Document:

Exhibit 10.3

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON
THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

 

AMENDED AND RESTATED SUBORDINATED PROMISSORY
NOTE

 

	$[●]	 	January [●], 2018
		 	Amended and Restated August 29, 2018

 

FOR VALUE RECEIVED,
FlexShopper, LLC, a North Carolina limited liability company (“Borrower”), hereby promises to pay to [●]
(“Lender”), the principal sum of up to $[●] or such lesser amount as shall remain outstanding hereunder,
together with interest thereon, subject to the terms and conditions set forth in this Amended and Restated Subordinated Promissory
Note (this “Note”).

 

1. Payment
of Principal and Interest.

 

(a) Payments
of principal and accrued interest on this Note shall be due and payable on June 30, 2019.

 

(b) The
unpaid principal balance of this Note shall bear interest at a rate equal to five percent (5.00%) per annum in excess of the non-default
rate of interest from time to time in effect under that certain Credit Agreement dated as of March 6, 2015 among FlexShopper 2,
LLC, as borrower, Wells Fargo Bank, National Association, as paying agent, WE 2014-1, LLC, as administrative agent (the “Administrative
Agent”), and the lenders party thereto (as amended, restated, supplemented or otherwise modified from time to time, the
“Senior Credit Agreement”) computed on the basis of a 360 day year.

 

(c) [Reserved.]

 

(d) Borrower
may prepay this Note in whole or in part at any time, without premium or penalty.

 

(e) All
payments of principal and interest shall be made in lawful money of the United States of America and shall be made to Lender at
Lender’s address set forth in Section 14 or at such other place as Lender may designate to Borrower in writing.

 

(f) Subject
to the other terms set forth herein. Lender shall make a notation on Schedule A hereto of each advance made by Lender and
of each prepayment or repayment made by Borrower, which schedule shall be conclusive evidence of the principal amount then outstanding
hereunder, absent manifest error, subject to the next sentence. In the event that the Lender fails to make a notation on Schedule
A, then the amount showing as owing from Borrower to Lender on the books and records of the Lender shall be conclusive evidence
of the principal amount then outstanding hereunder, absent manifest error.

 

     

     

    

 

2. Conversion.

 

(a) Upon
the closing of the Equity Financing, up to fifty percent (50%) of the outstanding principal balance of this Note at the time of
such closing plus accrued and unpaid interest thereon shall, at the election of Lender by written notice to the Borrower and FlexShopper,
Inc. (“Holdings”) no later than 5:00 p.m. Eastern time on the second business day following notice to Lender
that the underwriting agreement for the Equity Financing has been executed, be automatically converted into Conversion Shares.
The number of Conversion Shares to be issued upon any conversion pursuant to this Section 2 shall be equal to the quotient
obtained by dividing (i) the sum of (x) the dollar amount of the outstanding principal elected to be so converted by the Lender
in accordance herewith and (y) accrued and unpaid interest thereon by (ii) the Conversion Price, rounded down to the nearest whole
number.

 

(b) Issuance
of the Conversion Shares upon the conversion of a portion of this Note shall not be registered and such Conversion Shares shall
therefor bear an appropriate restrictive legend.

 

(c) Holdings
shall not be required to issue or deliver the Conversion Shares until the Lender has surrendered the Note to the Borrower. Upon
any such surrender, the Borrower shall issue a new Note reflecting the outstanding principal balance hereof after giving effect
to such conversion. Such conversion shall be made contingent upon the closing of the Equity Financing and nothing herein shall
obligate or be deemed to obligate the Borrower or Holdings to close the Equity Financing.

 

(d) As
used herein, the following terms shall have the following meanings:

 

“Conversion
Price” shall mean the price paid to Holdings for shares sold in the Equity Financing by the underwriter therefor net
of any underwriters discounts applicable thereto.

 

“Conversion
Shares” shall mean the Equity Securities issued in the Equity Financing.

 

“Equity
Financing” shall mean the offering described in the Registration Statement on Form S-1 initially filed by Borrower with
the U.S. Securities and Exchange Commission on August 13, 2018, as amended.

 

“Equity
Securities” shall mean shares of Holdings’ common stock.

 

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3. Security.
As collateral security for the payment and satisfaction of the unpaid principal balance of this Note and all interest accrued thereon,
and subject to the rights of the Senior Creditors as described in Section 13, Borrower hereby grants to Lender a continuing,
first-priority security interest in and to all of the Collateral. The Collateral means each and all of the following:

A. the
Accounts;

 

B. the
Equipment;

 

C. the
Inventory;

 

D. the
General Intangibles;

 

E. the
Negotiable Collateral;

 

F. any
money, deposit accounts or other assets of Borrower in which Lender receives a security interest or which hereafter come into the
possess ion, custody or control of Lender;

 

G. all
Supporting Obligations;

 

H. all
Investment Property;

 

I. all
Letter of Credit Rights; and

 

J. the
proceeds of any of the foregoing, including, but not limited to, proceeds of insurance covering the Collateral, or any portion
thereof, and any and all Accounts, Equipment, Inventory, General Intangibles, Negotiable Collateral, the Investment Property, the
Letter of Credit Rights, the Supporting Obligations, money, deposit accounts or other tangible and intangible property resulting
from the sale or other disposition of the Collateral, or any portion thereof or interest therein, and the proceeds thereof.

 

The capitalized terms
used in the definition of the Collateral shall have the meanings ascribed to them under the Uniform Commercial Code as adopted
in the State of North Carolina (the “UCC”).

 

4. Representations
and Warranties. Borrower hereby represents and warrants to Lender that:

 

(a) Borrower
(i) is a limited liability company duly organized, validly existing and in good standing under the laws of the State of North Carolina,
(ii) has all requisite limited liability company power and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged, (iii) is duly
qualified as a foreign entity, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify
would not have a material adverse effect on Borrower, and (iv) has the limited liability company power and authority to execute,
deliver and perform its obligations under this Note and to borrow hereunder;

 

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(b) The
execution, delivery and performance by Borrower of this Note (i) has been duly authorized by all necessary action, (ii) do not
and will not contravene or violate the terms of its corporate constitutional documents or any amendment thereto or any law applicable
to Borrower or its assets, business or properties, (iii) do not and will not (1) conflict with, contravene, result in any
violation or breach of or default under any material contractual obligation of Borrower (with or without the giving of notice or
the lapse of time or both), (2) create in any other person a right or claim of termination or amendment of any material contractual
obligation of Borrower, or (3) require modification, acceleration or cancellation of any material contractual obligation of Borrower,
and (iv) do not and will not result in the creation of any lien (or obligation to create a lien) against any property, asset or
business of Borrower; and

 

(c) Borrower
has duly executed and delivered this Note and this Note constitutes the legal, valid and binding obligations Borrower, enforceable
against Borrower in accordance with the terms hereof, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and by general
principles of equity.

 

5. Events
of Default. The following shall constitute “Events of Default” with respect to this Note:

 

(a) Borrower
shall fail to pay the principal of, or interest on, this Note when the same becomes due and payable in accordance with the terms
hereof;

 

(b) Any
representation or warranty made by Borrower in Section 4 hereof shall fail to be true and correct in all material respects
or Borrower shall default in the performance of any of its obligations under Section 2 hereof; or

 

(c) Borrower
makes a general assignment for the benefit of its creditors or applies to any tribunal for the appointment of a trustee or receiver
of a substantial part of the assets of Borrower, or commences any proceedings relating to Borrower under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debts, dissolution or other liquidation law of any jurisdiction; or any such application
is filed, or any such proceedings are commenced against Borrower and Borrower indicates its consent to such proceedings, or an
order or decree is entered by a court of competent jurisdiction appointing such trustee or receiver, or adjudicating Borrower bankrupt
or insolvent, or approving the petition in any such proceedings, and such order or decree remains unstayed and in effect for ninety
(90) days.

 

6. Consequences
of Event of Default. Upon the occurrence of any such Event of Default and during the continuation thereof, the unpaid principal
balance of this Note and accrued and unpaid interest hereon shall become immediately due and payable upon such occurrence without
action by Lender and Lender shall have all other rights and remedies provided by applicable law. Lender shall have all of the rights
and remedies of a secured party under the UCC.

 

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7. Remedies
are Cumulative. No failure on the part of Lender to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by Lender or any right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any right, power or remedy. The remedies herein provided are cumulative
and are not exclusive of any remedies provided by law, in equity, or in other loan documents.

 

8. Costs
of Collection. In the event that this Note is not paid when due, Borrower shall also pay or reimburse Lender for all reasonable
costs and expenses of collection, including, without limitation, reasonable attorneys’ fees.

 

9. Default
Interest Rate. Upon the occurrence of any Event of Default, any principal balance remaining unpaid under this Note shall bear
interest at a rate per annum equal to two percent (2%) above the interest rate otherwise applicable hereto.

 

10. Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of North Carolina without regard
to the conflicts of law provisions thereof.

 

11. Waiver.
Borrower waives presentment for payment, demand, protest, notice of dishonor, notice of protest, diligence on bringing suit against
any party hereto, and all defenses on the ground of any extension of the time of payment that may be given by Lender to it. Borrower
agrees not to assert against Lender as a defense (legal or equitable), as a set-off, as a counterclaim, or otherwise, any claims
Borrower may have against any other party liable to Lender for all or any part of the obligations under this Note. All rights of
Borrower hereunder, and all obligations of Borrower hereunder, shall be absolute and unconditional, not discharged or impaired
irrespective of (and regard less of whether Borrower receives any notice of): (i) any lack of validity or enforceability of any
provision of this Note; (ii) any change in the time, manner or place of payment or performance, or in any term, of all or any of
the obligations hereunder or any other amendment or waiver of or any consent to any departure from any provision herein; or (iii)
any release of or modifications to or insufficiency, unenforceability or enforcement of the obligations of any guarantor or other
obligor. To the extent permitted by law, Borrower hereby waives any rights under any valuation, stay, appraisement, extension or
redemption laws now existing or which may hereafter exist and any other circumstance which might otherwise constitute a defense
available to, or a discharge of any party with respect to the obligations of Borrower hereunder.

 

12. No
Right of Set-Off. As of the date hereof, Borrower represents that it has no claims or offsets against Lender in breach of contract,
breach of warranty, express or implied, negligence or for any other type of legal action under this Note or otherwise.

 

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13. Subordination.

 

(a) Lender
agrees that the obligations represented by this Note shall be in all respects subordinate in payment and junior in priority to
all indebtedness, liabilities and other obligations (collectively, the “Senior Debt” and the holders of such
Senior Debt, the “Senior Creditors”) owing under the Senior Credit Agreement and the other agreements, instruments
and documents executed and delivered in connection therewith, as amended, modified or increased (collectively, the “Senior
Debt Documents”).

 

(b) Until
all Senior Debt shall have been paid in full in cash and all commitments to advance Senior Debt have terminated, (i) no payment
may be made on this Note, whether of principal or interest or other obligations, at any time that the “Effective Advance
Rate” (as defined in the Senior Debt Documents) exceeds 95% or an “Event of Default” (as defined in the Senior
Debt Documents) exists, (ii) the Lender shall not (A) take any action or exercise any remedy against the Borrower under this Note
(other than the imposition of the default rate of interest as set forth herein); or (B) commence, or join with any other creditor
of the Borrower in commencing any insolvency or similar proceeding against the Borrower (iii) the Lender waives all rights of subrogation,
reimbursement and any similar rights with respect to the indebtedness evidenced by this Note and (iv) any and all liens and security
interests of Lender in any collateral shall be and hereby are subordinated for all purposes and in all respects to the liens and
security interests of the Senior Creditors in such collateral, whether or not valid or perfected, regardless of the time, manner
or order of attachment, grant or perfection of any such liens and security interests and regardless of any provision of the Uniform
Commercial Code of any jurisdiction or any other law or any other circumstance. Notwithstanding the foregoing or anything to the
contrary contained herein, this Note may be converted into Equity Securities to the extent provided in Section 2 hereof
without regard to the limitations set forth in this Section 13.

 

(c) In
case any funds shall be paid or delivered to the Lender in violation hereof, such funds shall be held in trust by the Lender for,
and paid and delivered to, the Senior Creditors (in the form received, together with any necessary endorsements) upon demand.

 

(d) The
priority of the Senior Debt (whether or not such amounts are deemed allowable or recoverable) set forth above shall continue during
any insolvency, receivership, bankruptcy, dissolution, liquidation, or reorganization proceeding, or in any other proceeding, whether
voluntary or involuntary, by or against the Borrower, under any bankruptcy or insolvency law or laws.

 

(e) The
Lender expressly waives all notice of the acceptance by any Senior Creditor of the subordination and other provisions of this Note.

 

Without limitation
of the foregoing, the Senior Creditors (including, without limitation, the Administrative Agent under the Senior Credit Agreement)
are express third party beneficiaries of the terms and conditions contained in this Section 13 and shall be entitled to
enforce such terms and conditions directly, as if they were parties to this Note. Furthermore, until all Senior Debt shall have
been paid in full in cash and all commitments to advance Senior Debt have terminated, this Section 13 may not be amended,
restated, supplemented or otherwise modified without the prior written consent of the Administrative Agent and the Required Lenders
(as defined in the Senior Credit Agreement).

 

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14. Notices.
Any notice pursuant to this Note must be in writing and will be deemed effectively given to another patty on the earliest of the
date (a) three (3) business days after such notice is sent by registered U.S. mail, return receipt requested, (b) one (1) business
day after receipt of confirmation if such notice is sent by facsimile, (c) one (1) business day after delivery of such notice into
the custody and control of an overnight courier service for next day delivery, (d) one (1) business day after delivery of such
notice in person and (e) such notice is received by that party; in each case to the appropriate address below (or to such other
address as a party may designate by notice to the other party):

 

If to Borrower:

 

FlexShopper, LLC

2700 N. Military Trail,
Suite 200

Boca Raton, FL 33431

Attn: Brad Bernstein

 

If to Lender:

 

[●]

 

15. Severability.
Any provision of this Note that is determined by any court of competent jurisdiction to be invalid or unenforceable will not affect
the validity or enforceability of any other provision hereof or the invalid or unenforceable provision in any other situation or
in any other jurisdiction. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full
force and effect to the extent not held invalid or unenforceable.

 

16. Counterparts.
This Note may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute
an original, but all of which when taken together shall constitute a single contract. This Note constitutes the entire contract
among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Note by telecopy
or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Note.

 

17. Amendment
and Restatement. This Note is an amendment to, and is in substitution and replacement of, that certain Subordinated Promissory
Note dated as of January [●], 2018 in the stated principal amount of $[●] (the “Replaced Note”).
This Note represents the same indebtedness as the Replaced Note and is secured by the same collateral securing the Replaced Note
and is not intended to constitute a novation in any manner whatsoever.

 

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IN WITNESS WHEREOF,
Borrower has caused this Note to be duly executed, and Lender has accepted this Note, as of the day and year first above written.

 

	 	Borrower:
	 	 
	 	FLEXSHOPPER, LLC
	 	 	 
	 	By:	  
	 	Name:	Brad Bernstein
	 	Title:	CEO

 

	ACCEPTED:	 
	 	 
	Lender:	 
	 	 
	[●]	 
	 	 	 
	By:	               	 
	Name:	 	 
	Title:	 	 

  

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Exhibit A to Subordinated Promissory
Note

Advancement/Payment Schedule

 

	Date	 	Amount Advanced	 	Principal Payment	 	Principal Balance
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    9Exhibit

Thomas Lillelund
[Address Intentionally Omitted]

29 August 2018
Dear Thomas

I refer to your recent resignation as Chief Executive Officer of Aspen Re and am writing to record the position agreed in relation to your departure from Aspen.

As you are aware, your employment with Aspen is currently governed by (i) a Service Agreement between you and Aspen Insurance UK Services Limited (the “Company”) dated 29 June 2016 (the “Service Agreement”), (ii) a Change in Control Agreement between you and Aspen Insurance UK Services Limited dated 29 June 2016 (the “Change in Control Agreement”) and (iii) an international assignment letter between you and Aspen Insurance UK Services Limited dated 29 June 2016 (the “Assignment Letter” and, collectively with the Service Agreement and the Change in Control Agreement the “Employment Documents”). 

Notwithstanding the 12 months’ notice set out in Clause 17.2 of the Service Agreement, we have agreed to your request to release you early such that your employment with the Company will cease on 31 October 2018 (the “Departure Date”). Accordingly, all of your entitlements in connection with your employment at Aspen, whether or not pursuant to the Employment Documents, will cease on the Departure Date.  

Notwithstanding Clause 13.2.3 of the Service Agreement, we have further agreed that you may commence employment with American International Group, Inc. (“AIG”) with effect from 1 November 2018.  

In consideration of the above, you hereby agree and confirm as follows:

		
	•
	The Employment Documents will terminate and cease to have any effect from the Departure Date. Notwithstanding, all remaining provisions of the Service Agreement applicable after termination (including, but not limited to, Clauses 10, 13.2 (to the extent you do not take up employment with AIG), 3.2.1, 13.2.2, 13.2.3, 18.1 and 19) shall continue in full force and effect following the Departure Date for the periods set forth in the Service Agreement.

		
	•
	You will have no claim for any payment for salary or other benefit under the Employment Documents with effect from the Departure Date. For the avoidance of doubt, all Performance Shares and Restricted Share Units which have been previously granted to you under the terms of the Aspen Insurance Holdings Limited 2013 Share Incentive Plan and which have not already vested and been distributed to you by the Departure Date will lapse on the Departure Date and will, from such date, cease to be eligible for vesting.  This forfeiture also applies to any Performance Shares which have already become “Eligible Shares” under the relevant long term incentive award agreement as at the Departure Date (meaning that the relevant financial performance criteria in relation to those Performance Shares have been tested but that they remain subject to a requirement 

of continued employment until the relevant vesting date).

		
	•
	No sums are owed to you by the Company or any Affiliate (as defined in the Service Agreement) as at the Departure Date, save for any salary accrued to the Departure Date.  For the avoidance of doubt, your housing allowance, tuition assistance, and any other benefit provided to you as noted in your Employment Documents will cease effective the Departure Date. In addition, any accrued holiday must be taken by the Departure Date as no payment will be made for any unused entitlement.  Any expense claim must be submitted by 15 October 2018 in the usual way.

		
	•
	Given your resignation, you will not be eligible for a 2018 bonus or cash incentive award.

		
	•
	You will cooperate fully and provide all requested information to the Company’s tax advisors in connection with tax return preparation and other tax obligations. You also agree to reimburse the Company within 30 days in the event that the Company’s tax advisors determine that the Company has made any overpayments of tax relating to your international assignment.  

		
	•
	Provided that you do not do or say anything which might include a breach of your obligations to Aspen, whether or not under the Employment Documents (including but not limited to Clause 10 (Confidential Information) of your Service Agreement), it has been agreed that you may attend AIG's Leadership Offsite meeting in New York in early September 2018.  

The above terms are offered in full and final settlement of all of your entitlements and all (if any) claims of any nature which you have or may have against the Company or any Affiliate and its or their respective officers and employees arising out of your employment and departure from the Company. Please sign and return a copy of this letter to indicate your acceptance of its terms.

Yours sincerely

/s/ Heather Brown

For and on behalf of Aspen Insurance UK Services Limited
Name: Heather Brown
Title: Group Head of HR

I hereby agree to the above provisions.

/s/ Thomas Lillelund                Date: August 29, 2018
Thomas Lillelund

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