; (h) [Reserved]; (i) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Contingent Obligations existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by an Obligor or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation; and (j) other Contingent Obligations not permitted by clauses (a) through (i) above, not to exceed $250,000 in the aggregate at any time outstanding. 

 “Permitted Debt” means, without duplication: (a) the Obligors’ Debt to the Purchaser under this Agreement and the other Note Documents; (b) Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business; (c) purchase money Debt not to exceed $1,000,000 at any time (whether in the form of a loan or a lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment; (d) Debt existing, or contemplated on the date of this Agreement and described on Schedule 8.1 (other than any items otherwise expressly set forth in this definition), including any refinancings, extensions, increases or amendments to the indebtedness underlying such Debt to the extent constituting (i) Refinancing Debt or (ii) extensions of the maturity thereof without any other change in terms); (e) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Debt existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by any Obligor or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation; (f) Debt in the form of insurance premiums financed through the applicable insurance company; (g) trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business; (h) Debt (other than Debt for borrowed money) that is a Permitted Intercompany Transaction; (i) Subordinated Debt and 

any Subordinated Debt Permitted Refinancing with respect thereto; (j) Permitted ABL Senior Debt (as defined below in the definition); (k) unsecured intercompany Debt between any Obligors; (l) unsecured intercompany Debt owing from any Obligor to any Foreign Subsidiary or Excluded Subsidiary, provided such Debt is at all times on and after the Closing Date subordinated to the Obligations pursuant to a subordination agreement satisfactory to Purchaser; (m) Permitted Acquisition Other Debt that is incurred in connection with the consummation of one or more Permitted Acquisitions (other than the Subject Acquisitions), provided that (i) no Default or Event of Default exists or would result therefrom, (ii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition, and (iii) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (n) and (o) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Closing Date) in the aggregate; (n) unsecured Debt of any Person that becomes a Subsidiary after the Closing Date in connection with any Permitted Acquisition (other than the Subject Acquisitions); provided that (i) such Debt exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary, (ii) no Default or Event of Default exists or would result therefrom, (iii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition, (iv) such Debt is at all times on and after the Closing Date subordinated to the Obligations on terms satisfactory to the Purchaser, and (v) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations, except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (m) and (o) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Date) in the aggregate; (o) unsecured Debt owing to sellers of assets or Equity Interests that is incurred in connection with the consummation of one or more Permitted Acquisitions (other than the Subject Acquisitions) so long as (i) such Debt is subordinated is at all times on and after the Closing Date subordinated to the Obligations on terms satisfactory to the Purchaser, (ii) no Default or Event of Default exists or would result therefrom, (iii) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition, and (iv) the principal amount of such Debt may not be repaid prior to the repayment in full of the Obligations except in the case of such repayments thereof that, together with any repayments of the principal amount of any Debt incurred pursuant to clauses (m) and (n) of this definition prior to the payment in full of the Obligations, do not exceed an amount equal to $3,000,000 (less the amount of any Series A Catch-up Payment made on or after the Original Date) in the aggregate; (p) secured Debt of a target entity acquired in connection with a Permitted Acquisition (other than the Subject Acquisitions), provided that (i) such Debt is incurred pursuant to an asset based working capital facility (“ABL Facility”) provided by a bank or other financial institution to such target entity and existing at the time such target entity was acquired and which ABL Facility continues following such Permitted Acquisition, (ii) the facility amount of such ABL Facility and the advance rates and eligibility requirements under such ABL Facility are not modified following the date of such Permitted Acquisition or in contemplation thereof in a manner which results in an increase in borrowing availability thereunder, (iii) neither the Company nor any other Obligor (other than the target entity) shall be liable, directly or indirectly, for any such Debt or other obligations and liabilities under such 

ABL Facility, (iv) no assets of the Company or any other Obligor (other than the target entity) shall be subject to any Liens or otherwise be used to secure, repay, guarantee or otherwise provide credit support for such ABL Facility or any such Debt or other obligations and liabilities under such ABL Facility, (v) no Default or Event of Default exists or would result therefrom, (vi) Obligors shall be in compliance on a pro forma trailing twelve month basis with the Total Leverage Ratio covenant and each of the other financial covenants in Section 8.17 after giving effect to such Debt, and the Purchaser shall have received a certificate from a Responsible Officer of the Company demonstrating such compliance in form and with the accompanying detail as described in clause (iii) of the definition of Permitted Acquisition, and (vii) the repayment of such ABL Facility shall be made solely from the cash flow of the target entity so acquired or, in the case of any default thereunder, solely from the cash flow and other assets of the target entity so acquired, and (q) Refinancing Debt.  

 

As used above in this definition, the term “Permitted ABL Senior Debt” means Debt incurred pursuant to the Existing Senior Secured Debt Documents, provided that:

 

(a)the outstanding principal amount of such Debt does not at any time exceed the lesser of:

 

(i)the applicable maximum applicable facility limit set forth in such Existing Senior Secured Debt Documents from time to time (without giving effect to any accordion or similar options to increase the maximum facility, unless such option has been validly exercised and become effective), and

 

(ii)any applicable borrowing base or similar borrowing availability limit (or receivables purchase availability limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt); provided that any waiver, change or other modification to any eligibility criteria, advance rates or other component used in calculating any such borrowing base or similar borrowing availability limit (or any receivables purchase limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) from that as set forth in the Existing Senior Secured Debt Documents as in effect on the date hereof shall require the prior written consent of Purchaser if any such waiver, change or other modification would result in any increased borrowing availability (or increased receivables purchase availability in the case of any receivables purchase or factoring arrangement that constitutes Debt);

 

(b)the outstanding principal amount of all such Debt shall not at any time violate the financial covenants set forth in Section 8.17; and

 

(c)in the case of any such Debt incurred under the MidCap ABL Credit Agreement:

 

(i)the principal amount thereof must not exceed the “ABL Debt Cap” as such term is defined in the MidCap Intercreditor Agreement;

 

(ii)the principal amount of such Debt shall be comprised solely of (A) a term loan in an aggregate principal amount not to exceed an amount equal to $700,000 (less any repayments of such term loan made at any time on or after the Closing Date), and (B) revolving loans advanced by the lender thereunder based upon a borrowing base formula; and

 

(iii)the outstanding principal amount of any revolving loans under the MidCap ABL Credit Agreement shall not exceed at any time, the lesser of (A) the revolving loan limit less the outstanding principal amount of any term loan under the MidCap ABL Credit Agreement, and (B) the borrowing base applicable to such revolving loans; provided that any waiver, change or other modification to any eligibility criteria, advance rates or any other component used in calculating 

such borrowing base from that set forth in the MidCap ABL Credit Agreement as in effect on the date hereof shall require the prior written consent of Purchaser if any such waiver, change or other modification would result in any increased borrowing availability under the MidCap ABL Credit Agreement.

 

“Permitted Distributions” means the following Restricted Distributions: (a) dividends payable solely in common stock and preferred stock; (b) repurchases of stock from individuals who were, but are no longer, employees, directors or consultants pursuant to stock purchase agreements entered as part of their compensation so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that such repurchases do not exceed $250,000 in the aggregate per Fiscal Year; (c) dividends or distributions paid by (i) a Subsidiary to the Company or another Obligor that is the direct or indirect parent of such Subsidiary or (ii) by a Foreign Subsidiary to an Obligor or to another Foreign Subsidiary that is the direct parent company of such Foreign Subsidiary; (d) dividends, distributions, management fees or other fees or compensation payable solely by an Obligor or a Subsidiary thereof to the Company or another Obligor; (e) dividends and distributions that are Permitted Intercompany Transactions so long as no Event of Default exists at the time thereof or would result therefrom, and (f) in respect of the Series A Preferred Stock of the Company, provided that the aggregate monthly amount of all such Series A Preferred Stock dividends shall not exceed $17,000 (excluding any catch-up payment amount in respect of the delinquent dividend payments currently outstanding as of the Original Date in an aggregate amount not to exceed $400,000; the payment of any such catch-up amount being referred to herein as the “Series A Catch-up Payment”) and at the time of the making of such dividend no Event of Default shall exist or would result therefrom.

“Permitted Domestic Acquisitions” means the collective reference to each acquisition by the Company (directly or indirectly by new wholly-owned direct or indirect Domestic Subsidiaries), (a) of substantially all of the assets, or all of the capital stock, of a Person in the line of business in which the Obligors are engaged on the Closing Date or that is incidental thereto and (b) involving assets and operations domiciled inside of the United States.

 “Permitted Foreign Acquisitions” means the collective reference to each acquisition by the Company (directly or indirectly by new wholly-owned direct or indirect Foreign Subsidiaries), (a) of substantially all of the assets, or all of the capital stock, of a Person in the line of business in which the Obligors are engaged on the Closing Date or that is incidental thereto and (b) involving assets and operations domiciled outside of the United States.

“Permitted Intercompany Transaction” has the meaning set forth in Section 8.8.

“Permitted Investments” means: (a) Investments shown on Schedule 8.7 and existing on the Closing Date; (b) cash and cash equivalents; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business; (d) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Obligors pursuant to employee stock purchase plans or agreements approved by such Obligors’ Board of Directors (or other governing body), but the aggregate of all such loans outstanding may not exceed $250,000 at any time; (e) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business; (f) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the Ordinary Course of Business, provided, however, that this subpart (f) shall not apply to Investments of Obligors in any Subsidiary; (g) Investments consisting of deposit accounts in which the Purchaser has received a Deposit Account Control Agreement; (h) 

Investments by any Obligor in any other Obligor; (i) Investments made by Obligor in any Foreign Subsidiary in connection with Permitted Acquisitions, provided that the aggregate of all such Investments, together with the outstanding principal amount of all Permitted Acquisition Other Debt, may not at any time exceed $1,000,000; (j) Permitted Acquisitions (including for the avoidance of doubt the Subject Acquisitions); and (k) other Investments in an amount not exceeding $250,000 in the aggregate.

“Permitted Liens” means: (a) deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA) pertaining to an Obligor’s employees, if any; (b) deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (c) carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral arising in the Ordinary Course of Business with respect to obligations which are not due, or which are being contested pursuant to a Permitted Contest; (d) Liens on Collateral for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or the subject of a Permitted Contest; (e) attachments, appeal bonds, judgments and other similar Liens on Collateral, for sums not exceeding $250,000 in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest; (f) [reserved]; (g) Liens and encumbrances in favor of the Purchaser under the Transaction Documents; (h) Liens on Collateral existing on the date hereof and set forth on Schedule 8.2 (other than items otherwise expressly set forth in this definition); (i) (A) Liens on receivables of Foreign Subsidiaries and any related rights or proceeds thereof (but not on any equity interests of any Foreign Subsidiary) granted pursuant to the applicable Existing Senior Secured Debt Documents to secure any Permitted ABL Senior Debt incurred thereunder or any other obligations of such Foreign Subsidiary under the ABN Amro Agreements for the Purchase of Debt or the HSBC Agreement for the Purchase of Debt, as applicable, and (B) Liens granted on the assets of Domestic Subsidiaries to secure any Permitted ABL Senior Debt incurred thereunder and any other obligations (not constituting Debt) of the Company and the Domestic Subsidiaries under the MidCap ABL Credit Agreement and related Financing Documents (as defined in the MidCap ABL Credit Agreement), provided such Liens in favor of MidCap are at all times subject to the MidCap Intercreditor Agreement; (j) Liens on the property of a Foreign Subsidiary (but not on any equity interest of any Foreign Subsidiary), which Liens secure only Permitted Acquisition Other Debt not to exceed $1,000,000 in the aggregate at any time; (k) Liens on Refinancing Debt permitted hereunder to the extent and only to the extent that the original Debt being so refinanced was secured by a Permitted Lien; (l) any Lien on any equipment securing Debt permitted under subpart (c) of the definition of Permitted Debt, provided, however, that such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof; and (m) Liens securing Debt permitted to be incurred under clause (p) of the definition of Permitted Debt, provided that such Liens do not at any time extend to any assets of the Company or any other Obligor (other than the target entity which is being acquired and which is party to the applicable ABL Facility described in clause (p) of the definition of Permitted Debt).

“Permitted Modifications” means (a) such amendments or other modifications to an Obligor’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of an Obligor or Subsidiary or involving a reorganization of a Obligor or Subsidiary under the laws of a different jurisdiction) as are required by applicable Law and fully disclosed to the Purchaser within thirty (30) days after such amendments or modifications have become effective, and (b) such other amendments or modifications to an Obligor’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of an Obligor or Subsidiary or involving a reorganization of a Obligor or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of the Purchaser and fully disclosed to the Purchaser within thirty (30) days after such amendments or modifications have become effective.

“Person” shall mean an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated association, or other entity, or a government or any political subdivision or agency thereof.

“Pledge Agreement” means that certain Amended and Restated Pledge Agreement, dated as of the date hereof, by and among the Company, the Domestic Subsidiaries party thereto and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

“Post-Closing Letter Agreement” means that certain Post-Closing Letter Agreement, dated as of the date hereof, between Purchaser and the Company.

“Principal Office” means the office of the Purchaser at the address as specified in Section 10.1.

“Purchase Price” has the meaning set forth in Section 2.1.

“Purchaser” means Jackson Investment Group, LLC, together with its successors and assigns and including, without limitation, any Transferee.

“Refinancing Debt” means Debt which represents extensions, renewals, refinancing or replacements of any Debt described in clauses (c), (d), (j), (n), or (p) in the definition of “Permitted Debt” hereunder (such Debt being referred to herein as the “Original Debt”); provided that (i) such Refinancing Debt does not increase the principal amount of the Original Debt (except by an amount equal to unpaid accrued interest and premium thereon, plus original issue discount and upfront fees plus other fees and expenses reasonably incurred in connection with such extensions, renewals, refinancing or replacement plus an amount equal to any existing commitments unutilized thereunder to the extent such commitments are otherwise permitted hereunder, plus an amount equal to any incremental facilities unutilized thereunder to the extent such amount is otherwise permitted hereunder), (ii) if the Original Debt is unsecured, such Refinancing Debt shall be unsecured, and if the Original Debt was permitted to be secured hereunder, then any Liens securing such Refinancing Debt are not extended to any additional property of an Obligor or any of its Subsidiaries (other than replacement Liens so long as the replacement Liens only encumber those assets or classes of assets that the original Lien encumbered), (iii) no Obligor or any of its Subsidiaries that is not originally obligated with respect to repayment of such Original Debt is required by the terms thereof to become obligated with respect to such Refinancing Debt, (iv) such Refinancing Debt does not result in a shortening of the average weighted maturity of such Original Debt, (v) the terms of such Refinancing Debt are not, taken as a whole, materially more burdensome or restrictive to the Obligors or materially more adverse to the interests of the Purchaser than the original terms of the Original Debt; it being understood that in the case of any refinancing of any Permitted ABL Senior Debt (as such term is defined in the definition of Permitted Debt), such refinancing shall require the prior written consent of the Purchaser if the applicable borrowing base or similar borrowing availability limit (or receivables purchase availability limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) in respect of such Refinancing Debt, including any eligibility criteria, advance rates or other components used in calculating such borrowing base or similar borrowing availability limit (or any receivables purchase limit, in the case of any receivables purchase or factoring arrangement that constitutes Debt) would result in any increased borrowing availability (or receivables purchase availability in the case of any receivables purchase or factoring arrangement that constitutes Debt) from that set forth in the applicable Existing Senior Secured Debt Documents as in effect on the date hereof, and (vi) if such Original Debt was subordinated in right of payment to the Obligations, then the terms and conditions of such Refinancing Debt must include subordination terms and conditions that are at least as favorable to the Purchaser as those that were applicable to such Original Debt (and in the case of Original Debt subject to the MidCap Intercreditor Agreement, the holder of such Refinancing Debt shall agree to be bound by the terms of the MidCap Intercreditor Agreement or otherwise shall enter into a new intercreditor agreement with Purchaser having 

terms and conditions at least as favorable to the Purchaser as those applicable to the MidCap Intercreditor Agreement).

“Responsible Officer” means any of the Executive Chairman (with respect the Company), Chief Executive Officer, Chief Financial Officer or any other officer of the applicable Obligor acceptable to the Purchaser.

“Restricted Distribution” means as to any Person (a) any dividend or other distribution (whether in cash, securities or other property) on any equity interest in such Person (except those payable solely in its equity interests of the same class), (b) any payment by such Person on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any equity interests in such Person or any claim respecting the purchase or sale of any equity interest in such Person (except in connection with the Existing Warrant), or (ii) any option, warrant or other right to acquire any equity interests in such Person (excluding, however the Existing Warrant), (c) any management fees, salaries or other fees or compensation to any Person holding an equity interest in an Obligor or a Subsidiary of an Obligor (other than (i) payments of compensation to individuals, (ii) customary directors fees, and (iii) advances and reimbursements to employees or directors, all in the Ordinary Course of Business), or to any Affiliate of an Obligor or an Affiliate of any Subsidiary of an Obligor, (d) any lease or rental payments to an Affiliate or Subsidiary of an Obligor other than such payments made in the Ordinary Course of Business and in compliance with Section 8.8, or (e) repayments of or debt service on loans or other indebtedness held by any Person holding an equity interest in an Obligor or a Subsidiary of an Obligor, an Affiliate of an Obligor or an Affiliate of any Subsidiary of an Obligor unless permitted under and made pursuant to a Subordination Agreement, in form and substance reasonably satisfactory to Purchaser, applicable to such loans or other indebtedness.

“S360 Georgia” means Staffing 360 Georgia, LLC, a Georgia limited liability company.

“S360 Ltd” has the meaning set forth in the first Whereas clause of this Agreement, and shall include Longdbridge’s successors and permitted assigns.

“SEC” means the United States Securities and Exchange Commission.

“Securities Account Control Agreement” shall mean any securities account control agreement entered into on or after the Closing Date by the applicable securities intermediary, the applicable Obligor, and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

“Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

“Security Agreement” means that certain Amended and Restated Security Agreement, dated as of the date hereof, by and among the Company, the Domestic Guarantors and the Purchaser, as may be amended, restated, supplemented or otherwise modified from time to time.

“Security Documents” means, collectively, the Security Agreement, the Pledge Agreement, Intellectual Property Security Agreements, the Deposit Account Control Agreements, the Third Party Waiver Agreements and all other security agreements, pledge agreements, collateral assignments, financing statements, powers of attorney, stock transfer powers and other instruments, documents or agreements now or hereafter executed and delivered by any of the Obligors to the Purchaser for the purposes of creating, perfecting, or preserving the Purchaser’s Liens in, to and under any of the Collateral. 

“Segregated Account” has the meaning set forth in Section 7.16(b).

“Senior Note” shall mean, collectively, the 12% Senior Secured Promissory Note, dated as of the date hereof, in the principal amount of Forty Million Dollars ($40,000,000) issued by the Company to the Purchaser on the Closing Date pursuant to Section 2.1, in substantially the form of Exhibit A hereto, and each other senior promissory note now or hereafter delivered by the Company to the Purchaser in substitution, replacement or exchange thereof, in each case as amended, restated, supplemented or modified from time to time pursuant to the provisions of this Agreement.

“Series A Catch-up Payment” has the meaning set forth in the definition of Permitted Distributions.

“Solvent” shall mean, with respect to any Person at any time, that (i) each of the fair value and the present fair saleable value of such Person’s assets (including any rights of subrogation or contribution to which such Person is entitled, under any of the Transaction Documents or otherwise) is greater than such Person’s debts and other liabilities (including contingent, unmatured and unliquidated debts and liabilities) and the maximum estimated amount required to pay such debts and liabilities as such debts and liabilities mature or otherwise become payable; (ii) such Person is able and expects to be able to pay its debts and other liabilities (including, without limitation, contingent, unmatured and unliquidated debts and liabilities) as they mature; and (iii) such Person does not have unreasonably small capital to carry on its business as conducted and as proposed to be conducted.

“Sterling Facility Agreement” means that certain Agreement dated as of November 4, 2013, between Sterling National Bank and Control Solutions International, Inc., as amended, restated, supplemented or otherwise modified from time to time.

“Subject Acquisition Agreements” means, collectively, the Butler Acquisition Agreement and the FirstPro Acquisition Agreement.

“Subject Acquisition Documents” means, collectively, the Butler Acquisition Documents and the FirstPro Acquisition Documents.

“Subject Acquisitions” means, collectively, the Butler Acquisition, and the FirstPro Acquisition.

“Subordinated Debt” means any Debt of any Obligor or Subsidiary thereof that by its terms is expressly subordinated to the Obligations and is incurred pursuant to the terms of the Subordinated Debt Documents and with the prior written consent of the Purchaser, all of which documents must be in form and substance reasonably acceptable to the Purchaser in its good faith discretion.

“Subordinated Debt Documents” means any documents evidencing and/or securing Subordinated Debt governed by a subordination agreement, all of which documents and subordination agreement must be in form and substance reasonably acceptable to the Purchaser in its good faith discretion.

“Subordinated Debt Permitted Refinancing” means the assignment or refinancing of Subordinated Debt if (a) that Subordinated Debt was incurred solely with respect to borrowed money, (b) the assignee or refinancer thereof has given the Purchaser not less than ten (10) Business Days’ prior written notice of such assignment or refinancing, (c) prior to the consummation of any such assignment or refinancing, the assignee or refinancer thereof shall execute and deliver to the Purchaser a joinder to the applicable subordination agreement (or to a replacement thereof) in form and substance satisfactory to the Purchaser in its good faith discretion pursuant to which such assignee or refinancer agrees to be bound by and subject to the terms the Subordination Agreement, (d) the assignee or refinancer specifically acknowledges and agrees in that joinder that no provision of any Subordinated Debt Documents with respect such Subordinated Debt shall contain any provision, and that no action shall be taken, that causes or that would cause a violation of Section 8.5 and (e) there exists no Default or Event of Default.

“Subsidiary” shall mean, as to any person, any corporation, limited liability company, partnership or joint venture, whether now existing or hereafter organized or acquired: (i) in the case of a corporation, of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (other than stock having such voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person and/or one or more of its Subsidiaries or (ii) in the case of a limited liability company, partnership or joint venture, in which such Person or a Subsidiary of such Person is a member, general partner or joint venturer or of which a majority of the partnership or other ownership interests are at the time owned by such Person or one or more of its Subsidiaries.  Unless otherwise specified herein, all references to a “Subsidiary” shall be deemed to refer to “Subsidiaries” of the Company. 

“Subsidiary Guarantors” means, collectively, (a) each Subsidiary of the Company identified as a “Subsidiary Guarantor” on the signature pages hereto, (b) each other Subsidiary that now or hereafter becomes a guarantor party to this Agreement and bound by the provisions of Article 4 hereof, by executing and delivering a Joinder Agreement in favor of Purchaser, including without limitation, S360 Georgia and any other Subsidiary of the Company that joins as a Guarantor pursuant to Section 7.10(c) hereof or otherwise.

“Swap Contract” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to provide protection against fluctuations in interest or currency exchange rates, but only if the Purchaser provides its prior written consent to the entry into such “swap agreement”.

“Taxes” shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto.

“Third Party Waiver Agreement” shall mean any waiver agreement, executed on or after the Closing Date, by the applicable landlord, bailee, warehousemen, processor or other third party operator of premises on which any Collateral is located and the applicable Obligor in favor of the Purchaser, in each case in form and substance reasonably satisfactory to the Purchaser.

“Transaction Documents” shall mean, collectively, this Agreement, the Senior Note, the Security Documents, the Existing Warrant Documents, the Post-Closing Letter Agreement, the MidCap Intercreditor Agreement, the Pay Proceeds Letter, any Joinder Agreement executed by the Company or any Subsidiary thereof, together with any other guaranty now or hereafter executed by any Obligor in favor of the Purchaser, and all consents, notices, documents, certificates and instruments heretofore, now or hereafter executed by or on behalf of any Obligor, and delivered to the Purchaser in connection with this Agreement, the Security Documents, the Existing Warrant or the transactions contemplated thereby, each as amended, restated, supplemented or otherwise modified from time to time.

“Transferee” shall mean any permitted direct or indirect transferee of all or any part of the Senior Note purchased under this Agreement.

“UCC” means the Uniform Commercial Code as in effect in the State of New York, unless the context requires application of the Uniform Commercial Code as in effect in another State, in which case such term means the Uniform Commercial Code as in effect in such State.  For purposes of this Agreement, “UCC” also means the equivalent, similar or analogous statutes, regulations and other laws of any foreign 

country or jurisdiction as the same may be applicable and the context requires, and any successor statute, regulation or law thereto.

Article 2.

ISSUANCE AND PURCHASE OF SENIOR NOTE

Section 2.1Purchase and Sale of Senior Note.  The Company hereby agrees to sell to the Purchaser and, subject to the terms and conditions set forth herein and in reliance upon the representations and warranties of the Company contained herein, Purchaser agrees to purchase from the Company the Senior Note for an aggregate total purchase price of Forty Million Dollars ($40,000,000) (the “Purchase Price”).  Subject to the conditions as provided below in this Section and to the satisfaction of all conditions precedent set forth in Sections 5.1 and 5.2 hereof, at the Closing the Purchaser shall pay the Purchase Price by wire transfer (or by credit, in the case of any proceeds of the Purchase Price to be applied by the Company to satisfy certain payment obligations owing by the Company to the Purchaser) pursuant to the instructions of the Company as set forth in the Pay Proceeds Letter.  For the avoidance of doubt, if the conditions precedent set forth in Sections 5.1 and 5.2 are not satisfied (or waived in writing by Purchaser in its sole discretion), then Purchaser shall be under no obligation to purchase the Senior Note and pay the Purchase Price and, in such case, Purchaser shall return to the Company the Senior Note, which shall not be considered issued and outstanding unless and until the Closing has occurred (as evidenced by payment of the Purchase Price to the Company as provided above in this Section 2.1 at Closing). 

Section 2.2Interest on the Senior Note.

(a)Interest on the outstanding principal balance of the Senior Note shall accrue at a rate per annum equal to twelve percent (12.00%) on and after the Closing Date (or, if later, the date specified in the Senior Note) until the principal amount of such Senior Note has been paid in full.  All accrued and unpaid interest on the outstanding principal balance of the Senior Note shall be due and payable quarterly on January 1, April 1, July 1 and October 1 in each year on and after the date hereof (with the first such quarterly payment due on January 1, 2018, which shall include all accrued and unpaid interest from the Closing Date) and on the Maturity Date, provided that upon any prepayment of the Senior Note or any portion thereof, accrued and unpaid interest shall be payable with respect to the principal amount of the Senior Note so prepaid on such date of prepayment.  

(b)After maturity, whether by acceleration or otherwise, interest shall accrue on the unpaid principal amount of the Senior Note at the Default Rate set forth in Section 3.4 below and shall be payable on demand.  

Section 2.3Maturity of Senior Note; Voluntary Prepayments; Funding Losses. 

(a)The entire unpaid principal amount of the Senior, together with all accrued and unpaid interest on the Senior Note, shall be due and payable on the Maturity Date, unless sooner accelerated in accordance with the terms hereof.

(b)Optional Prepayments. The Company may prepay principal on the Senior Note in whole or in part from time to time, without penalty or premium, upon five (5) Business Days’ prior notice to Purchaser, provided that (i) any partial prepayment hereunder shall be in a principal amount of not less than $100,000 or, if greater than $100,000, then in integral multiples of $100,000, and (ii) such prepayment is accompanied by all accrued and unpaid interest on the amount prepaid through the date of prepayment.

(c)Prepayment Incentive.  The Purchaser hereby agrees that so long as no Default or Event of Default exists and so long as the maturity of the Senior Note has not been accelerated (i) if on or prior to September 15, 2018, the Company makes an optional prepayment of the Senior Note in accordance with Section 2.3(b), then the Company shall be entitled to a three percent (3%) discount on the principal amount to be prepaid (for example, if the Company desires to make an optional prepayment of $1,000,000 in principal during such period, the Company would only be required to pay to the Purchaser $970,000 of such optional prepayment amount and the $30,000 portion of such optional prepayment amount (i.e. 3%) shall be treated as debt forgiveness and shall not be required to be repaid by the Company to the Purchaser), and (ii) if after September 15, 2018 and on or prior to September 15, 2019, the Company makes an optional prepayment of the Senior Note in accordance with Section 2.3(b), then the Company shall be entitled to a two percent (2%) discount on the principal amount to be prepaid (for example, if the Company desires to make an optional prepayment of $1,000,000 in principal during such period, the Company would only be required to pay to the Purchaser $980,000 of such optional prepayment amount and the $20,000 portion of such optional prepayment amount (i.e. 2%) shall be treated as debt forgiveness and shall not be required to be repaid by the Company to the Purchaser); provided, however, that (A) the prepayment notice required to be delivered by the Company to the Purchaser under Section 2.3(b) must (1) specify the full principal amount of the proposed optional prepayment, (2) specify the 3% or 2%, as applicable, discounted portion of such optional prepayment, and state that such discounted amount will be withheld from the specified prepayment amount in accordance with Section 3.2(c), and (3) certify to Purchaser that no Default or Event of Default exists and that all conditions to such discount set forth in Section 2.3(c) have been met, (B) nothing in this Section 2.3(c) shall require the Purchaser to refund or return any payments, whether of principal or interest, on the Senior Note to the extent received by the Purchaser, (C) in connection with any prepayment of principal, the Company must pay to Purchaser all accrued interest on the full amount of the optional prepayment amount in accordance with Section 2.3(b)(i) (without giving effect to any incentive discount provided for in this Section 2.3(c)), and (D) any forgiveness of debt otherwise provided for above in this Section 2.3(c) shall be deemed void ab initio if any payments of principal or interest on the Senior Note received by the Purchaser are required for any reason to be disgorged or turned over by the Purchaser to any court, creditor, trustee, Governmental Authority or other Person, and, in such case, the Company shall remain liable for the full payment of the entire original principal amount of the Senior Note, together with all accrued interest thereon, in accordance with the terms of this Agreement and the Senior Note.  Upon the effectiveness of any valid optional prepayment discount made in accordance with this Section 2.3(c), the remaining principal amount of the Senior Note shall be deemed reduced by the applicable amount of such discount for purposes of calculating accrued interest on the balance of the Senior Note on and after the date of receipt by Purchaser of the applicable optional prepayment.  The Purchaser’s records regarding any principal discounts made in accordance with this Section 2.3(c), and the remaining principal balance of the Senior Note after giving effect to any such discounts, will be conclusive and binding on the Company, absent manifest error. 

Article 3.

OTHER PROVISIONS RELATING TO THE SENIOR NOTE

Section 3.1Making of Payments.  The Company shall make each payment hereunder and under the Senior Note not later than 1:00 p.m. (New York, New York time) on the day when due in Dollars in same day funds to the Purchaser at its Principal Office, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes.  All payments received after that hour shall be deemed to have been received by the Purchaser on the next following Business Day.

Section 3.2Increased Costs.  In the event that any change in any applicable law, treaty or governmental regulation, or in the interpretation or application thereof, or compliance by the Purchaser with any guideline, request or directive (whether or not having the force of law) from any central bank or other U.S. or foreign financial, monetary or other governmental authority, shall:  (a) subject the Purchaser to any tax of any kind whatsoever with respect to this Agreement, the Senior Note or the Existing Warrant or change the basis of taxation of payments to the Purchaser of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of the Purchaser); (b) impose, modify, or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by or committed to be extended by any office of the Purchaser, including, without limitation, pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or (c) impose on the Purchaser any other condition with respect to this Agreement, the Senior Note or the Existing Warrant; and the result of any of the foregoing is to increase the cost to the Purchaser of making or maintaining the Senior Note or the Existing Warrant or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of the Senior Note or the Existing Warrant, THEN, IN ANY CASE, the Company shall pay, within five (5) Business Days following the demand of the Purchaser, such additional amounts as will compensate the Purchaser for such additional cost or such reduction, as the case may be, so long as such amounts have accrued on or after the date which is 270 days prior to the date of demand by the Purchaser.  The Purchaser shall certify the amount of such additional cost or reduced amount to the Company, and such certification shall be conclusive absent manifest error.

Section 3.3Tax Gross Up and Indemnity.  (a) Subject to clause (b) below, any payment to be made by any Obligor under this Agreement and under any other Note Document, shall be made to the Purchaser free and clear of and without deductions or withholdings of Taxes, unless the Obligor is required by law to make such deduction or withholding, in which case the Obligor shall, to the extent permitted by law, increase the sum due to the Purchaser to the extent necessary to ensure that the Purchaser receives a sum equal to the sum which it would have received if no such deduction or withholding had been made or required to be made.  In addition, the Obligors shall indemnify the Purchaser, within 10 days after demand therefor, for the full amount of any such Tax payable or paid by the Purchaser or required to be withheld or deducted from a payment to the Purchaser and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Government Authority.  A certificate as to the amount of such payment or liability delivered to the Obligors by the Purchaser shall be conclusive absent manifest error.

(b)   On or before the Closing Date, Purchaser shall deliver to the Company (or to its legal counsel for forwarding to the Company) an IRS Form W-9 establishing its exemption from certain federal income tax withholding. Failure to deliver such Form W-9 shall result in the inapplicability of clause (a) above to the extent any withholding of tax is required as a result of such failure.

Section 3.4Default Rate of Interest.  If the Company shall fail to pay on the due date therefor (after giving effect to any grace periods as provided by the terms of the Transaction Documents), whether by acceleration or otherwise, any principal owing under the Senior Note or any other Obligations, then interest shall accrue on such unpaid principal or other Obligation from the due date until and including the date on which such principal is paid in full at a rate per annum that is five percent (5%) in excess of the rate of interest otherwise payable hereunder (the “Default Rate”). Interest calculated at the Default Rate shall be due and payable upon demand by the Purchaser.

Section 3.5Calculation of Interest.  Interest payable on the Senior Note shall be calculated on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.  If the date for any payment of principal is extended (whether by operation of this Agreement, any provision of law or otherwise), interest shall be payable for such extended time at the rates provided herein.  Whenever any 

payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be due on the next succeeding Business Day and interest shall continue to accrue on such obligation until so paid.

Section 3.6Usury.  In no event shall the amount of interest due or payable on any Obligation, when aggregated with all amounts payable by the Company under any of the Transaction Documents that are deemed or construed to be interest, exceed the maximum rate of interest allowed by Applicable Law and, in the event any such payment is paid by the Company or received by the Purchaser, then such excess sum shall be credited as a payment of principal, unless the Company, as applicable, shall notify the Purchaser in writing that it elects to have such excess sum returned to it forthwith.  It is the express intent of the parties hereto that the Company not pay, and the Purchaser not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Company under Applicable Law.

Article 4.

GUARANTY

Section 4.1The Guaranty.  Each Subsidiary Guarantor hereby, jointly and severally, guarantees to the Purchaser, as primary obligor and not as surety, the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof.  Each Subsidiary Guarantor hereby further agrees that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, or otherwise), the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal.

Section 4.2Obligations Unconditional.  The obligations of the Subsidiary Guarantors under this Article 4 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Note Documents, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor (other than the payment in full of the Obligations), it being the intent of this Section 4.2 that the obligations of the Subsidiary Guarantors hereunder shall be absolute and unconditional under any and all circumstances.  Each Subsidiary Guarantor agrees that it shall have no right of subrogation, indemnity, reimbursement or contribution against the Company or any other guarantor for amounts paid under this Article 4 until such time as the Purchaser has been paid in full in respect of all Obligations, and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Purchaser in connection with monies received under the Note Documents.  Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of each Subsidiary Guarantor hereunder which shall remain absolute and unconditional as described above:

(a)at any time or from time to time, without notice to any Subsidiary Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived;

(b)any of the acts mentioned in any of the provisions of any of the Note Documents, or any other agreement or instrument referred to in the Note Documents shall be done or omitted;

(c)the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Note Documents, or any other agreement or instrument referred to in the Note Documents shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with; or

(d)any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Subsidiary Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Subsidiary Guarantor).

With respect to its obligations hereunder, each Subsidiary Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Purchaser exhaust any right, power or remedy or proceed against any Person under any of the Note Documents, or any other agreement or instrument referred to in the Note Documents, or against any other Person under any other guarantee of, or security for, any of the Obligations.

Section 4.3Reinstatement.  The obligations of the Subsidiary Guarantors under this Article 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Subsidiary Guarantor agrees that it will indemnify the Purchaser on demand for all reasonable costs and expenses (including, without limitation, the reasonable and documented out of pocket fees and expenses of counsel) incurred by the Purchaser in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

Section 4.4Certain Additional Waivers.  Each Subsidiary Guarantor further agrees that it shall have no right of recourse to security for the Obligations except, following the payment in full of all Obligations, through the exercise of rights of subrogation pursuant to Section 4.2 and through the exercise of rights of contribution pursuant to Section 4.7.

Section 4.5Remedies.  Each Subsidiary Guarantor agrees that, to the fullest extent permitted by law, as between the Subsidiary Guarantor, on the one hand, and the Purchaser, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of this Article 4.

Section 4.6Guarantee of Payment; Continuing Guarantee.  The guarantee in this Article 4 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Obligations whenever arising.

Section 4.7Limitations on Guaranty.

(a)Each Guarantor and the Purchaser hereby confirms that it is its intention that the guarantee provided for in this Article 4 not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar Federal or state law.  To effectuate the foregoing intention, each Guarantor and the Purchaser hereby irrevocably agrees that the guarantee of the Obligations by each such Guarantor provided for in this Article 4 shall be limited to an amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws and after giving effect to any rights to contribution provided in Section 4.7 or pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantors, result in the Obligations guaranteed by such Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any comparable Federal or state law.  

Section 4.8Contribution.  At any time a payment in respect of the Obligations guaranteed by the Guarantors under the Article 4 (the “Guaranteed Obligations”) is made under this Article 4, the right of contribution of each Guarantor against each other Guarantor shall be determined as provided in the immediately following sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a “Relevant Payment”) is made on the Guaranteed Obligations under this Article 4.  At any time that a Relevant Payment is made by a Guarantor that results in the aggregate payments made by such Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant Payment exceeding such Guarantor’s Contribution Percentage (as defined below) of the aggregate payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date of the Relevant Payment (such excess, the “Aggregate Excess Amount”), each such Guarantor shall have a right of contribution against each other Guarantor who has made payments in respect of the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Guarantor’s Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed Obligations (the aggregate amount of such deficit, the “Aggregate Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such other Guarantor.  A Guarantor’s right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment to the time of each computation; provided that no Guarantor may take any action to enforce such right until the Guaranteed Obligations have been paid in full in cash, it being expressly recognized and agreed by all parties hereto that any Guarantor’s right of contribution arising pursuant to this Section 4.7 against any other Guarantor shall be expressly junior and subordinate to such other Guarantor’s obligations and liabilities in respect of the Guaranteed Obligations and any other Obligations owing under this Agreement or the other Note Documents.  As used in this Section 4.7, (i) each Guarantor’s “Contribution Percentage” shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “Adjusted Net Worth” of each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero; and (iii) the “Net Worth” of each Guarantor shall mean the amount by which the fair saleable value of such Guarantor’s assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any Guaranteed Obligations arising under this Article 4) on such date.  All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 4.7, each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment until all of the Obligations have been irrevocably and paid in full in cash.  Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution.  In this connection, each Guarantor has the right to waive its contribution right against any Guarantor to the extent 

that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Purchaser.

Article 5.

CONDITIONS PRECEDENT TO EFFECTIVENESS AND CLOSING

Section 5.1This Agreement and the obligations of the Purchaser to purchase the Senior Note and to pay the Purchase Price therefore are subject to the satisfaction (or waiver by the Purchaser in its sole discretion, which such waiver must be in writing signed by Purchaser and specifically reference this Section 5.1) to Purchaser’s satisfaction of each of the following conditions:

(A)No Injunction, etc.  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of, this Agreement or any other Transaction Document, the Subject Acquisitions or the Subject Acquisition Documents, or the consummation of the transactions contemplated hereby or thereby, or which, in Purchaser’s sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement.

(B)Documentation.  Purchaser shall have received, on or prior to the Closing Date, the following, each in the form and substance satisfactory to Purchaser and its counsel:

(1)duly executed counterparts of this Agreement by each of the Obligors party hereto, together with all Schedules hereto;

(2)a Senior Note in the principal amount of Forty Million Dollars ($40,000,000) duly executed and issued by the Company to the Purchaser;

(3)the Security Agreement, duly executed by each of the Obligors, together with all schedules thereto; 

(4)the Pledge Agreement, duly executed by each of the Obligors, which for avoidance of doubt includes, among other collateral specified therein, a pledge of 65% of the equity of all first-tier Foreign Subsidiaries of the Obligors (other than any Excluded Subsidiaries), together with all schedules thereto;

(5)Post-Closing Letter Agreement, duly executed by the Company;

(6)a Closing Certificate, duly executed by the Company, certifying as to no default and the consummation of the Subject Acquisitions and certain other matters, and attaching true, correct and complete copies of all Acquisition Documents and Existing Debt Documents;

(7)[intentionally deleted];

(8)Pay Proceeds Letter, duly executed and delivered by the Company, directing application of the proceeds of the Purchase Price to (i) the payment of all fees and expenses owed by the Company to the Purchaser, including, without limitation, the payment of the non-refundable closing fee due to the Purchaser in the amount of $1,000,000, and all attorneys’ fees and expenses of the Purchaser’s counsel and other advisors, (ii) the payment of a portion of the purchase price consideration due at closing pursuant to the Subject Acquisition Agreements as in effect on the date 

hereof, (iii) the repayment in full of all Existing Subordinated Notes, together with all accrued and unpaid interest thereon, (iv) the repayment in full of all outstanding debts and other amounts owing by the Company and/or any of its Subsidiaries in respect of the debt described on Schedule 8.1 that is designated as to be paid off at Closing, including, without limitation (A) all loans, debt and other amounts owing to the Sterling National Bank, including all outstanding amounts under the Sterling Facility Agreement, and (B) all principal, interest and other amounts owing to MidCap Funding X Trust (or any affiliate thereof) solely in respect of all outstanding term loans, and (vi) the payment of certain fees and other amounts as specified in the Funds Flow Statement in the form attached as Exhibit A to the Pay Proceeds Letter (the “Funds Flow”), all in form and substance satisfactory to the Purchaser;

(9)UCC-1 Financing Statements for filing in each appropriate jurisdiction naming each of the Obligors (including, without limitation, S360 Georgia) as “debtor” and the Purchaser as “secured party” covering the Collateral;

(10)Copies of all stock certificates evidencing any certificated Equity Interests pledged to the Purchaser pursuant to the Pledge Agreement, together with duly executed in blank, undated stock powers attached thereto, including without limitation any and all stock certificates previously delivered by the Company to MidCap Senior Agent; with the originals of such stock certificates and stock powers to follow by no later than the date required for such delivery as set forth in the Post-Closing Letter Agreement;  

(11)UCC, tax, judgment and lien search results with respect to each Obligor, the Butler Entities and the “Sellers” as defined under the FirstPro Acquisition Agreement, from all appropriate jurisdictions and filing offices as requested by the Purchaser, with results satisfactory to the Purchaser, together with executed originals of such termination statements, releases and cancellations of mortgages required by the Purchaser in connection with the removal of any Liens (other than Permitted Liens) against the assets of the Obligors and the assets and equity interests being acquired pursuant to the Subject Acquisition Agreements; 

(12)Secretary Certificate for each Obligor, together with attached copies of the certificate of formation, organization or jurisdictional equivalent of each Obligor and all amendments thereto certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, together with the bylaws, operating agreement or equivalent document, in each case, certified by the relevant secretary or manager of such Obligor as of a recent date; and (b) good standing certificates or jurisdictional equivalent for each Obligor, issued by the relevant Secretary of State and or equivalent governmental authority in which such Obligor is organized, in each case as of a recent date; (c) a copy of resolutions adopted by the governing board of each Obligor, authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which such Obligor is a party certified as true, complete and correct by the relevant secretary of manager of such Transaction as of a recent date; and (d) specimen signatures of the officers or members of each Obligor executing the Agreement and the other Transaction Documents, certified as genuine by the relevant secretary or manager of such Obligor;

(13)favorable legal opinion of (i) Haynes & Boone, LLP, counsel to the Obligors, and (ii) Law Offices of Keith A. Minoff, P.C., special Massachusetts counsel to the Obligors, each addressed to the Purchaser, covering such matters relating to the transactions contemplated hereby as the Purchaser may reasonably request, and in form and scope reasonably satisfactory to Purchaser and its counsel; 

(14)copies of all consents and waivers, if any, required by any Governmental Authorities or required under any of the Company’s Material Contracts in connection with the transactions contemplated hereby, including, without limitation, consents or waivers with respect to any agreements prohibiting (A) the grant of any security interest on any Collateral, (B) the payment of the Commitment Fee Shares, and (C) the incurrence of the Obligations, any guaranty thereof by any Guarantor, and any security or pledge by the Obligors in favor of Purchaser, including without limitation any required consent of the MidCap Senior Agent under MidCap ABL Credit Agreement to the incurrence of Debt under the Senior Note, the guarantees by the Guarantors and the grant of Liens in favor of the Purchaser, shall be delivered as condition to the Closing;

(15)certified copies of (A) the audited annual consolidated financial statements of the Company for the fiscal years ending December 31, 2016, (B) the internally prepared monthly and year-to-date consolidated financial statements of the Company as of July 29, 2017, and (C) three years of preliminary financial projections for the Company and its consolidated subsidiaries, each in form and substance satisfactory to the Purchaser, copies of which are attached as Exhibit C hereto; 

(16)a duly executed solvency certificate from the Company as to solvency of each the Obligors, the Company and the Guarantors, taken as a whole, after giving effect to the transactions contemplated hereunder to occur on the Closing Date, including, without limitation, the incurrence of the Debt evidenced by the Senior Note, the consummation of the Subject Acquisitions and the payment of the purchase price consideration under the Subject Acquisition Agreements, each in form and substance satisfactory to the Purchaser;

(17)each other Transaction Document and closing item specified as an item to be delivered on or prior to the Closing Date on the Closing Checklist prepared by Purchaser’s counsel and furnished to the Company and its counsel shall have been executed and delivered to Purchaser or otherwise satisfied, as applicable, in each case, as determined by the Purchaser; 

(18)evidence of cancellation of the Global Intercompany Note, dated January 25, 2017, among the Company and the Subsidiaries party thereto;

(19)copies of the Longbridge Intercompany Note, duly executed by S360 Ltd., together with a duly executed allonge by the Company endorsing said note in blank to Purchaser; with originals of such note and allonge to be delivered to Purchaser by no later than the date required for such delivery as set forth in the Post-Closing Letter Agreement; and 

	
(20)
	
Collateral Assignment of Acquisition Documents, duly executed by the Company and S360 Georgia.

(C)No Material Adverse Effect.  No Material Adverse Effect has occurred since December 31, 2016.

(D)No Default, Etc.  No Default or Event of Default shall exist;

(E)Representations Accurate.  All representations and warranties made by the Obligors contained herein or in any other Transaction Document shall be true and correct in all material respects on and as of the Closing Date.

	
(F)
	
Delivery of Note Documents to MidCap.  Company shall have furnished to Purchaser evidence satisfactory to Purchaser that (i) Company has delivered true, correct and complete copies of all 

		
Note Documents to MidCap Senior Agent and (ii) MidCap Senior Agent has acknowledged (by electronic email or otherwise) receipt of same.

	
(G)
	
Repayment of Certain Existing Debt/Payoff Letters.  Substantially contemporaneously with the funding of the Purchase Price on the Closing Date, all Debt and other obligations on Schedule 8.1 that are designated as to be paid off at Closing shall have been paid in full and all Liens securing such Debt and other obligations shall have been terminated and released, and the Purchaser shall have received payoff letters from each of the applicable creditors/secured party agents in respect of all such debt, together with UCC 3 termination statements and other Lien releases as necessary with respect to any financing statements or security instruments evidencing any Liens securing such Debt and other obligations, all in form and substance reasonably satisfactory to Purchaser.  

	
(H)
	
Payment of Fees and Expenses.  The Company shall have paid to the Purchaser all fees and other amounts due and payable to the Purchaser, including but not limited to the payment of the closing fee in the amount of $1,000,000 (the “Closing Fee”) and all reasonable and documented out-of-pocket fees and expenses of legal counsel and other advisors to the Purchaser in connection with the transactions contemplated by the Transaction Documents and the preparation, negotiation, execution and delivery of the Transaction Documents.  The Company hereby authorizes the Purchaser to deduct from the proceeds of the Purchase Price to be paid for the Senior Note all such fees and expenses to the extent not paid directly by the Company on or prior to the Closing Date, as well as all amounts owing under the Existing Subordinated Notes.  The Closing Fee shall be fully earned and non-refundable when paid.

	
(K)
	
MidCap Intercreditor Agreement/MidCap Approval.  The Purchaser shall have received the MidCap Intercreditor Agreement, in form and substance satisfactory to it, duly executed by the Purchaser, the MidCap Senior Agent, the Company and other Obligors party thereto.  Purchaser shall have received evidence satisfactory to it of the consent of MidCap Funding X Trust to the incurrence of Debt under the Senior Note and the grant of Liens in favor of the Purchaser to the extent required under the under MidCap ABL Credit Agreement.

	
(L)
	
Commitment Fee Shares.  The Company shall have instructed its stock transfer agent to reflect the issuance of the Commitment Fee Shares to the Purchaser on the Closing Date and to deliver a share certificate to the Purchaser as required pursuant to Section 7.15.  Purchaser shall have received copies of said instructions, in form and substance reasonably satisfactory to it.

	
(M)
	
Consummation of the Subject Acquisitions.  All conditions to the closing of the Subject Acquisitions as set forth in the Subject Acquisition Agreements (other than the payment of the cash consideration due at closing) shall have been satisfied, and all third party and governmental consents and approvals necessary or required in order to consummate the Subject Acquisitions have been obtained.  There shall be no lawsuit, injunction, order or similar legal proceeding or process existing that challenges or seeks to challenge the validity or consummation of any of any the Subject Acquisitions, or otherwise relating to any of the Subject Acquisitions or any of the Subject Acquisition Documents.  Substantially contemporaneously with the funding of the Purchase Price, the Subject Acquisitions shall have been consummated on the Closing Date in accordance with the terms of the Subject Acquisition Documents as in effect on the Closing Date.  

Article 6.

REPRESENTATIONS AND WARRANTIES

Section 6.1Representations and Warranties Generally.  Each Obligor hereby represents and warrants to the Purchaser that the following statements set forth in Section 6.2 through and including 

Section 6.30 are true and correct, which are made after giving effect to the consummation of the Subject Acquisitions on the Closing Date:

Section 6.2Corporate Existence; Subsidiaries.  Each Obligor is an entity as specified on Schedule 6.2, is duly organized, validly existing and in good standing under the laws of the jurisdiction specified on Schedule 6.2 and no other jurisdiction, has the same legal name as it appears in such Obligor’s Organizational Documents and an organizational identification number (if any), in each case as specified on Schedule 6.2, and has all powers and all Permits necessary or desirable in the operation of its business as presently conducted or as proposed to be conducted, except where the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect. Each Obligor is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which jurisdictions as of the Closing Date are specified on Schedule 6.2, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 6.2, no Obligor (a) has had, over the five (5) year period preceding the Closing Date, any name other than its current name, or (b) was incorporated or organized under the laws of any jurisdiction other than its current jurisdiction of incorporation or organization. 

Section 6.3Organization and Governmental Authorization; No Contravention.  The execution, delivery and performance by each Obligor Party of the Transaction Documents (including, without limitation (a) the issuance and sale, on the terms and subject to the conditions set forth herein, of (i) the Senior Note in the aggregate issue amount of Forty Million Dollars ($40,000,000), and (ii) the Existing Warrant, and (b) the issuance of the Commitment Fee Shares to which it is a party are within its powers, have been duly authorized by all necessary action pursuant to its Organizational Documents, require no further action by or in respect of, or filing with, any Governmental Authority and, except as set forth on Schedule 6.3, do not violate, conflict with or cause a breach or a default under (a) any law applicable to any Obligor or any of the Organizational Documents of any Obligor, (b) any Existing Senior Secured Debt Document, or any other material indenture, agreement or other to which any Obligor is a party or by which the Obligors or any of their respective properties is bound, except for such violations, conflicts, breaches or defaults as could not, with respect to this clause (b), reasonably be expected to have a Material Adverse Effect.  The execution, delivery and performance of the Transaction Documents by the Obligors will not result in or require the creation of any material Lien upon or with respect to any of the properties of any Obligor, other than Liens granted in favor of Purchaser pursuant to the Transaction Documents.  

Section 6.4Binding Effect.  Each of the Transaction Documents to which any Obligor is a party constitutes a valid and binding agreement or instrument of such Obligor, enforceable against such Obligor in accordance with its respective 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.

Section 6.5Capitalization.  

(a)The authorized equity securities of each of the Obligors as of the Closing Date are as set forth on Schedule 6.5. All issued and outstanding equity securities of each of the Obligors are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of the Purchaser and Permitted Liens, and such equity securities were issued in compliance with all applicable laws. With the exception of the Existing Warrant Documents, the identity of the holders of the equity securities of each of the Obligors and the percentage of their fully-diluted ownership of the equity securities of each of the Obligors as of the Closing Date is set forth on Schedule 6.5.  The common shares reserved for issuance by the Company pursuant to any existing contractual commitment is as set forth on Schedule 6.5.  No shares of the capital stock or other equity securities of any Obligors, other than those described above, are issued and outstanding 

as of the Closing Date. Except as set forth on Schedule 6.5, as of the Closing Date there are no (i) preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Obligor of any equity securities of any such entity, and (ii) stockholder agreements (or equivalent), subscription agreements, voting trust agreements or any other similar agreements relating to the Equity Interests of any of the Obligors.

(b)The Common Stock of the Company underlying the Existing Warrant and the Commitment Fee Shares has been duly and validly authorized and when issued, will be duly and validly issued, fully paid and non-assessable, and such shares of Common Stock of the Company will not be issued in violation of any preemptive or other rights of stockholders of the Company and will be free from all taxes, liens, and charges with respect to the issuance thereof.

Section 6.6Financial Information.  All information delivered to the Purchaser and pertaining to the financial condition of any Obligor fairly presents the financial position of such Obligor as of such date in conformity with GAAP (and as to unaudited financial statements, subject to normal year-end adjustments and the absence of footnote disclosures). Since December 31, 2016, there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of any Obligor.

Section 6.7 Litigation.  Except as set forth on Schedule 6.7 as of the Closing Date, and except as hereafter disclosed to the Purchaser in writing, there is no Litigation pending against, or to such the Company’s knowledge threatened against or affecting, any Obligor or, to the Company’s knowledge, any party to any Transaction Document other than an Obligor. There is no Litigation pending in which an adverse decision could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of any of the Transaction Documents.

Section 6.8Ownership of Property.  Each Obligor and each of its Subsidiaries is the lawful owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties and other assets (real or personal, tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person.

Section 6.9No Default.  No Event of Default, or to the Company’s knowledge, Default, has occurred and is continuing. No Obligor is in breach or default under or with respect to any contract (including any Material Contract), agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.

Section 6.10 Labor Matters.  As of the Closing Date, there are no strikes or other labor disputes pending or, to the Company’s knowledge, threatened against any Obligor. Hours worked and payments made to the employees of the Obligors have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Obligors, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case may be. The consummation of the transactions contemplated by the Transaction Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which it is a party or by which it is bound.

Section 6.11Regulated Entities.  No Obligor is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.

Section 6.12[Reserved].

Section 6.13 Compliance With Laws; Anti-Terrorism Laws.

(a)Each Obligor is in compliance with the requirements of all Applicable Laws, except for such laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.

(b)None of the Obligors and, to the knowledge of the Company, no Affiliate of any Obligor (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No Obligor nor, to the knowledge of the Company, any of Affiliates of any Obligor or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order, any similar executive order or other Anti-Terrorism Law.

Section 6.14Taxes.  All federal, state and local tax returns, reports and statements required to be filed by or on behalf of each Obligor have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed and, except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. Except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, all state and local sales and use Taxes required to be paid by each Obligor have been paid. All federal and state returns have been filed by each Obligor for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except as set forth in Schedule 6.14 and except to the extent subject to a Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made..

Section 6.15Compliance with ERISA.

(a)Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with, has been administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Obligor has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.

(b)Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Obligor and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date, (i) except as set forth in Schedule 6.15, no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has occurred with respect to any Pension Plan 

sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by any Obligor of any material liability, fine or penalty. No Obligor has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Obligor or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable Law; no Obligor nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan, and no Obligor nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

Section 6.16 Consummation of Transaction Documents; Brokers.  Except for fees payable to the Purchaser or as set forth on Schedule 6.16, no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Transaction Documents, and no Obligor has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.

Section 6.17[Reserved].

Section 6.18Material Contracts.  Except for the Existing Senior Secured Debt Documents, the Subject Acquisition Documents and the other agreements set forth on Schedule 6.18 as of the Closing Date, there are no (a) employment agreements covering the management of any Obligor, (b) collective bargaining agreements or other similar labor agreements covering any employees of any Obligor, (c) agreements for managerial, consulting or similar services to which any Obligor is a party or by which it is bound, (d) agreements regarding any Obligor, its assets or operations or any investment therein to which any of its equity holders is a party or by which it is bound, (e) real estate leases, Intellectual Property licenses or other lease or license agreements to which any Obligor is a party, either as lessor or lessee, or as licensor or licensee (other than licenses arising from the purchase of “off the shelf” products), (f) customer, distribution, marketing or supply agreements to which any Obligor is a party, in each case with respect to the preceding clauses (a) through (e) requiring payment of more than $250,000 in any year, (g) partnership agreements to which any Obligor is a general partner or joint venture agreements to which any Obligor is a party, (h) third party billing arrangements to which any Obligor is a party, or (i) any other agreements or instruments to which any Obligor is a party, and the breach, nonperformance or cancellation of which, or the failure of which to renew, could reasonably be expected to have a Material Adverse Effect. Each of the Material Contracts is in full force and effect on the date hereof and the consummation of the transactions contemplated by the Transaction Documents and the Subject Acquisition Documents will not give rise to a right of termination in favor of any party (other than any Obligor) to any Material Contract, except for such Material Contracts the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.  

Section 6.19[Reserved].

Section 6.20Intellectual Property.  Each Obligor owns, is licensed to use or otherwise has the right to use, all Intellectual Property that is material to the condition (financial or other), business or operations of such Obligor. All Intellectual Property existing as of the Closing Date which is issued, 

registered or pending with any United States or foreign Governmental Authority (including, without limitation, any and all applications for the registration of any Intellectual Property with any such United States or foreign Governmental Authority) and all licenses under which any Obligor is the licensee of any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person are set forth on Schedule 6.20. Such Schedule 6.20 indicates in each case whether such registered Intellectual Property (or application therefor) is owned or licensed by such Obligor, and in the case of any such licensed registered Intellectual Property (or application therefor), lists the name and address of the licensor and the name and date of the agreement pursuant to which such item of Intellectual Property is licensed and whether or not such license is an exclusive license and indicates whether there are any purported restrictions in such license on the ability to such Obligor to grant a security interest in and/or to transfer any of its rights as a licensee under such license. Except as indicated on Schedule 6.20, the applicable Obligor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each such registered Intellectual Property (or application therefor) purported to be owned by such Obligor, free and clear of any Liens and/or licenses in favor of third parties or agreements or covenants not to sue such third parties for infringement. All registered Intellectual Property of each Obligor is duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. No Obligor is party to, nor bound by, any material license or other agreement with respect to which any Obligor is the licensee that prohibits or otherwise restricts such Obligor from granting a security interest in such Obligor’s interest in such license or agreement or other property. To the Company’s knowledge, each Obligor conducts its business without infringement or claim of infringement of any Intellectual Property rights of others and there is no infringement or claim of infringement by others of any Intellectual Property rights of any Obligor, which infringement or claim of infringement could reasonably be expected to have a Material Adverse Effect.

Section 6.21Solvency.  After giving effect to the incurrence of Debt under the Senior Note, the consummation of the transactions under the Transaction Documents and the Subject Acquisition Documents on the Closing Date, the liabilities and obligations of the Company and each Obligor under the Transaction Documents, taken as a whole, are Solvent.

Section 6.22Full Disclosure.  None of the written information (financial or otherwise) furnished by or on behalf of any Obligor to the Purchaser in connection with the consummation of the transactions contemplated by the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. All financial projections delivered to Purchaser by the Company (or their agents) have been prepared on the basis of the assumptions stated therein. Such projections represent the Company’s best estimate of the future financial performance of the Company and the other Obligors, as applicable, and such assumptions are believed by the Company to be fair and reasonable in light of current business conditions; provided, however, that the Company can give no assurance that such projections will be attained.

Section 6.23 Interest Rate.  The rate of interest paid under the Senior Note and the method and manner of the calculation thereof do not violate any usury or other law or Applicable Laws, or any of the Organizational Documents.

Section 6.24Subsidiaries.  Except as set forth on Schedule 6.24, the Company does not own any stock, partnership interests, limited liability company interests or other equity securities or Subsidiaries except for Permitted Investments.  As of the Closing Date, (i) there is no Subsidiary of the Company that is not an Obligor other than the Excluded Subsidiaries, and (ii) the Company does not own any Subsidiaries other than the Subsidiaries identified on Schedule 6.24.

Section 6.25[Reserved].

Section 6.26Approvals.  No consent of any Person and no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforcement of any Transaction Document (including, without limitation, the issuance of the Senior Note, the Existing Warrant and the Commitment Fee Shares) which has not been obtained or made as of the date hereof.  No approval of the stockholders of the Borrower shall be required under Nasdaq rules and regulations or otherwise due to the execution and performance under the Transaction Documents, including, without limitation, the issuance of the Commitment Fee Shares at the Closing.

Section 6.27Insurance.  Each Obligor has in place, with financially sound and reputable insurance companies or associations, casualty, public liability and other insurance, including without limitation, product liability insurance, in such amounts and covering such risks as are customarily maintained by other companies operating similar businesses in similar locations and will furnish to the Purchaser on the Closing Date, information presented in reasonable detail as to the insurance so carried, including (i) endorsements to (A) all “All Risk” policies naming the Purchaser as loss payee and (B) all general liability and other liability policies naming the Purchaser as additional insured and (ii) legends providing that no cancellation, material reduction in amount or material change in insurance coverage thereof shall be effective until at least thirty (30) days after receipt by the Purchaser of written notice thereof.

Section 6.28Continuing Business of Company.  There exists no actual or, to the knowledge of any Obligor, threatened in writing termination, cancellation or material limitation of, or any material modification or change in, (i) the business relationships of any Obligor with any customer or group of customers of such Obligor whose business individually or in the aggregate is material to the operations or financial condition of such Obligor, (ii) the business relationships of any Obligor with any of its material suppliers or (iii) any Material Contract; and each Obligor reasonably anticipates that after the consummation of the transactions contemplated by this Agreement, all such customers and suppliers will continue a business relationship with such Obligor on a basis no less favorable to such Obligor than as heretofore conducted.

Section 6.29[Reserved].

Section 6.30No General Solicitation.  Except as set forth in Schedule 6.16, neither the Company, nor any of its officers, employees, agents, directors, stockholders or partners has engaged the services of a broker, investment banker or finder to contact any potential investor nor has the Company or any of the Company’s officers, employees, agents, directors, stockholders or partners, agreed to pay any commission, fee or other remuneration to any third party to solicit or contact any potential investor, in either case with respect to the issuance of the Senior Note or the Existing Warrant.  The Company and its officers, directors, employees, agents, stockholders and representatives have not published, distributed, issued, posted or otherwise used or employed, and shall not publish, distribute, issue, post or otherwise use or employ, any form of general solicitation or general advertising, including, without limitation, via mass publication (including via mass e-mail to persons or entities with whom the Company has no substantial and pre-existing relationship), television, radio, the Internet or any other form of mass media (“General Solicitation”) within the meaning of Rule 502(c) under the Securities Act or any General Solicitation that constitutes a written communication within the meaning of Rule 405 under the Securities Act in connection with the offer and sale of the Senior Note and the Existing Warrant.  The Company shall conduct the offering of the Senior Note, and has conducted the offering of the Existing Warrant, in a manner so as to allow the offering to qualify for a private placement exemption from registration under the Securities Act, including Rule 506(b) thereunder.

Section 6.31Representations and Warranties of the Purchaser.  The Purchaser hereby represents and warrants to the Company as of the Closing Date that:

(a)Authorization.  The Purchaser has the requisite legal capacity, power and/or authority to enter into and perform under the Transaction Agreements.  The Transaction Agreements, when executed and delivered by each Purchaser, will constitute valid and legally binding obligations of such Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (b) to the extent the indemnification provisions contained in any Existing Warrant Documents may be limited by applicable federal or state securities laws.

(b)Purchase Entirely for Own Account.  The Senior Note to be acquired by the Purchaser on the Closing Date is being acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof; it being understood that Purchaser may after the Closing Date assign or transfer all or any part of the Senior Note in accordance with the terms of this Agreement.

(c)Disclosure of Information.  The Purchaser further represents that it has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Senior Note and the business, properties, prospects and financial condition of the Company.  The foregoing, however, does not limit or modify the representations and warranties of the Company in Article 6 of this Agreement or the right of the Purchaser to rely on such representations and warranties.

(d)Restricted Securities.  The Purchaser understands that the Senior Note and the Commitment Fee Shares may be characterized as “restricted securities” under the federal securities laws, inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations they may not be resold without registration under the Securities Act, except in certain limited circumstances.  In this connection, the Purchaser represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.  The Purchaser acknowledges that the Company shall have no obligation to register or qualify the Senior Note, except as set forth in this Agreement.  The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the applicable securities, and on requirements relating to the Company that are outside the Purchaser's control, and which the Company is under no obligation (except as otherwise set forth in Section 7.14 hereof) and may not be able to satisfy.

(e)Legends.  The Purchaser understands that the Existing Warrant, and any securities issued in respect of or exchange for the Existing Warrant, may bear one or all of the following legends:

	
 
	
(i)
	
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF 

	
 
		
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

	
 
	
(ii)
	
Any legend set forth in or required by the other Transaction Agreements.

	
 
	
(iii)
	
Any legend required by the securities laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

(f)Accredited Investor.  The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

(g)ERISA. The Purchaser is not acquiring the Senior Note and warrant with the assets of any employee benefit plan, which is subject to Title I of ERISA or any “plan” which is subject to Section 4975 of the Code. 

Each of the foregoing representations and warranties shall be deemed made by each Obligor on and as of the Closing Date and shall survive the execution and delivery of this Agreement and the Closing.

Article 7.

AFFIRMATIVE COVENANTS

So long as the Senior Note or any other Obligations (other than contingent obligations to the extent that no claim giving rise thereto has been asserted) shall remain outstanding pursuant to the Note Documents, unless the Purchaser shall otherwise consent in the manner set forth in Section 10.4, each Obligor shall, and shall cause each of its Subsidiaries to, comply with each of the following covenants:

Section 7.1Financial Statements and Other Reports.  The Company will deliver to the Purchaser: (a) as available, but no later than thirty (30) days after the last day of each month, a company prepared “flash report” covering the Company’s and its Consolidated Subsidiaries’ consolidated operations during the period, prepared in a manner, scope and detail satisfactory to the Purchaser, certified by a Responsible Officer and in a form acceptable to the Purchaser, (b) as available, but no later than forty five (45) days (unless further extended to sixty (60) days pursuant to the grant of a valid extension to the filing deadline of the related 10-Q from the SEC) after the last day of each Fiscal Quarter of the Company, a company prepared consolidated balance sheet, cash flow and income statement (including year-to-date results) covering the Company’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 the Purchaser; (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 Obligors with respect to the payroll period(s) occurring during such month, subject to Section 7.2; (d) as soon as available, but no later than one hundred five (105) days after the last day of the Company’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 the Purchaser in its reasonable discretion; (e) within five (5) days of delivery or filing thereof, copies of all statements, reports (other than borrowing base reports delivered pursuant thereto) and notices made available to the Company’s security holders or to any agents or lenders under any Existing Senior Secured Debt Documents and copies of all reports and other filings made by the Company with any stock exchange on which any securities of any Obligor are traded and/or the SEC; (f) a prompt written report of any legal actions pending or threatened against any Obligor or any of its 

Subsidiaries that could reasonably be expected to result in damages or costs to any Obligor or any of its Subsidiaries of One Hundred Fifty Thousand Dollars ($150,000) or more; (g) prompt written notice of an event that materially and adversely affects the value of any Intellectual Property; (h) budgets, sales projections, operating plans and other financial information and information, reports or statements regarding the Obligors, their business and the Collateral (including, without limitation, copies of any borrowing base reports delivered pursuant to any of the Existing Senior Secured Debt Documents) as the Purchaser may from time to time reasonably request. The Company will, within thirty (30) days after the last day of each month, deliver to the Purchaser (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; (i) promptly upon receipt thereof, copies of all financial statements of, and all reports and management letters submitted by, independent public accountants to any of the Obligors in connection with each annual, interim, or special audit of any Obligor’s financial statements; (j) within sixty (60) days following the end of the Company’s Fiscal Year, the Company shall deliver to the Purchaser the annual budget for both the Company and any of its Subsidiaries, including forecasts of the income statement, the balance sheet and a cash flow statement for the immediately succeeding year on a quarterly basis and thereafter, shall promptly deliver any amendment thereto; (k) promptly upon their becoming available, the Company shall deliver to the Purchaser copies of all Material Contracts or material amendments thereto entered into after the Closing Date.

Section 7.2Payment and Performance of Obligations.  Each Obligor (a) will pay and discharge, and cause each Subsidiary to pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities (i) that may be the subject of a Permitted Contest, and (ii) the nonpayment or nondischarge of which could not reasonably be expected to have a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (b) without limiting anything contained in the foregoing clause (a), pay all amounts due and owing in respect of Taxes (including without limitation, payroll and withholdings tax liabilities) on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, other than in connection with any tax payment plan with the applicable Governmental Authority on terms consistent with past practices, provided that Purchaser has been furnished with a copy of such payment plan (or if such payment plan is not in writing, the Company shall either (i) provide the Purchaser with a certificate of a Responsible Officer setting forth the material terms and conditions of such payment plan or (ii) for any such plans existing on the Closing Date, disclose the material terms and conditions of such plan on Schedule 6.14), (c) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of all of their respective obligations and liabilities, and (d) will not breach or permit any Subsidiary to breach, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, except for such breaches or defaults which could not reasonably be expected to have a Material Adverse Effect.

Section 7.3Maintenance of Existence.  Each Obligor will preserve, renew and keep in full force and effect and in good standing, and will cause each Subsidiary to preserve, renew and keep in full force and effect and in good standing, their respective existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business.

Section 7.4Maintenance of Property; Insurance.

(a)Each Obligor will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. If all or any part of the Collateral useful or necessary in its business becomes damaged or destroyed, 

each Obligor will, and will cause each Subsidiary to, promptly and completely repair and/or restore the affected Collateral in a good and workmanlike manner.

(b)Upon completion of any Permitted Contest, Obligors shall, and will cause each Subsidiary to, promptly pay the amount due, if any, and deliver to the Purchaser proof of the completion of the contest and payment of the amount due, if any, following which the Purchaser shall return the security, if any, deposited with the Purchaser pursuant to the definition of Permitted Contest.

(c)Each Obligor will maintain with financially sound and reputable insurance companies or associations casualty, public liability and other insurance in such amounts and covering such risks as are customarily maintained by other companies operating similar businesses in similar locations, and, at the written request of the Purchaser, provide evidence of compliance with this covenant to the Purchaser in the form of certificates of insurance naming the Purchaser as an additional insured, assignee and lender loss payee, as applicable, on each insurance policy required to be maintained pursuant to this Section 7.4 pursuant to endorsements in form and substance reasonably acceptable to the Purchaser.

Section 7.5 Compliance with Laws and Material Contracts.  Each Obligor will comply, and cause each Subsidiary to comply, with the requirements of all Applicable Laws and Material Contracts, except to the extent that failure to so comply could not reasonably be expected to (a) have a Material Adverse Effect, or (b) result in any Lien upon a material portion of the assets of any such Obligor in favor of any Governmental Authority.

Section 7.6Inspection of Property, Books and Records.  Each Obligor will keep, and will cause each Subsidiary to keep, proper books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Obligor or any applicable Subsidiary, representatives of the Purchaser to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the Collateral, to verify the amount and age of the accounts, the identity and credit of the respective account debtors, to review the billing practices of Obligors and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired. Notwithstanding the foregoing, in the absence of a Default or an Event of Default, the Purchaser exercising any rights pursuant to this Section 7.6 shall give the applicable Obligor or any applicable Subsidiary commercially reasonable prior notice of such exercise and (ii) Obligors shall only be required to reimburse the costs of the Purchaser for one such audit, inspection, verification or examination per Fiscal Year. No notice shall be required during the existence and continuance of any Default or Event of Default or any time during which the Purchaser reasonably believes a Default or an Event of Default exists.

Section 7.7Use of Proceeds.  The Company shall use the proceeds from the sale of the Senior Note solely for  (i) the payment of the purchase price for the Subject Acquisitions, (ii) the repayment in full of the Existing Subordinated Notes, together with the Debt on Schedule 8.1 that is designated as to be paid off at Closing on the Closing Date, (iii) to pay on the Closing Date the transaction fees and expenses incurred by the Company in connection with the transactions contemplated by this Agreement and the other items, in each case, as indicated on Funds Flow, and (iv) the remainder for working capital and the general corporate purposes of the Company, and none of such proceeds will be used, directly or indirectly, (a) for the purpose of purchasing or carrying any “margin security” or “margin stock” or for the purpose of reducing or retiring any debt that originally was incurred to purchase or carry a “margin security” or “margin stock” or for any other purpose that might constitute this transaction a “purpose credit” within the 

meaning of the regulations of the Board of Governors of the Federal Reserve System, (b) for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of any Anti-Corruption Laws, or (c) to fund any activities or business of or with any Designated Person or in any country or territory that at the time of such funding is itself the subject of any sanctions under any Anti-Terrorism Laws or any sanctions program administered by (x) OFAC or (y) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom in violation of any Anti-Terrorism Laws.  Neither the purchase of the Senior Note hereunder nor the use of the proceeds thereof, will result in a violation of any Anti-Terrorism Laws or any sanctions program administered by (x) OFAC or (y) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom, or otherwise in violation of any Anti-Corruption Laws. 

Section 7.8[Reserved].

Section 7.9Notices of Litigation and Defaults.  Obligors will give prompt written notice to the Purchaser (a) of any litigation or governmental proceedings pending or threatened (in writing) against any Obligor which would reasonably be expected to have a Material Adverse Effect or which in any manner calls into question the validity or enforceability of any Transaction Document or any Subject Acquisition Document, (b) upon any Obligor becoming aware of the existence of any Default or Event of Default together with a certificate of a Responsible Officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto, (c) if any Obligor is in breach or default under or with respect to any Material Contract, or if any Obligor is in breach or default under or with respect to any other contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default in each case or in the aggregate could reasonably be expected to have a Material Adverse Effect, (d) of any strikes or other labor disputes pending or, to the Company’s knowledge, threatened against any Obligor, (e) if there is any infringement or claim of infringement by any other Person with respect to any Intellectual Property rights of any Obligor that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any Obligor in the conduct of its business is infringing on the Intellectual Property Rights of others, and (f) of all returns, recoveries, disputes and claims that involve more than $250,000. Obligors represent and warrant that Schedule 7.9 sets forth a complete list of all matters existing as of the Closing Date for which notice could be required under this Section and all litigation or governmental proceedings pending or threatened (in writing) against any Obligor as of the Closing Date.

Section 7.10Further Assurances; Additional Guarantors.

(a)Each Obligor will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as the Purchaser may from time to time reasonably request in order to carry out the intent and purposes of the Transaction Documents and the transactions contemplated thereby, including all such actions to establish, create, preserve, protect and perfect a first priority Lien (subject only to Permitted Liens) in favor of the Purchaser on the Collateral (including Collateral acquired after the date hereof).

(b)Upon receipt of an affidavit of an authorized representative of the Purchaser as to the loss, theft, destruction or mutilation of the Senior Note or any other Transaction Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Senior Note or other applicable Transaction Document, Obligors will issue, in lieu thereof, a replacement Senior Note or other applicable Transaction Document, dated the date 

of such lost, stolen, destroyed or mutilated Senior Note or other Transaction Document in the same principal amount thereof and otherwise of like tenor.

(c)Within ten (10) Business days (or such later date as the Purchaser may agree in its sole discretion) after any Person becomes a direct or indirect Domestic Subsidiary of the Company or any other Obligor (other than any the Excluded Subsidiaries), whether by formation, acquisition or otherwise, the Company shall cause such Person to (i) become a Subsidiary Guarantor and to grant a lien on its assets by becoming a “Debtor” party to the Security Agreement and a “Pledgor” party to the Pledge Agreement, by executing and delivering to the Purchaser a Joinder Agreement in form and substance satisfactory to the Purchaser, (ii) the Company shall, and shall cause the applicable direct parent company of such new Domestic Subsidiary, to execute and deliver to the Purchaser a Joinder Agreement to such new Domestic Subsidiary as a “Pledged Entity” under the Pledge Agreement and pledge all of the equity interests of such new Domestic Subsidiary as security for the Obligations, in form and substance satisfactory to the Purchaser, and (iii) deliver to the Purchaser such charter documents, resolutions and favorable opinions of counsel reasonably requested by the Purchaser with respect to such new Domestic Subsidiary (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in the immediately preceding clauses (i) through (ii)), all in form, content and scope reasonably satisfactory to Purchaser.

Section 7.11[Reserved]

Section 7.12Maintenance of Management.  The Company will cause its business to be continuously managed by its present executive chairman, chief executive officer and chief financial officer or such other individuals serving in such capacities as shall be appointed by the board of directors of the Company. The Company will notify the Purchaser promptly in writing of any change in its board of directors or executive officers.

Section 7.13[Reserved].

Section 7.14Registration Rights; Indemnification.

(a)Registration Rights. The Commitment Fee Shares will be included in an existing Form S-3 Shelf Registration Statement with a resale prospectus through an amendment to such registration statement if permitted or through a new resale registration statement, either of which shall be filed by the Company with the SEC at the Company’s sole expense not later than forty-five (45) days after the Closing Date. The Company shall use its best efforts to cause such amendment to be declared effective by the SEC at the earliest practicable time and to remain effective for the period of the distribution contemplated thereby. The Company shall also (i) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period of the distribution and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement in accordance with the Purchaser’s intended method of disposition, (ii) use its commercially reasonable efforts to register or qualify the securities covered by such registration statement under the securities or blue sky laws of such jurisdictions as the sellers of securities or, in the case of an underwritten public offering, the managing underwriter, may reasonably request; and (iii) notify each seller when the prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, of any request by the SEC for amendments or supplements to such registration statement or to amend or to supplement such prospectus or for additional information, of the issuance by the 

SEC of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose.

(b)Indemnification.  To the extent permitted by law, the Company shall indemnify and hold harmless the Purchaser, and any of its members, officers, managers, legal counsel and accountants, underwriter (as defined in the Securities Act), against any expenses, losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act or other applicable federal or state law, insofar as such expenses, losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”):

(i)any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

(ii)the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading;

(iii)any violation or alleged violation by the Company of the Securities Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act or any federal or state securities law in connection with the offering covered by such registration statement;

and the Company shall reimburse the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person for any legal or other expenses reasonably incurred by it, as incurred, in connection with investigating or defending any such loss, claim, damage liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in any such registration statement in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use in preparation thereof.  Lender agrees to promptly notify the Company in writing of any such claim or suit that the pleading, demand letter, or other notice is served upon Lender; and agrees to cooperate in a reasonable manner with the Company and at the Company’s expense, with respect to the defense and disposition of such claim. The Company shall have control of the defense or settlement of any such claim; provided, however, that the Company shall not enter into any settlement that obligates the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person to take any action or incur any expense without such person’s prior written consent, and further provided that the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person shall have the right to be represented by independent counsel of their own choosing, at their own expense, in connection with such claim or suit. If the Company fails to defend such suit, then the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person, through counsel of their own choice, shall, at the expense of the Company, have the right to conduct the defense of such claim; provided however that the Purchaser and/or its applicable members, officers, managers, underwriter or controlling person shall not enter into any settlement that obligates the Company to take any action or incur any expense without the Company’s prior written consent.

Section 7.15Closing Commitment Fee.  The Company shall issue to the Purchaser two million two hundred and fifty thousand (2,250,000) shares of the Company's Common Stock (the "Commitment Fee Shares") as a closing commitment fee, which fee shall be fully earned on the Closing Date. Such shares shall be issued in the name of JIG on the Closing Date and the related share certificate shall be delivered to 

the Purchaser not later than five (5) days after the Closing Date. The Commitment Fee Shares shall be evidenced by an original share certificate duly executed, and validly issued and delivered by the Company to the Purchaser, representing 2,250,000 shares of Common Stock of the Company.  Such share certificate shall contain any restrictive legend comparable to the legend in Section 6.13€(i), provided however, the Company shall promptly cause such legend to be removed at any time that there is an effective registration statement covering the resale of such shares. The Purchaser agrees that it shall return such share certificate to the Company for its prompt inclusion of a restrictive legend comparable to the legend in Section 6.31(e)(i) if the Company provides written notice to the Purchaser that the registration statement referenced in Section 7.14 has ceased to be effective under applicable SEC rules and regulations.

Section 7.16Post-Closing Covenants; Segregated Account Covenant. 

(a)Post-Closing Letter Agreement.  The Company shall fully and timely comply with any and all covenants set forth in the Post-Closing Letter Agreement.

(b)Segregated Account Covenants.  On or prior to the time required for such in the Post-Closing Letter Agreement, the Company shall have established and shall maintain at all times thereafter a deposit account with a bank reasonably acceptable to the Purchaser (together with any replacement deposit account or additional deposit account of the Company approved in writing by the Purchaser, referred to herein the “Segregated Account”), which account shall not at any time be subject to any deposit account control agreement in favor of any Person (other than the Purchaser) and shall not be an account designated as an ABL Priority Deposit Account (as such term is defined in the MidCap Intercreditor Agreement or otherwise subject to a deposit account control agreement in favor of MidCap Senior Agent or any other Person (other than the Purchaser)).  The Company and the applicable depository bank shall have entered into a Deposit Account Control Agreement in favor of the Purchaser with respect to the Segregated Account within the time required for such in the Post-Closing Letter Agreement, and such Deposit Account Control Agreement shall remain in effect at all times after the date of execution and delivery by all parties thereto.  On and at all times after the establishment of the Segregated Account as required above, the Company will, and will cause each Subsidiary to, deposit into the Segregated Account (i) any and all dividends or distributions made by any Subsidiary to the Company or to any other Obligor on or after the date such Segregated Account is established, (ii) any and all payments of principal or interest under of the Longbridge Intercompany Note received by the Company on or after the date such Segregated Account is established, (iii) any and all cash proceeds received by the Company or any Subsidiary from the sale or issuance of any Equity Interests on or after the date such Segregated Account is established, (iv) any and all cash proceeds received by the Company or any other Obligor from the sale of any assets or equity interests of the Company or any Subsidiary on or after the date such Segregated Account is established other than ABL Priority Subsidiary Asset Sale Proceeds (as such term is defined in the MidCap Intercreditor Agreement), it being understood that the items described in the immediately preceding clauses (i) through (iv) inclusive shall not at any time on or after the date hereof be (A) deposited into any deposit account which is subject to a deposit account control agreement with MidCap Senior Agent or (B) otherwise commingled with any proceeds or other collateral in which MidCap has a first priority Lien in pursuant to the terms of the MidCap Intercreditor Agreement.  The Company will promptly upon request furnish Purchaser with copies of all bank statements with respect to the Segregated Account.  The Company shall have the right to make withdrawals from the Segregated Account from time to time to pay expenses in the Ordinary Course of Business, to make payments of principal and interest due under the MidCap ABL Credit Agreement and otherwise to use such monies for lawful purposes not otherwise prohibited under this Agreement, in each case, so long as no Event of Default has occurred and is continuing or would result therefrom.  This Section 7.16(b) is in addition to and not in limitation of Section 8.14.  Upon the establishment of the 

Segregated Account (or any additional Segregated Account which has been approved by the Purchaser in writing), the Parent shall promptly (and in any event within two (2) Business Days thereafter) deliver notice thereof to the MidCap Senior Agent in accordance with the terms of the MidCap Intercreditor Agreement, together with a supplement to Schedule 2 to the MidCap Intercreditor Agreement designating and/or adding such Segregated Account as a “Term Debt Priority Deposit Account” (as such term is defined in the MidCap Intercreditor Agereement), in a form and substance reasonably satisfactory to the Purchaser; it being understood that the Company shall not deliver any such notice to MidCap Senior Agent of the designation of any Segregated Account or any supplement to Schedule 2 to the MidCap Intercreditor Agreement adding or changing any Segregated Account, in each case without the prior written consent of the Purchaser.

	
(c)
	
Upon the exercise by the Purchaser at any time of any purchase option under the MidCap Intercreditor Agreement, the Company shall promptly (and in any event within five (5) Business Days following demand therefore by the Purchaser) reimburse the Purchaser in full for any prepayment fee or premium paid by the Purchaser to the MidCap Senior Agent in connection with the exercise of any such purchase option. Nothing in the immediately preceding sentence is intended to obligate, nor shall it be construed as obligating, the Purchaser at any time and under any circumstances to exercise such purchase option, it being understood that any decision by the Purchaser to exercise such purchase option shall be made by the Purchaser in its sole and absolute discretion.

Article 8.

NEGATIVE COVENANTS AND FINANCIAL COVeNANTS

For so long as the Senior Note or any other Obligations shall remain outstanding (other than contingent obligations to the extent that no claim giving rise thereto has been asserted), unless the Purchaser shall otherwise consent in the manner set forth in Section 10.4, each Obligor agrees to comply with the following covenants:

Section 8.1Debt; Contingent Obligations.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt. No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any Contingent Obligations, except for Permitted Contingent Obligations.

Section 8.2Liens.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.

Section 8.3 Restricted Distributions.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Distribution, except, provided there exists no Default or Event of Default, for Permitted Distributions.

Section 8.4 Restrictive Agreements.  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) enter into or assume any agreement (other than (w) the Transaction Documents (x) any agreements for purchase money debt permitted under clause (c) of the definition of Permitted Debt and (y) the Existing Senior Secured Debt Documents as in effect on the date hereof) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind (except as provided by the Existing Senior Secured Debt Documents) on the ability of any Subsidiary 

to: (i) pay or make Restricted Distributions to any Obligor or any Subsidiary; (ii) pay any Debt owed to any Obligor or any Subsidiary (other than to another Excluded Subsidiary); (iii) make loans or advances to any Obligor or any Subsidiary; or (iv) transfer any of its property or assets to any Obligor or any Subsidiary.

Section 8.5Payments and Modifications of Subordinated Debt.  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) declare, pay, make or set aside any amount for payment in respect of any Subordinated Debt, except for payments made in full compliance with and expressly permitted under a subordination agreement in form and substance satisfactory to Purchaser (other than by a Subordinated Debt Permitted Refinancing), (b) amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full compliance with the Subordination Agreement, (c) declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by separate agreement, is subordinated to the Obligations, except for payments made in full compliance with and expressly permitted under the subordination provisions applicable thereto, or (d) amend or otherwise modify the terms of any such Debt if the effect of such amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount of, such Debt, (iii) change in a manner adverse to any Obligor or the Purchaser any event of default or add or make more restrictive any covenant with respect to such Debt, (iv) change the prepayment provisions of such Debt or any of the defined terms related thereto, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Debt in a manner adverse to any of the Obligors or the Purchasers. The Obligors shall, prior to entering into any such amendment or modification, deliver to the Purchaser reasonably in advance of the execution thereof, any final or execution form copy thereof.  For the avoidance of doubt, nothing contained in this Section is intended to restrict the Company from making payments of principal and interest with respect to any Permitted ABL Senior Debt in accordance with the terms of the Existing Senior Secured Debt Documents and the Midcap Intercreditor Agreement; it being understood that Permitted ABL Senior Debt is not Subordinated Debt.

Section 8.6 Consolidations, Mergers and Sales of Assets; Change in Control.  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) consolidate or merge or amalgamate with or into any other Person (provided that (i) any Subsidiary may merge into the Company so long as the Company is the surviving entity, (ii) any Domestic Subsidiary may merge with and into any Obligor, provided that in the case of any merger with the Company, the Company is the surviving entity, and (iii) any Foreign Subsidiary may merge with and into any other Foreign Subsidiary of the Company or any Obligor, provided that in the case of a merger of a Foreign Subsidiary with and into any Obligor, such Obligor is the surviving entity, or (b) consummate any Asset Dispositions other than Permitted Asset Dispositions. No Obligor will suffer or permit to occur any Change in Control with respect to itself, any Subsidiary or any Guarantor, except any Change of Control with respect to a Subsidiary resulting from a merger or consolidation of the type expressly permitted under clauses (i) through (ii) of the proviso above in this Section 8.6.

Section 8.7 Purchase of Assets, Investments.  No Obligor will, or will permit any Subsidiary to, directly or indirectly (a) acquire or enter into any agreement to acquire any assets (other than in the Ordinary Course of Business), or acquire all or substantially all of the assets or Equity Interests of any Person (whether by merger, asset purchase, stock purchase or otherwise), except as permitted under clause (h) or clause (i) of the definition of Permitted Investments; (b) engage or enter into any agreement to engage in any joint venture or partnership with any other Person; or (c) acquire or own or enter into any agreement to acquire or own any Investment in any Person other than Permitted Investments.

Section 8.8Transactions with Affiliates.  Except as otherwise disclosed on Schedule 8.8 or as otherwise expressly permitted pursuant to this Agreement with respect to transactions between any 

Subsidiary and any other Subsidiary or the Company, no Obligor will, or will permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Obligor except, provided there exists no Default or Event of Default, for transactions that are disclosed to the Purchaser in advance of being entered into and which contain terms that are no less favorable to the applicable Obligor or any Subsidiary, as the case may be, than those which might be obtained from a third party not an Affiliate of any Obligor (collectively, “Permitted Intercompany Transactions”).  Notwithstanding anything to the contrary herein or in any Schedule, the Company and the Obligors may not pay any management fees to any Subsidiary or other Person that is not an Obligor.

Section 8.9Modification of Organizational Documents.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.

Section 8.10Modification of Certain Agreements.  (a) No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Existing Senior Secured Debt Documents (other than the MidCap ABL Credit Agreement) or any other Material Contract, which amendment or modification in any case: (i) is contrary to the terms of this Agreement or any other Transaction Document; (ii) could reasonably be expected to be materially adverse to the rights, interests or privileges of the Purchaser or their ability to enforce the same; (iii) results in the imposition or expansion in any material respect of any obligation of or restriction or burden on any Obligor or any Subsidiary; or (iv) reduces in any material respect any rights or benefits of any Obligor or any Subsidiaries (it being understood and agreed that any such determination shall be in the discretion of the Purchaser). Each Obligor shall, prior to entering into any amendment or other modification of any of the foregoing documents, deliver to the Purchaser reasonably in advance of the execution thereof, any final or execution form copy of amendments or other modifications to such documents, and such Obligor agrees not to take, nor permit any of its Subsidiaries to take, any such action with respect to any such documents.  No Obligor will, or will permit any Subsidiary to, (i) forgive any Debt evidenced by, or extend, postpone, defer or waive any required payments to be made under the Longbridge Intercompany Note as in effect on the Closing Date, (ii) amend or otherwise modify any of the terms of the Longbridge Intercompany Note as in effect on the Closing Date, (iii) sell, assign, transfer or otherwise dispose of the Longbridge Intercompany Note or any rights, duties or obligations thereunder, (iv) or pledge or grant a Lien upon the Longbridge Intercompany Note or any rights to payment thereunder (other than Liens in favor of (x) Purchaser or (y) MidCap Senior Agent so long as any such Lien in favor of MidCap Senior Agent is subject to the MidCap Intercreditor Agreement) in each case under clauses (i) through (iv) hereof, without the prior written consent of the Purchaser. 

	
(b)
	
No Obligor will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any MidCap ABL Credit Agreement or any related document thereto except for amendments or modifications made in full compliance of the MidCap Intercreditor Agreement.

Section 8.11Conduct of Business.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, engage in any line of business other than those businesses engaged in on the Closing Date and described on Schedule 8.11 and businesses reasonably related thereto. 

Section 8.12Lease Payments.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments except in the Ordinary Course of Business.

Section 8.13Limitation on Sale and Leaseback Transactions.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person whereby, in a 

substantially contemporaneous transaction, any Obligor or any Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.

Section 8.14Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts.  No Obligor will, or will permit any Subsidiary (except in the case of any Foreign Subsidiary in the Ordinary Course of Business) to, directly or indirectly, establish any new deposit account or securities account without prior written notice to the Purchaser, and, subject to the terms of the MidCap Intercreditor Agreement, unless the Purchaser, such Obligor or such Subsidiary and the bank, financial institution or securities intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement concurrently with the establishment of such deposit account or securities account. Each Obligor represents and warrants that Schedule 8.14 lists all of the deposit accounts and securities accounts of each Obligor as of the Closing Date. The provisions of this Section requiring Deposit Account Control Agreements shall not apply to any Excluded Accounts; provided, however, that at all times that any Obligations remain outstanding, the Obligors shall maintain one or more separate deposit accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other deposit account.

Section 8.15Compliance with Anti-Terrorism Laws.  No Obligor will, or will permit any Subsidiary to, directly or indirectly, knowingly enter into any Material Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each Obligor shall immediately notify the Purchaser if such Obligor has knowledge that any Obligor or any of their respective Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Obligor will, or will permit any Subsidiary to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

Section 8.16Sale or Discount of Receivables.  No Obligor shall sell with recourse or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable, except for up to $100,000 in the aggregate in discounts in any Fiscal Year of the Company.

Section 8.17Financial Covenants.  Each of the Obligors shall at all times during the term of this Agreement, comply with the following financial covenants and ratios as at the dates and for the fiscal periods indicated below:  

(a)Fixed Charge Coverage Ratio.  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors shall not, as of the end of any Fiscal Month, permit the Fixed Charge Coverage Ratio for the period of 12 consecutive Fiscal Months (“T12M”) ended on the last day of such Fiscal Month (each such measurement period herein referred to as a “Defined Period”) to be less than 1.0x. 

(b)Minimum Liquidity.  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors 

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 and if the Fixed Charge Ratio, as determined in Section 8.17(a), has been greater than 1.20x for three consecutive Defined Periods, Minimum Liquidity shall no longer be tested under this Section 8.17(b).

(c)Total Leverage Ratio.  Commencing with the Fiscal Month ending September 30, 2017 and until such time as all Obligations are paid, satisfied and discharged in full, the Obligors will not, as of the end of any Fiscal Month, permit the Total Leverage Ratio, calculated on a trailing T12M basis, to be greater than the ratio set forth in the table below for the corresponding Fiscal Month end set forth in the table below:

		
	
Fiscal Month
	
Total Leverage Ratio 

	
September 30, 2017
	
5.5 to 1.00

	
October 31, 2017
	
5.3 to 1.00

	
November 30, 2017
	
5.1 to 1.00

	
December 31, 2017
	
4.8 to 1.00

	
January 31, 2018

February 28, 2018

March 31, 2018
	
4.8 to 1.00

	
April 30, 2018

May 31, 2018

June 30, 2018
	
4.6 to 1.00

	
July 31, 2018

August 31, 2018

September 30, 2018
	
4.4 to 1.00

	
October 31, 2018

November 30, 2018

December 31, 2018
	
4.6 to 1.00

	
January 31, 2019

February 28, 2019

March 31, 2019
	
4.0 to 1.00

	
April 30, 2019

May 31, 2019

June 30, 2019
	
3.7 to 1.00

	
July 31, 2019

August 31, 2019

September 30, 2019
	
3.6 to 1.00

		
	
October 31, 2019

November 30, 2019

December 31, 2019
	
3.4 to 1.00

	
January 31, 2020

February 29, 2020

March 31, 2020
	
3.1 to 1.00

	
April 30, 2020

May 31, 2020

June 30, 2020
	
2.8 to 1.00

	
July 31, 2020 and

each Fiscal Month thereafter

 
	
2.6 to 1.00

 

(d)Evidence of Compliance. Commencing with the Fiscal Month ending September 30, 2017, Obligors shall furnish to the Purchaser, together with the monthly financial reporting required of Obligors in Section 7.1 hereof, a monthly Compliance Certificate as evidence of Obligors’ compliance with the covenants in this Section 8.17 and evidence that no Event of Default has occurred. The Compliance Certificate shall include, without limitation, (a) a statement and report, on a form approved by the Purchaser, detailing Obligors’ calculations, and (b) if requested by the Purchaser, back-up documentation (including, without limitation, invoices, receipts and other evidence of costs incurred during such fiscal period as the Purchaser shall reasonably require) evidencing the propriety of the calculations.

(e)Additional Defined Terms.  The following additional definitions are hereby appended to Section 1.1 of this Agreement:

“Adjusted EBITDA” means EBITDA (with reference in the definition of EBITDA to “Defined Period” being deemed to be references to “measurement period” for all purposes of this definition) plus (x) EBITDA during the applicable measurement period, but prior to the consummation of such acquisition, of businesses, assets or entities acquired through Permitted Acquisitions or other acquisitions to the extent expressly permitted under this Agreement plus (y) the amount of net “run rate” cost savings, operating expense reductions, other operating improvements and synergies resulting from acquisitions, dispositions, restructurings, cost savings initiatives and other operational initiatives projected by the Company in good faith to be realized after the end of the applicable measurement period but within twelve (12) months after the consummation of the acquisition, disposition, operational change or other applicable event, which is expected to result in such cost savings, expense reductions or synergies (calculated, in the case of each of the foregoing clauses (x) and (y), on a pro forma basis as though such items had been realized on the first day of such period) as a result of actions taken, including consummated acquisitions permitted under this Agreement, by any of the Obligors or any of their Subsidiaries, any operational changes (including, without limitation, operational changes arising out of the modification of contractual arrangements (including, without limitation, renegotiation of lease agreements, utilities and logistics contracts and insurance policies, as well as purchases of leased real properties)) or headcount reductions, net of the amount of actual benefits realized during such period that are otherwise included in the calculation of EBITDA from such actions (it being agreed that “run rate” means the full recurring benefit for a period that is associated with any action taken), provided that (A) a duly completed certificate signed by a Responsible Officer of the Company shall be delivered to the Purchaser together with the Compliance Certificate required to be delivered pursuant to Section 7.1, certifying that (x) such cost savings, operating expense reductions and 

synergies are reasonably expected and factually supportable, and (y) such actions have been taken and the results with respect thereto have been achieved or are reasonably expected to be achieved within twelve (12) months after the consummation of the acquisition, disposition, operational change or other applicable event, which is expected to result in such cost savings, expense reductions or synergies, (B) no cost savings, operating expense reductions and synergies shall be added pursuant to this subclause (y) to the extent duplicative of any expenses or charges otherwise added to EBITDA, whether through a pro forma adjustment or otherwise, for such period, (C) the aggregate amount of add backs made pursuant to this subclause (y) shall not exceed an amount equal to 50% of EBITDA for the period of four consecutive fiscal quarters most recently ended prior to the determination date and (D) such cost savings, operating expense reductions and synergies are reasonably expected and factually supportable as determined in the Purchaser’s sole discretion.  

 

“EBITDA” has the meaning provided in the Compliance Certificate.

“Fixed Charge Coverage Ratio” means the ratio of Operating Cash Flow (as defined in the Compliance Certificate) to Fixed Charges (as defined in the Compliance Certificate) for each Defined Period.  For the avoidance of doubt, the Fixed Charge Coverage Ratio shall be calculated on a pro forma basis with respect to any Permitted Acquisitions, with (i) pro forma adjustments relating to EBITDA of any target assets or entity acquired in connection with a Permitted Acquisition being made in accordance with clauses (x) and (y) of the definition of Adjusted EBITDA and (ii) and any interest or principal payments in respect of any Debt assumed or acquired in connection with such Permitted Acquisition being included for purposes of calculating Fixed Charges. 

“Fixed Charges” has the meaning provided in the Compliance Certificate.

“Minimum Liquidity” means the sum of Revolving Loan Availability (as such term is defined in the MidCap ABL Credit Agreement) plus cash and cash equivalents that are (a) owned by any Obligor, and (b) not subject to any Lien other than a Lien in favor of the Purchaser and the MidCap Senior Agent, excluding, however, any cash and cash equivalents in a specified amount pledged to or held by the MidCap Senior Agent to secure a specified Obligation (as such term is defined in the MidCap ABL Credit Agreement) in that amount. For the avoidance of doubt, cash and cash equivalents that in accordance with this Agreement secure the Senior Note or the obligations of the Obligors owing under the MidCap ABL Credit Agreement generally are not excluded except to the extent so specified above in this definition.

“Total Net Debt” means as of any date of determination, (a) an amount equal to the total aggregate principal amount of Debt of the Company and its Subsidiaries for borrowed money (including, without limitation, the principal amount of Obligations hereunder, the principal amount of Debt under the Existing Senior Secured Debt Documents, Debt of the type described under clauses (a) through (e) of the definition of Debt, and clauses (m) through (p) of the definition of Permitted Debt, capitalized leases and the outstanding balance of the Subordinated Debt) as of such date, less (b) (i) any unrestricted cash and cash equivalents that are (A) owned by any Obligor or any direct or indirect Foreign Subsidiary thereof as of such date, and (B) not subject to any Lien (other than a Lien in favor of the MidCap Senior Agent or Purchaser, but excluding, however, any cash and cash equivalents in a specified amount pledged to or held by the MidCap Senior Agent or the Purchaser to secure a specified Obligation in that amount), as of such date, and (ii) cash of the Company in an amount not to exceed $1,405,380 which is pledged as of such date by the Company as cash collateral for the Company’s reimbursement obligations in respect of a surety bond posted by the Company to stay enforcement of a judgment in the CSI related litigation described on 

Schedule 4.7 so long as (A) such reimbursement obligations of the Company in respect of such surety bond constitute Debt of a type that would otherwise be included in clause (a) above of this definition and (B) such cash collateral remains in effect and has not been applied in satisfaction of such reimbursement obligation or released. For purposes of calculating Total Net Debt the amount of any revolving Debt outstanding as of any Fiscal Month end test date shall be deemed to be the average daily balance of such revolving Debt outstanding during such Fiscal Month.

“Total Leverage Ratio” means for any measurement period the ratio of (a) Total Net Debt of Company and its Subsidiaries as of the last date of such period to (b) annualized Adjusted EBITDA of the Company and its Subsidiaries for the trailing twelve month period ending on such date.  For the avoidance of doubt, the Total Leverage Ratio shall be calculated on a pro forma basis with respect to any Permitted Acquisition, with (i) pro forma adjustments relating to EBITDA of any target assets or entity acquired in connection with a Permitted Acquisition being made in accordance with clauses (x) and (y) of the definition of Adjusted EBITDA and (ii) any Debt assumed or acquired in connection with such Permitted Acquisition being included in the calculation of Total Net Debt.   

Section 8.18Excluded Subsidiaries.  Unless an Excluded Subsidiary becomes a Guarantor hereunder in accordance with terms of 7.10 of this Agreement, no Obligor shall make any additional Investment (other than any Investments otherwise expressly permitted to be made to an Excluded Subsidiary in the definition of “Permitted Investments”) or other transfer, assignment or conveyance of any type of asset of any kind whatsoever to such Excluded Subsidiary.  

Article 9.

EVENTS OF DEFAULT

Section 9.1Events of Default.  Each of the following shall constitute an Event of Default, whatever the reason for such event and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule, or regulation of any governmental or nongovernmental body:

(a)(i) failure of the Company to pay any principal on any of the Senior Note when due; or (ii) failure of the Company to pay any interest on any of the Senior Note or to pay any other amount payable hereunder or under any other Note Documents and such failure to pay continues for three days after the due date thereof; or

(b)failure on the part of any Obligor to perform or observe any covenant contained in Article 4, Article 8, Sections 7.1, 7.2(b), 7.3, 7.6, 7.7, 7.10, 7.14, 7.15 or 7.16 hereof; or

(c)failure on the part of any Obligor to perform or observe any other term, covenant or agreement contained in this Agreement or in any other Note Document to which it is a party, not specifically referred to elsewhere in this Article 9, and any such failure remains unremedied for thirty (30) days after the earlier of (i) the discovery thereof by the Company or any other Obligor, or (ii) written notice thereof to the Company by the Purchaser; or

(d)any warranty, representation or other written statement made by or on behalf of any Obligor contained herein or in any other Transaction Document or in any instrument furnished in compliance with or in reference to this Agreement is false or misleading in any material respect on the date as of which made; or

(e)any Obligor shall fail to pay its debts generally as they come due, or shall file any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or

(f)an involuntary petition shall be filed under any bankruptcy statute against any Obligor, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) shall be appointed to take possession, custody, or control of the properties of any Obligor, unless such petition or appointment is set aside or withdrawn or ceases to be in effect within sixty (60) days from the date of said filing or appointment or an order for relief shall be entered in any such involuntary action; or

(g)any Obligor: (i) fails to may any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any principal, interest or other amount under any of the Existing Senior Secured Debt Documents, taking into account any applicable grace and cure periods provided for therein (provided, however, if (1) any such failure to pay relates to a borrowing base or appraisal deficiency or to the repurchase of assigned accounts and (2) the applicable creditor is permitting the repayment of such deficiency or repurchase over time, no Event of Default shall arise on account of such failure unless the Obligor subsequently fails to make such repayment when due); or (ii) breaches or fails to maintain compliance with any financial covenant contained in, or fails to perform or observe any other agreement, term or condition contained in, any Existing Senior Secured Debt Documents, or if any other event shall occur and be continuing thereunder, and the effect of such failure or other event as described above in this clause (ii) results in the holders thereof causing the maturity date of the Debt thereunder to be accelerated and become due prior to any stated maturity except to the extent waived by the holders thereof; or

(h)a Change of Control shall occur; or

(i)any order or judgment for the payment of money (unless fully covered by insurance as to which the relevant insurance company has not denied coverage) in excess of $250,000 shall be rendered against any Obligor, and such order or judgment shall continue unsatisfied and unstayed for more than the time permitted by applicable law for an appeal of such judgment to be filed; or

(j)any Obligor shall disavow, revoke or terminate any Transaction Document to which it is a party or shall otherwise challenge or contest in any action, suit or proceeding in any court or before any arbitrator or governmental body the validity or enforceability of this Agreement, any Note Document or any other Transaction Document; or

(k)a warrant or writ of attachment or execution or similar process shall be issued against any property of any Obligor which exceeds, individually or together with all other such warrants, writs and processes since the Closing Date, $250,000 in amount and such warrant, writ or process shall not be discharged, vacated, stayed or bonded for the time permitted by applicable law for an appeal of such judgment to be filed; provided, however, that in the event a bond has been issued in favor of the claimant or other Person obtaining such attachment or writ, the issuer of such bond shall execute a waiver or subordination agreement in form and substance satisfactory to the Purchaser pursuant to which the issuer of such bond subordinates its right of reimbursement, contribution or subrogation to the Obligations and waives or subordinates any Lien it may have on the assets of the Obligors; or

(l)any Obligor is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for more than the time permitted by applicable law for an appeal of such judgment to be filed; or

(m)the loss, suspension or revocation of, or failure to renew, any license, permit or Material Contract now held or hereafter acquired by any Obligor, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect; or

(n)any order, judgment or decree is entered against any Obligor decreeing the dissolution or split up of such Obligor and such order remains undischarged or unstayed for a period in excess of sixty (60) days; or

(o)the occurrence of (i) any material default or event of default under the terms of any of Existing Warrant Documents, or (ii) any default or event of default under the terms of any Material Contract (other than the Existing Senior Secured Debt Documents), to the extent such default or event of default would give the non-defaulting party thereto the right to terminate, cancel, or suspend its performance under, such contract and such default or event of default under such Material Contract, as the case may be, could reasonably be expected to have a Material Adverse Effect.

Section 9.2Remedies on Default.  (a)  Upon the occurrence and continuation of an Event of Default (other than an Event of Default described in Section 9.1 (e) and (f)), the Purchaser may, in its sole discretion, but shall not be obligated to, declare all amounts payable under the Senior Note and the other Note Documents to be forthwith due and payable, including, without limitation, costs of collection (including reasonable attorneys’ fees if collected by or through an attorney at law or in bankruptcy, receivership or other judicial proceedings) and the same shall thereupon become immediately due and payable without demand, presentment, protest or further notice of any kind, all of which are hereby expressly waived, and may exercise all of its rights and remedies under the Transaction Documents or under applicable law.

(b)Upon the occurrence of any Event of Default set forth in Section 9.1(e) or (f) above, without any notice to the Company or any other act by the Purchaser, all amounts payable under the Senior Note and the other Note Documents, including, without limitation, all costs of collection (including reasonable attorneys’ fees if collected by or through an attorney at law or in bankruptcy, receivership or other judicial proceedings) shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Company and each other Obligor.

(c)No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement and each other Transaction Document or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to exercise any remedy reserved to the Purchaser in this Agreement or any other Transaction Document, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

Article 10.

MISCELLANEOUS

Section 10.1Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including telecopier) and shall be effective (a) if given by mail, when deposited in the mails or (b) if given by telecopier, when so telecopied.  Notices hereunder shall be mailed or telecopied as follows:

If to the Company or any other Obligor:

Staffing 360 Solutions, Inc. 

3A London Wall Buildings

London Wall

London EC2M 5SY

United Kingdom

Attn:  Brendan Flood, Executive Chairman

Telephone No.:+44 20 7464 1999

 

with a copy to:

Staffing 360 Solutions, Inc.

641 Lexington Avenue, 27th Floor

New York, NY 10022

Attention: General Counsel

Telephone Number: 646-507-5718 

 

and

 

Haynes and Boone, LLP

30 Rockefeller Plaza

26th Floor

New York, New York 10112

Attention: Rick A. Werner and Greg Kramer

Telephone Number: 212-659-7300 

 

If to the Purchaser:

Jackson Investment  Group, LLC

2655 Northwinds Parkway

Alpharetta, Georgia 30009

Attn:  Richard L. Jackson

Telecopy Number:   678-495-5356

Telephone Number: 770-643-5605

with a copy to:

Kilpatrick Townsend & Stockton LLP

1100 Peachtree Street, N.E.

Atlanta, GA 30309

Attn:  David Stockton, Esq.

Telecopy Number:  (404) 815-541-3402

Telephone Number:  (404) 815-6444

Section 10.2No Waiver.  No delay or failure on the part of the Purchaser or any holder of the Senior Note and the exercise of any right, power or privilege granted under this Agreement or any other Transaction Document or available at law or in equity, shall impair any such right, power or privilege or be construed as a waiver of any Event of Default or any acquiescence therein.  No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege.  No waiver shall be valid against the Purchaser unless made in writing and signed by the Purchaser, and then only to the extent expressly specified therein.

Section 10.3Expenses.

(1)The Company agrees to pay on demand all costs, expenses, taxes and fees (i) incurred by the Purchaser in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents, including the reasonable and documented out-of-pocket fees and disbursements of counsel for the Purchaser, in each case, irrespective of whether or not the Closing has occurred or has failed to occur, (ii) incurred by Purchaser in connection with the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Purchaser relating to any of the Transaction Documents, including the reasonable costs and fees of counsel for the Purchaser; and (iii) incurred by the Purchaser, including the reasonable costs and fees of its counsel, in connection with the enforcement of the Transaction Documents.

(2)The Company agrees to indemnify, pay and hold the Purchaser and any holder of any of the Senior Note and the Existing Warrant and the officers, directors, employees and agents of the Purchaser and such holders (the “Indemnified Persons”) harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Person in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnified Person shall be designated a party thereto) which may be incurred by any Indemnified Person, relating to or arising out of this Agreement, the Senior Note, the Existing Warrant or any other Transaction Document, the transactions contemplated hereby or under any other Transaction Documents, and any actual or proposed use of proceeds of the Senior Note; provided, that no Indemnified Person shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction.

Section 10.4Amendments, Etc.  Any provision of this Agreement, the Senior Note, or any other Note Document to which the Company is a party may be amended or waived, if such amendment or waiver is in writing and is signed by the Company and the Purchaser.  Any provision of any other Note Document to which the Company is not a party may be amended or waived, if such amendment or waiver is in writing and is signed by the Obligor(s) party thereto and the Purchaser. 

Section 10.5Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, that (a) no Obligor may assign or otherwise transfer any of its rights or obligations under this Agreement, the Senior Note or any other Note Document to any Person without the prior written consent of the Purchaser (it being understood that the foregoing restriction is not intended to restrict the consummation of the Reincorporation on the Closing Date), and (b) so long as no Default or Event of Default has occurred and is continuing, any such assignment or transfer by the Purchaser of its rights or obligations under this Agreement or the Senior Note shall be subject to the consent of the Company, which consent shall not be unreasonably withheld, 

delayed or conditioned. Any assignee or transferee of the Purchaser shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, obligations and benefits as it would have if it were the Purchaser hereunder and under the other Note Documents.  Notwithstanding the foregoing, the Purchaser may sell or otherwise grant participations in all or any part of the Senior Note, provided, that so long as no Default or Event of Default has occurred and is continuing, any such sale or participation by the Purchaser of its rights or obligations under this Agreement or the Senior Note shall be subject to the consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned.  

Section 10.6Governing Law.  THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS SHALL (OTHER THAN THE MIDCAP INTERCREDITOR AGREEMENT) 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). 

Section 10.7Survival of Representations and Warranties.  All representations and warranties contained herein or made by or furnished on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Closing.

Section 10.8Severability.  If any part of any provision contained in this Agreement shall be invalid or unenforceable under applicable law, said part shall be ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provision or the remaining provisions.

Section 10.9Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.10Set-Off.  Upon the occurrence and during the continuation of an Event of Default, each Obligor authorizes the Purchaser, without notice or demand, to apply any indebtedness due or to become due to such Obligor from the Purchaser in satisfaction of any of the indebtedness, liabilities or obligations of such Obligor under this Agreement or under any other Note Document, including, without limitation, the right to set-off against any deposits or other cash collateral of the Company held by the Purchaser or an Affiliate thereof.

Section 10.11Termination of Agreement.  This Agreement shall terminate upon the payment in full of the Senior Note and all other Obligations (subject to Section 4.3 hereof); provided that Sections 3.2, 7.13, 7.14, 10.3, 10.6, 10.12 and 10.13 shall survive the termination of this Agreement.

Section 10.12Consent to Service of Process.  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01.  EACH OF THE OBLIGORS (OTHER THAN THE COMPANY) HEREBY irrevocably ACKNOWLEDGES AND AGREES TO THE APPOINTMENT BY EACH SUCH OBLIGOR OF THE COMPANY AS its NON-EXCLUSIVE AGENT FOR SERVICE OF PROCESS ON BEHALF OF EACH SUCH OBLIGOR IN ANY SUIT, ACTION or PROCEEDING brought by the purchaser arising out of or relating to THIS AGREEMENT, THE SENIOR NOTE or any of the OTHER Transaction documents.  Nothing in this Agreement or any other Transaction Document will affect the right of any party hereto or thereto to serve process in any other manner permitted by law.

Section 10.13WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN CONTRACT OR TORT, AT LAW OR EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR PURCHASER ENTERING INTO THIS AGREEMENT.  FURTHER, EACH OBLIGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER, NOR THE PURCHASER’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT PURCHASER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION, NO REPRESENTATIVE OR AGENT OF THE PURCHASER, NOR THE PURCHASER’S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

Section 10.14Entire Agreement.  This Agreement, the Senior Note and the other Transaction Documents to which the Company is a party, together with any exhibits and schedules attached hereto and thereto, constitute the entire understanding of the parties with respect to the subject matter hereof and thereof, and any other prior or contemporaneous agreements, whether written or oral, with respect hereto or thereto are expressly superseded hereby.  The execution of this Agreement, the Senior Note and the other Transaction Documents to which the Company is a party by the Company was not based upon any facts or materials provided by the Purchaser, nor was the Company induced to execute this Agreement, the Senior Note or the other Transaction Documents to which the Company is a party by any representation, statement or analysis made by the Purchaser.

Section 10.15Publicity.  The Company and the Purchaser agree to consult with each other before issuing any press release or public announcement regarding the transactions contemplated hereby or by the other Transaction Documents, and shall not issue any such press release or public announcement without the consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that while the Company will consult with the Purchaser with regards to any form 8-k filing with respect to the transactions contemplated hereby, nothing herein shall restrict the Company from so filing any such 8-k in accordance with the terms and requirements (including timing requirement) of the SEC.

Section 10.16Further Assurances.  At any time or from time to time after the date hereof, each party agrees to cooperate with the others, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. Without limiting the foregoing, the Obligors shall execute such documents and take such actions as Purchaser may reasonably request from time to time in order to perfect and/or maintain the perfection of its Liens on the Collateral.

Section 10.17Subordination of Intercompany Indebtedness and Management Fees.  Each Obligor (a “Subordinating Obligor”) agrees that the payment of all obligations and indebtedness, whether principal, interest, fees (including, without limitation, any management fees) and other amounts and whether now owing or hereafter arising, owing to such Subordinating Obligor by any other Obligor is expressly subordinated to the payment in full in cash of the Obligations.  If the Purchaser so requests after the occurrence and during the continuance of any Default or Event of Default, any such obligation or indebtedness shall be enforced and performance received by the Subordinating Obligor as trustee for the holders of the Obligations and the proceeds thereof shall be paid over to the holders of the Obligations on account of the Obligations, but without reducing or affecting in any manner the liability of the 

Subordinating Obligor under this Agreement or any other Note Document.  Without limitation of the foregoing, so long as no Default has occurred and is continuing, the Obligors may make and receive payments with respect to any such obligations and indebtedness, provided, that in the event that any Obligor receives any payment of any such obligations and indebtedness at a time when such  payment is prohibited by this Section, such payment shall be held by such Obligor, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the Purchaser.

Section 10.18Effect of Amendment and Restatement.  Effective upon satisfaction of the conditions set forth in Section 5.1, this Agreement shall be amend and restated the Existing Note Purchase Agreement in its entirety. The parties hereto acknowledge and agree that (a) this Agreement and the other Note Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation or termination of the “Obligations” (as defined in the Existing Note Purchase Agreement) under the Existing Note Purchase Agreement as in effect immediately prior to the Closing Date and which remain outstanding; and (b) except for any “Obligations” (as defined in the Existing Note Purchase Agreement) which are expressly contemplated to be repaid on the Closing Date and to the extent are in fact so repaid, the “Obligations” (as amended and restated hereby and which are hereinafter subject to the terms herein) are in all respects continuing.  Without limiting the foregoing, the parties hereto acknowledge and confirm that (i) the Company previously issued and sold to the Purchaser, and the Purchaser previously purchased, the Existing Warrant pursuant to the terms of the Existing Note Purchase Agreement and the Existing Warrant Documents, in reliance on the representations and warranties contained in the Existing Note Purchase Agreement, and (ii) on and after the Closing Date, and after giving effect to this Agreement, the Existing Warrant Documents shall remain in full force and effect and shall continue to be binding on and enforceable against the Company in accordance with their terms.  Notwithstanding the foregoing, the parties acknowledge and agree that the Purchaser irrevocably releases and discharges each Foreign Subsidiary from their obligations under any guarantee previously given in connection with the Existing Note Purchase Agreement and releases any and all liens and security interests previously granted by any Foreign Subsidiary to the Purchaser in connection with the Existing Note Purchase Agreement; it being understood that no Foreign Subsidiary is guaranteeing any of the Obligations or granting any security interest or pledge on its assets as security for the Obligations.

 

[Signatures on Following Pages]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Note Purchase Agreement to be executed by their authorized officers or members, as the case may be, all as of the day and year first above written.

		
	
 
	
COMPANY:

 

STaffing 360 solutions, inc. 

 

 

By: _/s/ Brendan Flood_______ 

Name: Brendan Flood

Title:   Executive Chairman

	
 
	
 

	
 
	
 

	
 
	
 

SUBSIDIARY GUARANTORS:

 

	
 
	
 

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

 

 

STAFFING 360 GEORGIA, LLC

 

 

By: _/s/ Brendan Flood_______

Name:  Brendan Flood

Title:    Executive Chairman

 

 

 

PURCHASER:

 

JACKSON INVESTMENT GROUP, LLC

 

 

By: _/s/ Douglas B. Kline_______

Name:  Douglas B. Kline

Title:    Chief Financial Officer

[SIGNATURE PAGE TO THE

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT]staf-ex104_6.htm

Exhibit 10.4

INTERCREDITOR AGREEMENT

 

THIS INTERCREDITOR AGREEMENT (this “Agreement”) is entered into as of September 15, 2017, among JACKSON INVESTMENT GROUP, LLC, a Georgia limited liability company, as purchaser and holder of the Term Note (as defined below) and as secured party under the Term Debt Documents (as defined below) (“Term Note Purchaser”), STAFFING 360 SOLUTIONS, INC., a Delaware 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 ABL Loan Agreement (as hereinafter defined) (acting in such capacity, “Agent”), and as a “Lender” under the ABL Loan Agreement, or such then present holder or holders of the ABL Loans (as hereinafter defined) as may from time to time exist (as the “Lenders” under the ABL Loan Agreement; collectively with the Agent, the “ABL Lenders”).  Reference in this Agreement to “Term Note Purchaser”, “Term Note Purchasers”, “each Term Note Purchaser” or otherwise with respect to any one or more of the Term Note Purchasers shall mean each and every person included from time to time in the term “Term Note Purchaser” and any one or more of the Term Note Purchasers, jointly and severally, unless a specific Term Note Purchaser is expressly identified.

 

RECITALS

 

A.PEOPLESERVE, INC., MONROE STAFFING SERVICES, LLC, PEOPLESERVE PRS, INC., FARO RECRUITMENT AMERICA, INC., LIGHTHOUSE PLACEMENT SERVICES, INC., STAFFING 360 GEORGIA, LLC and any additional borrower that may hereafter be added to the ABL Loan Agreement (as hereinafter defined) (collectively, “Borrowers”), Parent, Agent and ABL 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 “ABL Loan Agreement”) pursuant to which, among other things, ABL Lenders have made certain loans and financial accommodations to Borrowers.  Parent has guaranteed the obligations of Borrowers pursuant to that certain Payment Guaranty dated April 8, 2015 (as amended, restated, modified, substituted, extended and renewed from time to time, the “Parent Guaranty”).  Borrowers, Parent and any other Credit Party (as defined in the ABL Loan Agreement) may each be referred to herein as a “Credit Party” and collectively as “Credit Parties.”

 

B.All of Credit Parties’ obligations to ABL Lenders under the ABL Loan Agreement and the other ABL 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 the Credit Parties.

 

C.Term Note Purchaser has made a $40,000,000 senior debt secured investment in Parent that is guaranteed by the Borrowers pursuant to the Term Debt Documents (as defined below). All of the Credit Parties’ obligations to Term Note Purchaser under the Term Note Agreement and the other Term Debt 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 the Credit Parties.

 

D.Pursuant to the terms of the ABL Loan Agreement and the Term Debt Documents, ABL Lenders and Term Note Purchaser require the execution and delivery of this Agreement in order to set forth the relative rights and priorities of ABL Lenders and Term Note Purchaser under the ABL Loan Documents and the Term Debt Documents (as hereinafter defined) in the Common Collateral (as hereinafter defined).

 

AGREEMENT

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby covenant and agree as follows:

 

1.Definitions.  The following terms which are defined in the Uniform Commercial Code are used herein as so defined:  Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Records, Securities Accounts, Security, Security Entitlements and Supporting Obligations.

 

In addition, the following terms shall have the following meanings in this Agreement:

 

“ABL Enforcement Action” shall have the meaning as set forth in Section 17.1.

 

“ABL Debt” shall mean all obligations, liabilities and indebtedness (including, without limitation, the ABL Loans and all “Obligations” (as that term is defined in the ABL Loan Agreement) ) of every nature of any Grantor from time to time owed to ABL Lenders, evidenced by or incurred with respect to the ABL Loan Documents, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses evidenced by or incurred with respect to the ABL Loan Documents, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof; provided, however, that (i) in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser, and (ii) such amendments, modifications, renewals or extensions are not in violation of Section 7.1.  To the extent any payment with respect to any ABL Debt (whether by or on behalf of any Grantor, as Proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any Term Debt Secured Party, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the ABL Secured Parties and the Term Debt Secured Parties, be deemed to be reinstated and outstanding as if such payment had not occurred.

 

“ABL Debt Cap” with respect to the ABL Loans, means the aggregate principal amount of the following (all as determined exclusive of all interest, fees (including attorneys’ fees) and expenses, amounts (including, without limitation, attorneys’ fees and fees, expenses and obligations in respect of returned items and overdrafts or reversed payment orders, and fees and expenses in respect of cash management and treasury management services in line with the customary fees and expenses of a third-party provider of such services or, if the Agent or an affiliate of the Agent is the provider, in line with the reasonable and customary fees and expenses of such provider) expended by Agent or ABL Lenders and remitted to Persons other than the Credit Parties to enforce its rights and remedies in respect of the Collateral, the ABL Loans, or both, and all indemnity obligations): (i) $25,000,000,  plus (ii) during a Proceeding of any Credit Party, incremental principal amount not to exceed (if funded pursuant to an ABL DIP Financing) to 15% of the sum of the aggregate principal amount funded and outstanding under the immediately preceding clause (i) as of the day immediately preceding the commencement of such Proceeding, minus (iii) the amount of all payments of principal on (x) term loans (except for term loans intended to be repaid on or about the date of this Agreement) and (y) revolving loan obligations under the ABL Loan Agreement that result in a permanent reduction of the revolving credit commitments under the ABL Loan Agreement (other than (A) payments of such revolving loan obligations in connection with a refinancing thereof, including any Permitted Refinancing, (B) any commitment reduction occurring as a result of a default under the ABL Loan Documents that does not constitute a permanent commitment reduction and (C) any portion of the ABL DIP Financing used to refinance or “roll up” the ABL Loans.

 

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“ABL Debt Collateral” shall mean all assets, real property, personal property (including, but not limited to, Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Rights, Payment Intangibles, Records, Securities Accounts, Security Entitlements, Supporting Obligations, money, cash or cash equivalents, insurance policies, rights arising under insurance policies, and  accessions to, substitutions for, replacements for, and Proceeds and products of the foregoing), whether now owned or hereafter acquired by any Grantor or in which such Grantor now or hereafter has an interest, or as to which such Grantor now or hereafter has rights or the power to transfer rights, and wherever situated, all whether now owned or existing or hereafter acquired or arising, in which a Lien is granted or purported to be granted at any time to any ABL Secured Party as security for any ABL Debt.

 

“ABL Debt Payment Date” shall mean the first date on which (a) all ABL Debt have been Paid in Full, (b) all commitments to extend credit under the ABL Loan Documents have been terminated, (c) there are no outstanding letters of credit or similar instruments issued under the ABL Loan Documents, except for such items that have been fully cash collateralized to the satisfaction of the ABL Lenders, (d) so long as the Term Debt Payment Date shall not have occurred, the Agent has delivered a written notice to the Term Note Purchaser stating that the events described in clauses (a), (b) and (c) have occurred to the satisfaction of the ABL Secured Parties.

 

“ABL DIP Financing” shall have the meaning set forth in Section 5.2(a).

 

“ABL Lenders” shall have the meaning set forth in the preamble hereto; provided, that upon the consummation of any Permitted Refinancing, the ABL Lenders shall be the “ABL Lenders” (or like term) as specified in the applicable Permitted Refinancing of ABL Loan Documents.

 

 “ABL Liens” shall mean means any Lien created, or intended to be created, pursuant to the ABL Security Documents.

 

“ABL Loan Documents” shall mean (a) the ABL Loan Agreement, the Parent Guaranty, together with any promissory note or other instruments evidencing or securing the ABL Loans or the obligation to pay the ABL Loans, any guaranty with respect to the ABL Loans, any security agreement or other collateral document securing the ABL Loans (including, without limitation, the ABL Loan Agreement and Parent Guaranty) and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the ABL Loans (as any of the same may be amended, restated, supplemented or otherwise modified from time to time) and (b) after the consummation of any Permitted Refinancing, the Permitted Refinancing Documents; provided, however, that in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser.

 

“ABL Loans” shall mean the loans and other extensions of credit, to the extent the aggregate principal of which do not at any time exceed the ABL Debt Cap, made by the ABL Lenders to the Grantors pursuant to the ABL Loan Documents, together with all obligations, liabilities and indebtedness of every nature of any Grantor from time to time owed to ABL Lenders under the ABL Loan Documents or otherwise, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims, reimbursement obligations, and indebtedness, accrued and unpaid interest and all fees, costs, indemnities and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable pursuant to the ABL Loan Documents, whether before or after the filing of a Proceeding under the Bankruptcy Code, together with (a) any amendments, modifications, renewals or extensions thereof to the extent such amendments, modifications, renewals or extensions are not in violation of Section 7.1 or in case of any increases in principal in excess of the ABL Debt Cap, and (b) any interest accruing thereon after the commencement of 

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a Proceeding, without regard to whether or not such interest is an allowed claim; however, that in no event shall the aggregate outstanding principal amount due under the ABL Loans exceed the ABL Debt Cap without the prior written consent of the Term Note Purchaser.

 

“ABL Priority Collateral” shall mean all ABL Debt Collateral consisting of the following (including for the avoidance of doubt, any such assets, interests or rights that, but for the application of Section 552 of the Bankruptcy Code, or any similar provision of any other Debtor Relief Laws, would be ABL Priority Collateral): 

 

(a)(i) all Accounts, (ii)  other rights to payment, however evidenced, of a monetary obligation, whether or not earned by performance, in each case, for goods provided or to be provided or services rendered or to be rendered by a Borrower, and (iii) payment intangibles (except to the extent any of the foregoing arise under contracts for the sale of, or constitute identifiable Proceeds of, Term Debt Priority Collateral), to include, without limitation, tax refunds and refunds, reimbursements and indemnifications for current expenses and those with respect to contracts, business interruption insurance to the extent the proceeds of which are attributable to a diminution in the volume of revenue, and rights to the extent set forth in Section 3.4 to use or access Term Loan Priority Collateral during the Access Period;

 

(b)cash, money and cash equivalents constituting collections and proceeds of the items described in the preceding clause (a) (other than identifiable proceeds of Term Debt Priority Collateral) including, without limitation, ABL Priority Subsidiary Asset Sale Proceeds;

 

(c)all ABL Priority Deposit Accounts and, in each case, all cash, money, cash equivalents, checks and other property held therein or credited thereto (other than identifiable net proceeds of Term Debt Priority Collateral); provided, however, that Section 2.9 of this Agreement shall govern to the extent that identifiable Proceeds of Term Debt Priority Collateral are deposited in any such ABL Priority Deposit Accounts and to the extent any identifiable Proceeds of ABL Priority Collateral are deposited in any Term Debt Priority Accounts;

 

(d)to the extent relating to or arising from, evidencing or governing any of the items referred to in the preceding clauses (a) through (c) constituting ABL Priority Collateral, all Documents, General Intangibles (including all rights under contracts but excluding any intellectual property), Instruments (including promissory notes), Chattel Paper (including tangible Chattel Paper and electronic Chattel Paper) and Commercial Tort Claims; provided that to the extent any of the foregoing also relates to Term Debt Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (c) shall be included in the ABL Priority Collateral;

 

(e)to the extent relating to any of the items referred to in the preceding clauses (a) through (d) constituting ABL Priority Collateral, all Supporting Obligations and Letter-of-Credit Rights; provided that to the extent any of the foregoing also relates to Term Debt Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (d) shall be included in the ABL Priority Collateral;

 

(f)all books and Records relating to the items referred to in the preceding clauses (a) through (e) constituting ABL Priority Collateral (including all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the items referred to in the preceding clauses (a) through (e) constituting ABL Priority Collateral); provided that to the extent any of the foregoing also relates to Term Debt 

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Priority Collateral only that portion related to the items referred to in the preceding clauses (a) through (e) shall be included in the ABL Priority Collateral; and 

 

(g)all Proceeds of any of the items referred to in the preceding clauses (a) through (f).

 

“ABL Priority Deposit Accounts” shall mean all Deposit and Securities Accounts in which collections and other cash Proceeds of ABL Priority Collateral or advances under the ABL Loan Agreement are required to be deposited in accordance with the ABL Loan Documents (including any related lockboxes associated with such deposit accounts) and all other Deposit and Securities Accounts other than a Term Debt Priority Deposit Accounts.  As of the date hereof, the ABL Priority Deposit Accounts are listed on Schedule 1 attached hereto.  Agent and Parent agree to promptly notify Term Note Purchaser in writing of any additional ABL Priority Deposit Accounts established after the date hereof with Agent or which are subject to a deposit account or securities account control agreement in favor of Agent and to provide a written supplement to Schedule 1 hereto reflecting the addition of such ABL Priority Deposit Accounts; it being understood that any such supplement to Schedule 1 may not remove any Deposit Accounts or Securities Accounts set forth on Schedule 1 unless consented to in writing by Agent.

 

“ABL Priority Subsidiary Asset Sale Proceeds” shall mean, with respect to Subsidiary Asset Sale Proceeds, an amount equal to equal to 100% of the uncollected face amount of Eligible Accounts (as that term is defined in the ABL Loan Agreement) of such Subsidiary.

 

“ABL Secured Parties” shall mean the Agent, any of the other ABL Lenders and any other holders of the ABL Debt.

 

“ABL Security Documents” shall mean any ABL Loan Documents and any other documents that create Liens to secure the ABL Debt.

 

“Access Period” shall mean, with respect to each parcel or item which constitutes Term Debt Priority Collateral, the period, following the commencement of any Enforcement Action, which begins on the earlier of (a) the day on which the Agent provides the Term Note Purchaser with the notice of its election to request access to such parcel or item of Term Debt Priority Collateral pursuant to Section 3.4(b) and (c) the fifth Business Day after the Term Note Purchaser provides the Agent with notice that the Term Note Purchaser (or its agent) has obtained possession or control of such parcel or item of Term Debt Priority Collateral and ends on the earliest of (i) the day which is 180 days after the date (the “Initial Access Date”) on which the Agent initially obtains the ability to take physical possession of, remove any associated ABL Priority Collateral, or otherwise control physical access to, or actually uses, such parcel or item of Term Debt Priority Collateral plus such number of days, if any, after the Initial Access Date that it is stayed or otherwise prohibited by law or court order from exercising remedies with respect to associated ABL Priority Collateral, (ii) the date on which all or substantially all of the ABL Priority Collateral associated with such parcel or item of Term Debt Priority Collateral is sold, collected or liquidated, (iii) the ABL Debt Payment Date and (iv) the date on which the default which resulted in such Enforcement Action has been cured or waived in writing.

 

“Agent” has the meaning set forth in the preamble hereto; provided, that upon the consummation of any Permitted Refinancing, the Agent shall be the “Agent” or “Administrative Agent” (or like term) as specified in the applicable Permitted Refinancing of ABL Loan Documents. 

 

“Bankruptcy Code” shall mean United States Bankruptcy Code (11 U.S.C. §101 et seq.), as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.

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“Business Day” shall mean means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on which commercial banks in Washington, DC and New York City are authorized by law to close.

 

“Buy-Out Notice” shall have the meaning as set forth in Section 17.2.

 

“Collateral” shall mean any property or assets (whether real or personal and whether now existing or hereafter acquired or arising) of any Grantor or subsidiary thereof that is now or hereafter subject to any lien, mortgage, security interest or other encumbrance granted in favor of any of the ABL Lenders or the Term Note Purchaser, respectively, to secure the obligations of any Grantor to any of the ABL Lenders under any ABL Loan Documents or the Term Note Purchaser under any Term Debt Documents.

 

“Common Collateral” shall mean, all Collateral that constitutes both ABL Debt Collateral and Term Debt Collateral.

 

“Comparable Security Document” shall mean, in relation to any Senior Collateral subject to any Senior Security Document, that Junior Security Document that creates a security interest in the same Senior Collateral, granted by the same Grantor, as applicable.

 

“Debtor Relief Laws” shall mean the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Demand/Exercise Event” shall have the meaning as set forth in Section 17.1.

 

“Demand/Exercise Event Notice” shall have the meaning as set forth in Section 17.1.

 

“Deposit and Securities Accounts” shall mean all Deposit Accounts, Securities Accounts, collection accounts and lockbox accounts (and all related lockboxes) of the Grantors.

 

“Enforcement Action” shall mean, with respect to the ABL Debt or the Term Debt, the exercise of any rights and remedies with respect to any Common Collateral securing such obligations or the commencement or prosecution of enforcement of any of the rights and remedies with respect to any Common Collateral under, as applicable, the ABL Loan Documents or the Term Debt Documents, or applicable law, including without limitation the exercise of any rights of setoff or recoupment, and the exercise of any rights or remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction or under the Bankruptcy Code.

 

“Equity Interests”  means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination. 

 

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“Excluded Accounts” means deposit accounts of any Grantor exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Grantor’s employees.

 

“Exigent Circumstance” shall mean an event or circumstance that in the judgment of Agent imminently threatens the ability of Agent to realize upon all or any material portion of the ABL Priority Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of the Credit Parties after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Agent, could result in a material diminution in value of the Collateral. 

 

“Grantor” shall mean Parent, each other Credit Party and any other direct or indirect Subsidiary of Parent that is now or hereafter becomes a party to any ABL Document or Term Note Document.  All references in this Agreement to any Grantor shall include such Grantor as a debtor-in-possession and any receiver or trustee for such Grantor in any Proceeding.

 

“Indemnifiable Matters” shall have the meaning set forth in Section 17.2.

 

“Junior Collateral” shall mean with respect to any Junior Secured Party, any Collateral on which it has a Junior Lien.

 

“Junior Debt” shall mean (a) with respect to any ABL Priority Collateral, all Term Debt and (b) with respect to any Term Debt Priority Collateral, all ABL Debt.

 

“Junior Documents” shall mean, collectively, with respect to any Junior Obligation, any provision pertaining to such Junior Obligation in any Secured Debt Document or any other document, instrument or certificate evidencing or delivered in connection with such Junior Obligation.

 

“Junior Liens” shall mean (a) with respect to any ABL Priority Collateral, all Liens securing the Term Debt and (b) with respect to any Term Debt Priority Collateral, all Liens securing the ABL Debt.

 

“Junior Obligations” shall mean (a) with respect to any ABL Priority Collateral, all Term Debt and (b) with respect to any Term Debt Priority Collateral, all ABL Debt.

 

“Junior Obligations Payment Date” shall mean shall mean (a) with respect to ABL Debt, the Term Debt Payment Date and (b) with respect to any Term Debt, the ABL Debt Payment Date, as the context applies.  

 

“Junior Representative” shall mean (a) with respect to any ABL Priority Collateral, the Term Note Purchaser and (b) with respect to any Term Debt Priority Collateral, the Agent.

 

“Junior Secured Parties” shall mean (a) with respect to the ABL Priority Collateral, all Term Debt Secured Parties and (b) with respect to the Term Debt Priority Collateral, all ABL Secured Parties.

 

“Junior Security Documents” shall mean with respect to any Junior Secured Party, the Security Documents that secure the Junior Debt.

 

“Junior Standstill Period” shall have the meaning as set forth in Section 3.2.

 

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“Lien” shall mean, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset, whether arising before or after the commencement of a Proceeding.  For the purposes of this Agreement, any Grantor shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“Lien Priority” shall mean with respect to any Lien of the Agent or Term Note Purchaser in the Common Collateral, the order of priority of such Lien specified in Section 2.1.

 

“Notice of Commingling” shall mean a written notice delivered by either (a) the Term Note Purchaser to the Agent (i) stating that certain identifiable cash proceeds have been or will be deposited in an ABL Priority Deposit Account constitute Term Debt Priority Collateral, and reasonably identifying the amount of such proceeds and specifying the origin thereof, or (b) the Agent to the Term Note Purchaser stating that certain identifiable cash proceeds have been or will be deposited in a Term Debt Priority Deposit Account constitute ABL Priority Collateral, and reasonably identifying the amount of such proceeds and specifying the origin thereof.

 

“Paid in Full” or “Payment in Full” shall mean (a) with respect to the ABL Loans, the payment in full in cash and satisfaction in full of all of the obligations under the ABL Loan Documents (other than Unasserted Contingent Indemnification Obligations), and the termination of all obligations of Agent and ABL Lenders under the ABL Loan Documents (including, without limitation, any commitment to lend), and (b) with respect to the Term Debt, the payment in full in cash and satisfaction in full of all of the obligations under the Term Debt Documents (other than Unasserted Contingent Indemnification Obligations), and the termination of all obligations of Term Note Purchaser under the Term Debt Documents (including, without limitation, any commitment to lend). 

 

“Permitted Refinancing” shall mean any refinancing or replacement (whether before or after the commencement of a Proceeding), as applicable, of (a) the ABL Loans under the then existing ABL Loan Documents, provided that the financing documentation entered into by the Credit Parties in connection with such Permitted Refinancing constitutes Permitted Refinancing Documents, and (b) the Term Debt under the then existing Term Debt Documents, provided that the applicable financing documentation entered into by the Credit Parties in connection with such Permitted Refinancing constitutes Permitted Refinancing Documents and the assignee or other lender and any administrative agent for such lenders has agreed in writing that it is subject to the provision of this Agreement as one of the ABL Lenders and ABL Secured Parties or the Term Note Purchaser and the Term Note Secured Parties, as applicable. 

 

“Permitted Refinancing Documents” shall mean any financing documentation which replaces the then existing ABL Loan Documents or Term Debt Documents and pursuant to which the ABL Loans under the then existing ABL Loan Documents or the Term Debt under the then existing Term Debt Documents are refinanced or replaced, as such documentation may be amended, restated, amended and restated, supplemented or otherwise modified from time to time in compliance with this Agreement but specifically excluding any such financing documentation to the extent it contains, either initially or by amendment or other modification, any material terms or conditions other than those which (a) exist in the then existing ABL Loan Documents or Term Debt Documents, as applicable, (b) could be included in the then existing ABL Loan Documents or Term Debt Documents, as applicable by an amendment or other modification that would not be prohibited by the terms of this Agreement (including, without limitation, any provision that would cause the ABL Debt Cap or the Term Debt Cap to be exceeded) or (c) are otherwise approved in writing by the ABL Lenders or Term Note Purchaser, as applicable. 

 

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“Person” shall mean any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

 

“Post-Petition Interest” shall mean any interest or entitlement to fees or expenses or other charges that accrues after the commencement of any Proceeding (or would accrue but for the commencement of a Proceeding), whether or not allowed or allowable in any such Proceeding.

 

“Priority Collateral” shall mean, collectively, the ABL Priority Collateral and the Term Debt Priority Collateral.

 

“Proceeding” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

 

“Purchase Option Closing Date” shall have the meaning as set forth in Section 17.3.

 

“Recovery” shall have the meaning as set forth in Section 5.5.

 

“Secured Debt Documents” shall mean, collectively, the ABL Loan Documents and the Term Debt Documents.

 

“Secured Parties” shall mean the ABL Secured Parties and the Term Debt Secured Parties.

 

“Security Documents” shall mean, collectively, the ABL Security Documents and the Term Debt Security Documents.

 

“Senior Collateral” shall mean with respect to any Senior Secured Party, any Collateral on which it has a Senior Lien.

 

“Senior Documents” shall mean, collectively, with respect to any Senior Obligation, any provision pertaining to such Senior Obligation in any Secured Debt Document or any other document, instrument or certificate evidencing or delivered in connection with such Senior Obligation.

 

“Senior Liens” shall mean (a) with respect to the ABL Priority Collateral, all Liens securing the ABL Debt and (b) with respect to the Term Debt Priority Collateral, all Liens securing the Term Debt.

 

“Senior Obligations” shall mean (a) with respect to any ABL Priority Collateral, all ABL Debt and (b) with respect to any Term Debt Priority Collateral, all Term Debt.

 

“Senior Obligations Payment Date” shall mean (a) with respect to ABL Debt, the ABL Debt Payment Date and (b) with respect to any Term Debt, the Term Debt Payment Date.

 

“Senior Representative” shall mean (a) with respect to any ABL Priority Collateral, the Agent and (b) with respect to any Term Debt Priority Collateral, the Term Note Purchaser.

 

“Senior Secured Parties” shall mean (a) with respect to the ABL Priority Collateral, all ABL Secured Parties and (b) with respect to the Term Debt Priority Collateral, all Term Debt Secured Parties.

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“Senior Security Documents” shall mean with respect to any Senior Secured Party, the Security Documents that secure the Senior Obligations.

 

“Subsidiary” shall mean, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

 

“Subsidiary Asset Sale Proceeds” shall mean all Proceeds with respect to the sale of all or substantially all of the assets of a Grantor that is a direct or indirect Subsidiary of the Parent.

 

“Term Debt” shall mean all obligations, liabilities and indebtedness of every nature of any Grantor from time to time owed under, evidenced by or incurred with respect to the Term Note or any other Term Note Document, including, without limitation, all “Obligations” (as such term is defined in the Term Note Agreement), whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses evidenced by or incurred with respect to the Term Debt Documents, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof; provided, however, that (i) in no event shall the aggregate outstanding principal amount due under the Term Debt exceed the Term Debt Cap without the prior written consent of the Agent, and (ii) such amendments, modifications, renewals or extensions are not in violation of Section 7.2.  To the extent any payment with respect to any Term Debt (whether by or on behalf of any Grantor, as Proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a debtor in possession, any ABL Secured Party, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the ABL Secured Parties and the Term Debt Secured Parties, be deemed to be reinstated and outstanding as if such payment had not occurred.  For the avoidance of doubt, Term Debt does not and shall not include any indebtedness, duties, liabilities and obligations of any Grantor under any Equity Interests issued by such Grantor.

 

“Term Debt Cap” with respect to the Term Note, means the aggregate principal amount of the following (all as determined exclusive of all interest, fees (including attorneys’ fees) and expenses, expended by the Term Note Purchaser and remitted to Persons other than the Credit Parties to enforce its rights and remedies in respect of the Collateral, the Term Note, or both, and all indemnity obligations): (i) $40,000,000 in aggregate advances, minus (ii) the amount of all payments of principal on the Term Note.

 

“Term Debt Collateral” shall mean all assets, real property, personal property (including, but not limited to, Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit, Letter-of-Credit Rights, Payment Intangibles, Records, Securities Accounts, Security Entitlements, Supporting Obligations, money, cash or cash equivalents, insurance policies, rights arising under insurance policies, and all accessions to, substitutions for, replacements for, and Proceeds and products of the foregoing), whether now owned or hereafter acquired by any Grantor or in which such Grantor now or hereafter has an interest, or as to which such Grantor now or hereafter has rights or the power to transfer rights, and wherever situated, all whether now owned or existing or hereafter acquired or arising, in which a Lien 

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is granted or purported to be granted at any time to any Term Debt Secured Party as security for any Term Debt.  For the avoidance of doubt, Term Debt Collateral does not and may not secure any payment obligations, duties, liabilities or other obligations  arising under any Equity Interest, including, without limitation, any warrants and convertible instruments held be or issued to the Term Note Purchaser.

 

 “Term Debt Documents” shall mean the Term Note, the Term Note Agreement, any other promissory note, lease or other instrument evidencing the Term Debt or the obligation to pay the Term Debt, any guaranty with respect to the Term Debt, any security agreement or other collateral document securing the Term Debt and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Term Debt (as any of the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement).

“Term Debt Payment Date” shall mean the first date on which (a) all Term Debt (other than those that constitute Unasserted Contingent Indemnification Obligations) has been Paid in Full, (b) all commitments to extend credit under the Term Debt Documents have been terminated, and (c) so long as the ABL Debt Payment Date shall not have occurred, the Term Note Purchaser has delivered a written notice to the Agent stating that the events described in clauses (a) and (b) have occurred to the satisfaction of the Term Debt Secured Parties.

“Term Debt Priority Collateral” shall mean all Term Debt Collateral other than ABL Priority Collateral, including, without limitation, (a) the Term Debt Priority Deposit Accounts and all cash and other amounts from time to time on deposit therein, (b) all Term Debt Priority Equity Interests and all Proceeds thereof, (c) the Term Debt Priority Longbridge Note and all payments made by Longbridge thereunder and all Proceeds thereof, and (d) Term Debt Priority Subsidiary Asset Sale Proceeds and all Proceeds thereof, in each case, together with all Proceeds thereof.  Without implying any limitation on the foregoing, the parties agree that the following items and proceeds that now or at any time hereafter are deposited into a Term Debt Priority Deposit Account are Proceeds of Term Debt Priority Collateral and are not ABL Priority Collateral:

 

(a)  all cash dividends and distributions (including, without limitation, all dividends and distributions from any direct or indirect Subsidiaries of Parent organized under the laws of the United Kingdom of Great Britain and Northern Ireland, England and Wales, Scotland or Northern Ireland) with respect to Term Debt Priority Equity Interests received by the Parent or any Grantor,

 

(b)  all Proceeds received by the Parent or any Grantor from any the sale or disposition of any Term Debt Priority Equity Interests,

 

(c)  all cash payments of principal, interest or otherwise Proceeds received by the Parent with respect to the Term Debt Priority Longbridge Note,  

 

(d)  all cash payments received by a Grantor with respect to Term Debt Priority Subsidiary Asset Sale Proceeds, 

 

(e)all cash Proceeds received by any Grantor with respect to the issuance of any Equity Interests.

 

“Term Debt Priority Deposit Accounts” shall mean one or more other Deposit Accounts or Securities Accounts now or hereafter established or maintained by any Grantor for the sole purpose of holding the Proceeds of any collection, sale or other disposition of any Term Debt Priority Collateral that 

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the Term Note Purchaser requires to be held in such account or accounts pursuant to the terms of any Term Debt Document.  As of the date hereof, the Term Debt Priority Deposit Accounts are listed on Schedule 2 attached hereto.  Term Note Purchaser and Parent agree to promptly notify Agent in writing of any additional Term Debt Priority Deposit Accounts established after the date hereof which are or will be subject to a deposit account or securities account control agreement in favor of Term Note Purchaser and to provide a supplement to Schedule 2 reflecting the addition of such Term Debt Priority Deposit Accounts; it being understood that any such supplement to Schedule 2 may not remove any Deposit Accounts or Securities Accounts set forth on Schedule 2 unless consented to in writing by Term Note Purchaser.  

 

“Term Debt Priority Equity Interests” shall mean all Equity Interests owned by any Grantor (including, without limitation, all Equity Interests in any direct or indirect Subsidiaries of such Grantor), irrespective of whether or not such Equity Interests have been pledged as security for or are otherwise subject to a Lien granted in favor of the Term Note Purchaser to secure the Term Debt.   

 

“Term Debt Priority Longbridge Note” shall mean that certain Promissory Note dated the date hereof, in the principal amount of $16,316,941.05 issued by Longbridge Recruitment 360 Limited to the Parent, as amended, restated, supplemented, modified or extended from time to time.

 

“Term Debt Priority Subsidiary Asset Sale Proceeds” shall mean all Subsidiary Asset Sale Proceeds (excluding ABL Priority Subsidiary Asset Sale Proceeds). 

 

“Term Debt Secured Parties” shall mean the Term Note Purchaser and its successors and assigns.

 

“Term Debt Security Documents” shall mean any Term Debt Documents and any other documents that create Liens to secure the Term Debt.

 

“Term Note Agreement” shall means that certain Amended and Restated Note and Warrant Purchase Agreement dated as of the date hereof among, the Parent, certain subsidiaries of the Parent and the Term Note Purchaser, as any of the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement. 

 

“Term Note” shall mean, the Parent’s $40,000,000 12% Senior Secured Promissory Note dated the same date as this Agreement payable to Term Note Purchaser, together with any and all promissory notes at any time issued in substitution, exchange or replacement thereof. 

“Term Note Lien” shall mean the lien and security interest held by each Term Note Purchaser in and to all or a portion of the Collateral; provided that the Term Note Lien shall only secure the Term Debt.

“Term Note Post-Petition Assets” shall have the meaning as set forth in Section 5.2(a).

“Unasserted Contingent Indemnification Obligations” shall mean, at any time, contingent indebtedness, duties, liabilities and obligations for indemnifications in respect of which no claim or demand for payment has been made, no notice for indemnification has been issued, or can reasonably be expected to be issued, by the indemnitee at such time; provided, however, notwithstanding the foregoing, contingent indebtedness, duties, liabilities and obligations with respect to any undrawn letters of credit issued by ABL Lenders, shall in no event be considered Unasserted Contingent Indemnification Obligations.

 

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“Uniform Commercial Code” shall mean the Uniform Commercial Code of the State of Maryland or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

2.Lien Priorities. 

 

2.1  Subordination.   Notwithstanding (a) the date, time or order of grant, attachment or perfection of any Liens granted to the ABL Lenders in respect of all or any portion of the Collateral or of any Liens granted to the Term Note Purchaser in respect of all or any portion of the Collateral and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (b) the order, date or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the ABL Lenders or the Term Note Purchaser in any Collateral, (c) any provision of the Uniform Commercial Code, Debtor Relief Laws or any other applicable law, or of the ABL Loan Documents or the Term Debt Documents governing the priority of the Liens in favor of the Secured Parties, (d) whether the ABL Lenders or the Term Note Purchaser, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral (except to the extent that taking control over such Collateral is necessary to perfect Liens in such Collateral), or (e) the date on which the ABL Debt or the Term Debt is incurred, advanced or made available to the Credit Parties, the Agent, on behalf of itself and the other ABL Lenders, and the Term Note Purchaser, hereby agree that:

 

(1)any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Term Note Purchaser that secures all or any portion of the Term Debt shall in all respects be junior and subordinate to all Liens granted to the Agent and/or any of the other ABL Lenders in such ABL Priority Collateral to secure all or any portion of the ABL Debt;

 

(2)any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Agent and/or the other ABL Lenders that secures all or any portion of the ABL Debt shall in all respects be senior and prior to all Liens granted to the Term Note Purchaser in such ABL Priority Collateral to secure all or any portion of the Term Debt;

 

(3)any Lien in respect of all or any portion of the Term Debt Priority Collateral now or hereafter held by or on behalf of the Agent and/or any of the other ABL Lenders that secures all or any portion of the ABL Debt shall in all respects be junior and subordinate to all Liens granted to the Term Note Purchaser and the Term Note Purchaser in such Term Debt Priority Collateral to secure all or any portion of the Term Debt; and

 

(4)any Lien in respect of all or any portion of the Term Debt Priority Collateral now or hereafter held by or on behalf of the Term Note Purchaser that secures all or any portion of the Term Debt shall in all respects be senior and prior to all Liens granted to the Agent and/or any of the other ABL Lenders in such Term Debt Priority Collateral to secure all or any portion of the ABL Debt.

 

2.2  Consents.  The Term Note Purchaser acknowledges and agrees that, concurrently herewith, the Agent, for the benefit of itself and the other ABL Lenders, has been, or may be, granted Liens upon all of the Collateral in which the Term Note Purchaser has been granted Liens and the Term Note Purchaser, for and on behalf of itself and the Term Note Purchaser, hereby consents thereto. The Agent, for and on behalf of itself and the other ABL Lenders, acknowledges and agrees that, concurrently herewith, the Term Note Purchaser has been, or may be, granted Liens upon all of the Collateral in which the Agent and/or any of the other ABL Lenders have been granted Liens and the Agent, for and on behalf of itself 

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and the other ABL Lenders, hereby consents thereto. The subordination of Liens by the Term Note Purchaser and the Agent in favor of one another as set forth herein shall not be deemed to subordinate the Term Note Purchaser’s Liens or the Agent’s Liens to the Liens of any other Person, nor shall such subordination be affected by the subordination of such Liens to any Lien of any other Person.

 

2.3  Prohibition on Contesting Liens.In respect of any Collateral, the Junior Representative, on behalf of each Junior Secured Party, in respect of such Collateral agrees that it shall not, and hereby waives any right to:

(a)contest, or support any other Person in contesting, in any proceeding (including any Proceeding), the priority, validity or enforceability of any Senior Lien on such Collateral; or

 

(b)demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or similar right which it may have in respect of such Collateral or the Senior Liens on such Collateral, except to the extent that such rights are expressly granted in this Agreement.

 

2.4  Nature of Obligations.  Each of the Term Note Purchaser and the Agent, on behalf of itself and the other ABL Lenders, acknowledges that a portion of the ABL Debt and the Term Debt either does now or may in the future represent debt that is revolving in nature and that the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the ABL Debt and the Term Debt, as the case may be, may be modified, extended or amended from time to time, and that (x) the aggregate amount of the ABL Debt may be increased, replaced or refinanced, in each event, subject to the ABL Debt Cap and the applicable provisions hereof with respect to a Permitted Refinancing and without notice to or consent by the Term Note Purchaser and without affecting the provisions hereof and (y) the aggregate amount of the Term Debt may be increased, replaced or refinanced, in each event, subject to the Term Debt Cap and the applicable provisions hereof with respect to a Permitted Refinancing and without notice to or consent by the ABL Lenders and without affecting the provisions hereof.  The Lien Priorities provided in Section 2.1 shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of either the ABL Debt or the Term Debt, or any portion thereof.

 

2.5  No New Liens.

 

(a)Until the ABL Debt Payment Date, the Term Note Purchaser shall not acquire or hold any Lien on any assets of any Grantor securing any Term Debt which assets are not also subject to the Lien of the Agent under the ABL Loan Documents, subject to the Lien Priority set forth herein.  If any Term Debt Secured Party shall control for the purposes of perfection, acquire or hold any Lien on any assets of any Grantor securing any Term Debt which assets are not also subject to the Lien of the Agent under the ABL Loan Documents, subject to the Lien Priority set forth herein, then the Term Note Purchaser (or the relevant Term Debt Secured Party) shall, without the need for any further consent of any other Term Debt Secured Party and notwithstanding anything to the contrary in any other Term Debt Document be deemed to also control or hold such Lien on such Collateral as gratuitous bailee and as a non-fiduciary representative for perfection for the benefit of the ABL Lenders and shall endeavor to notify the Agent promptly in writing of the existence of such Lien. 

 

(b)Until the Term Debt Payment Date, no ABL Lender shall acquire or hold any Lien on any assets of any Grantor securing any ABL Debt which assets are not also subject to the Lien of the Term Note Purchaser under the Term Debt Documents, subject to the Lien Priority set forth herein.  If any ABL Lender shall control for the purposes of perfection,  acquire or hold any Lien on any assets of 

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any Grantor Party securing any ABL Debt which assets are not also subject to the Lien of the Term Note Purchaser under the Term Debt Documents, subject to the Lien Priority set forth herein, then the Agent (or the relevant ABL Secured Party) shall, without the need for any further consent of any other ABL Lender and notwithstanding anything to the contrary in any other ABL Loan Document be deemed to also control or hold such Lien on such Collateral as gratuitous bailee and as a non-fiduciary representative for perfection for the benefit of the Term Note Purchaser and shall endeavor to notify the Term Note Purchaser promptly in writing of the existence of such Lien.

 

(c)The rights and obligations of the parties under subsections (b) and (c) above are also subject to the provisions of Section 2.7(b). 

 

2.6  Separate Grants of Security and Separate Classification.The Agent, on behalf of each ABL Secured Party, and the Term Note Purchaser, acknowledge, agree and intend that that (a) the respective grants of Liens pursuant to the ABL Security Documents and the Term Debt Security Documents constitute two separate and distinct grants of Liens and (b) because of, among other things, their differing rights in the Collateral, the Term Debt is fundamentally different from the ABL Debt and, in each case must be separately classified in any plan of reorganization proposed or similar restructuring plan adopted, confirmed (or approved) in a Proceeding.  To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the ABL Lenders and the Term Note Purchaser in respect of the Collateral constitute claims in the same class (rather than at least two separate classes of senior and junior secured claims with the priorities described in Section 2.1), then the ABL Lenders and the Term Note Purchaser hereby acknowledge and agree that all distributions shall be made as if there were two separate classes of ABL Debt claims, on the one hand, and Term Debt claims, on the other (with the effect being that, (i) to the extent that the aggregate value of the ABL Priority Collateral is sufficient (for this purpose ignoring all claims held by the Term Note Purchaser thereon), the ABL Lenders shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from each pool of ABL Priority Collateral, before any distribution is made in respect of the Term Debt with respect to such ABL Priority Collateral, with the Term Note Purchaser hereby acknowledging and agreeing to turn over to the Agent amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries of the Term Note Purchaser, and (ii) to the extent that the aggregate value of the Term Debt Priority Collateral is sufficient (for this purpose ignoring all claims held by the ABL Lenders thereon), the Term Note Purchaser shall be entitled to receive, in addition to amounts distributed to it in respect of principal, pre-petition interest and other claims, all amounts owing in respect of Post-Petition Interest that is available from each pool of Term Debt Priority Collateral, before any distribution is made in respect of the ABL Debt with respect to such Term Debt Priority Collateral, with the ABL Lenders hereby acknowledging and agreeing to turn over to the Term Note Purchaser amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries of the ABL Lenders).

 

2.7  Agreements Regarding Actions to Perfect Liens.  (a) The Agent agrees, on behalf of itself and the other ABL Lenders, with respect to the ABL Security Documents, on the one hand, and the Term Note Purchaser agrees with respect to the Term Debt Security Documents, on the other hand, that each such Security Document granting any security interest in the Collateral will contain the following legend (or a legend substantially similar thereto):

 

“Reference is made to that certain Intercreditor Agreement, dated as of September 15, 2017  (as amended, restated, supplemented or modified from time to time, the “Intercreditor Agreement”), by and among Jackson Investment Group, LLC, a Georgia limited liability company, (“Term Note 

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Purchaser”), Staffing 360 Solutions, Inc., a Delaware 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, “Agent”) for the ABL Lenders (as defined in the Intercreditor 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 Intercreditor Agreement.  Each Person that benefits from the security hereunder, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to authorize) the [Agent] [Term Note Purchaser] on behalf of such Person to enter into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Person.

 

Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement.  In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.”

 

(b)Each of the Agent and the Term Note Purchaser hereby acknowledges that, to the extent that it holds, or a third party holds on its behalf, physical possession of or “control” (as defined in the Uniform Commercial Code) over Common Collateral pursuant to the ABL Security Documents or the Term Debt Security Documents (including, without limitation, under any deposit account or securities account control agreements), as applicable, whether as gratuitous bailee and as a non-fiduciary representative  for perfection or otherwise, such possession or control is also for the benefit of the Term Note Purchaser or the Agent and the other ABL Lenders, as applicable, solely to the extent required to perfect their security interest in such Common Collateral.  Nothing in the preceding sentence shall be construed to impose any duty on the Agent or the Term Note Purchaser (or any third party acting on either such Person’s behalf) with respect to such Common Collateral or provide the Term Note Purchaser, the Agent or any other ABL Lender, as applicable, with any rights with respect to such Common Collateral beyond those specified in this Agreement, the ABL Security Documents and the Term Debt Security Documents, as applicable, provided that after the ABL Debt Payment Date (so long as the Term Debt Payment Date shall not have sooner occurred), the Agent shall (i) deliver to the Term Note Purchaser, at the Credit Parties’ sole cost and expense, the Common Collateral in its possession or control together with any necessary endorsements to the extent required by the Term Debt Documents, and assign its rights as secured party (without representation or warranty) under any deposit account or securities account control agreement, or (ii) direct and deliver such Common Collateral as a court of competent jurisdiction otherwise directs; provided, further, that after the Term Debt Payment Date (so long as the ABL Debt Payment Date shall not have sooner occurred), the Term Note Purchaser shall (i) deliver to the Agent, at the Credit Parties’ sole cost and expense, the Common Collateral in its possession or control together with any necessary endorsements to the extent required by the ABL Loan Documents, and assign its rights as secured party (without representation or warranty) under any deposit account or securities account control agreement or (ii) direct and deliver such Common Collateral as a court of competent jurisdiction otherwise directs.  The provisions of this Agreement are intended solely to govern the respective Lien Priorities as between the ABL Lenders and the Term Note Purchaser and shall not impose 

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on the ABL Lenders or the Term Note Purchaser any obligations in respect of the disposition of any Common Collateral (or any Proceeds thereof) that would conflict with prior perfected Liens or any claims thereon in favor of any other Person that is not a Secured Party.

 

2.8  Tracing of and Priorities in Proceeds

.  

 

(a)With respect to any funds that are identifiable proceeds of Term Debt Priority Collateral credited to any ABL Priority Deposit Account which funds in respect of which the Agent has received a Notice of Commingling or other written notice by the Term Note Purchaser that proceeds of Term Debt Priority Collateral are to be or should have been deposited into a Term Debt Priority Account and passage of a reasonable time to act on such notice, the Agent shall turn over any misdirected proceeds of the Term Debt Priority Collateral to the Term Note Purchaser. 

 

(b)With respect to any funds that are identifiable proceeds of ABL Priority Collateral credited to any Term Debt Priority Deposit Account which funds in respect of which the Term Note Purchaser has received a Notice of Commingling or other written notice by the Agent that proceeds of ABL Priority Collateral are to be or should have been deposited into an ABL Priority Account and passage of a reasonable time to act on such notice, the Term Note Purchaser shall turn over any misdirected proceeds of the ABL Priority Collateral to the Agent.  

 

(c)The ABL Loan Agreement provides that all proceeds of the ABL Priority Collateral are to be deposited into an ABL Priority Deposit Account; and any funds that are identifiable proceeds of ABL Priority Collateral credited to or otherwise received by the Term Note Purchaser or other Term Debt Secured Parties shall be turned over by the receiving Term Note Purchaser or other Term Debt Secured Parties to the Agent.   

 

(d)The Term Note Agreement provides that all proceeds of the Term Priority Collateral are to be deposited into a Term Debt Priority Deposit Account; and any funds that are identifiable proceeds of Term Debt Priority Collateral credited to or otherwise received by the Agent or other ABL Secured Parties shall be turned over by the receiving Agent or other ABL Secured Parties to the Term Note Purchaser. 

 

2.9   Further Agreements of the ABL Lender.  The ABL Lenders agree that:

 

(a)  Without the prior written consent of the Term Note Purchaser in each instance, the ABL Lenders shall not enter into a deposit account control agreement or a securities account control agreement with respect to any Term Debt Priority Deposit Account, 

 

(b) All stock and other certificates evidencing Equity Interests of any Grantor which now or hereafter have been pledged as security for or are otherwise subject to a Lien granted in favor of the Term Note Purchaser to secure the Term Debt, shall be held by Term Note Purchaser and to the extent Agent or any other ABL Secured Party receives possession of such certificates it shall promptly deliver said certificates to Term Note Purchaser, and until the time of delivery of possession of such certificates to Term Note Purchaser shall hold such certificates as gratuitous bailee agent for perfection on behalf of Term Note Purchaser in accordance with Section 2.7(b).  

 

(c) Provided that there exists no Default or Event of Default (as such terms are defined in the ABL Loan Agreement) and none could reasonably be expected to result with respect to a sale of substantially all of the assets of a Grantor that is a direct or indirect Subsidiary of the Parent, the ABL Lenders will release their ABL Priority Lien on Grantor’s Accounts included in such sale simultaneously with the Agent’s receipt of the ABL Priority Subsidiary Asset Sale Proceeds from such sale, provided that 

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this clause (c) shall not apply to any series of asset sales, or multiple sales of all or substantially all of the assets of more than one Grantor occurring at the same time or as part of a related transaction, unless consented to in writing by ABL Lenders, of multiple Grantors; it being understood that this Section 2.10 is in addition to and not in limitation of Section 4.2; and 

 

(d)  The ABL Lenders acknowledge and agree that the Term Note Purchaser has the right under certain circumstances as provided in the Term Note Agreement and/or in any deposit account control agreement entered into with respect to any Term Debt Priority Deposit Account to restrict the use of any cash or Proceeds in any Term Debt Priority Deposit Account, and the ABL Lenders acknowledge and agree that they are not entitled to consent to any such restriction or to receive notice from Term Note Purchaser as to the existence or imposition of any such restrictions; it being understood that any such restrictions shall not impair or diminish the rights of the ABL Lenders as provided for in this Agreement to receive all ABL Priority Subsidiary Asset Sale Proceeds contained in any Term Debt Priority Deposit Account. The Term Note Purchaser acknowledges and agrees that the ABL Lenders may receive and retain for application to the ABL Debt in accordance with the terms of the ABL Loan Documents, any payments from the Grantor that come from any Term Debt Priority Deposit Account notwithstanding the fact that Grantor may have made such payment in violation of such restrictions, provided that if Term Note Purchaser has notified Agent by delivery of a Notice of Commingling that such payments constitute Term Debt Priority Collateral and Agent has had a reasonable time to act on such notice then to the extent (i) such payments are identifiable proceeds of Term Debt Priority Collateral and (ii) such payments have not yet been applied by the ABL Lenders to the repayment of any ABL Debt prior to receipt of such Notice of Commingling, ABL Lenders agree to turn over such misdirected payments in accordance with Section 2.8

 

3.Enforcement Rights.

 

3.1  Exclusive Enforcement.  Until the Senior Obligations Payment Date has occurred, whether or not a Proceeding has been commenced by or against any Grantor, the Senior Secured Parties shall have the exclusive right to take and continue any Enforcement Action (including the right to credit bid their debt) with respect to the Senior Collateral, without any consultation with or consent of any Junior Secured Party, but subject to the proviso set forth in Section 5.1.  Upon the occurrence and during the continuance of a default or an event of default under the Senior Documents, the Senior Representative and the other Senior Secured Parties may take and continue any Enforcement Action with respect to the Senior Obligations and the Senior Collateral in such order and manner as they may determine in their sole discretion in accordance with the terms and conditions of the Senior Documents, subject to Section 3.4.

 

3.2  Standstill and Waivers.  Each Junior Representative, on behalf of itself and the other Junior Secured Parties, agrees that, until the Senior Obligations Payment Date has occurred, but subject to the proviso set forth in Section 5.1 and the last sentence in this Section 3.2:

 

(i)they will not take or cause to be taken any action, the purpose or effect of which is to make any Lien on any Senior Collateral that secures any Junior Obligation pari passu with or senior to, or to give any Junior Secured Party any preference or priority relative to, the Liens on the Senior Collateral securing the Senior Obligations;

 

(ii)they will not contest, oppose, object to, interfere with, hinder or delay, in any manner, whether by judicial proceedings (including without limitation the filing of a Proceeding) or otherwise, any foreclosure, sale, lease, exchange, transfer or other disposition of the Senior Collateral by any Senior Secured Party or any other Enforcement Action taken (or any forbearance from taking any Enforcement Action) in respect of the Senior Collateral by or on behalf of any Senior Secured Party;

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(iii)they have no right to (x) direct either the Senior Representative or any other Senior Secured Party to exercise any right, remedy or power with respect to the Senior Collateral or pursuant to the Senior Security Documents in respect of the Senior Collateral or (y) consent or object to the exercise by the Senior Representative or any other Senior Secured Party of any right, remedy or power with respect to the Senior Collateral or pursuant to the Senior Security Documents with respect to the Senior Collateral or to the timing or manner in which any such right is exercised or not exercised (or, to the extent they may have any such right described in this clause (iii), whether as a junior lien creditor in respect of the Senior Collateral or otherwise, they hereby irrevocably waive such right); 

 

(iv)they will not institute any suit or other proceeding or assert in any suit, Proceeding or other proceeding any claim against any Senior Secured Party seeking damages from or other relief by way of specific performance, instructions or otherwise, with respect to, and no Senior Secured Party shall be liable for, any action taken or omitted to be taken by any Senior Secured Party with respect to the Senior Collateral or pursuant to the Senior Documents in respect of the Senior Collateral;

 

(v)they will not commence judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or similar official appointed for or over, attempt any action to take possession of any Senior Collateral, exercise any right, remedy or power with respect to, or otherwise take any action to enforce their interest in or realize upon, the Senior Collateral; and

 

(vi)they will not seek, and hereby waive any right, to have the Senior Collateral or any part thereof marshaled upon any foreclosure or other disposition of the Senior Collateral.

 

Notwithstanding the foregoing, any Junior Representative may, but shall not be required to, (i) take all such actions as it shall deem necessary to (A) perfect or continue the perfection of its Junior Liens or (B) create or preserve (but not enforce) the Junior Liens on any Collateral, and (ii) subject at all times to the provisions of Section 5 of this Agreement, enforce or exercise any or all such rights and remedies as to any Junior Collateral commencing one hundred eighty (180) days after the date of the receipt by the Senior Representative of written notice from the Junior Representative of the declaration by the Junior Secured Parties of an event of default under the applicable Junior Documents in accordance with the terms of such Junior Documents that is continuing and the written demand by the Junior Secured Parties of the immediate Payment in Full of all of the applicable Junior Debt (such 180-day period being referred to herein as the “Junior Standstill Period”), provided that 

 

(i)in the event that at any time after the Junior Representative has sent a notice to the Senior Representative to commence the Junior Standstill Period, the event of default that was the basis for such notice is cured or waived or otherwise ceases to exist and no other events of default under the applicable Junior Documents have occurred and are then continuing, then the notice shall automatically and without further action of the parties be deemed rescinded and no Junior Standstill Period shall be deemed to have been commenced;

 

(ii)the Junior Standstill Period shall be tolled for any period during which the Senior Representative is stayed from exercising rights or remedies pursuant to a Proceeding or court order, so long as the Senior Representative has used its commercially reasonable efforts to have such stay lifted;

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(iii)prior to taking any action to enforce or exercise any or all such rights and remedies after the end of the Junior Standstill Period, the Junior Representative shall give the Senior Representative not more than ten (10) Business Days’ and not less than five (5) Business Days’ prior written notice of the intention of Junior Representative to exercise its rights and remedies, including specifying the rights and remedies that it intends to exercise, which notice may be sent prior to the end of the Junior Standstill Period and in the event that Junior Representative shall not take any action to enforce or exercise any or all of such rights within ninety (90) days after the end of the Junior Standstill Period, then the notice to commence such Junior Standstill Period shall automatically and without further action of the parties be deemed rescinded and no Junior Standstill Period shall be deemed to have been commenced; and

 

(iv)notwithstanding anything to the contrary contained in this Section 3.2, the Junior Representative and the other Junior Secured Parties may not exercise any rights and remedies against any specific item or items of Junior Collateral after the end of the Junior Standstill Period, if and for so long as the Senior Representative or any other Senior Secured Party is diligently pursuing in good faith the exercise of its enforcement rights or remedies against the Grantors and/or all or any material portion of the Senior Collateral.

 

3.3  Judgment Creditors.  In the event that any Term Debt Secured Party becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subject to the terms of this Agreement for all purposes (including in relation to the ABL Liens and the ABL Debt) to the same extent as all other Liens securing the Term Debt are subject to the terms of this Agreement.  In the event that any ABL Secured Party becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subject to the terms of this Agreement for all purposes (including in relation to the Term Note Liens and the Term Debt) to the same extent as all other Liens securing the ABL Debt are subject to the terms of this Agreement.

 

3.4  Cooperation; Sharing of Information and Access.

 

(a)The Term Note Purchaser, on behalf of itself and the other Term Debt Secured Parties, agrees that each of them shall take such actions as the Agent shall request in writing in connection with the exercise by the ABL Secured Parties of their rights set forth herein in respect of the ABL Priority Collateral.  The Agent, on behalf of itself and the other ABL Secured Parties, agrees that each of them shall take such actions as the Term Note Purchaser shall request in writing in connection with the exercise by the Term Debt Secured Parties of their rights set forth herein in respect of the Term Debt Priority Collateral.

 

(b)In the event that the Agent shall, in the exercise of its rights under the ABL Security Documents or otherwise, receive possession or control of any books and Records of any Grantor which contain information identifying or pertaining to any of the Term Debt Priority Collateral, the Agent shall promptly notify the Term Note Purchaser of such fact and, upon request from the Term Note Purchaser and as promptly as practicable thereafter, either make available to the Term Note Purchaser such books and Records for inspection and duplication or provide to the Term Note Purchaser copies thereof.  In the event that the Term Note Purchaser shall, in the exercise of its rights under the Term Debt Security Documents or otherwise, receive possession or control of any books and Records of any Grantor which contain information identifying or pertaining to any of the ABL Priority Collateral, the Term Note Purchaser shall promptly notify the Agent of such fact and, upon request from the Agent and as promptly as practicable thereafter, either make available to the Agent such books and Records for inspection and duplication or provide the Agent copies thereof.  The Term Note Purchaser hereby irrevocably grants the Agent a non-exclusive worldwide license or right to use, to the maximum extent permitted by applicable law and to the 

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extent of the Term Note Purchaser’s interest therein, exercisable without payment of royalty or other compensation, to use any of the intellectual property now or hereafter owned by, licensed to, or otherwise used by the Grantors in order for Agent and ABL Secured Parties to purchase, use, market, repossess, possess, store, assemble, manufacture, process, sell, transfer, distribute or otherwise dispose of any asset included in the ABL Priority Collateral in connection with the liquidation, disposition or realization upon the ABL Priority Collateral in accordance with the terms and conditions of the ABL Security Documents and the other ABL Loan Documents.  Until the ABL Debt Payment Date, the Term Note Purchaser agrees that any sale, transfer or other disposition of any of the Grantors’ intellectual property (whether by foreclosure or otherwise) will be subject to the Agent’s rights as set forth in this Section 3.4(b). The ABL Lenders hereby irrevocably grants the Term Note Purchaser a non-exclusive worldwide license or right to use, to the maximum extent permitted by applicable law and to the extent of the ABL Lenders’ interest therein, exercisable without payment of royalty or other compensation, to use any of the intellectual property now or hereafter owned by, licensed to, or otherwise used by the Grantors in order for Term Note Purchaser to purchase, use, market, repossess, possess, store, assemble, manufacture, process, sell, transfer, distribute or otherwise dispose of any asset included in the Term Debt Priority Collateral in connection with the liquidation, disposition or realization upon the Term Debt Priority Collateral in accordance with the terms and conditions of the Term Debt Security Documents and the other Term Debt Documents.  Until the Term Debt Payment Date, the ABL Lenders agree that any sale, transfer or other disposition of any of the Grantors’ intellectual property (whether by foreclosure or otherwise) will be subject to the Term Note Purchaser’s rights as set forth in this Section 3.4.(b).  If the Term Note Purchaser, or any agent or representative of the Term Note Purchaser, or any receiver, shall, after the commencement of any Enforcement Action, obtain possession or physical control of any of the ABL Debt Priority Collateral, the Term Note Purchaser shall promptly notify the Agent in writing of that fact, and the Agent shall, within thirty (30) Business Days thereafter, notify the Term Note Purchaser in writing as to whether the Agent desires to exercise access rights under this Agreement.  In addition, if the Agent, or any agent or representative of the Agent, or any receiver, shall obtain possession or physical control of any of the Term Debt Priority Collateral in connection with an Enforcement Action, then the Agent shall promptly notify the Term Note Purchaser that the Agent is exercising its access rights under this Agreement.  Upon delivery of such notice by the Agent to the Term Note Purchaser, the parties shall confer in good faith to coordinate with respect to the Agent’s exercise of such access rights, with such access rights to apply to any parcel or item of Term Debt Priority Collateral access to which is reasonably necessary to enable the Agent during normal business hours:  (i) to convert ABL Priority Collateral consisting of raw materials and work-in-process into saleable finished goods; (ii) to complete any service or project required for the practical realization of the benefits of the ABL Priority Collateral; (iii) to transport such ABL Priority Collateral to a point where such conversion can occur; (iv) to otherwise prepare ABL Priority Collateral for sale; and/or (v) to arrange or effect the sale of ABL Priority Collateral, all in accordance with the manner in which such matters are completed in the ordinary course of business, and at Borrowers’ expense. 

 

(c)Consistent with the definition of Access Period, access rights will apply to differing parcels of real property and differing items (including, without limitation, equipment) constituting Term Debt Priority Collateral at differing times, in which case, a differing Access Period will apply to each such parcel and items.  During any pertinent Access Period, the Agent and its agents, representatives and designees shall have an irrevocable, non-exclusive right to have access at reasonable times to, and a rent-free right to use, the relevant parcel or item of Term Debt Priority Collateral for the purposes described above in Section 3.4(b).  The Agent shall take proper and reasonable care under the circumstances of any Term Debt Priority Collateral that is used by the Agent during the Access Period and repair and replace any damage (ordinary wear-and-tear excepted) caused by the Agent or its agents, representatives or designees and the Agent shall comply with all applicable laws in all material respects in connection with its use or occupancy or possession of the ABL Priority Collateral.  The Agent shall indemnify and hold harmless the Term Note Purchaser for any injury or damage to Persons or property (ordinary wear-and-tear excepted) caused by the acts or omissions of Persons under its control; provided, however, that the Agent and the 

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ABL Lenders will not be liable for any diminution in the value of Term Debt Priority Collateral caused by the absence of the ABL Priority Collateral therefrom.  The Agent and the Term Note Purchaser shall cooperate and use reasonable efforts to ensure that their activities during the Access Period as described above do not interfere materially with the activities of the other as described above, including the right of Term Note Purchaser to show the Term Debt Priority Collateral to prospective purchasers and to ready the Term Debt Priority Collateral for sale.  Consistent with the definition of the term Access Period, if any order or injunction is issued or stay is granted or is otherwise effective by operation of law that prohibits the Agent from exercising any of its rights hereunder, then the Access Period granted to the Agent under this Section 3.4 shall be stayed during the period of such prohibition and shall continue thereafter for the number of days remaining as required under this Section 3.4.  This Section 3.4 will not restrict the rights of the Term Note Purchaser to sell, assign or otherwise transfer the related Term Debt Priority Collateral prior to the expiration of any applicable Access Period if either (i) such Term Debt Priority Collateral is not reasonably necessary to enable the Agent to convert, transport or arrange to sell any associated ABL Priority Collateral as described above, or (ii) the purchaser, assignee or transferee thereof agrees to be bound by the access provisions of this Section 3.4.

 

3.5  No Additional Rights For the Grantors Hereunder.  Except as provided in Section 3.6 hereof, if any ABL Secured Party or Term Debt Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, no Grantor shall be entitled to use such violation as a defense to any action by any ABL Secured Party or Term Debt Secured Party, nor to assert such violation as a counterclaim or basis for set off or recoupment against any ABL Secured Party or any Term Debt Secured Party.

 

3.6  Actions Upon Breach

.   

 

(a)If any ABL Secured Party or any Term Debt Secured Party, contrary to this Agreement, commences or participates in any action or proceeding against any Grantor or the Common Collateral, such Grantor, with the prior written consent of the Agent or the Term Note Purchaser, as applicable, may interpose as a defense or dilatory plea the making of this Agreement, and any ABL Secured Party or Term Debt Secured Party, as applicable, may intervene and interpose such defense or plea in its or their name or in the name of such Grantor.

 

(b)Should any ABL Secured Party or Term Debt Secured Party, contrary to this Agreement, in any way take, attempt to or threaten to take any action with respect to the Common Collateral (including, without limitation, any attempt to realize upon or enforce any remedy with respect to this Agreement), or fail to take any action required by this Agreement, any ABL Secured Party or any Term Debt Secured Party (in its own name or in the name of the relevant Grantor), as applicable, may obtain relief against such ABL Secured Party or Term Debt Secured Party, as applicable, by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by each of the Agent on behalf of each ABL Secured Party and the Term Note Purchaser on behalf of each Term Debt Secured Party that (i) the ABL Secured Parties’ or Term Debt Secured Parties’, as applicable, damages from its actions may at that time be difficult to ascertain and may be irreparable, and (ii) each Term Debt Secured Party or each ABL Secured Party, as applicable, waives any defense that the Grantors and/or the Term Debt Secured Parties and/or ABL Secured Parties, as applicable, cannot demonstrate damage and/or be made whole by the awarding of damages.

 

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4. Application of Proceeds of Senior Collateral; Dispositions and Releases of Lien; Notices and Insurance.

 

4.1  Application of Proceeds

.

 

(a)Application of Proceeds of Senior Collateral.  The Senior Representative and Junior Representative hereby agree that, whether or not a Proceeding has been commenced by or against any Grantor, all Senior Collateral, and all Proceeds thereof, received by either of them in connection with the collection, sale or disposition of Senior Collateral in an Enforcement Action shall be applied,

 

first, to the payment of costs and expenses (including reasonable attorneys’ fees and expenses and court costs) of the Senior Representative in connection with such Enforcement Action,

second, to the payment of the Senior Obligations in accordance with the Senior Documents until the Senior Obligations Payment Date,

third, to the payment of costs and expenses (including reasonable attorneys’ fees and expenses and court costs) of the Junior Representative in connection with such Enforcement Action,

fourth, to the payment of the Junior Debt in accordance with the Junior Documents until the Junior Obligations Payment Date, and

fifth, the balance, if any, to the Grantors or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Nothing in this Section 4.1 is intended to or shall limit the right of the Agent and ABL Lenders, in the exercise of their sole and absolute discretion from time to time, from administering their revolving credit facility in the manner described in subsection (d) below despite the existence of an event of default under the ABL Loan Agreement.

(b)Limited Obligation or Liability.  In exercising remedies, whether as a secured creditor or otherwise, the Senior Representative shall have no obligation or liability to the Junior Representative or to any Junior Secured Party, regarding the adequacy of any Proceeds or for any action or omission, save and except solely for an action or omission that breaches the express obligations undertaken by each party under the terms of this Agreement.

 

(c)Segregation of Collateral.  Until the occurrence of the Senior Obligations Payment Date, any Senior Collateral that may be received by any Junior Secured Party in violation of this Agreement shall be segregated and held in trust and promptly paid over to the Senior Representative, for the benefit of the Senior Secured Parties, in the same form as received, with any necessary endorsements, and each Junior Secured Party hereby authorizes the Senior Representative to make any such endorsements as agent for the Junior Representative (which authorization, being coupled with an interest, is irrevocable).

 

(d)Revolving Nature of ABL Loans. The Term Note Purchaser acknowledges and agrees that (i) the ABL Loan Agreement includes a revolving commitment, that in the ordinary course of business the ABL Lenders will apply payments and make advances thereunder, and that no application of any ABL Priority Collateral or the release of any Lien by the Agent upon any portion of the ABL Priority Collateral in connection with a disposition permitted by the Credit Parties under the ABL Loan 

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Agreement shall not constitute an Enforcement Action or the pursuit of a collection action under this Agreement; (ii) the amount of the ABL Loans that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, subject to the ABL Debt Cap, (iii) from time to time the Agent and the other ABL Lenders may modify (or have the effect of a modification of) advance rates, sub-limits, borrowing base components, eligibility criteria or reserves, or provide for special advances, overadvances, protective advances and other changes that would increase or decrease the amount available to be borrowed under the ABL Loan Agreement as in effect on the date hereof, and no such modification and no provision for the repayment off ABL Loans as a result of such modification, shall constitute an Enforcement Action or the pursuit of a collection action under this Agreement; (iv) subject to Section 7.1, the terms of the ABL Loans may be modified, amended and restated, extended or amended from time to time, and that the aggregate amount of the ABL Loans may be increased, replaced or refinanced, in each event, without notice to or consent by the Term Secured Parties and without affecting the provisions hereof; and (v) all ABL Priority Collateral received by the Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL Loans at any time. 

 

4.2  Releases of Liens.  Upon any release, sale or disposition of Senior Collateral that is permitted pursuant to the terms of the Senior Documents or is effected by any sale or other disposition pursuant to any Enforcement Action, and that results in the release of the Senior Lien on any Senior Collateral (other than release of the Senior Lien due to the occurrence of the Senior Obligations Payment Date), the Junior Lien on such Senior Collateral (excluding any portion of the Proceeds of such Senior Collateral remaining after the Senior Obligations Payment Date occurs, which shall continue to be subject to the Junior Liens) shall be automatically and unconditionally released with no further consent or action of any Person, it being specifically agreed and acknowledged by the Senior Representative that the automatic release of any such Junior Lien on the Senior Collateral will not impair the security under the ABL Loan Documents or Term Debt Documents, as applicable, in contravention of the provisions thereof, provided that the proceeds of any such sale or disposition pursuant to an Enforcement Action must be applied in accordance with Section 4.1 and to permanently repay the Senior Obligations (with a corresponding commitment reduction in the case of any repayment of ABL Loans). The Junior Representative shall promptly execute and deliver such release documents and instruments and shall take such further actions as the Senior Representative shall request to evidence any release of the Junior Lien described in this Section 4.2.  The Junior Representative hereby appoints the Senior Representative and any officer or duly authorized person of the Senior Representative, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the Junior Representative and in the name of the Junior Representative or in the Senior Representative’s own name, from time to time, in the Senior Representative’s sole discretion, for the purposes of carrying out the terms of this Section 4.2, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this Section 4.2, including, without limitation, any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).

 

4.3  Insurance.  Proceeds of Common Collateral include insurance proceeds and therefore the Lien Priority shall govern the ultimate disposition of casualty insurance proceeds.  The Agent shall be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to ABL Priority Collateral and the Term Note Purchaser shall be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to Term Debt Priority Collateral.  Prior to the ABL Debt Payment Date, the Agent shall have the sole and exclusive right, as between the Term Note Purchaser on the one hand and the Agent on the other hand, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of ABL Priority Collateral.  Prior to the Term Debt Payment Date, the Term Note Purchaser shall have the sole and exclusive right, as between the Agent on the one hand and the Term Note Purchaser on the other hand, to adjust settlement of insurance claims in 

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the event of any covered loss, theft or destruction of Term Debt Priority Collateral.  All proceeds of such insurance shall be remitted to the Agent or the Term Note Purchaser, as the case may be, and each of the Term Note Purchaser and Agent shall cooperate (if necessary) in a reasonable manner in effecting the payment of insurance proceeds in accordance with Section 4.1.

 

5.Proceedings.

 

5.1  Filing of Motions.  Until the Senior Obligations Payment Date has occurred, the Junior Representative agrees on behalf of itself and the other Junior Secured Parties that no Junior Secured Party shall, in or in connection with any Proceeding, file any pleadings or motions, take any position at any hearing or proceeding of any nature, or otherwise take any action whatsoever, in each case in respect of any of the Senior Collateral, including, without limitation, with respect to the determination of any Liens or claims held by the Senior Representative (including the validity and enforceability thereof) or any other Senior Secured Party in respect of any Senior Collateral or the value of any claims of such parties under Section 506(a) of the Bankruptcy Code or otherwise; provided that the Junior Representative may (i) file a proof of claim in a Proceeding, and (ii) file any necessary responsive or defensive pleadings in opposition of any motion or other pleadings made by any Person objecting to or otherwise seeking the disallowance of the claims of the Junior Secured Parties on the Senior Collateral, subject to the limitations contained in this Agreement and only if consistent with the terms and the limitations on the Junior Representative imposed hereby. 

 

5.2  Financing Matters

.  

 

(a)If any Grantor becomes subject to any Proceeding in the United States at any time prior to the ABL Debt Payment Date, and if the Agent or other ABL Secured Parties desire to consent (or not object) to the use of cash collateral under the Bankruptcy Code constituting ABL Priority Collateral or to provide financing to any Grantor under the Bankruptcy Code or to consent (or not object) to the provision of such financing to any Grantor by one or more of the ABL Lenders or by any third party provided the provisions of the financing provided by such third party qualifies as a Permitted Refinancing (any such financing, “ABL DIP Financing”), then the Term Note Purchaser agrees, on behalf of itself and the other Term Debt Secured Parties, that each Term Debt Secured Party (i) will be deemed to have consented to, will raise no objection to, nor support any other Person objecting to, the use of such cash collateral constituting ABL Priority Collateral or to such ABL DIP Financing on the grounds of a failure to provide “adequate protection” for the Term Debt Secured Parties’ Lien on the Term Debt Collateral to secure the Term Debt (except as provided in clause (z) below) or on any other grounds (and will not request any adequate protection solely as a result of such ABL DIP Financing, except as provided in clause (z) below) and (ii) will subordinate (and will be deemed hereunder to have subordinated) the Term Note Liens on any ABL Priority Collateral (A) to such ABL DIP Financing on the same terms as the ABL Liens are subordinated thereto (and such subordination will not alter in any manner the terms of this Agreement), (B) to any adequate protection provided to the ABL Secured Parties and (C) to any “carve-out” in respect of fees and expenses of professionals retained by any debtor or committee and administrative expenses as agreed to by the Agent or the other ABL Secured Parties, in each case, under the immediately preceding clauses (i) and (ii), so long as (x) the following conditions are met: (1) the financing is not made in conjunction with the use of cash collateral consisting of Term Debt Priority Collateral and the Term Debt Secured Parties retain their  Lien on the Term Debt Collateral to secure the Term Debt (in each case, including Proceeds thereof arising after the commencement of the case under the Bankruptcy Code) and (2) as to the Term Debt Priority Collateral only, such Lien has the same priority as existed prior to the commencement of the case under the Bankruptcy Code and any Lien securing such ABL DIP Financing, together with any adequate protection Liens granted to any ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) on any Term Debt Priority Collateral (and all obligations relating to such ABL DIP Financing, including any “carve-out”), 

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shall be junior and subordinate to the Lien of the Term Debt Secured Parties on the Term Debt Priority Collateral, (y) all Liens on ABL Priority Collateral securing any such ABL DIP Financing shall be senior to or on a parity with the Liens of the Agent and the other ABL Secured Parties securing the ABL Debt on ABL Priority Collateral and (z) if the Agent or any other ABL Secured Party (or any third party under a Permitted Refinancing of ABL Debt) receives a replacement or adequate protection Lien on post-petition assets of the debtor to secure the ABL Debt, and such replacement or adequate protection Lien is on any of the Term Debt Priority Collateral, (1) such replacement or adequate protection Lien on such post-petition assets which are part of the Term Debt Priority Collateral (the “Term Note Post-Petition Assets”) is junior and subordinate to the Lien in favor of the Term Debt Secured Parties on the Term Debt Priority Collateral and (2) the Term Debt Secured Parties also receive a replacement or adequate protection Lien on such Term Note Post-Petition Assets of the debtor to secure the Term Debt senior in priority to any adequate protection or replacement Lien granted to Agent or any other ABL Secured Party (or any third party under a Permitted Refinancing of ABL Debt), and the Agent and ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) shall not oppose any motion by any of the Term Debt Secured Parties with respect to the granting of any such adequate or replacement Lien on such Term Note Post-Petition Assets.  In no event will (i) the terms of such DIP Financing or use of cash collateral order either require any of the Term Debt Secured Parties to extend additional credit pursuant to such DIP Financing or authorize the use of cash collateral consisting of Term Debt Priority Collateral, (ii) any of the ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) seek to obtain a priming Lien on any of the Term Debt Priority Collateral and nothing contained herein shall be deemed to be a consent by Term Debt Secured Parties to any adequate protection payments using Term Debt Priority Collateral.  If the ABL Secured Parties (or any third party under a Permitted Refinancing of ABL Debt) offer to provide DIP Financing that meets the requirements set forth above in this Section 5.2(a) and, to the extent of any modifications to the ABL Debt Documents meet the requirements for a Permitted Refinancing, then, for so long as such offer by such ABL Secured Parties remains in effect and has not terminated or been withdrawn, the Term Debt Secured Parties will not provide, participate in, or join in or support any other Person in any manner in providing or supporting the use of cash collateral constituting ABL Priority Collateral under the Bankruptcy Code or financing to any Grantor under the Bankruptcy Code.   The foregoing provisions of this Section 5.2(a) shall not prevent the Term Debt Secured Parties from objecting to any provision in any cash collateral order or DIP Financing documentation relating to any provision or content of a plan of reorganization or similar dispositive re-structuring plan that is inconsistent with the terms of this Agreement, including, without limitation, the lien priorities in respect of the Collateral and Proceeds thereof as set forth in this Agreement.

 

(b)All Liens granted to the Term Note Purchaser or the Agent in any Proceeding, whether as adequate protection or otherwise, are intended to be and shall be deemed to be subject to the Lien Priority and the other terms and conditions of this Agreement.

 

5.3  Relief From the Automatic Stay

.  Until the ABL Debt Payment Date, the Term Note Purchaser agrees, on behalf of itself and the other Term Debt Secured Parties, that none of them will seek relief from the automatic stay or from any other stay in any Proceeding or take any action in derogation thereof, in each case in respect of any ABL Priority Collateral, without the prior written consent of the Agent.  Until the Term Debt Payment Date, the Agent agrees, on behalf of itself and the other ABL Secured Parties, that none of them will seek relief from the automatic stay or from any other stay in any Proceeding or take any action in derogation thereof, in each case in respect of any Term Debt Priority Collateral, without the prior written consent of the Term Debt Secured Parties.  Notwithstanding the foregoing, Junior Secured Parties may seek such relief to the extent it is conditioned and coextensive with the relief sought and granted to the Senior Secured Parties and the exercise of such relief to the Junior Secured Parties is subject to the continuing terms of this Agreement.

 

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5.4  No Contest.  The Junior Representative, on behalf of itself and the Junior Secured Parties, agrees that, prior to the Senior Obligations Payment Date, none of them shall contest (or support any other Person contesting) (a) any request by the Senior Representative or any Senior Secured Party for adequate protection of its interest in the Senior Collateral (unless in contravention of Section 5.2(a) or (b), as applicable), or (b) any objection by the Senior Representative or any Senior Secured Party to any motion, relief, action, or proceeding based on a claim by the Senior Representative or any Senior Secured Party that its interests in the Senior Collateral (unless in contravention of Section 5.2 (a) or (b), as applicable) are not adequately protected (or any other similar request under any law applicable to a Proceeding), so long as any Liens granted to the Senior Representative as adequate protection of its interests are subject to this Agreement.

 

5.5  Avoidance Issues.  If any Senior Secured Party is required in any Proceeding or otherwise to disgorge, turn over or otherwise pay to the estate of any Grantor, because such amount was avoided or ordered to be paid or disgorged for any reason, including without limitation because it was found to be a fraudulent or preferential transfer, any amount (a “Recovery”), whether received as Proceeds of security, enforcement of any right of set-off or otherwise, then the Senior Obligations shall be reinstated to the extent of such Recovery and deemed to be outstanding as if such payment had not occurred and the Senior Obligations Payment Date shall be deemed not to have occurred.  If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto. 

 

5.6  Asset Dispositions in a Proceeding.  Neither the Junior Representative nor any other Junior Secured Party shall, in a Proceeding or otherwise, oppose any motion  under Section 363 of the Bankruptcy Code (and otherwise) relating to the sale or disposition of any Senior Collateral that is supported by the Senior Secured Parties, and the Junior Representative and each other Junior Secured Party will be deemed to have consented under Section 363 of the Bankruptcy Code (and otherwise) to any sale of any Senior Collateral supported by the Senior Secured Parties and to have released their Liens on such assets, provided that (i) such motion does not impair, subject to the priorities set forth in this Agreement, the rights of such party under Section 363(k) of the Bankruptcy Code or any similar Bankruptcy Law (so long as the right of any Junior Secured Party to offset its claim against the purchase price for any Senior Collateral exists only after the Senior Obligations have been paid in full in cash, (ii) the terms of any proposed order approving such transaction provide for the respective Liens of the Secured Parties to attach to the proceeds of the Senior Collateral that is the subject of such Disposition, subject to the Lien priorities set forth in Section 2.1 of this Agreement, and (iii) the proceeds received by the Senior Secured Parties from any such sale or disposition are applied in accordance with Section 4.1.  Each of the Agent on behalf of the ABL Secured Parties and the Term Debt Secured Parties further agrees that it will not oppose, or support any party in opposing, the right of the other party to credit bid under Section 363(k) of the Bankruptcy Code or any similar Bankruptcy Law, subject to the provisions of the immediately preceding sentence.

 

5.7  Other Matters.  To the extent that the Senior Representative or any Senior Secured Party has or acquires rights under Section 363 or Section 364 of the Bankruptcy Code with respect to any of the Junior Collateral, the Senior Representative agrees, on behalf of itself and the other Senior Secured Parties, not to assert any of such rights without the prior written consent of the Junior Representative; provided that if requested by the Junior Representative, the Senior Representative shall timely exercise such rights in the manner requested by the Junior Representative, including any rights to payments in respect of such rights.

 

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5.8  Effectiveness in Proceedings.  This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under section 510(a) of the Bankruptcy Code, shall be effective before, during and after the commencement of a Proceeding.

 

6.Reliance; Waivers; etc.

 

6.1  Reliance.  The ABL Loan Documents are deemed to have been executed and delivered, and all extensions of credit thereunder are deemed to have been made or incurred, in reliance upon this Agreement.  The Term Note Purchaser, on behalf of it itself and the other Term Debt Secured Parties, expressly waives all notice of the acceptance of and reliance on this Agreement by the Agent and the other ABL Secured Parties.  The Term Debt Documents are deemed to have been executed and delivered, and all extensions of credit thereunder are deemed to have been made or incurred, in reliance upon this Agreement.  The Agent, on behalf of itself and the other ABL Secured Parties, expressly waives all notices of the acceptance of and reliance on this Agreement by the Term Note Purchaser and the other Term Debt Secured Parties.

 

6.2 No Warranties or Liability.  The Term Note Purchaser and the Agent acknowledge and agree that neither has made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any other ABL Loan Document or any other Term Debt Document.  Except as otherwise provided in this Agreement, the Term Note Purchaser and the Agent will be entitled to manage and supervise the respective extensions of credit to any Grantor in accordance with law and their usual practices, modified from time to time as they deem appropriate.

 

6.3  No Waivers.   No right or benefit of any party hereunder shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of such party or any other party hereto or by any noncompliance by any Grantor with the terms and conditions of any of the ABL Loan Documents or the Term Debt Documents.

 

7.Modifications. 

 

7.1.  Modifications to ABL Loan Documents.  ABL Lenders may at any time and from time to time without the consent of or notice to Term Note Purchaser, without incurring liability to Term Note Purchaser and without impairing or releasing the obligations of Term Note Purchaser under this Agreement, (a) change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the ABL Loans, or (b) increase or decrease the amount of the ABL Loans; provided, however, that in no event shall the increase provide that the aggregate outstanding principal amount due under the ABL Loans may exceed the ABL Debt Cap, or (c) amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the ABL Loans, or (d) accept collateral security or guaranties for the ABL Loans and sell, exchange, fail to perfect, release or otherwise deal with all or any part of any such collateral or guaranties, (e) release any party primarily or secondarily obligated on the ABL Loans, (f) grant indulgences and take or refrain from taking any action with regard to the collection or enforcement of the ABL Loans, and (g) take any action which might otherwise constitute a defense to or a discharge of any Credit Party; provided however that that no such amendment or modification shall do any of the following without the prior written consent of the Term Note Purchaser:

(i) provide for an outstanding principal amount of, without duplication, ABL Loans in the aggregate in excess of the ABL Debt Cap; 

(ii) increase the interest rate or yield provisions applicable to the ABL Loans by more than 4.00% per annum in the aggregate (excluding increases (A) resulting from increases in 

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the underlying reference rate or (B) resulting from the accrual of interest at the default rate of interest (as calculated in the ABL Loan Documents as of the date hereof); 

(iii) extend by more than one (1) year the scheduled maturity date or facility termination date of any loan or extension of credit or credit facility provided for in the ABL Loan Documents beyond the scheduled final maturity and/or termination date, as applicable, set forth in the ABL Loan Documents as in effect on the date hereof;

(iv) change any covenant, default or event of default (including the addition of any covenant, default or event of default not contained in the ABL Loan Documents as in effect on the date hereof) to restrict the payment of any Term Debt) that would otherwise be permitted hereunder or under the ABL Loan Documents as in effect on the date hereof (for the avoidance of doubt, however, nothing in this Section 7.1 or otherwise shall (A) limit the ABL Lenders’ right to modify advance rates, sub-limits, borrowing base components, eligibility criteria or reserves, or provide for special advances, overadvances, protective advances and other changes that would increase (subject to the limitations in clause (i) above) or decrease the amount of credit available under ABL Loan Agreement, (B) limit the effect, or  prohibit the Senior Secured Parties from agreeing to any addition, amendment or modification, of the provisions of the Senior Documents that has the indirect effect of restricting the ability of the Credit Party to pay Junior Obligations or otherwise restricts such payments in accordance with the terms of this Agreement by restricting the use the Senior Collateral or the use of loan proceeds to pay Junior Obligations during the continuance of an event of default under the Senior Documents, or (C) give the Term Note Purchaser any rights in or under, or make the Term Note Purchaser a third party beneficiary of, the ABL Loan Documents), 

 

(v) changes any redemption or prepayment provisions so as to require any new payments or accelerate (except as permitted under the ABL Debt Documents during the continuance of an event of default or as described in clause (ii) of Section 4.1) or increase any existing payments or shorten the stated maturity of the ABL Debt, or  

(vi) contravene the provisions of this Agreement. 

 

7.2.   Modifications to Term Debt Documents.  

 

(a)Until the ABL Debt Payment Date, and notwithstanding anything to the contrary contained in the Term Debt Documents, Term Note Purchaser shall not, without the prior written consent of Agent, agree to any amendment, modification or supplement to the terms of the Term Debt or the Term Debt Documents if such amendment, modification or supplement would:

(i) increase the principal amount in excess of the Term Debt Cap or increase interest rate of the Term Debt by more than 4.00% per annum in the aggregate (excluding increases (A) resulting from increases in the underlying reference rate or (B) resulting from the accrual of interest at the default rate of interest (as calculated in the Term Debt Documents as of the date hereof, or (C) resulting from any payment-in-kind,  non-cash interest) other than as set forth in the Term Debt Documents in effect on the date hereof, 

(ii) changes any redemption or prepayment provisions so as to require any new payments or accelerate (except as permitted under the Term Debt Documents during the continuance of an event of default) or increase any existing payments or shorten the stated maturity of the Term Debt, 

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(iv) change any covenant, default or event of default (including the addition of any covenant, default or event of default not contained in the Term Debt Documents as in effect on the date hereof) to restrict the payment of any ABL Debt that would otherwise be permitted hereunder or under the Term Debt Documents as in effect on the date hereof , or

(v) contravene the provisions of this Agreement. 

 

Nothing herein, including the provisions of this Agreement pertaining to subordination of liens on the Collateral, shall be construed to imply (i) Agent’s or ABL Lenders’ consent to any Term Debt Document which grants a lien upon any of the Collateral (other than the Term Note Lien), or (ii) Term Note Purchaser’ consent to any ABL Debt Document which grants a lien upon any of the Collateral (other than the ABL Liens).

 

8.Construction.  The terms of this Agreement were negotiated among business persons sophisticated in the area of business finance, and accordingly, in construing the terms of this Agreement, no rule or law which would require that this instrument be construed against the party who drafted this instrument shall be given any force or effect. 

   

9.Modification of this Agreement.  Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and Term Note Purchaser to be bound thereby, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

 

10.Further Assurances.  Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

 

11.Continuing Agreement.   This Agreement is a continuing agreement and will remain in full force and effect until all of the obligations under the ABL Loan Documents or the Term Note Documents have been Paid in Full, subject to reinstatement as provided for below, and without limiting any claim or cause of action that may have arisen against the Term Note Purchaser, Agent or any ABL Lender under the terms of this Agreement or applicable law prior to the date of termination. This Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any claim or demand for indemnification or payment with respect thereto has been made or payment of all or any part of the ABL Debt or the Term Debt is rescinded or must otherwise be returned by Agent and/or ABL Lenders or the Term Note Purchaser, as applicable, upon any Proceeding with respect to any Grantor or otherwise, all as though such payment had not been made.

 

12.Notices.  Any notice or other communication required or permitted under this Agreement shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested and postage prepaid), sent by facsimile (with a confirming copy sent by regular mail), or sent by prepaid overnight courier service, and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Agreement:

 

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If to ABL Lenders, to Agent at:

 

c/o MidCap Financial Services, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, MD  20814

Attention:  Portfolio Management – Staffing 360 transaction

Facsimile:  (301) 941-1450 

 

with a copy to:

 

c/o MidCap Financial Services, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, MD  20814

Attention:  General Counsel

Facsimile:  (301) 941-1450 

 

If to Parent or any other Credit Party, at:

 

c/o Staffing 360 Solutions, Inc.

641 Lexington Avenue, 27th Floor

New York, NY 10022

Attention:  David Faiman

Facsimile:  (509) 694-8692

 

If to Term Note Purchaser, at:

 

 

the address set forth on the signature pages attached hereto.

	

	
 

 

If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery, facsimile or prepaid courier, notice shall be deemed to be given when delivered.

 

13.Successors and Assigns.  This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of ABL Lenders, Term Note Purchaser and the Credit Parties; provided, however, that no Credit Party may assign this Agreement in whole or in part without the prior written consent of Agent and the Term Note Purchaser.   ABL Lenders may, from time to time, without notice to Term Note Purchaser, assign or transfer any or all of the ABL Loans or any interest therein to any Person and  Term Note Purchaser may, from time to time, without notice to ABL Lenders, assign or transfer any or all of the Term Debt or any interest therein to any Person, provided in each case the assignee or transferee (and each subsequent assignee or transferee) has been bound in writing to the same terms and conditions of this Agreement as the assignor or transferor, Notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Obligations and the Junior Obligations shall, subject to the terms hereof, be and remain the Senior Obligations or the Junior Obligations for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Obligations and the Junior Obligations or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Obligations or the Junior Obligations, be entitled to rely upon the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto. 

 

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14.No Waiver or Novation.  No waiver shall be deemed to have been made by any party to this Agreement of any of its rights under this Agreement unless the same shall be in writing and duly signed by its duly authorized officers or representatives, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of any party to this Agreement in any other respect at any time.  No executory agreement shall be effective to change, modify or to discharge, in whole or in part, this Agreement, unless such executory agreement is in writing and duly signed by the duly authorized officers or representatives of each party to this Agreement.

 

15.CONSENT TO JURISDICTION.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF MARYLAND AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SECURED PARTY AND EACH OF THE CREDIT PARTIES AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

16.WAIVER OF JURY TRIAL.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE TERM DEBT DOCUMENTS OR ANY OF THE ABL LOAN DOCUMENTS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE APPLICABLE ABL LOAN DOCUMENTS AND NOTE DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH PARTY HERETO AND EACH OF THE CREDIT PARTIES WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

17.Term Note Purchaser Purchase Option.

 

17.1  Agent agrees that it shall give Term Note Purchaser written notice (a  “Demand/Exercise Event Notice”) of any proposed demand by Agent or any other ABL Lenders with respect to all of the ABL Loans outstanding under the ABL Loan Agreement and the other ABL Loan Documents, any proposed acceleration of the maturity of the ABL Loans or any proposed taking of any Enforcement Action against any of the Common Collateral (including, without limitation, any proposed private or public foreclosure sale in respect of all or any portion of the Collateral securing the ABL Loans) (each a “Demand/Exercise Event”):  (a) in the absence of an Exigent Circumstance, not less than two (2) Business Days prior to such demand or the issuance of such foreclosure notice or taking of any of Enforcement Actions (each referred to herein as an “ABL Enforcement Action”); or (b) if, in the judgment of Agent, Exigent Circumstances exist, concurrently with or as promptly as reasonably practicable after the taking of such action; provided, however, that the Agent’s failure to provide the notice of a ABL Enforcement Action to the Term Note Purchaser shall not impair any of the Agent’s rights hereunder or under the ABL  Loan Agreement and the 

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other ABL Loan Documents as against the Credit Parties, provided, further that it shall not impair the Term Note Purchaser’s remedies with respect to any such violation for failure to send such notice.  

17.2  Upon the occurrence and during the continuance of a Demand/Exercise Event, Term Note Purchaser shall have the option at any time upon five (5) Business Days’ prior written notice (the “Buy-Out Notice”) from Term Note Purchaser to Agent to purchase (at par and without discount) all (but not less than all) of the ABL Loans outstanding under the ABL Loan Agreement and the other ABL Loan Documents from the ABL Lenders (other than any rights to indemnification that any ABL Lender has against any Credit Party under any ABL Loan Agreement or other ABL Loan Document as to matters and circumstances (“Indemnifiable Matters”) whether known or unknown to Term Note Purchaser on the closing date of such purchase, which may result in any loss, cost, damage or expense (including reasonable attorneys’ fees and expenses)) for the purchase price specified below.  Any Buy-Out Notice given by Term Note Purchaser to Agent shall be irrevocable.  

17.3  On the closing date (the “Purchase Option Closing Date”) specified by Term Note Purchaser in the Buy-Out Notice (which shall not be less than five (5) Business Days, nor more than fifteen (15) days, after the receipt by Agent on behalf of the ABL Lenders of the Buy-Out Notice), the ABL Lenders shall (a) sell to the Term Note Purchaser, and Term Note Purchaser shall purchase from the ABL Lenders, all (but not less than all) of the ABL Loans (other than Unasserted Contingent Indemnification Obligations) outstanding under the ABL Loan Agreement and the other ABL Loan Documents and held by the ABL Lenders, including any and all prepayment fees or premium (whether or not the same are then due from any Credit Party) and Indemnifiable Matters asserted as of the Purchase Option Closing Date and (b) the Agent and the ABL Lenders shall assign to the Term Note Purchaser (or its designee) all of their rights and interests under the ABL Loan Documents (including all rights and interests with respect to the Collateral securing the ABL Loans (other than unasserted Indemnifiable Matters as of the Purchase Option Closing Date) in accordance with the terms and conditions of this Section 17.  The Credit Parties and the Term Note Purchaser acknowledge and agree that, after the Purchase Option Closing Date, the Credit Parties shall continue to be liable to the ABL Lenders for all Indemnifiable Matters that have not been paid in full in cash or secured, in each such instance to the satisfaction of each the ABL Lenders in the exercise of its sole and absolute discretion from time to time.

17.4  On the Purchase Option Closing Date, Term Note Purchaser shall (i) pay to Agent for the ratable benefit of the ABL Lenders as the purchase price for sale and assignment contemplated by Section 17.2, in immediately available funds the full amount of all ABL Loans (at par and without discount) then outstanding and unpaid under the ABL Loan Agreement and the other ABL Loan Documents (including outstanding principal, accrued and unpaid interest, fees and expenses, including (A) any prepayment fees or premium specified in the ABL Loan Agreement or any other ABL Loan Documents (even though the ABL Loans are being assigned and not repaid and the prepayment fees or premium may not be then due from the Credit Parties) and (B) any Indemnifiable Matters asserted as of the Purchase Option Closing Date, in each case on a dollar for dollar basis), and (ii) furnish such amount of cash collateral in immediately available funds as the Agent determines is reasonably necessary to secure ABL Lenders in connection with (x) any known Indemnifiable Matters and (y) any outstanding letters of credit issued under the ABL Loan Agreement but not, in any event, in an amount greater than 110% of the aggregate undrawn amount of all such outstanding letters of credit (and any excess of such cash collateral for such letters of credit remaining at such time when there are no longer any such letters of credit outstanding and there are no unreimbursed amounts then owing in respect of such drawings under such letters of credit shall be promptly paid over to the Term Note Purchaser), and Agent and ABL Lenders execute and delivery to the Term Note Purchaser (or its designee) a written assignment agreement in form mutually satisfactory to Agent, ABL Lenders and the Term Note Purchaser evidencing the assignment by Agent and ABL Lenders all of their rights with respect to the ABL Loans so purchased and the ABL Loan Documents.  Such purchase price shall be remitted by wire transfer in federal funds to such bank account of Agent as Agent (individually or on behalf 

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of such ABL Lender) may designate in writing to Term Note Purchaser for such purpose.  Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by Term Note Purchaser to the bank account designated by Agent for the benefit of ABL Lenders are received in such bank account prior to 1:00 p.m., New York City time and interest shall be calculated to and including such Business Day if the amounts so paid by Term Note Purchaser to the bank account designated by Agent are received in such bank account later than 1:00 p.m., New York City time.

17.5  Such purchase shall be expressly made without representation or warranty of any kind by Agent or any of the ABL Lenders as to any of the ABL Loans or otherwise and without recourse to Agent or any of the ABL Lenders, except that each ABL Lender shall represent and warrant:  (i) the amount of the ABL Loans being purchased from such ABL Lender, (ii) that such ABL Lender owns such ABL Loans being sold by it and has not created any Lien on any such ABL Loans, (iii) that such ABL Lenders has the right to assign such ABL Loans being assigned by it and the assignment is duly authorized, and (iv) Agent is the current collateral agent and administrative agent under the ABL Loan Documents and has not resigned or assigned its rights, duties or obligations as such to any other person or entity.

17.6  Upon the delivery by Agent to Term Note Purchaser of a notice of Demand/Exercise Event, Agent and ABL Lenders will forbear from instituting judicial proceedings or otherwise pursuing collection actions of the ABL Loans, foreclosing on any lien or security interest on any of the Collateral or from taking any other Enforcement Action (other than actions taken by Agent in connection with the collection of accounts receivable through lockbox or blocked account arrangements, regardless of whether such collection occurs prior to or following any Demand/Exercise Event Notice), until the earlier of (i) the second Business Day following the date of such delivery if a Buy-Out Notice then shall not have been delivered to Agent on or before such second Business Day or (ii) after delivery of a Buy-Out Notice to Agent, the fifteenth day following the date of the delivery of such Buy-Out Notice if the purchase and sale of the ABL Loans contemplated by Section 17.2 hereof pursuant to such Buy-Out Notice and this Section 17 shall have not occurred on or before such fifteenth day; provided, however, that nothing herein is intended to or shall restrict Agent’s right to limit, suspend or terminate advances under the ABL Loan Agreement or Agent’s collection rights under Section 9-607 of the Uniform Commercial Code with respect to the proceeds of Collateral, including, without limitation, the collection and application of proceeds of Accounts.  Nothing in this Agreement, however, shall limit Agent’s rights under the ABL Loan Documents to require that the Credit Parties cause Account Debtors (as defined in the ABL Loan Agreement) to make payments to a lockbox or to a blocked account or that proceeds of Collateral be deposited in or remitted to a blocked account and to apply such proceeds to the ABL Loans.

 

17.7  Each Credit Party hereby consents to any assignment to the Term Note Purchaser set forth in this Section 17.

 

17.8  The transfer of the ABL Loans shall be effected by an assignment agreement, endorsements and such other documents as Term Note Purchaser may reasonably request from time to time, all in form and substance reasonably satisfactory to Agent and the Term Note Purchaser, whereby the Term Note Purchaser will have all rights of the ABL Lenders (except to the extent control agreements and other agreements require the consent of persons who are not party to this Agreement; provided that ABL Lenders agree to reasonably cooperate with Term Note Purchaser in obtaining any such consents) under the ABL Loan Documents and assume the obligations of ABL Lenders under the ABL Loan Documents and Agent will convey all right, title and interest of the Agent in and to the ABL Loans. 

 

18.Miscellaneous.  

 

18.1.Conflict. Subject to the applicable provisions of Section 18.6, in the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of 

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the Term Debt Documents or the ABL Documents, the provisions of this Agreement shall control and govern. 

 

18.2.Headings.  The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof. 

 

18.3.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, but in making proof hereof, it shall only be necessary to produce one such counterpart containing signatures pages signed by each party.  Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page to this Agreement shall bind the parties hereto.

 

18.4.Severability.  In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement. 

 

18.5.Governing Law.  This Agreement shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of Maryland, without regard to conflicts of law principles. 

 

18.6.Relative Rights. This Agreement shall define the relative rights of ABL Lenders and Term Note Purchaser.  Nothing in this Agreement shall (a) impair, as between the Grantors and ABL Lenders, on the one hand, and the Grantors and the Term Note Purchaser on the other hand, the obligation of the Grantors with respect to the payment of the ABL Loans and the Term Debt and performance of their obligations under the ABL Loan Documents and the Term Debt Documents, respectively, in accordance with their respective terms, or (b) affect the relative rights of ABL Lenders or Term Note Purchaser with respect to any other creditors of the Grantors.

 

18.7.Entire Agreement.  This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes and replaces all other prior agreements (including, without limitation, that certain Subordination Agreement dated as of January 25, 2017 between Term Note Purchaser, Agent, Parent and certain of Parent’s Subsidiaries, as amended) and understandings, both written and oral, among the parties with respect to the subject matter hereof.  

 

18.8.Representations and Warranties. The Agent and the Term Note Purchaser each represents and warrants to the other that it has been authorized by ABL Lenders or holders of Term Note, as applicable, under the ABL Loan Agreement or the Term Note Agreement, as applicable, to enter into this Agreement, and the agreements of the Agent set forth herein shall be binding on the ABL Lenders and the agreements of the Term Note Purchasers set forth herein shall be binding on the holders of the Term Note.

 

18.9.Subrogation.   With respect to (a) any payments or distributions in cash, property or other assets that any Term Note Purchaser pays over to the Agent or any ABL Lender under the terms of this Agreement, the Term Note Purchaser, shall on the ABL Debt Payment Date be subrogated to the rights of the Agent and the ABL Lenders and (b) with respect to any payments or distributions in cash, property or other assets that Agent or any ABL Lender pays over to the Term Note Purchaser under the terms of this Agreement, the Agent and the ABL Lenders, as applicable, shall on the Term Debt Payment Date be subrogated to the rights of the Term Note Purchaser. Any payments or distributions in cash, property or 

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other assets received by the Agent or the ABL Lenders that are paid over to the Term Note Purchaser pursuant to this Agreement shall not reduce any of the ABL Debt. Any payments or distributions in cash, property or other assets received by the Term Note Purchaser that are paid over to the Agent or the ABL Lenders pursuant to this Agreement shall not reduce any of the Term Debt. Notwithstanding the foregoing provisions of this Section 18.9, none of the Agent or ABL Lenders shall have any claim against the Term Note Purchaser for any impairment of any subrogation rights herein granted to the Term Note Purchaser, and the Term Note Purchaser shall not have any claim against the Agent or any of the ABL Lenders for any impairment of any subrogation rights herein granted to the Agent or the ABL Lenders.

 

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

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

 

 

AGENT:

 

MIDCAP FUNDING X TRUST, a Delaware statutory trust, as successor-by-assignment from MidCap Financial 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

 

 

Agent’s Signature Page to Intercreditor Agreement

 

 

 

TERM NOTE PURCHASER:

 

	
 
	

	
JACKSON INVESTMENT GROUP, LLC 

 

 

 

By: _/s/ Douglas B. Kline_______________ (SEAL)

Name: Douglas B. Kline

Title: Chief Financial Officer

 

 

Address for Notice to Term Note Purchaser:

 

 

Jackson Investment  Group, LLC

2655 Northwinds Parkway

Alpharetta, Georgia 30009

Attn:  Richard L. Jackson

Telecopy Number:   678-495-5356

Telephone Number: 770-643-5605

 

with a copy to:

 

Kilpatrick Townsend & Stockton LLP

1100 Peachtree Street, N.E.

Atlanta, GA 30309

Attn:  David Stockton, Esq.

Telecopy Number:  (404) 815-541-3402

Telephone Number:  (404) 815-6444

 

 

 

 

Term Note Purchaser’s Signature Page to Intercreditor Agreement

 

PARENT:STAFFING 360 SOLUTIONS, INC., a Delaware corporation

 

 

By:_/s/ Brendan Flood___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

SUBSIDIARIES:

	
 
	
MONROE STAFFING SERVICES, LLC, a Delaware limited liability company 

 

	
 
	
By:_/s/ Brendan Flood___________(Seal)

	
 
	
Name:  Brendan Flood
Title:  Executive Chairman

	
 

PEOPLESERVE, INC., a Massachusetts corporation

 

By:_/s/ Brendan Flood___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

FARO RECRUITMENT AMERICA, INC., a NY corp.

 

 

By:_/s/ Brendan Flood___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

  

LIGHTHOUSE PLACEMENT SERVICES, INC., a Massachusetts corporation

 

 

By:_/s/ David Faiman____________(Seal)

Name:  David Faiman
Title:  Secretary and Treasurer

 

PEOPLESERVE PRS, INC., a Massachusetts corporation

 

 

By:_/s/ Brendan Flood___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

  

STAFFING 360 GEORGIA, LLC, a Georgia limited liability company

 

 

By:_/s/ Brendan Flood___________(Seal)

Name:  Brendan Flood
Title:  Executive Chairman

 

Borrowers’ Signature Page to Intercreditor Agreement

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