Form 8-K Staffing 360 Solutions, For: May 17

 

Exhibit 2.1

 

FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT

 

This First Amendment to Stock Purchase Agreement (this “Amendment”) is entered into as of May 18, 2022, by and between Staffing 360 Solutions, Inc., a Delaware corporation (the “Buyer”), Headway Workforce Solutions, Inc., a Delaware corporation (the “Company”), and Chapel Hill Partners, LP, as the representative of all of the stockholders (collectively, the “Sellers”) of the Company (the “Sellers Representative”, and collectively with the Company and the Sellers, the “Parties”).

 

WHEREAS, the Parties entered into that certain Stock Purchase Agreement dated as of April 18, 2022 (the “Agreement”), which provides for the sale of 100% of the Stock of the Company to Buyer, as specifically set forth and subject to the terms and conditions therein; and

 

WHEREAS, the Parties desire to amend the terms and conditions of the Agreement, and related Schedules to the Agreement, as set forth herein.

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party hereto, the Parties agree as follows:

 

1. Capitalized Terms; References. Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Agreement. All references herein to Sections, Exhibits, or Schedules shall mean such Sections, Exhibits, or Schedules set forth in the Agreement.

 

2. Amendment to Agreement. The Agreement is hereby amended as follows:

 

	a.	The first “WHEREAS” clause set forth in the Recitals of the Agreement is deleted in its entirety and replaced with the following:
		“WHEREAS, as of the date hereof, the Company directly or indirectly owns (a) 100% of the issued and outstanding membership interests of Headway Employer Services, LLC, a Delaware limited liability company (“Headway Employer”); (b) 100% of the issued and outstanding membership interests of Headway Payroll Solutions, LLC, a Delaware limited liability company (“Headway Payroll”); (c) 100% of the issued and outstanding stock of Headway HR Solutions, Inc., a New York corporation (“Headway HR”); and (d) 100% of the issued and outstanding membership interests of NC PEO Holdings, LLC., a Delaware limited liability Company (“NC PEO” and collectively with Headway Employer, Headway Payroll, Headway HR, and Headway Workforce, the “Subsidiaries” and each individually, a “Subsidiary”);”
	b.	The definition of “Closing Balance Sheet Changes” set forth in Section 1.2 of the Agreement is deleted in its entirety and replaced with the following:
		“Closing Balance Sheet Changes” means, as of the Effective Time, an amount equal to any negative differential to the Company’s balance sheet between the Closing Balance Sheet and the Benchmark Balance Sheet outside the Ordinary Course of Business. For the avoidance of doubt, changes on the balance sheet resulting from normal operating activity in accordance with past practices, including ordinary seasonal business fluctuations, shall be considered Ordinary Course of Business. Additionally, for the avoidance of doubt, any forgiveness or reduction (or lack thereof) or payment of any unforgiven amounts of that certain Small Business Administration Paycheck Protection Program Note dated May 13, 2020 between Newtek Small Business Finance, LLC and the Company shall have no impact and not be considered when determining any Closing Balance Sheet Changes. Furthermore, any payment of the Becker Advance by the Company shall have no impact and not be considered when determining any Closing Balance Sheet Changes.”

 

 

	c.	The reference to “Straddle Period” set forth in Section 1.2 of the Agreement is deleted.
	d.	Section 2.3(b) of the Agreement is deleted in its entirety and replaced with the following:
		“(b) Subject to Section 2.10, at the Closing, the Company shall deliver to each payee identified in each Transaction Expense Statement the amount payable to such payee as set forth in such Transaction Expense Statement and reflected in the Estimated Closing Statement, in each case by wire transfer to an account designated by the applicable payee; provided, that in no event shall the aggregate of all amounts payable pursuant to this Section 2.3(b) exceed the amount equal to the Purchase Price as adjusted pursuant to Section 2.4. Notwithstanding the foregoing sentence, the Becker Advance shall be paid by the Company at Closing and treated as an advance against the Contingent Payment to be paid to Sellers’ Representative, on behalf of the Sellers, under Section 2.5 herein, and shall not reduce the amount of the Closing Payment. In the event that the Contingent Payment is not earned or does not cover the Becker Advance in full, then the Becker Advance shall be offset against interest earned and dividends payable on the Staffing 360 Preferred Stock on a pro rata basis. If, upon the third (3rd) anniversary of the Original Issue Date as set forth within the Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Stock, the interest earned and dividends payable on the Staffing 360 Preferred Stock have not resulted in the payment in full of the Becker Advance, then, and only then, shall the Becker Advance be offset against the redemption price of the Staffing 360 Preferred Stock on a pro rata basis.”
	e.	Section 4.9(vi) of the Agreement is deleted in its entirety and replaced with the following:
		“(vi) except in the Ordinary Course of Business and in connection with the repayment of any PPP loans not forgiven prior to the Closing Date, (A) issued, created, incurred, assumed, guaranteed, endorsed or otherwise became liable or responsible with respect to (whether directly, contingently or otherwise) any Indebtedness; (B), paid, repaid, discharged, purchased, repurchased or satisfied any Indebtedness of the Company or any of the Subsidiaries; or (C) modified the terms of any Indebtedness or other Liability;
	f.	Section 4.9(viii) of the Agreement is deleted in its entirety and replaced with the following:
		“(viii) except in the connection with the repayment of any PPP loans not forgiven prior to the Closing Date and the payment of the Becker Advance, acquired any material properties or assets or sold, assigned, licensed, transferred, conveyed, leased or otherwise disposed of any of the material properties or assets of, or used by, the Company or the Subsidiaries, other than for fair consideration in the Ordinary Course of Business;”

 

 

	g.	Section 4.9(xi) of the Agreement is deleted in its entirety and replaced with the following:
		“(xi) except in the connection with the repayment of any PPP loans not forgiven prior to the Closing Date, entered into any commitment for capital expenditures of the Company and the Subsidiaries in excess of $5,000 for any individual commitment and $10,000 for all commitments in the aggregate;”
	h.	Section 4.20(b) of the Agreement is deleted in its entirety and replaced with the following:
		“(b) All accounts payable of the Company and the Subsidiaries as of the Closing Date will be reflected in the books and records of the Company and the Subsidiaries and the Estimated Closing Statement. Except with respect to any PPP Loans not forgiven prior to the Closing Date, there are no accounts payable of the Company and the Subsidiaries (i) for purchases in material excess of usual requirements, (ii) that did not arise in the Ordinary Course of Business, or (iii) that are materially past due. All accounts payable of the Company and the Subsidiaries are appropriately reserved for and recorded in accordance with GAAP and reflected in the Financial Statements.”
	i.	Section 4.27(b) of the Agreement is deleted in its entirety and replaced with the following:
		“(b) The Company and its Subsidiaries, as applicable, has (i) applied for and received all PPP loans in accordance with all PPP Requirements, (ii) complied with the PPP Requirements and other applicable Laws with respect thereto, and (iii) has applied for forgiveness with respect to each PPP loan in accordance with the PPP Requirements and any requirements imposed by the PPP Lenders. The Company has not received a notice from any Governmental Body or the PPP Lenders that such PPP loan does not comply with applicable Laws and requirements (including the PPP Requirements).”
	j.	Section 6.10(b)(vi) of the Agreement is deleted in its entirety and replaced with the following:
		“(vi) except in the Ordinary Course of Business and in connection with the repayment of any PPP loans not forgiven prior to the Closing Date, (A) issue, create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any Indebtedness; (B), pay, repay, discharge, purchase, repurchase or satisfy any Indebtedness of the Company or any of the Subsidiaries; or (C) modify the terms of any Indebtedness or other Liability;”
	k.	Section 6.10(b)(viii) of the Agreement is deleted in its entirety and replaced with the following:
		“(viii) except in the connection with the repayment of any PPP loans not forgiven prior to the Closing Date and the payment of the Becker Advance, acquire any material properties or assets or sell, assign, license, transfer, convey, lease or otherwise dispose of any of the material properties or assets of, or used by, the Company or the Subsidiaries, other than for fair consideration in the Ordinary Course of Business;”

 

 

	l.	Section 6.10(b)(xi) of the Agreement is deleted in its entirety and replaced with the following:
		“(xi) except in the connection with the repayment of any PPP loans not forgiven prior to the Closing Date, enter into any commitment for capital expenditures of the Company and the Subsidiaries in excess of $5,000 for any individual commitment and $10,000 for all commitments in the aggregate;”
	m.	Section 7.2(a)(vi) of the Agreement is deleted in its entirety and replaced with the following:
		“(A) all Taxes of the Company and the Subsidiaries (or any predecessor thereof), net of any reserves therefor, for any taxable period ending on or before the Closing Date which (i) are not accounted for within the Balance Sheet, and (ii) which are not able to be offset by the Company and its Subsidiaries’ current net operating loss (NOL) carryover, except in relation to all 2021 State and Federal Taxes of the Company and its Subsidiaries which shall be and remain the complete financial responsibility of the Company; (B) any failure to timely pay any and all Taxes required to be borne by any Sellers pursuant to Section 7.7(e); and (C) the breach of any representation and warranty in Section 4.10. For the avoidance of doubt, and notwithstanding anything herein to the contrary, it is hereby agreed that Sellers/Sellers’ Representative shall have no liability for any Taxes of the Company or the Subsidiaries related to the 2021 taxable period, or which are accounted for within the Balance Sheet and/or are able to be offset against the Company and its Subsidiaries current net operating loss (NOL);”
	n.	Section 7.5 of the Agreement is deleted in its entirety and replaced with the following:
		“Indemnity Payments. Any payment Sellers’ Representative is obligated to make to any Buyer Indemnified Parties pursuant to this Article VII shall be offset against the Contingent Payment to be paid to Sellers’ Representative, on behalf of the Sellers, under Section 2.5 herein. In the event that the Contingent Payment is not earned or does not cover such owed payments in full, then such payments shall be offset against interest earned and dividends payable on the Staffing 360 Preferred Stock on a pro rata basis. If, upon the third (3rd) anniversary of the Original Issue Date as set forth within the Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Preferred Stock, the interest earned and dividends payable on the Staffing 360 Preferred Stock have not resulted in the payment in full of such payments, then, and only then, shall such payments be offset against the redemption price of the Staffing 360 Preferred Stock on a pro rata basis.
	o.	Section 7.6 of the Agreement is deleted in its entirety and replaced with the following:
		“Exclusive Remedies. Except for the remedies set forth in Section 2.4, Section 7.7 and Section 9.2, the parties acknowledge and agree that their sole and exclusive remedy (and the sole and exclusive remedy of the Buyer Indemnified Parties and the Seller Indemnified Parties) with respect to any and all claims (other than claims arising from fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement and claims for equitable relief made with respect to breaches of any covenant contained in this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the provisions set forth in this Article VII. Nothing in this Section 7.6 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled hereunder or to seek any remedy on account of fraud or criminal activity by any party hereto.

 

 

	p.	Section 7.7 of the Agreement is deleted in its entirety and replaced with the following:
		“(a) Filing of Tax Returns; Payment of Taxes.

 

(i) Except as set forth herein to the contrary, Sellers’ Representative shall file, or cause to be filed, all income Tax Returns of the Company and the Subsidiaries for all taxable periods ending on or before the Closing Date and shall timely pay any and all Taxes due with respect to such income Tax Returns, net of any reserves therefor and after utilizing any net operating loss (NOL) available to be utilized. Such income Tax Returns shall be prepared in a manner consistent with prior practice. Following the Closing Date, Buyer shall file, or cause to be timely filed, (i) all other Tax Returns of the Company and its Subsidiaries relating to taxable periods ending before, on and after the Closing Date, and (ii) the 2021 Federal and State income Tax Returns of the Company and its Subsidiaries, and pay, or cause to be paid, all Taxes due with respect thereto, with no right of contribution from Sellers’ Representative, except for amounts which are not accounted for within the Balance Sheet and which are not able to be offset by the Company and its Subsidiaries’ current net operating loss (NOL) carryover, except in relation to all 2021 State and Federal Taxes of the Company and its Subsidiaries which shall be and remain the complete financial responsibility of the Company. For the avoidance of doubt, the Company shall be responsible for the timely filing and payment of the total $1,231,042 of payroll and employment taxes currently deferred by the Company and the Subsidiaries under the CARES Act, without contribution from Sellers’ Representative.

 

(ii) The parties shall each provide the other with copies of their completed Tax Returns at least twenty (20) days prior to the due date for filing thereof, along with supporting work papers, for the other parties’ review and approval. The Sellers’ Representative and Buyer shall attempt in good faith to resolve any disagreements regarding such Tax Returns prior to the due date for filing. In the event that the parties are unable to resolve any dispute with respect to such Tax Return at least ten (10) days prior to the due date for filing, such dispute shall be resolved pursuant to Section 7.7(f), which resolution shall be binding on the parties. Sellers’ Representative and Buyer shall take into account all reasonable revisions on such Tax Returns reasonably requested by the other party.

 

(iii) Not later than ten (10) days prior to the due date for the payment of Taxes on any Tax Returns which Buyer has the responsibility to cause to be filed pursuant to Section 7.7(a)(i), or within three (3) days of the amount of such Tax Return being finally determined as set forth in Section 7.7(a)(ii) above, the Sellers’ Representative shall pay to Buyer the amount of Taxes (if any) owed by the Sellers pursuant to the provisions of this Section 7.7(a), except to the extent of any Taxes that were specifically taken into account in the determination of the Purchase Price. No payment pursuant to this Section 7.7(a)(iii) shall excuse the Sellers’ Representative from the indemnification obligations pursuant to Section 7.2 if the amount of Taxes as ultimately determined (on audit or otherwise) for the periods covered by such Tax Returns exceeds the amount of Sellers’ payment under this Section 7.7(a)(iii).

 

 

(b) [Intentionally Omitted].

 

(c) After the Closing, except as otherwise required by Law or as contemplated under this Agreement, Buyer shall not, and shall cause the Company and the Subsidiaries not to, (i) amend any Tax Return, (ii) make or change a material Tax election, or (iii) enter into any voluntary disclosure agreement or similar arrangement with a Government Authority, in each case relating to the Company or the Subsidiaries with respect to any taxable periods ending on or before the Closing Date, to the extent such action would reasonably be expected to result in any Losses to Seller’s Representative and/or Sellers or which are indemnifiable under this Agreement, without the prior written permission of the Sellers’ Representative, which shall not be unreasonably withheld, conditioned or delayed.

 

(d) Tax Audits.

 

(i) If notice of any Legal Proceeding with respect to Taxes of any of the Company and the Subsidiaries (a “Tax Claim”) shall be received by Buyer for which Sellers’ Representative may reasonably be expected to be liable pursuant to Section 7.2(a), Buyer shall notify Sellers’ Representative in writing of such Tax Claim; provided that the failure of Buyer to give Sellers’ Representative notice as provided herein shall not relieve Sellers’ Representative of its obligations under this Section 7.7, except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure.

 

(ii) Buyer shall have the right, at the expense of Sellers’ Representative, to the extent such Tax Claim is subject to indemnification by Sellers’ Representative pursuant to Section 7.2(a)(vi), to represent the interests of the Company and the Subsidiaries in any Tax Claim; provided, that with respect to a Tax Claim relating exclusively to taxable periods ending on or before the Closing Date, Buyer shall not settle such claim without the consent of Seller’ Representative, which consent shall not be unreasonably withheld or delayed.

 

(e) Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such similar Taxes, and all conveyance fees, recording charges and such other similar fees and charges (including any penalties and interest (collectively, “Transfer Taxes”)) incurred in connection with consummation of the Transactions shall be paid (i) 50% by Sellers’ Representative and (ii) 50% by Buyer when due, and the Sellers’ Representative, on the one hand, and Buyer, on the other hand, will, each at their own expense, cooperate to file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes.

 

(f) Disputes. Any dispute as to any matter covered in this Section 7.7 shall be resolved by the Independent Accountant. If any dispute with respect to a Tax Return is not resolved prior to the due date of such Tax Return, such Tax Return shall be filed in the manner which the party responsible for preparing such Tax Return deems correct. The fees, costs and expenses of the Independent Accountant shall be allocated to and borne by Buyer, on the one hand, and Sellers’ Representative, on the other hand, based on the inverse of the percentage that the Independent Accountant’s determination (before such allocation) bears to the total amount of the total items in dispute as originally submitted to the Independent Accountant. For example, should the items in dispute total in amount to $1,000 and the Independent Accountant awards $600 in favor of Sellers’ Representative’s position, 60% of the costs of its review would be borne by Buyer and 40% of the costs would be borne by Sellers’ Representative. Reimbursement to the Sellers’ Representative, if required, shall be paid within three (3) days of final determination of the disputed amount by the Independent Accountant. Any payment that is required to be paid by Sellers’ Representative under this Section 7.7(f) shall be paid to Buyer in the same procedure as set forth in Section 7.5 herein.

 

 

3. Amendment to Schedules to Stock Purchase Agreement. The Schedules to the Agreement (the “Schedules”) are hereby amended as follows:

 

	a.	Schedule 4.7(d) of the Schedules is deleted in its entirety and replaced with the updated Schedule 4.7(d) attached hereto under Exhibit A.
	b.	Schedule 4.10(u) attached hereto as Exhibit B is hereby inserted/added into the Schedules.
	c.	Schedule 4.27(a) of the Schedules is deleted in its entirety and replaced with updated Schedule 4.27(a) attached hereto as Exhibit C.

 

4. No Other Changes. Except as expressly provided in this Amendment, the Agreement shall remain in full force and effect upon its original terms. This Amendment and the Agreement constitute an integrated agreement with respect to the subject matter hereof and thereof. This Amendment may be amended, modified, and supplemented only in accordance with the terms of the Agreement.

 

5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed in such State, without reference to such State’s or any other state’s or other jurisdiction’s principles of conflict of laws..

 

6. Counterparts. This Amendment may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

BUYER:
Staffing 360 Solutions, Inc.
By	/s/ Brendan Flood
Name:	Brendan Flood
Title:	Chairman, CEO & President
THE COMPANY:
Headway Workforce Solutions, Inc.
By	/s/ Joseph Yelenic
Name:	Joseph Yelenic
Title:	President

 

SELLERS’ REPRESENTATIVE
Chapel Hill Partners, LP
By	/s/ Jean-Pierre Sakey
Name:	Jean-Pierre Sakey
Title:	General Partner

 

 

EXHIBIT A

Update Schedule 4.7(d) of the Schedules

 

(see attached)

 

 

EXHIBIT A

Update Schedule 4.10(u) of the Schedules

 

(see attached)

 

 

EXHIBIT A

Update Schedule 4.27(a) of the Schedules

 

(see attached)

 

 

Exhibit 3.1

 

STAFFING 360 SOLUTIONS, INC.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS

OF

SERIES H CONVERTIBLE PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE DELAWARE GENERAL CORPORATION LAW

 

The undersigned, Brendan Flood and Nick Koutsivitis, do hereby certify that:

 

1. They are the President and Secretary, respectively, of Staffing 360 Solutions, Inc., a Delaware corporation (the “Corporation”).

 

2. The Corporation is authorized to issue 20,000,000 shares of preferred stock, of which none are currently issued and outstanding.

 

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 20,000,000 shares, $0.00001 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Acquisition Agreement, up to 9,000,000 shares of the preferred stock, convertible into an aggregate of 3,500,000 shares of common stock, subject to adjustment, which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

 

 

TERMS OF PREFERRED STOCK

 

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

“Acquisition” means the acquisition of Headway Workforce Solutions, Inc. and its subsidiaries by the Corporation pursuant to the Acquisition Agreement.

 

“Acquisition Agreement” means the Stock Purchase Agreement, dated April 18, 2022, by and among the Corporation, Headway Workforce Solutions, Inc. and Chapel Hill Partners, LP, as the seller’s representative.

 

“Attribution Parties” shall have the meaning set forth in Section 6(d).

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 6(d).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Delaware are authorized or required by law or other governmental action to close.

 

“Closing” means the closing of the Acquisition pursuant to the terms of the Acquisition Agreement.

 

“Closing Date” means the Business Day on which the Acquisition Agreement and all related documentation have been executed and delivered by the applicable parties thereto and all conditions precedent to the consummation of the Acquisition and the issuance and delivery the Preferred Stock by the Corporation have, in each case, been satisfied or waived.

 

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

 

“Common Stock” means the Corporation’s common stock, par value $0.00001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Conversion Amount” means the sum of the Stated Value at issue.

 

“Conversion Date” shall have the meaning set forth in Section 6(a)(i).

 

“Conversion Price” shall have the meaning set forth in Section 6(b).

 

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.

 

“Debt Instruments” shall have the meaning set forth in Section 9(j).

 

“Dividend Rate” means an annual rate equal to twelve percent (12%), provided, if the Corporation has not redeemed all of the outstanding shares of the Series H Convertible Preferred Stock by the third (3rd) anniversary of the Issue Date, the Dividend Rate shall automatically be increased to an annual rate equal to fifteen percent (15%).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“GAAP” means United States generally accepted accounting principles.

 

“Holder” shall have the meaning given such term in Section 2.

 

“Liquidation” shall have the meaning set forth in Section 5.

 

“Delaware Courts” shall have the meaning set forth in Section 9(d).

 

“Notice of Conversion” shall have the meaning set forth in Section 6(a)(i).

 

“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“PIK Dividend” shall have the meaning set forth in Section 3(a).

 

“Preferred Stock” shall have the meaning set forth in Section 2.

 

“Preferred Dividends” shall have the meaning set forth in Section 3(a).

 

“Quarterly Dividend Payment Date” shall have the meaning set forth in Section 3(a).

 

“Redemption Date” shall have the meaning set forth in Section 8(b).

 

“Redemption Notice” shall have the meaning set forth in Section 8(b).

 

 

“Redemption Price” shall have the meaning set forth in Section 8(a).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Series H Liquidation Preference” shall have the meaning set forth in Section 5.

 

“Share Delivery Date” shall have the meaning set forth in Section 6(c)(i).

 

“Stated Value” shall have the meaning set forth in Section 2.

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Transfer Agent” means Action Stock Transfer Corporation, the current transfer agent of the Corporation.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock.

 

Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series H Convertible Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 9,000,000 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.00001 per share and a stated value equal to $1.00 (the “Stated Value”).

 

Section 3. Dividends and Distributions.

 

a) Cash Dividends. The Holders of the Preferred Stock shall be entitled to receive dividends, out of funds legally available therefor, at the rate equal to the Dividend Rate of the Stated Value (adjusted to reflect any stock split, stock dividend, combination, recapitalization or reorganization) accruing from the date upon which such shares of Preferred Stock were first issued (the “Preferred Dividend”), in preference and priority to any payment of any dividend on shares of capital stock ranking junior to the Series H Convertible Preferred Stock in dividends or liquidation rights. The Preferred Dividend shall be payable quarterly in arrears on March 30th, June 30th, September 30th and December 31st of each calendar year (each such date a “Quarterly Dividend Payment Date”), except that if any Quarterly Dividend Payment Date is not a Business Day, then they shall be payable on the next succeeding Business Day. The Preferred Dividend shall be payable in cash, provided, however, if any event of default has occurred under any of the Corporation’s or its subsidiaries’ Debt Instruments (as defined below) or payment of such dividend in cash would not be permissible under applicable law, then the Corporation may pay such dividend in-kind by adding the amount of such Preferred Dividend to the Stated Valued (“PIK Dividends”). In the event that the Corporation pays the Preferred Dividend on any given Quarterly Dividend Payment Date as PIK Dividends, then the Dividend Rate for the applicable quarter, retroactive to the first day of such quarter, shall be increased by three (3) percentage points. Preferred Dividends shall be cumulative, whether or not declared or paid. Dividends payable on the Series H Convertible Preferred Stock will be computed on the basis of a 365-day year and the actual number of days elapsed and will be deemed to accrue on a daily basis.

 

 

b) Calculation and Payment. Preferred Dividends shall be cumulative, whether or not declared or paid. Dividends payable on the Series H Convertible Preferred Stock will be computed on the basis of a 365-day year consisting of twelve 30-day months and the number of days actually elapsed, and will be deemed to accrue on a daily basis.

 

c) Failure to Pay Dividends. For so long as the Preferred Stock is outstanding, if the Corporation fails to pay accrued dividends to any Holder of the Preferred Stock for any quarter pursuant to Section 3(a), whether in cash or in kind, the then the Dividend Rate for the applicable quarter, retroactive to the first day of such quarter, shall be increased by three (3) percentage points to annual rate equal to fifteen percent (15%).

 

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall vote on an “as converted” basis, subject to the Beneficial Ownership Limitation (which Beneficial Ownership Limitation shall be calculated on a basis which includes, for purposes of this Section 4, the number of shares of Common Stock which are issuable upon conversion of the unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties) on all matters submitted to the holders of Common Stock for approval. In addition, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, voting as a separate class, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (c) increase the number of authorized shares of Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

 

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation legally available therefor, prior and in preference to the Common Stock, and on a pari passu basis with the Corporation’s other classes of preferred stock (if any), an amount per share of Preferred Stock equal to the greater of: (i) an amount equal to the sum of (A) the Stated Value, plus (B) any accrued but unpaid dividends on such share of Preferred Stock as of immediately prior to such Liquidation and (ii) the amount that would be distributable pursuant to such Liquidation in respect of the shares of Common Stock into which such share of Preferred Stock would be converted pursuant to Section 6 hereof (without regard to any of the limitations on convertibility contained therein) if all outstanding shares of the Preferred Stock were converted into shares of Common Stock as of immediately prior to such Liquidation; provided, that in each such case, if a Liquidation occurs prior to the Redemption Date, in calculating the accrued but unpaid dividends on such share of Preferred Stock held by such Holder, the Holder will be deemed entitled to, and such share of Preferred Stock shall be deemed to have accrued, all Preferred Dividends that would have accrued between the Closing Date and Redemption Date, less any Preferred Dividends previously paid to the Holder prior to such Liquidation (the “Series H Liquidation Preference”). For the avoidance of doubt, following the payment of the Series H Liquidation Preference upon a Liquidation, the Preferred Stock will not participate in any distribution to the Common Stock or other class or series of capital stock of the Corporation

 

 

Section 6. Conversion.

 

a) Conversions at Option of Holder; Conversion at the Option of the Corporation.

 

i.

Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.

 

b) Conversion Price. The conversion price for the Preferred Stock shall equal $2.5714, subject to adjustment herein (the “Conversion Price”).

 

 

c) Mechanics of Conversion

 

i. Delivery of Conversion Shares Upon Conversion. Not later than the five (2) Business Days after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder representing the number of Conversion Shares being acquired upon the conversion of the Preferred Stock, and (B) a bank check in the amount of accrued and unpaid dividends on the shares of Preferred Stock subject to such Conversion, if any. Each certificate evidencing shares of Common Stock issued to the Holder following the conversion of the Series H Convertible Preferred Stock shall bear the following restrictive legend or a similar legend until such time as the transfer of such security is not restricted under the federal securities laws:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION.

 

ii. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other Holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Acquisition Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

iii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

 

 

d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Preferred Stock are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any shares of Preferred Stock, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder.

 

Section 7. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock , (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 

b) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

 

c) Notice to the Holders.

 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

Section 8. Redemption.

 

a) General. Unless prohibited by Delaware law governing distributions to stockholders, shares of the Preferred Stock may be redeemed by the Corporation through a cash payment at a per share price equal to the Stated Value (including, for the avoidance of doubt, all PIK Dividends accreted thereto), plus all accrued but unpaid dividends thereon (the “Redemption Price”), at any time on or after the Original Issue Date. Upon the third anniversary of the Original Issue Date, the Corporation shall redeem all of the shares of the Preferred Stock at the Redemption Price.

 

b) Redemption Notice. The Corporation shall send written notice of any redemption (the “Redemption Notice”) to each Holder of record of Preferred Stock not less than ten (10) days prior to the date that such shares are to be redeemed (the “Redemption Date”). Each Redemption Notice shall state:

 

i. the number of shares of Series H Convertible Preferred Stock held by the Holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

ii. the Redemption Date and the Redemption Price; and

 

iii. for Holders of shares in certificated form, that the Holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series H Convertible Preferred Stock to be redeemed.

 

c) Surrender of Certificates; Payment. On or before the applicable Redemption Date, each Holder of record of shares of Preferred Stock to be redeemed on such Redemption Date, unless such Holder has exercised his, her or its right to convert such shares as provided in Section 6, shall, if a Holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered Holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such Holder.

 

 

d) Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the Holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.

 

e) Failure to Redeem on Third Anniversary of the Closing Date. In the event the Corporation fails to redeem the Preferred Stock on or prior to the third anniversary of the Original Issue Date, the then the Dividend Rate for the period commencing on the third anniversary of the Original Issue Date and ending on the date the Preferred Stock is redeemed, shall be increased by three (3) percentage points to annual rate equal to fifteen percent (15%).

 

Section 9. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Brendan Flood, e-mail address [email protected] or such other facsimile number, e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Acquisition Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section 9 prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section 9 on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and accrued dividends, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the State of Delaware (the “Delaware Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

 

e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

f) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

 

g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

 

i) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Acquisition Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series H Convertible Preferred Stock.

 

j) Debt Instruments. Notwithstanding anything contained herein to the contrary, any payment of dividends or Redemption Price in cash may not be permitted by the Corporation’s and its subsidiaries then-existing debt instruments (collectively “Debt Instruments”). To the extent that the Corporation is not able to pay any dividends or Redemption Price in cash under applicable law and in compliance with its and its subsidiaries Debt Instruments, the Corporation shall not have any obligation to pay such amount in cash until such that such cash payment would be permissible under such Debt Instruments and applicable law.

 

*********************

 

 

RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

 

IN WITNESS WHEREOF, the undersigned have executed this Certificate this 17th day of May 2022.

 

By:	/s/ Brendan Flood		By:	/s/ Nick Koutsivitis
Name:	Brendan Flood		Name:	Nick Koutsivitis
Title:	Chairman, CEO & President		Title:	Secretary

 

Signature Page to Certificate of Designation

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)

 

The undersigned hereby elects to convert the number of shares of Series H Convertible Preferred Stock indicated below into shares of common stock, par value $0.00001 per share (the “Common Stock”), of Staffing 360 Solutions, Inc., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Acquisition Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: ____________________________________________________________

 

 

Number of shares of Preferred Stock owned prior to Conversion: _______________________________

 

Number of shares of Preferred Stock to be Converted: _______________________________________

 

Stated Value of shares of Preferred Stock to be Converted: ____________________________________

 

Number of shares of Common Stock to be Issued: __________________________________________

 

Applicable Conversion Price: __________________________________________________________

 

Number of shares of Preferred Stock subsequent to Conversion: _______________________________

 

Address for Delivery: ______________________

 

 

	[HOLDER]
	By:
	Name:
	Title:

 

Signature Page to Certificate of Designation

 

 

Exhibit 99.1

 

 

Staffing 360 Solutions Completes Acquisition of Headway Workforce Solutions

 

Expands Offerings Nationwide With

Enhanced Cutting-Edge Tools and Technologies

 

NEW YORK, May 19, 2022 – Staffing 360 Solutions, Inc. (NASDAQ: STAF), a company executing an international buy-integrate-build strategy through the acquisition of staffing organizations in the United States and the United Kingdom, announced today that it has completed the acquisition of Headway Workforce Solutions for up to approximately $14 million in a combination of stock and cash.

 

$9 million was paid through issuance of shares of preferred stock that are convertible into approximately 3.5 million common shares, and up to $5 million cash through an earn-out.

 

With a 35-year history and a national reach of human capital workforce solutions, Headway reported unaudited revenues of $85 million in 2021.

 

Brendan Flood, Chairman, CEO and President of STAF said, “This accretive acquisition immediately provides us with both a national footprint, and the leading-edge e-recruiting technologies to enhance both operating margins and customer satisfaction. The respective leadership teams are already working together to hit the ground running.

 

“Scale and technology are two of the key components required of the future leading human capital providers in our industry– and we now have both to propel us to our goal of achieving a profitable, $500 million revenue enterprise,” said Flood.

 

Headway offers customized contract-based workforce solutions in all 50 states, providing full scope staffing. Headway’s leading blended business service model of high-touch technology-driven-processes encompasses integral components delivered through Headway’s CORE: Center for Operational and Recruitment Excellence:

 

●

Recruitment & Staffing

	○	Project-based streamlined recruiting processes and
	○	An integrated suite of HR processes from on-boarding to payroll processing

 

Headway’s CORE is based on a foundation of proprietary and integrated processes and technologies to source the best candidates via its flexible and customizable strategy and execution. A proprietary database of three million candidates supports job search campaign management and is augmented with advanced e-recruiting technologies and integrated with a sophisticated applicant tracking system (ATS).

 

Headway is one of the largest US providers of survey research personnel with projects in the social sciences, healthcare and marketing sectors. Its unique survey research niche is a valuable tool and differentiator in the staffing industry, providing these services in every zip code of the US.

 

About Headway Workforce Solutions

 

Since 1974, Headway has been laser focused on building opportunities that help its clients overcome their business obstacles. Character, commitment, and passion are the cornerstones of its offering as it seeks to deliver state-of-the-art workforce solutions across the nation. Its vision is to partner with clients, candidates, employees, and stakeholders to leverage sophisticated technology without sacrificing the relationships that are the foundation of our industry.

 

 

About Staffing 360 Solutions, Inc.

 

Staffing 360 Solutions, Inc. is engaged in the execution of an international buy-integrate-build strategy through the acquisition of domestic and international staffing organizations in the United States and United Kingdom. The Company believes that the staffing industry offers opportunities for accretive acquisitions and as part of its targeted consolidation model, is pursuing acquisition targets in the finance and accounting, administrative, engineering, IT, and light industrial staffing space. For more information, visit http://www.staffing360solutions.com. Follow Staffing 360 Solutions on Facebook, LinkedIn and Twitter.

 

Forward-Looking Statements

 

This press release contains forward-looking statements, which may be identified by words such as “expect,” “look forward to,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “project” or words of similar meaning. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified; consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, our ability to retain our listing on the Nasdaq Capital Market; market and other conditions; the geographic, social and economic impact of COVID-19 on the Company’s ability to conduct its business and raise capital in the future when needed; weakness in general economic conditions and levels of capital spending by customers in the industries the Company serves; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of customer capital projects or the inability of the Company’s customers to pay the Company’s fees; the termination of a major customer contract or project; delays or reductions in U.S. government spending; credit risks associated with the Company’s customers; competitive market pressures; the availability and cost of qualified labor; the Company’s level of success in attracting, training and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for the Company’s business activities, including, but not limited to, the activities of the Company’s temporary employees; the Company’s performance on customer contracts; negative outcome of pending and future claims and litigation; government policies, legislation or judicial decisions adverse to the Company’s businesses; the Company’s ability to access the capital markets by pursuing additional debt and equity financing to fund its business plan and expenses on terms acceptable to the Company or at all; and the Company’s ability to comply with its contractual covenants, including in respect of its debt agreements, as well as various additional risks, many of which are now unknown and generally out of the Company’s control, and which are detailed from time to time in reports filed by the Company with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Staffing 360 Solutions does not undertake any duty to update any statements contained herein (including any forward-looking statements), except as required by law.

 

Investor Relations Contact:

 

Terri MacInnis, VP of IR

Bibicoff + MacInnis, Inc.

(818) 379-8500 x 2

[email protected]

 

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