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Exhibit 10.2

PQ GROUP HOLDINGS INC.
2017 Omnibus Incentive Plan

Performance Stock Unit Award Agreement

This Performance Stock Unit Award Agreement (this “Agreement”) is made by and between PQ Group Holdings Inc., a Delaware corporation (the “Company”), and [●] (the “Participant”), effective as of [●] (the “Date of Grant”).

RECITALS

WHEREAS, the Company has adopted the PQ Group Holdings Inc. 2017 Omnibus Incentive Plan (as the same may be amended and/or amended and restated from time to time, the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined in this Agreement will have the meanings ascribed to those terms in the Plan; and

WHEREAS, the Committee has authorized and approved the grant of an Award of performance stock units (“PSUs”) to the Participant that provides the Participant the conditional opportunity to acquire one share of Common Stock (a “Share”) with respect to each PSU forming part of the Award, subject to the terms and conditions set forth in the Plan and this Agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants set forth in this Agreement, the parties agree as follows:

1.Grant of PSUs.  The Company has granted to the Participant [●] PSUs (the “Target Award), effective as of the Date of Grant, on the terms and conditions set forth in the Plan and this Agreement, subject to adjustment as forth in the Plan.

2.Earning and Vesting of PSUs.  Subject to the terms and conditions set forth in the Plan and this Agreement, the PSUs may be earned and will vest as follows:

(a)Performance Conditions.  Between 0% and 200% (the “Payout Range”) of the Target Award is eligible to be earned contingent on achievement of the Performance Measures set forth on Appendix A to this Agreement during the period beginning on January 1, 2020 and ending on December 31, 2022 (the “Performance Period”) and other terms and conditions as set forth in Appendix A to this Agreement.  

(b)Vesting Schedule.  Subject to the terms and conditions set forth in the Plan and this Agreement, and except as otherwise provided in Section 2(b) or Appendix A of this Agreement, any PSUs that are earned in accordance with Appendix A will vest on the date the Committee certifies the levels of achievement of the Performance Measures, which shall be no later than sixty (60) days following the end of the Performance Period  (the “Performance Vesting Date”), subject to the Participant’s continued Service through the Performance Vesting Date (or other earlier vesting date specified in Appendix A).  Any PSUs that are not earned in accordance with Appendix A on the Performance Vesting Date (or any other date specified in Appendix A) will immediately terminate and be forfeited and cancelled without payment of consideration therefor.

(c)Termination of Service.  Except as otherwise provided in Appendix A of this Agreement, the Participant shall forfeit, immediately and without consideration, all unvested PSUs upon a termination of the Participant’s Service for any reason.  Without limiting the generality of the foregoing, the PSUs and the Shares (and any resulting proceeds) will continue to be subject to Section 13 of the Plan.

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3.Payment

(a)Settlement.  The Company shall deliver to the Participant within thirty (30) days following the vesting date of the PSUs (but no later than March 15th of the year following the year in which such PSUs are earned hereunder) a number of Shares equal to the aggregate number of PSUs that are earned in accordance with Appendix A and that vest on such date.  No fractional Shares shall be delivered.  The Company may deliver such Shares either through book entry accounts held by, or in the name of, the Participant or cause to be issued a certificate or certificates representing the number of Shares to be issued in respect of the PSUs registered in the name of the Participant.

(b)Withholding Requirements.  The Company will have the power and the right to deduct or withhold automatically from any Shares deliverable under this Agreement or from any other compensation payable to the Participant, or to require the Participant or the Participant’s representative to remit to the Company, up to the maximum statutory amount necessary to satisfy federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement.  Nothing in this Agreement may be construed as relieving the Participant of his or her obligation to satisfy all taxes required to be withheld in connection with the award, vesting or settlement of the PSUs.

4.Adjustment of Shares.   In the event of any change with respect to the outstanding shares of Common Stock contemplated by Section 4.5 of the Plan, the PSUs may be adjusted by the Committee in accordance with Section 4.5 of the Plan.

5.Miscellaneous Provisions

(a)Securities Laws Requirements.  No Shares will be issued or transferred pursuant to this Agreement unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met.  As a condition precedent to the issuance of Shares pursuant to this Agreement, the Company may require the Participant to take any reasonable action to meet those requirements.  The Committee may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act, under the requirements of any exchange upon which shares of the same class are then listed and under any blue sky or other securities laws applicable to those Shares.  

(b)Rights of a Shareholder of the Company.  Prior to settlement of the PSUs and the delivery of Shares to the Participant with respect thereto, neither the Participant nor the Participant’s representative will have any rights as a shareholder of the Company with respect to any Shares underlying the PSUs and the Participant will not receive payment of, or credit for, dividends or dividend equivalents with respect to any Shares underlying the PSUs.

(c)Transfer Restrictions.  The PSUs may not be transferred except as expressly permitted under Section 15.3 of the Plan.  The Shares delivered hereunder will be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws and any agreement with, or policy of, the Company or the Committee to which the Participant is a party or subject, and the Committee may cause orders or designations to be placed upon the books and 
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records of the Company’s transfer agent to make appropriate reference to such restrictions.

(d)No Right to Continued Service.  Nothing in this Agreement or the Plan confers upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause.

(e)Notification.  Any notification required by the terms of this Agreement will be given by the Participant (i) in a writing addressed to the Company at its principal executive office and will be deemed effective upon actual receipt when delivered by personal delivery or by registered or certified mail, with postage and fees prepaid, or (ii) by electronic transmission to the Company’s e-mail address of the Company’s General Counsel and will be deemed effective upon actual receipt.  Any notification required by the terms of this Agreement will be given by the Company (x) in a writing addressed to the address that the Participant most recently provided to the Company and will be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, or (y) by facsimile or electronic transmission to the Participant’s primary work fax number or e-mail address (as applicable) and will be deemed effective upon confirmation of receipt by the sender of such transmission.

(f)Entire Agreement.  This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter of this Agreement.  This Agreement and the Plan supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter of this Agreement.

(g)Waiver.  No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

(h)Successors and Assigns.  The provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s executor, personal representative(s), distributees, administrator, permitted transferees, permitted assignees, beneficiaries, and legatee(s), as applicable, whether or not any such person will have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.

(i)Severability.  The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.

(j)Choice of Law; Jurisdiction.  This Agreement and all claims, causes of action or proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or relate to this Agreement will be governed by the laws of the State of Delaware, excluding any conflicts or choice-of-law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.  The Participant agrees that he or she will bring all claims, causes of action and proceedings (whether in contract, in tort, at law or otherwise) that may be based upon, arise out of or be related to the Plan and this Agreement exclusively in the federal and state courts located within the geographic boundaries of the United States District Court for the Eastern District of Pennsylvania (the “Chosen Court”), and hereby (i) irrevocably submits to the 
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exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such proceeding in the Chosen Court, (iii) waives any objection that the Chosen Court is an inconvenient forum or does not have jurisdiction over any party and (iv) agrees that service of process upon such party in any such claim or cause of action will be effective if notice is given in accordance with this Agreement.

(k)Acceptance.  The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement.  The Participant has read and understands the terms and provisions of the Plan and this Agreement, and accepts the PSUs subject to all of the terms and conditions of the Plan and this Agreement.  In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable term and provision of the Plan will govern and prevail.

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Appendix A

PERFORMANCE MEASURES AND VESTING TERMS

Performance Measures.  The Performance Measures associated with the PSUs are Three-Year Average Return on Net Tangible Assets (“ROANTA”) as calculated utilizing the methodology and adjustments described in the definition below, and Relative Total Shareholder Return (“TSR”) Performance, as calculated utilizing the methodology and adjustments described in the definition below.

1. Performance Factor for Three-Year Average ROANTA.  The performance factor for Three -Year Average ROANTA (the “ROANTA Performance Factor”) is determined utilizing the percentage which correlates in the chart below with actual Three-Year Average ROANTA.

						
	ROANTA Performance Factor	Three-Average Year ROANTA
	200%	18.1%
	150%	17.9%
	100%	17.7%
	50%	17.25%
	25%	16.8%

2.Performance Factor for Relative TSR Performance. The performance factor for Relative TSR Performance (the “TSR Performance Factor”, with the ROANTA Performance Factor, hereinafter referred to separately each as a “Performance Factor” and collectively as the “Performance Factors”) is determined utilizing the percentage in the chart below which correlates with the Company’s actual TSR performance relative to the actual TSR performance of all of the companies in the Russell 2000 Index:

																		
	Place in Russell 2000 Index	25th percentile
	32.5th
percentile
	50th 
percentile
	62.5th 
percentile
	75th percentile

	TSR Performance Factor	25%	50%	100%	150%	200%

3.Determination of Earned PSUs.   Fifty percent (50%) of the PSUs that are earned under this Appendix A will be determined by multiplying the ROANTA Performance Factor by fifty percent (50%) of the Target Award, rounded down to the nearest whole share, and the remaining fifty percent (50%) of the PSUs that are earned under this Appendix A will be determined by multiplying the TSR Performance Factor by fifty percent (50%) of the Target Award, rounded up to the nearest whole share.  

4.Rules for Determining the Performance Factors. The following rules will apply separately in determining the Performance Factors for each Performance Measure.  

4.1If actual performance is below threshold, the Performance Factor will be zero percent (0%), and no PSUs will be earned with respect to the applicable Performance Measure.

4.2If actual performance is above maximum, the Performance Factor will be (and will not exceed) two hundred percent (200%).

4.3If actual performance is between the threshold and maximum benchmarks for Three-Year Average ROANTA and between the benchmarks for Relative TSR Performance, as set forth in each of the two charts above, then the Performance Factor will be determined by linear interpolation. 

4.4In calculating the Performance Factor all percentages will be rounded to the nearest one-tenth (1/10th) of one percent (1%).  In calculating the number of PSUs that are earned under Section 3 of this Appendix A, the number of earned PSUs shall be rounded to the nearest whole PSU.

5.Definition of Three- Year Average ROANTA.  ROANTA is defined as:

       (Adjusted EBITDA – Depreciation) * (1- Adjusted Tax Rate)
Average Investment (Average Net Working Capital + Average Net Property, Plant & Equipment)

EBITDA consists of net income (loss) attributable to the Company before interest, taxes, depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense, (ii) the impact of certain non-cash, nonrecurring or other items included in net income (loss) and EBITDA that the Company does not consider indicative of its ongoing operating performance, and (iii) depreciation, amortization and interest of the Company’s 50% share of the Zeolyst Joint Venture.

Adjusted Tax Rate – the tax rate effective for each tax jurisdiction. Tax rates are frozen at the assumed 2020 operating plan tax rates.

Average Net Working Capital – the sum of Accounts Receivable and Inventory, less Accounts Payable for the corresponding year.

Average Net Working Capital and Average Net Property, Plant & Equipment shall be calculated each year based upon the balances at the beginning and ending of each year.

Three-Year Average ROANTA shall be calculated as the simple average of the three annual ROANTA calculations.

6.Definition of Relative TSR Performance.  TSR is defined as the financial gain that results from a change in the price of a company’s stock during the Performance Period plus any dividends paid by the company during the Performance Period divided by the price of the company’s stock at the beginning of the Performance Period.  Relative TSR Performance shall be determined by comparing the Company’s actual TSR performance relative to the TSR performance of all of the companies included in the Russell 2000 Index as last day of the Performance Period. TSR performance shall be calculated utilizing a widely-accepted financial reporting service identified by the Committee at the end of the Performance Period.

7.Adjustments. Certain adjustments may be made at the discretion of the Committee to the Three-Year Average ROANTA and the Relative TSR Performance thresholds, targets and maximums as set forth in the tables above in in the event of the Company’s acquisition or divestiture of an entity, business, or product line, or any capital market transactions including debt refinancings or equity offerings.

8.Termination by Reason of Disability, Retirement, Good Reason, Termination by the Company without Cause or Death.  Upon a termination of the Participant’s Service during the Performance Period by reason of Disability, Retirement (defined below), Good Reason (defined below), termination by the Company without Cause, or death, the PSUs shall be eligible to be earned and to vest as follows (and any PSUs that are not earned and do not vest under the circumstances described below will be forfeited and cancelled without payout of consideration therefor):

8.1If the Participant’s Service is terminated by the Company without Cause or due to his or her Disability, or if the Participate terminates his or her Service due to Retirement or Good Reason, in each case, before the end of the Performance Period, the PSUs will remain outstanding and will be eligible to be earned based on actual performance as determined under this Appendix A, subject to pro ration as provided for below, 

and to vest on the Performance Vesting Date.  Any PSUs that are so earned will be pro rated by dividing the number of earned PSUs by a fraction, the numerator of which is the number of days the Participant actually worked in the Performance Period, and the denominator of which is the number of days in the Performance Period.

8.2If the Participant’s Service is terminated due to his or her death before the end of the Performance Period, upon such termination, a number of PSUs will be deemed earned and will vest equal to the Target Award multiplied by a fraction, the numerator of which is the number of days worked in the Performance Period, and the denominator which is the total number of days in the Performance Period.

8.3For purposes of this Appendix A, “Retirement” means a termination of Service due to the voluntary resignation of the Participant, other than at a time when Cause exists, after attaining the age of 60 with a minimum of ten years of continued Service (for the avoidance of doubt, from the most recent hire date, including service with predecessor acquired entities).

8.4For purposes of this Appendix A, “Good Reason” shall have the meaning set forth in any severance agreement between the Participant and the Company and/or any of its Subsidiaries to the extent that such severance agreement provides for the voluntary resignation of the Participant for “Good Reason”.

9.Change in Control.

9.1If a Change in Control occurs during the Performance Period, upon such Change in Control, a number of PSUs will be deemed earned and will vest as provided for in Section 9.2 below. Any PSUs that do not vest in connection with such Change in Control as provided for in this Section 9 will be forfeited and cancelled without payment of consideration therefor.

9.2For purposes of determining the number of PSUs that vest in connection with a Change in Control, the Performance Factors shall be determined as otherwise set forth in Sections 2, 3 and 4 of this Appendix A, except that (i) the Performance Period shall be deemed to have ended on (A) the date of the Change in Control, if the Change in Control occurs on the last date of a fiscal quarter, or (B) the last day of the fiscal quarter preceding the Change in Control if the Change in Control does not occur on the last day of a fiscal quarter, and (ii) if the date the Performance Period is deemed to have ended under clause (i) is not also the last day of a fiscal year, then the period between the last day of the Company’s immediately preceding fiscal year and the deemed last day of the Performance Period (the “Stub Period”) shall be deemed a fiscal year for purposes of this Appendix A and the Company’s ROANTA for such deemed fiscal year shall be an annualized amount based on the Company’s actual ROANTA for the Stub Period.staf-ex45_597.htm

 

Exhibit 4.5

DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

As of March 27, 2020, Staffing 360 Solutions, Inc., a Delaware corporation (“we,” “our” and the “Company”) has our common stock, par value $0.00001 per share (the “Common Stock”) registered under Section 12 of the Securities Exchange Act of 1934, as amended. 

The foregoing description is intended as a summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation (the “Certificate of Incorporation”), the amended and restated bylaws (the “Bylaws”) and any certificates of designation of our preferred stock as currently in effect, copies of which are filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein.

Authorized Capital Stock

Our Certificate of Incorporation authorizes us to issue 60,000,000 shares of capital stock, of which 40,000,000 are shares of Common Stock and 20,000,000 are shares of preferred stock, of 1,663,008 are designated as Series A Preferred Stock, $0.00001 par value per share (“Series A Preferred Stock”), 200,000 are designated as Series B Preferred Stock, $0.00001 par value per share (“Series B Preferred Stock”), 2,000,000 are designated as Series C Preferred Stock, $0.00001 par value per share (“Series C Preferred Stock”), 13,000 are designated as Series E Convertible Preferred Stock, $0.00001 par value per share (“Series E Preferred Stock”) and 6,500 are designated as Series E-1 Convertible Preferred Stock, $0.00001 par value per share (“Series E-1 Preferred Stock”). 

As of March 27, 2020, we had 9,107,563 shares of common stock, 1,039,380 shares of Series A Preferred Stock, 13,000 shares of Series E Preferred Stock and 891 shares of Series E-1 Preferred Stock issued and outstanding. 

The authorized and unissued shares of Common Stock and the authorized and undesignated shares of preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed. Unless approval of our stockholders is so required, our board of directors does not intend to seek stockholder approval for the issuance and sale of our Common Stock or preferred stock.

Common Stock

Classified Board of Directors

Pursuant to the Certificate of Incorporation, the members of the Board of Directors are divided into three classes, designated Class I, Class II and Non-Classified.  Class I or Class II directors shall be elected to hold office for a two-year term and until such directors’ respective successors shall be duly elected and qualified.  Each member of the board of directors who is not assigned to either Class I or Class II, including such member’s respective successors shall be designated “Non-Classified Directors”, and shall, at each annual meeting of stockholders, be 

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elected to serve for a term of one year and until such director’s successor shall be duly elected and qualified. The stockholders do not have the right to cumulate their votes for the election of Directors.

Voting

Our Common stock is entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors, and does not have cumulative voting rights. Accordingly, the holders of a majority of the shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election.

Dividends

Subject to preferences that may be applicable to any then-outstanding preferred stock, the holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. On January 29, 2019, our board of directors approved a dividend program under which we intend to pay a regular quarterly cash dividend of $0.01 per share to holders of our common stock, subject to the requirements of applicable law and our material agreements. We are limited in our ability to pay dividends by certain of our existing agreements and the certificate of designations for our Series E Preferred Stock.  In particular, our debt agreements and certificate of designations for our Series E Preferred Stock only permit us to pay quarterly cash dividend of one cent per share of common stock issued and outstanding, provided, that such cash dividend does not exceed $100 in the aggregate per fiscal quarter.  We may not pay such dividends if any events of default exist under our debt agreements or the certificates of designations for our Series E Preferred Stock.  In addition, so long as any shares of Series A Preferred Stock are outstanding, we are not able to declare, pay or set apart for payment any dividend on any shares of Common Stock, unless at the time of such dividend we have paid all accrued and unpaid dividends on the outstanding shares of Series A Preferred Stock. Effective January 1, 2020, pursuant to certain restrictions contained in our existing agreements, we are not allowed to make any further dividend payments with respect to Series A Preferred Stock so, as a consequence, a Common Stock dividend will not be declared while such restrictions remain in force. In addition, no dividends shall be declared or paid nor funds set apart for the payment of dividends on Common Stock for so long as any Series E Preferred Stock is issued and outstanding.

 Liquidation

In the event of our liquidation, dissolution or winding-up, holders of our Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights and Preferences

Holders of our Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our Common Stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be 

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adversely affected by, the rights of the holders of shares of any series of our preferred stock that are outstanding or that we may designate and issue in the future.

The NASDAQ Capital Market Listing

Our common stock is listed on the NASDAQ Capital Market under the symbol “STAF.”

Transfer Agent 

 The transfer agent and registrar for our common stock is VStock Transfer, LLC. The transfer agent’s address is 18 Lafayette Place, Woodmere, New York 11598.

Preferred Stock 

 Our board of directors has the authority, without further action by the stockholders, to issue up to an aggregate of 20,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.  Issuance of preferred stock by our board of directors may result in such shares having dividend and/or liquidation preferences senior to the rights of the holders of our Common Stock and could dilute the voting rights of the holders of our Common Stock.

 Prior to the issuance of shares of each series of preferred stock, the board of directors is required by the Delaware General Corporation Law and our Certificate of Incorporation to adopt resolutions and file a certificate of designation with the Secretary of State of the State of Delaware. The certificate of designation fixes for each class or series the designations, powers, preferences, rights, qualifications, limitations and restrictions, including, but not limited to, some or all of the following:

	
 
	
•
	
the number of shares constituting that series and the distinctive designation of that series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the board of directors;

	
 
	
•
	
the dividend rate and the manner and frequency of payment of dividends on the shares of that series, whether dividends will be cumulative, and, if so, from which date;

	
 
	
•
	
whether that series will have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights;

	
 
	
•
	
whether that series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the board of directors may determine;

	
 
	
•
	
whether or not the shares of that series will be redeemable, and, if so, the terms and conditions of such redemption;

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•
	
whether that series will have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

	
 
	
•
	
whether or not the shares of the series will have priority over or be on a parity with or be junior to the shares of any other series or class in any respect;

	
 
	
•
	
the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights or priority, if any, of payment of shares of that series; and

	
 
	
•
	
any other relative rights, preferences and limitations of that series.

Series A Preferred Stock

Pursuant to the authority conferred upon our board of directors under the Certificate of Incorporation, our board of directors, on May 29, 2015, created the Series A Preferred Stock as evidenced by the Certificate of Designation, Preferences and Rights of Series A Preferred Stock of Staffing 360 Solutions Inc., dated May 29, 2015, a copy of which has been filed with the SEC. 

Stated Value

The Series A Preferred Stock have a stated value of $1.00 per share.

Voting

Except as otherwise required by law, the Series A Preferred Stock has no voting rights.

Dividends

The holders of Series A Preferred Stock will be entitled to receive cash dividend at the rate of 12% of the stated value per annum, payable monthly in cash, prior to and in preference to any declaration or payment of any dividend on our Common Stock. So long as any shares of Series A Preferred Stock are outstanding, the Company shall not declare, pay or set apart for payment any dividend on any shares of common stock, unless at the time of such dividend the Company shall have paid all accrued and unpaid dividends on the outstanding shares of Series A Preferred Stock.

Redemption

Up until December 31, 2020, holders may convert their shares into Common Stock at their election. On December 31, 2020, we shall redeem all of the shares of Series A Preferred Stock of each holder, for cash or for shares of common stock in our sole discretion. The redemption price paid to each holder shall be equal to the stated value for each share of Series A Preferred Stock, multiplied by the number of shares of Series A Preferred Stock held by such holder, less the aggregate amount of dividends paid to such holder. If the redemption purchase price is paid in shares of common stock, the holders shall initially receive one and three tenths (1.3) shares of Common Stock for each $50.00 of the redemption purchase price. 

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Optional Conversion

At any time prior to December 31, 2020, each holder may elect to convert the shares of Series A Preferred Stock held by such holder into shares of Common. Upon such conversion, a holder shall receive one and three tenths (1.3) shares of Common Stock for every 50 share of Series A Preferred Stock that the holder elects to convert.

Acceleration of Redemption Upon Change in Control

Upon the consummation of any transaction resulting in a Change of Control (as defined in the certificate of designation of Series A Preferred Stock) of the Company, the holders of Series A Preferred Stock shall have the right to declare the redemption purchase price due and payable immediately. 

Acceleration of Redemption Upon Termination of Employment

Our issuance of an aggregate of 1,663,008 shares of Series A Preferred Stock to Brendan Flood and Matthew Briand was made in connection with the conversion of the Gross Profit Appreciation Bonus (as defined in each employment agreement) associated with their employment agreements. In the event of we terminate the employment of a holder without cause, the holder shall have the right to declare the redemption purchase price due and payable immediately.

Liquidation Preferences

In the event of a liquidation, dissolution or winding up, holders of Series A Preferred Stock be entitled to receive out of the assets of the Company legally available for distribution, prior to and in preference to distributions to the holders of the Common Stock or classes and series of securities of the Company which by their terms do not rank senior to the Series A Preferred Stock, and either in preference to or pari passu with the holders of any other series of Preferred Stock that may be issued in the future that is expressly made senior or pari passu, as the case may be, an amount equal to the stated value of the Series A Preferred Stock less any dividends previously paid out on the Series A Preferred Stock. 

Other Rights

In case of any consolidation with or merger or reclassification or change of the Common Stock, there shall thereafter be deliverable upon redemption of the Series A Preferred Stock the kind and amount of shares of stock or other securities or property receivable upon such event by a holder of the number of shares of Common Stock equal to the number of shares of Common Stock issuable upon the redemption of the Series A Preferred Stock for which the Series A Preferred Stock might have been redeemed immediately prior to such event. 

Exchange Listing

We do not plan on making an application to list the shares of Series A Preferred Stock on the NASDAQ, any national securities exchange or other nationally recognized trading system. 

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Series E Preferred Stock and Series E-1 Preferred Stock 

Pursuant to the authority conferred upon our board of directors under the Certificate of Incorporation, our board of directors, on November 15, 2018, created the Series E Preferred Stock and Series E-1 Preferred Stock as evidenced by the Certificate of Designation of Series E Convertible Preferred Stock of Staffing 360 Solutions Inc., dated November 15, 2018, a copy of which has been filed with the SEC. Shares of Series E-1 Preferred Stock shall have all the same terms, preferences and characteristics as are provided for in the summary below with respect to Series E Preferred Stock and references herein to Series E Preferred Stock shall include Series E-1 Preferred Stock unless otherwise indicated.

Rank

The Series E Preferred Stock ranks senior to common stock and any other series or classes of preferred stock now or after issued or outstanding with respect to dividend rights and rights on liquidation, winding up and dissolution. 

Dividends

The Series E Preferred Stock carries quarterly dividend rights of (a) cash dividends accruing (i) at an annual rate per share equal to 12% from the date of issuance and (ii) 17% after the occurrence of a Preferred Default, and (b) a dividend payable in shares of Series E-1 Preferred Stock equal to 5% per annum of the liquidation value of the outstanding Series E Preferred Stock. The shares of Series E-1 Preferred Stock have all the same terms, preferences and characteristics as the Series E Preferred Stock (including, without limitation, the right to receive cash dividends), except (i) Series E-1 Convertible Preferred Stock are mandatorily redeemable by us within thirty (30) days after written demand received from any holder at any time after the earlier of the occurrence of a Preferred Default or November 15, 2020, for a cash payment equal to the Liquidation Value (as defined in the Certificate of Designation for the Series E Preferred Stock) plus any accrued and unpaid dividends thereon, (ii) each share of Series E-1 Preferred Stock is initially convertible into 602 shares of our common stock, and (iii) Series E-1 Convertible Preferred Stock may be cancelled and extinguished by us if all shares of Series E Preferred Stock are redeemed by us on or prior to October 31, 2020. As of March 27, 2020, 7,303,371 shares and 536,747 of common stock were issuable upon the potential conversion of Series E Preferred Stock and Series E-1 Preferred Stock, respectively. 

No dividends shall be declared or paid nor funds set apart for the payment of dividends on any Junior Securities for so long as any Series E Preferred Stock is issued and outstanding.

Mandatory Redemption of Series E-1 Preferred Stock

Series E-1 Preferred Stock shall be mandatorily redeemable by the Company within thirty (30) days after written demand received from any holder at any time after the earlier of the occurrence of a Preferred Default or November 15, 2020, for a cash payment equal to the liquidation value of Series E-1 Preferred Stock plus any accrued and unpaid dividends thereon. 

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Notwithstanding the above, if on or prior to October 31, 2020 we complete the redemption of all shares of Series E Preferred Stock, then all shares of Series E-1 Preferred Stock previously issued as PIK Dividends shall be cancelled and extinguished without further action.  

Liquidation

In the event of liquidation, dissolution or winding up, the holders of the Series E Preferred Stock are entitled to receive out of the Company assets legally available for distribution, prior to and in preference to distributions to the holders of common stock or classes and series of securities which by their terms do not rank senior to the Series E Preferred Stock, and either in preference to or pari passu with the holders of any other series of preferred stock that may be issued in the future that is expressly made senior or pari passu, as the case may be, an amount equal to the stated value of the Series E Preferred Stock plus any accrued but unpaid dividends.

Voting

Except as provided by law or by the other provisions of the Certificate of Incorporation and as provided below, holders of Series E Preferred Stock shall have no right to vote on any matter presented to the stockholders of the Corporation for their action or consideration.

At any time that any shares of Series E Preferred Stock are outstanding, we shall not, either directly or indirectly, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series E Preferred Stock, given in writing or by vote at a meeting, consenting or voting separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

	
 
	
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liquidate, dissolve or wind-up the business and affairs, effect any merger or consolidation or any other deemed liquidation event, or consent to any of the foregoing;

	
 
	
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amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws in a manner that adversely affects the powers, preferences or rights of the Series E Preferred Stock;

	
 
	
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create or authorize the creation of any new class or series of capital stock, or issue or authorize or commit to the issuance of any shares of any class or series of capital stock of the Company or any security convertible into or excisable for any such capital stock, including pursuant to grants to directors, employees or contractors (other than pursuant to binding agreements entered into prior to the Issue Date), business acquisitions or combinations, or otherwise; provided, however, this provision shall not prohibit us from (i) issuing shares of Common Stock upon the conversion or exercise of warrants, options, notes, preferred stock or other instruments that are convertible into or exercisable for shares of Common Stock in accordance with their terms and outstanding as of the Issue Date, (ii) selling shares of Common Stock in a public or private offering on or before the first (1st) anniversary of the Issue Date for gross proceeds up to $3,000,000, where proceeds are used for working capital purposes only, (iii) granting up to 75,000 shares of Common Stock on or before the second (2nd) anniversary of the Issue Date as part of one 

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or more new management recruitment packages, and (iv) issuing up to 450,000 shares of Common Stock pursuant to a new long-term incentive plan providing for grants to management that would not vest or be payable until the later to occur of December 31, 2020 and the redemption in full of all Series E Preferred.  

	
 
	
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reclassify, alter or amend (i) any existing Parity Securities if such reclassification, alteration or amendment would render such other security senior to the Series E Preferred Stock in respect of any such right, preference, or privilege, or (ii) any existing Junior Securities if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series E Preferred Stock in respect of any such right, preference or privilege;

	
 
	
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purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Company other than (i) redemptions of or dividends or distributions on the Series E Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof; or

	
 
	
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enter into any transaction with a “related person” as defined in Item 404 of Regulation S-K under the Securities Exchange Act of 1934, as amended, or with any director, officer, or employee of the Corporation or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of any such director, officer, or employee.

Optional Conversion

Each share of Series E Preferred Stock shall be convertible, at the option of the holder thereof, at any time from and after the earlier of October 31, 2020 or the occurrence of a Preferred Default, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the liquidation value of Series E Preferred Stock plus any accrued but unpaid dividends on such share by $1.78 with respect to Series E Preferred Stock and $1.66 with respect to Series E-1 Preferred Stock.  

In the event of a notice of redemption of any shares of Series E Preferred Stock, the conversion rights of the shares designated for redemption shall terminate at the close of business on the last full business day preceding the redemption date for such shares, unless the redemption price is not fully paid on such redemption date, in which case the conversion rights for such shares shall continue until such price is paid in full.  In the event of a liquidation, dissolution or winding up, the conversion rights shall terminate at the close of business on the last full business day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series E Preferred Stock.

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Redemption

Unless prohibited by Delaware law governing distributions to stockholders, we may redeem shares of Series E Preferred Stock at a per share price equal to the stated value ($1,000 per share), plus all accrued but unpaid dividends thereon, at any time on or after the Issue Date.  While the Series E Preferred Stock is outstanding, the Company is required to use the proceeds of any sales of equity securities, exclusively to redeem any outstanding shares of Series E Preferred Stock, except that the Company is permitted to use up to an aggregate of $3,000 of the gross proceeds from any equity offering completed on or before November 15, 2019 for working capital purposes.

There is no restriction on the redemption of shares of Series E Preferred while there is any arrearage in the payment of dividends.

Other Rights

In case of any consolidation with or merger or reclassification or change of the Common Stock, there shall thereafter be deliverable upon redemption of the Series E Preferred Stock the kind and amount of shares of stock or other securities or property receivable upon such event by a holder of the number of shares of Common Stock equal to the number of shares of Common Stock issuable upon the redemption of the Series E Preferred Stock for which the Series E Preferred Stock might have been redeemed immediately prior to such event. 

Exchange Listing

We do not plan on making an application to list the shares of Series A Preferred Stock on the NASDAQ, any national securities exchange or other nationally recognized trading system. 

Options, Warrants and RSUs

As of March 27, 2020, we had 76,500 shares of common stock issuable upon exercise of outstanding options, 925,935 shares of common stock issuable upon the exercise of warrants, 450,915 shares of common stock issuable upon the vesting of RSUs, up to 355,000 shares of common stock reserved for future issuance under our long term incentive plan and 7,867,142 shares of common stock issuable upon conversion of our convertible preferred stock. There are no other outstanding warrants, options or RSUs at this time.

 

Delaware Anti-Takeover Law and Provisions of our Certificate of Incorporation and Bylaws

Delaware Anti-Takeover Law

We are subject to Section 203 of the DGCL. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

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prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

	
 
	
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the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (i) shares owned by persons who are directors and also officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

	
 
	
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on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

	
 
	
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any merger or consolidation involving the corporation and the interested stockholder;

	
 
	
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any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

	
 
	
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subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; or

	
 
	
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the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, or controlling, or controlled by, the entity or person. The term “owner” is broadly defined to include any person that, individually, with or through that person’s affiliates or associates, among other things, beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of acquiring, holding, voting or disposing of the stock. 

The restrictions in Section 203 do not apply to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the DGCL or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities exchange or authorized for quotation on the Nasdaq Stock Market or held of record by more than 2,000 stockholders. Our certificate of incorporation and bylaws do not opt out of Section 203. 

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Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Certificate of Incorporation and Bylaws 

 Provisions of our Certificate of Incorporation and Bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our Common Stock. Among other things, our Certificate of incorporation and Bylaws:

	
 
	
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permit our board of directors to issue up to 20,000,000 shares of preferred stock, without further action by the stockholders, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in control;

	
 
	
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provide that the authorized number of directors may be changed only by resolution of the board of directors;

	
 
	
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except for directors, if any, elected by the holders of any series of preferred stock as provided for or fixed pursuant to any other provision, provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

	
 
	
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do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

	
 
	
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provide that special meetings of our stockholders may be called only by our board of directors; and

	
 
	
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provide for a classified board of directors.

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