UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

 

July 19, 2017

Date of Report (Date of earliest event reported)

 

 

TSS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware 000-33627 20-2027651

(State or other jurisdiction of

incorporation)

(Commission File Number)

(I.R.S. Employer

Identification No.)

 

     
110 E. Old Settlers Road    
Round Rock, Texas   78664
(Address of principal executive offices)   (Zip Code)

 

(512) 310-1000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 1.01.

Item 2.03 .

Entry Into a Material Definitive Contract.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On July 19, 2017, TSS, Inc. (the “Company”) and its subsidiaries Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions Arizona, LLC and Alletag Builders, Inc. (together with the Company, collectively, the “Borrowers”) entered into an amended and restated loan agreement (the “Loan Agreement”) and related agreements with MHW SPV II, LLC (“MHW SPV”) and MHW Partners, LP (“MHW Partners” and, collectively with MHW SPV, the “Lender”) for a multiple advance term loan in the maximum principal amount of up to $2,500,000 for up to sixty days following the date thereof and then $2,000,000 thereafter (collectively, the “Loan”). The Loan Agreement amends and restates the original loan agreement that the Borrowers and MHW SPV entered into on February 3, 2015.

 

In accordance with the terms of the Loan Agreement, MHW SPV provided $945,000 of the Loan on February 3, 2015 (the “MHW SPV Loan”), MHW Partners provided $650,000 of the Loan on July 19, 2017 (the “MHW Partners Loan”), and the remainder of the Loan may be advanced (an “Additional Advance”) in the Lender’s discretion to the Borrowers prior to July 19, 2022. The Borrowers may decide whether to accept such an Additional Advance in their discretion, and have the right to obtain substitute or alternate financing for the Additional Advance from any lender to be secured on a pari passu basis with the MHW SPV Loan and the MHW Partners Loan. The Borrowers executed and delivered an amended and restated promissory note (the “MHW SPV Promissory Note”) to MHW SPV to evidence the MHW SPV Loan and the terms of repayment thereof, and a promissory note to MHW Partners (the “MHW Partners Promissory Note”) to evidence the MHW Partners Loan and the terms of repayment thereof. The MHW SPV Promissory Note amends and restates the promissory note delivered by the Borrowers to MHW SPV on February 3, 2015.

 

The Loan bears interest at a fixed rate of 12% per annum, payable in cash monthly in arrears at a fixed rate of 6% per annum (the “Basic Interest”), and payable in kind at a fixed rate of 6% (the “PIK Interest”) to be evidenced by additional promissory notes having an aggregate principal amount equal to the accrued but unpaid PIK Interest. The Loan has a maturity date of July 19, 2022. The Borrowers are permitted to make optional prepayments of the Loan at any time, subject to a prepayment fee of (a) 4% of the amount prepaid if the prepayment is made prior to July 20, 2018, (b) 2% of the amount prepaid if the prepayment is made between July 20, 2018 and July 19, 2019, and (c) 1% of the amount prepaid if the prepayment is made between July 20, 2019 and July 19, 2020.

 

The Loan Agreement and ancillary documents include customary affirmative covenants for secured transactions of this type, including compliance with laws, maintenance of insurance, maintenance of assets, timely payment of taxes and notice of adverse events. The Loan Agreement and ancillary documents include customary negative covenants, including limitations on liens on assets of the Borrowers.

 

The Loan Agreement and ancillary documents include customary events of default, including payment defaults, the making of false or misleading representations or warranties included in the Loan Agreement and ancillary documents, failure to perform or observe terms, covenants or agreements included in the Loan Agreement and ancillary documents, insolvency and bankruptcy defaults and dissolution and liquidation defaults.

 

The obligations under the Loan are secured by substantially all of the Borrower’s assets pursuant to the terms of an amended and restated security agreement (the “Security Agreement”). The Security Agreement amends and restates the security agreement from the Borrowers in favor of MHW SPV dated February 3, 2015.

 

The Company and MHW SPV also entered into an amended and restated warrant (the “MHW SPV Warrant”) granting MHW SPV the right to purchase up to 1,115,826 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The MHW SPV Warrant amends and restates that warrant issued by the Company to MHW SPV on February 3, 2015. The MHW SPV Warrant is exercisable for a period of five years from July 19, 2017, at an exercise price of $0.10 for the first 390,539 shares, $0.20 for the next 390,539 shares and $0.30 for the final 334,748 shares. The exercise price and number of shares of Common Stock issuable on exercise of the MHW SPV Warrant will be subject to adjustment in the event of any stock split, reverse stock split, recapitalization, reorganization or similar transaction.

 

 

 

 

The Company and MHW Partners also entered into a warrant (the “MHW Partners Warrant”, collectively with the MHW SPV Warrant, the “Warrants”) granting MHW Partners the right to purchase up to 767,500 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The MHW Partner Warrant is exercisable for a period of five years from July 19, 2017, at an exercise price of $0.10 for the first 268,625 shares, $0.20 for the next 268,625 shares and $0.30 for the final 230,250 shares. The exercise price and number of shares of Common Stock issuable on exercise of the MHW Partners Warrant will be subject to adjustment in the event of any stock split, reverse stock split, recapitalization, reorganization or similar transaction.

 

Peter H. Woodward, the chairman of the board of directors of the Company, is a principal of MHW Capital Management, LLC, which is the investment manager of MHW SPV and MHW Partners. MHW Capital Management, LLC is entitled to a performance fee based on the appreciation in the valuation of the common stock of the Company in excess of the applicable strike price under the Warrants.

 

A copy of the Loan Agreement is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the MHW SPV Promissory Note is attached hereto as Exhibit 99.2 and is incorporated herein by reference. A copy of the MHW Partners Promissory Note is attached hereto as Exhibit 99.3 and is incorporated herein by reference. A copy of the Security Agreement is attached hereto as Exhibit 99.4 and is incorporated herein by reference. Copies of the Warrants are attached hereto as Exhibit 99.5 and Exhibit 99.6 and are incorporated herein by reference. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the attached Loan Agreement, MHW SPV Promissory Note, MHW Partners Promissory Note, Security Agreement and Warrants.

 

Item 3.02.

Unregistered Sales of Equity Securities.

 

As more fully described in Item 2.03 of this Current Report on Form 8-K, in connection with the Loan Agreement, on the closing date, the Company issued the Warrants to MHW SPV and MHW Partners. The Warrants were issued in reliance on the exemption from registration provided for under Section 4(2) of the Securities Act of 1933, as amended. Each of MHW SPV and MHW Partners represented in the applicable Warrant that it was an accredited investor, that it was acquiring such Warrant and the underlying shares of common stock for investment for its own account, and that such Warrant and the underlying shares of common stock are restricted securities under the federal securities laws.

 

Item 9.01. Financial Statements and Exhibits.

 

  99.1 Amended and Restated Loan Agreement, among TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions Arizona, LLC, Alletag Builders, Inc., MHW Partners, LP and MHW SPV II, LLC, dated July 19, 2017

  99.2 Amended and Restated Promissory Note, made by TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions Arizona, LLC, and Alletag Builders, Inc. payable to the order of MHW SPV II, LLC, dated July 19, 2017
  99.3 Promissory Note, made by TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions Arizona, LLC, and Alletag Builders, Inc. payable to the order of MHW Partners, LP, dated July 19, 2017

  99.4 Amended and Restated Security Agreement, among TSS, Inc., Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions Arizona, LLC and Alletag Builders, Inc. in favor of MHW Partners, LP and MHW SPV II, LLC, dated July 19, 2017

  99.5 Amended and Restated Warrant between TSS, Inc. and MHW SPV II, LLC, dated July 19, 2017
  99.6 Warrant between TSS, Inc. and MHW Partners, LP, dated July 19, 2017

 

 

 

 

S I G N A T U R E S

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  TSS, INC.  
       
       
  By: /s/ John Penver  
    John Penver  
    Chief Financial Officer  
       
Date: July 25, 2017      

 

 

 

 

 

 

 

Exhibit 99.1

 

THIS AGREEMENT, THE OBLIGATIONS SET FORTH HEREIN AND THE LENDER’S RIGHTS AND REMEDIES HEREUNDER MAY FROM TIME TO TIME BE SUBORDINATED TO THE SENIOR DEBT AND THE RIGHTS AND REMEDIES OF SENIOR LENDER PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT.

 

AMENDED AND RESTATED LOAN AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is made as of July 19, 2017 (the “ Closing Date ”), by and among TSS, INC., INNOVATIVE POWER SYSTEMS, INC., VTC, L.L.C., VORTECH, L.L.C., TOTAL SITE SOLUTIONS AZ, LLC and ALLETAG BUILDERS, INC., jointly and severally (collectively, the “ Borrower ”), with an address for purposes of this Agreement of 110 E. Old Settlers Road, Round Rock, Texas 78664, Telephone: (512) 310-1000, Fax: (512) 310-1828, and MHW SPV II, LLC and MHW PARTNERS, LP (collectively, the “ Lender ”), with an address for purposes of this Agreement of 150 East 52 nd Street, 30 th Floor, New York, New York 10022.

 

RECITALS

 

A.           The Borrower and Lender are parties to that certain Loan Agreement (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “ Original Loan Agreement ”) dated as of February 2, 2015 (the “ Original Closing Date ”).

 

B.           The Borrower and the Lender have agreed to amend and restate the Original Loan Agreement in its entirety.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants and agreements of the parties contained in this Agreement, the parties agree the Original Loan Agreement shall be amended and restated in its entirety as follows:

 

1.      Definitions; Interpretation .

 

1.1     Definitions. Capitalized terms not otherwise defined in this Section shall have the meaning set forth or provided for elsewhere in this Agreement. As used in this Agreement, the term:

 

Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Maryland are authorized or required to close.

 

CFC Holding Company ” means any Person that (a) is organized in the fifty (50) states comprising the United States of America or the District of Columbia, (b) is an entity disregarded as separate from its owner for federal income tax purposes and (c) owns no material assets other than the capital stock of a “controlled foreign corporation”.

 

Commitment Amount ” means (i) from the Closing Date until the date that is sixty (60) days after the Closing Date, Two Million Five Hundred Dollars ($2,500,000), and (ii) thereafter, Two Million Dollars ($2,000,000).

 

Governmental Authority ” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any department, agency or instrumentality thereof.

 

 

 

 

Laws ” means, collectively, laws, ordinances, statutes, rules, regulations, orders, injunctions, rule of common law, judicial interpretation, writs, or decrees of any Governmental Authority.

 

Lien ” means any security interest, lien, encumbrance, charge, assignment, reservation of title, trust, financing statement, or any other right whatsoever of a third party in property, whether real or personal, whether such interest is based on the common law, agreement, statute, rule of equity, judgment or other determination of Governmental Authority, or otherwise, and also means any contingent or other agreement to provide any of the foregoing.

 

Loan ” means the multiple advance term loan in the amount of up to the Commitment Amount, in each case made pursuant to Section 2.

 

Loan Documents ” means this Agreement, the Notes, the Security Agreement and any and all other documents, instruments, guarantees, certificates, agreements, loan agreements, security agreements, guaranties, deeds of trust, mortgages, assignments or other contract with or for the benefit of the Lender, or securing or evidencing payment of the Loan and the Obligations.

 

Maturity Date ” means the five (5) year anniversary of the Closing Date.

 

Notes ” means each promissory note described in Section 2, as amended, restated, substituted or replaced from time to time.

 

Obligations ” means all present and future indebtedness, duties, obligations, and liabilities of the Borrower to the Lender with respect to the Loan in accordance with the terms of the Loan Documents; provided, that , for purposes of the Security Agreement and any grant of a Lien by the Borrower to Lender, the term “Obligations” shall at no time include any obligations or liabilities of Borrower to Lender under or with respect to the Warrants.

 

Person ” means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated association, a Governmental Authority, or any other organization or entity.

 

Purchase Money Debt ” means indebtedness, lease obligations, deferred purchase price obligations or other obligations and liabilities of the Borrower for or related to the financing, purchase, lease or rental of equipment, fixed assets, capital assets, software, insurance or other business assets in the ordinary course of Borrower’s business.

 

Security Agreement ” means that certain Security Agreement dated as of even date herewith executed by the Borrowers in favor of the Lender, as the same may be amended, restated, substituted, replaced or otherwise modified from time to time.

 

 

 

 

Senior Debt ” means the collective reference to any commercial loans or other commercial credit accommodations provided to the Borrower (or any one or more Borrower) by a Senior Lender from time to time.

 

Senior Lender ” means the collective reference to any bank, commercial finance company or other financial institution that provides commercial loans in the ordinary course of its business, and all successors and assigns of such Person.

 

Subordination Agreement ” means the collective reference to any subordination agreement required by a Senior Lender or RTS, as the same may be amended, restated, substituted, replaced or otherwise modified from time to time.

 

Warrants ” means, collectively, each of the Warrant and the Amended and Restated Warrant dated as of even date herewith executed by TSS, Inc. in favor of the applicable Lender, as may be amended, restated, substituted, replaced or otherwise modified from time to time.

 

1.2      Interpretation . The Recitals accurately state the facts, circumstances and intentions of the parties and are hereby incorporated in this Agreement by this reference and made a part hereof. The headings in this Agreement are included in this Agreement for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. As used in this Agreement, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. All terms used in this Agreement which are defined by the Maryland Uniform Commercial Code shall have the same meanings as assigned to them by the Maryland Uniform Commercial Code unless and to the extent varied by this Agreement. References to any one or more of the Loan Documents include the same as amended, restated, modified, substituted, extended and renewed from time to time. Unless expressly otherwise defined, as used in this Agreement and in any financial statement, certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under United States generally accepted accounting principles, as consistently applied to the applicable Person.

 

1.3     Multiple Borrowers; Multiple Lenders . Reference in this Agreement and the other Loan Documents to the “Borrower”, the “Borrowers”, “each Borrower” or otherwise with respect to any one or more of the Borrowers shall mean each and every Person included from time to time in the term “Borrower” and any one or more of the Borrowers, jointly and severally, unless a specific Borrower is expressly identified. Reference in this Agreement and the other Loan Documents to the “Lender”, the “Lenders”, “each Lender” or otherwise with respect to any one or more of the Lenders shall mean each and every Person included from time to time in the term “Lender” and any one or more of the Lenders, unless a specific Lender is expressly identified.

 

2.      The Loan.

 

(a)          The Lender hereby agrees to provide the Loan as follows: (i) proceeds of the Loan of Nine Hundred Forty-Five Thousand Dollars ($945,000) were disbursed by MHW SPV II, LLC to Borrower on the Original Closing Date (the “ MHW Loan ”), (ii) proceeds of the Loan of Six Hundred Fifty Thousand Dollars ($650,000) will be disbursed by MHW Partners, LP to the Borrower on the Closing Date (the “ Partners Loan ”) and (iii) the remainder of the maximum principal amount of the Commitment Amount (the “ Additional Advance Amount ”) may be advanced in Lender’s discretion to the Borrower, subject to Section 3(b). To evidence the Loan and the terms of repayment thereof with interest, the Borrower agrees to execute one or more Notes.

 

 

 

 

(b)          At such time as Lender desires to advance all or a portion of the Additional Advance Amount to Borrower, Lender shall so notify the Borrower in writing, which notification shall include (i) the requested amount of such advance and (ii) the requested date of such advance. The Borrower shall have a period of five (5) Business Days to evaluate each such notification by Lender and to decide whether or not to accept such advance in its discretion. In the event that the Borrower does not notify the Lender of its acceptance such advance by the expiration of said five (5) Business Day period, it shall be deemed that the Borrower has refused such request by Lender to make an advance and Lender shall not make such advance.

 

(c)          The Lender shall make all advances under the Loan by transfer of funds to a deposit account of the Borrower in accordance with Borrower’s directions.

 

3.      Security for the Obligations; Permitted Pari Passu Liens; Dell Releases; RTS Factoring .

 

(a)          The Obligations (other than any obligations, liabilities or indebtedness under the Warrant) shall be secured pursuant to the Security Agreement.

 

(b)          The Borrower shall have the right to obtain substitute or alternative financing for that portion of the Additional Advance Amount not advanced by the Lender for any reason (such financing, the “ Remaining Amount Financing ”) that is secured by Permitted Pari Passu Liens on the Collateral (as defined in the Security Agreement). The term “ Permitted Pari Passu Liens ” means Liens on the Collateral in favor of the providers of the Remaining Amount Financing that rank equal in right and priority to the Lender’s Liens on the Collateral that secure the Obligations. The Lender shall promptly enter into such intercreditor agreements, amendments to the Loan Documents and other documents and agreements requested by the Borrower or providers of the Remaining Amount Financing that memorialize and ensure that the Liens on the Collateral securing the Remaining Amount Financing rank equal in right and priority to the Lender’s Liens securing the Obligations.

 

(c)          The Lender hereby acknowledges and agrees that the Borrower has entered into certain agreements with Citibank, N.A. (together with its branches, subsidiaries, affiliates and successors and assigns thereof, collectively, “ Citibank ”), whereby Citibank purchases from Borrower, and Borrower sells to Citibank, certain accounts receivable (the “ Dell Receivables ”) from Dell Inc. (together with its various subsidiaries and affiliates and successors and assigns thereof, collectively, “ Dell ”). Lender hereby consents to the sale of the Dell Receivables by Borrower to Citibank, from time to time. Lender hereby agrees that, effective upon the purchase by Citibank of the Dell Receivables, the security interest of Lender in the Dell Receivables is automatically released and Lender hereby agrees to execute any lien release and acknowledgement agreements and similar documents requested by Citibank in connection with such release of Lender’s Liens on the Dell Receivables.

 

(d)          The Lender hereby acknowledges and agrees that the Borrower has entered into a factoring agreement dated May 6, 2016 (as the same may be amended, restated, substituted, replaced or otherwise modified from time to time, the “ RTS Factoring Agreement ”) with RTS Financial Service, Inc. (together with its branches, subsidiaries, affiliates and successors and assigns thereof, collectively, “ RTS ”), whereby RTS purchases from Borrower, and Borrower sells to RTS, certain accounts receivable (the “ RTS Receivables ”). Lender hereby consents to the sale of the RTS Receivables by Borrower to RTS, from time to time. Lender hereby agrees that, effective upon the purchase by RTS of the RTS Receivables, the security interest of Lender in the RTS Receivables is automatically released and Lender hereby agrees to execute any lien release and acknowledgement agreements and similar documents requested by RTS in connection with such release of Lender’s Liens on the RTS Receivables. Lender further agrees that its security interest and any UCC-1 financing statements shall be subordinate to the security interest of RTS in all of Borrower’s present and future accounts receivable and all proceeds thereof, as set forth in that certain letter from RTS dated April 19, 2016 acknowledged and agreed to by MHW SPV II, LLC and any similar letter acknowledged and agreed to by MHW Partners, LP.

 

 

 

 

4.      Representations and Warranties . The Borrower represents and warrants to the Lender on the date of this Agreement, and shall be deemed to represent and warrant to the Lender at the time each request for an advance under the Loan is submitted and again at the time any advance is made under the Loans, as follows:

 

4.1     Borrower is in good standing in the state of its incorporation or formation and is qualified in each other state in which the Borrower does business and where failure to so qualify would reasonably be expected to have material adverse effect on the Borrower. The Borrower has full power and authority to borrow the proceeds of the Loan, to execute and deliver the Loan Documents, and to incur and perform the Obligations provided for therein, all of which have been duly authorized by all proper and necessary action of the appropriate governing body of the Borrower.

 

4.2     This Agreement and the other Loan Documents executed and delivered by the Borrower have been properly executed and delivered and constitute the valid and legally binding obligations of the Borrower and are enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law.

 

4.3     There is no litigation, other proceeding or inquiry involving the Borrower pending or, to the knowledge of the Borrower, threatened before any Governmental Authority that would reasonably be expected to have a material adverse effect on the Borrower.

 

4.4     There exists no Event of Default.

 

4.5     The execution, delivery and performance by the Borrower of the Loan Documents executed by it do not (i) violate the Borrower’s organizational documents, (ii) violate any law applicable to the Borrower or any order of any court binding on the Borrower or (iii) violate any material agreement to which such Person is a party

 

5.      Covenants .

 

5.1     The Borrower shall maintain its organizational existence in good standing and shall be qualified to do business in each jurisdiction where failure to so qualify would reasonably be expected to have a material adverse effect on the Borrower.

 

5.2     The Borrower shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or any of its income or properties to the extent that failure to do so would reasonably be expected to have a material adverse effect on the Borrower; provided, however, the Borrower shall not be required to pay any such tax, assessment, charge, levy or claim if Borrower is the contesting the same in good faith and by proper proceedings.

 

 

 

 

5.3     The Borrower agrees to notify the Lender promptly of any condition or event that would reasonably be expected to have a material adverse effect on the Borrower.

 

5.4     The Borrower shall execute any further instruments and take further action as the Lender reasonably requests to effect the purposes of the Loan Documents

 

6.      Default . The Borrower shall be in default under this Agreement and under each of the other Loan Documents upon the occurrence of any one or more of the following (each an “ Event of Default ”): (a) there occurs any failure to pay any amounts when due under the Loans or the other Obligations within ten (10) Business Days of the date when due; or (b) any representation or warranty made in this Agreement or any of the other Loan Documents, shall prove to have been false or misleading when made in any material respect; or (c) the Borrower fails to timely and properly observe, keep or perform, any term, covenant, agreement or condition in this Agreement or in any of the other Loan Documents, which failure is not cured within thirty (30) Business Days from notice by Lender of such failure; or (d) the Borrower suspends or terminates its business operations or liquidates, dissolves or terminates its existence (other than with respect to a Borrower that is not an operating entity and owns no material assets and other than with respect to transactions where a Borrower is merged into or its assets are distributed or otherwise transferred to another Borrower); or (e) the Borrower (i) admits in writing its inability generally to pay its debts as they mature or shall make any assignment for the benefit of any of its creditors or (ii) is the subject of federal or state bankruptcy, insolvency, receivership or trustee proceedings; provided, that, it shall not be an Event of Default under this clause (ii) if any involuntary proceeding is commenced against Borrower that is dismissed or stayed within ninety (90) days after the filing of the proceeding (any Event of Default under this clause (e) being sometimes referred to as an “ Insolvency Default ”); or (f) all Borrowers shall have been released pursuant to Section 8.10.

 

7.      Remedies; No Waiver . During the continuance of an Event of Default, the Lender may, in the exercise of its discretion, declare all the rest or any portion of the Note and all other Obligations remaining unpaid, whether due or not, immediately due and payable exercise its rights and remedies under applicable Laws and as otherwise set forth in the Loan Documents; provided that upon an Insolvency Default, the Note and all other Obligations shall be immediately due and payable, together with accrued and unpaid interest thereon, without further action of the Lender. No failure on the part of the Lender to exercise, and no delay in exercising, any right under any of the Loan Documents shall operate as a waiver thereof.

 

8.      Other Agreements .

 

8.1     All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing, hand delivered, sent by nationally recognized overnight courier or mailed, addressed to the Lender and to the Borrower, at the addresses set forth in the initial paragraph to this Agreement, or to such other address as any party may designate by written notice to the other party. Each such notice, request and demand shall be deemed given or made as follows: (i) if sent by hand delivery or by nationally recognized overnight courier service, upon delivery; or (ii) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U. S. Mail, first class postage prepaid.

 

8.2     The rights, powers and remedies provided in this Agreement and the other Loan Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Lender shall determine, and are in addition to, and not exclusive of, rights, powers and remedies provided by applicable Laws.

 

 

 

 

8.3     This Agreement shall be binding upon and inure to the benefit of the parties and of their respective successors and assigns.

 

8.4     This Agreement shall be governed by and construed in accordance with the Laws of the State of Maryland.

 

8.5     In the event any provision of this Agreement shall be determined to be invalid or unenforceable by any court of competent jurisdiction, the remaining provisions hereof shall nevertheless continue in full force and effect.

 

8.6     This Agreement may be modified, changed or amended only in writing executed by the parties.

 

8.7     In case one or more provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any Laws, the validity, legality and enforceability of the remaining provisions contained herein shall remain effective and binding on the parties hereto and shall not be affected or impaired thereby.

 

8.8     THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS AGREEMENT AND/OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE BY THE BORROWER AND THE LENDER, AND EACH HEREBY REPRESENTS TO THE OTHER THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF THE BORROWER AND THE LENDER HEREBY FURTHER REPRESENT TO THE OTHER THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

8.9     Each Borrower shall be jointly and severally liable for all amounts due to the Lender under this Agreement and the other Loan Documents, regardless of which Borrower actually receives the proceeds of the Loans or other extensions of credit under the Obligations, the amount of such proceeds received or the manner in which the Lender accounts for such proceeds or extensions of credit on its books and records. Each Borrower’s Obligations with respect to proceeds of the Loans paid to it, and the Borrower’s Obligations arising as a result of the joint and several liability of the Borrower under this Agreement and under the other Loan Documents, with respect to proceeds of the Loans paid to the other Borrower hereunder, shall be separate and distinct obligations, but all such Obligations shall be primary obligations of the Borrower.

 

8.10   At any time any Borrower is a CFC Holding Company, (a) such Borrower shall be automatically released as a party to and from its obligations and liabilities under this Agreement and the other Loan Documents and (b) all of Lender’s Liens with respect to the assets and properties of such CFC Holding Company shall be automatically be released and terminated and Lender shall promptly file such releases and terminations that such CFC Holding Company may reasonably require.

 

 

 

 

8.11   Lender agrees that non-public information regarding the Borrowers, their operations, assets, owners, employees, affiliates, pricing, customer lists, and existing and contemplated business plans (collectively, the “ Confidential Information ”) shall be treated by Lender in a confidential manner, and shall not be disclosed by Lender to Persons who are not parties to this Agreement, except: (i) to attorneys for and other advisors, accountants, auditors, and consultants to Lender on a “need to know” basis in connection with this Agreement and the transactions contemplated hereby and on a confidential basis, (ii) as may be required by statute, decision, or judicial or administrative order, rule, or regulation; provided, that, prior to any disclosure this clause, the disclosing party agrees to provide Borrower with prior notice thereof, to the extent that the disclosing party is permitted to provide such prior notice to Borrower pursuant to the policies of such regulatory authority or terms of the applicable statute, decision, or judicial or administrative order, rule, or regulation, (iii) as requested or required by any Governmental Authority pursuant to any subpoena or other legal process; provided, that, (A) prior to any disclosure under this clause (iii) the disclosing party agrees to provide Borrower with prior written notice thereof, to the extent that the disclosing party is permitted to provide such prior written notice to Borrower pursuant to the terms of the subpoena or other legal process, (iv) as to any such information that is or becomes generally available to the public (other than as a result of prohibited disclosure by Lender), (v) in connection with any litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement and the other Loan Documents; provided, that, prior to any disclosure to any Person under this clause (v) with respect to litigation involving any Person, the disclosing party agrees to provide Borrower with prior written notice thereof, and (vi) in connection with, and to the extent reasonably necessary for, the exercise of any secured creditor remedy under this Agreement or under any other Loan Document.

 

8.12   This Agreement, the other Loan Documents, the Obligations and all Liens securing the Obligations may from time to time be subordinated to any Senior Debt pursuant to the terms of a Subordination Agreement approved by the Lender (such approval not to be unreasonably withheld, conditioned or delayed). The Lender hereby agrees to promptly execute and deliver any such Subordination Agreement with each Senior Lender or RTS upon the request of a Senior Lender or RTS.

 

8.13   The Borrower agrees to pay on demand all reasonable and documented out-of-pocket costs and expenses of the Lender (including attorney’s fees and costs) in connection with any enforcement (including in appellate, bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings) of the Loan Documents.

 

8.14   The Borrower shall not have the right to assign its rights and obligations under the Loan Documents or any interest herein or therein without the prior written consent of the Lender (such consent not to be unreasonably withheld, delayed or conditioned). The Lender may not assign its right and obligations under the Loan Documents or any interest herein or therein without the prior written consent of the Borrower (such consent not to be unreasonably withheld, delayed or conditioned), provided that no such consent of the Borrower shall be required during the continuance of an Event of Default.

 

 

 

 

8.15   As of the date hereof, the Borrower hereby confirms and ratifies all of its obligations under the Loan Documents (in each case, as amended hereby as of such date) to which it is a party. The parties hereto confirm that they have entered into this Agreement to amend and restate the terms of the Original Loan Agreement. By its execution on the respective signature lines provided below, as of the date hereof, each of the parties hereto (i) confirms that all references in such Loan Documents to the “Loan Agreement” (or words of similar import) refer to the Original Loan Agreement as amended by this Agreement, and (ii) represents and warrants that the representations and warranties set forth in such Loan Documents are true, correct and complete in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true, correct and complete in all material respects on and as of such earlier date. The parties hereto do not intend this Agreement or the transactions contemplated hereby to be, and this Agreement and the transactions contemplated hereby shall not be construed to be, a novation of any of the Liabilities owing by the Borrower under or in connection with the Original Loan Agreement or any of the other Loan Documents.

 

[Signatures Follow on Next Page]

 

 

 

 

BORROWER’S SIGNATURE PAGE TO AMENDED AND RESTATED LOAN AGREEMENT

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written.

 

BORROWER:

 

TSS, INC.

 

By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer and President  
   
INNOVATIVE POWER SYSTEMS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  
   
VTC, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer  
   
VORTECH, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chairman  
   
TOTAL SITE SOLUTIONS AZ, LLC  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Manager  
   
ALLETAG BUILDERS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  

 

 

 

 

LENDER’S SIGNATURE PAGE TO AMENDED AND RESTATED LOAN AGREEMENT

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written.

 

LENDER:

 

MHW SPV II, LLC

 

By: /s/ Peter H. Woodward  
Name: Peter H. Woodward  
Title: Managing Member  
   
MHW PARTNERS, LP  
     
By: /s/ Peter H. Woodward  
Name: Peter H. Woodward  
Title: Managing Member  

 

 

 

Exhibit 99.2

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM.

 

THIS NOTE AND THE OBLIGATIONS AND INDEBTEDNESS EVIDENCED HEREBY MAY FROM TIME TO TIME BE SUBORDINATED TO THE SENIOR DEBT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT THIS NOTE AND THE OBLIGATIONS AND INDEBTEDNESS EVIDENCED HEREBY SHALL BE SUBORDINATED IN ACCORDANCE WITH THE PROVISIONS OF ANY SUBORDINATION AGREEMENT, AND THE HOLDER ACCEPTS AND AGREES TO BE BOUND BY ANY SUCH SUBORDINATION AGREEMENT.

 

July 19, 2017

 

AMENDED AND RESTATED PROMISSORY NOTE

 

FOR VALUE RECEIVED TSS, INC., INNOVATIVE POWER SYSTEMS, INC., VTC, L.L.C., VORTECH, L.L.C., TOTAL SITE SOLUTIONS AZ, LLC and ALLETAG BUILDERS, INC., jointly and severally (the “ Borrower ”), promise to pay to MHW SPV II, LLC (the “ Lender ”), the principal sum of up to Nine Hundred Forty-Five Thousand Dollars ($945,000), or so much thereof as may be outstanding under the MHW Loan (defined in the Loan Agreement (defined herein)) pursuant to the terms and conditions of the Loan Agreement (such amount, including any amounts evidenced by the PIK Notes (as defined below), the “ Principal Sum ”), together with interest thereon at the rate or rates hereinafter provided, in accordance with the terms set forth herein.

 

Capitalized terms not otherwise defined herein (including terms set forth in the header hereto) shall have the meanings set forth in the Loan Agreement.

 

Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest (“ Interest ”) at the fixed rate of twelve percent (12%) per annum (the “ Interest Rate ”), payable as follows:

 

(a)          The Borrower shall pay cash interest (the “ Basic Interest ”) on the unpaid Principal Sum at the fixed rate of six percent (6%) per annum, monthly in arrears on the first day of each month (each, an “ Interest Payment Date ”) and on the Maturity Date.

 

(b)          The Borrower shall pay interest (“ PIK Interest ”) on the unpaid Principal Sum at the fixed rate of six percent (6%) per annum by delivery to the Holder, upon written request by the Lender, by a date no later than each Interest Payment Date or such other date as the Lender shall specify, of an additional promissory note (each, a “ PIK Note ”) having an aggregate principal amount equal to the accrued but unpaid PIK Interest on this Note (and the amount of accrued but unpaid PIK Interest on any previously undelivered PIK Notes) and otherwise having substantially identical terms to this Note (including, without limitation, with respect to the Interest Rate). Interest on each PIK Note shall accrue from the Interest Payment Date in respect of which such additional PIK Note was issued until repayment of the principal and payment of all accrued interest in full. If for any reason one or more PIK Notes shall not be delivered in accordance herewith, Interest shall accrue on this Note such that the aggregate Interest due and payable on the Maturity Date and on each Interest Payment Date would be the same as if all PIK Notes not issued had been issued, and the principal payable on the Maturity Date with respect to this Note shall be an amount equal to the sum of the principal outstanding hereunder and the aggregate principal which would be outstanding if the PIK Notes not issued had been issued.

 

 

 

 

All interest payable under the terms of this Amended and Restated Promissory Note (as amended, restated, supplemented, replaced or otherwise modified from time to time, this “ Note ”) shall be calculated on the basis of a 365-day year and the actual number of days elapsed.

 

Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on the Maturity Date.

 

All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds at such places as the Lender may from time to time designate in writing to the Borrower.

 

Except for any applicable Prepayment Fee, the Borrower may prepay the Principal Sum in whole or in part at any time without premium or penalty.

 

In the event that Borrower makes an optional prepayment of any of the Principal Sum prior to the third anniversary of the Closing Date, the Borrowers shall pay a fee (the “ Prepayment Fee ”) equal to the following amount at the following times:

 

Period:   Prepayment Fee:
     
Closing Date through and including the first anniversary of the Closing Date   Four percent (4%) of the amount prepaid
     
The day following the first anniversary of the Closing Date  through and including the second anniversary of the Closing Date   Two percent (2%) of the amount prepaid
     
The day following the second anniversary of the Closing Date through and including the third anniversary of the Closing Date   One percent (1%) of the amount prepaid

 

This Note is one of the “ Notes ” described in that certain Loan Agreement of even date herewith by and among the Borrower and the Lender (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “ Loan Agreement ”). The Borrower agrees that the Lender, with respect to this Note, shall have the benefit of the provisions of the Loan Agreement that apply to the Loan Documents.

 

Upon the occurrence of any Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender by written demand from Lender to Borrower and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note and all applicable Laws.

 

This Note is secured by, among other things, Liens on and security interests in certain property of Borrower that have been granted to the Lender pursuant to the Loan Documents. Reference is hereby made to the Loan Documents for a description of the collateral securing this Note, the terms and conditions upon which such liens and security interests were granted and the rights of the holder of this Note in respect thereof.

 

The Borrower acknowledges and agrees that this Note shall be governed by the Laws of the State of Maryland.

 

  - 2 -  

 

 

THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS NOTE AND/OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE BY THE BORROWER AND THE LENDER, AND EACH HEREBY REPRESENTS TO THE OTHER THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF THE BORROWER AND THE LENDER HEREBY FURTHER REPRESENT TO THE OTHER THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

This Note amends and restates that certain Promissory Note dated as of February 2, 2015 (as amended, restated, replaced, supplemented or otherwise modified prior to the date hereof, the “ Original Note ”) delivered by the Borrower to the Lender in its entirety. While this Note amends, restates and supersedes the Original Note, this Note is not given in payment or satisfaction of the Original Note (which has been amended and restated into the terms herein) and does not extinguish the indebtedness represented thereby, but rather the indebtedness represented thereby is now evidenced by the terms of this Note. This Note is not a novation.

 

[Signatures Follow on Next Page]

 

  - 3 -  

 

 

SIGNATURE PAGE TO AMENDED AND RESTATED PROMISSORY NOTE

 

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the date first written above.

 

BORROWER:

 

TSS, INC.

 

By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer and President  
   
INNOVATIVE POWER SYSTEMS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  
   
VTC, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer  
   
VORTECH, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chairman  
   
TOTAL SITE SOLUTIONS AZ, LLC  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Manager  
   
ALLETAG BUILDERS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  

 

 

 

Exhibit 99.3

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM.

 

THIS NOTE AND THE OBLIGATIONS AND INDEBTEDNESS EVIDENCED HEREBY MAY FROM TIME TO TIME BE SUBORDINATED TO THE SENIOR DEBT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT THIS NOTE AND THE OBLIGATIONS AND INDEBTEDNESS EVIDENCED HEREBY SHALL BE SUBORDINATED IN ACCORDANCE WITH THE PROVISIONS OF ANY SUBORDINATION AGREEMENT, AND THE HOLDER ACCEPTS AND AGREES TO BE BOUND BY ANY SUCH SUBORDINATION AGREEMENT.

 

July 19, 2017

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED TSS, INC., INNOVATIVE POWER SYSTEMS, INC., VTC, L.L.C., VORTECH, L.L.C., TOTAL SITE SOLUTIONS AZ, LLC and ALLETAG BUILDERS, INC., jointly and severally (the “ Borrower ”), promise to pay to MHW PARTNERS, LP (the “ Lender ”), the principal sum of up to Six Hundred Fifty Thousand Dollars ($650,000), or so much thereof as may be outstanding under the Partners Loan (defined in the Loan Agreement (defined herein)) pursuant to the terms and conditions of the Loan Agreement (such amount, including any amounts evidenced by the PIK Notes (as defined below), the “ Principal Sum ”), together with interest thereon at the rate or rates hereinafter provided, in accordance with the terms set forth herein.

 

Capitalized terms not otherwise defined herein (including terms set forth in the header hereto) shall have the meanings set forth in the Loan Agreement.

 

Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest (“ Interest ”) at the fixed rate of twelve percent (12%) per annum (the “ Interest Rate ”), payable as follows:

 

(a)           The Borrower shall pay cash interest (the “ Basic Interest ”) on the unpaid Principal Sum at the fixed rate of six percent (6%) per annum, monthly in arrears on the first day of each month (each, an “ Interest Payment Date ”) and on the Maturity Date.

 

(b)           The Borrower shall pay interest (“ PIK Interest ”) on the unpaid Principal Sum at the fixed rate of six percent (6%) per annum by delivery to the Holder, upon written request by the Lender, by a date no later than each Interest Payment Date or such other date as the Lender shall specify, of an additional promissory note (each, a “ PIK Note ”) having an aggregate principal amount equal to the accrued but unpaid PIK Interest on this Note (and the amount of accrued but unpaid PIK Interest on any previously undelivered PIK Notes) and otherwise having substantially identical terms to this Note (including, without limitation, with respect to the Interest Rate). Interest on each PIK Note shall accrue from the Interest Payment Date in respect of which such additional PIK Note was issued until repayment of the principal and payment of all accrued interest in full. If for any reason one or more PIK Notes shall not be delivered in accordance herewith, Interest shall accrue on this Note such that the aggregate Interest due and payable on the Maturity Date and on each Interest Payment Date would be the same as if all PIK Notes not issued had been issued, and the principal payable on the Maturity Date with respect to this Note shall be an amount equal to the sum of the principal outstanding hereunder and the aggregate principal which would be outstanding if the PIK Notes not issued had been issued.

 

 

 

 

All interest payable under the terms of this Amended and Restated Promissory Note (as amended, restated, supplemented, replaced or otherwise modified from time to time, this “ Note ”) shall be calculated on the basis of a 365-day year and the actual number of days elapsed.

 

Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on the Maturity Date.

 

All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds at such places as the Lender may from time to time designate in writing to the Borrower.

 

Except for any applicable Prepayment Fee, the Borrower may prepay the Principal Sum in whole or in part at any time without premium or penalty.

 

In the event that Borrower makes an optional prepayment of any of the Principal Sum prior to the third anniversary of the Closing Date, the Borrowers shall pay a fee (the “ Prepayment Fee ”) equal to the following amount at the following times:

 

Period:   Prepayment Fee:
     
Closing Date through and including the first anniversary of the Closing Date   Four percent (4%) of the amount prepaid
     
The day following the first anniversary of the Closing Date  through and including the second anniversary of the Closing Date   Two percent (2%) of the amount prepaid
     
The day following the second anniversary of the Closing Date through and including the third anniversary of the Closing Date   One percent (1%) of the amount prepaid

 

This Note is one of the “ Notes ” described in that certain Loan Agreement of even date herewith by and among the Borrower and the Lender (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “ Loan Agreement ”). The Borrower agrees that the Lender, with respect to this Note, shall have the benefit of the provisions of the Loan Agreement that apply to the Loan Documents.

 

Upon the occurrence of any Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender by written demand from Lender to Borrower and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note and all applicable Laws.

 

This Note is secured by, among other things, Liens on and security interests in certain property of Borrower that have been granted to the Lender pursuant to the Loan Documents. Reference is hereby made to the Loan Documents for a description of the collateral securing this Note, the terms and conditions upon which such liens and security interests were granted and the rights of the holder of this Note in respect thereof.

 

The Borrower acknowledges and agrees that this Note shall be governed by the Laws of the State of Maryland.

 

  - 2 -  

 

 

THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS NOTE AND/OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE BY THE BORROWER AND THE LENDER, AND EACH HEREBY REPRESENTS TO THE OTHER THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF THE BORROWER AND THE LENDER HEREBY FURTHER REPRESENT TO THE OTHER THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

[Signatures Follow on Next Page]

 

  - 3 -  

 

 

SIGNATURE PAGE TO PROMISSORY NOTE

 

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative as of the date first written above.

 

BORROWER:  
   
TSS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer and President  
   
INNOVATIVE POWER SYSTEMS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  
   
VTC, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer  
   
VORTECH, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chairman  
   
TOTAL SITE SOLUTIONS AZ, LLC  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Manager  
   
ALLETAG BUILDERS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  

 

 

Exhibit 99.4

 

THIS AGREEMENT, THE OBLIGATIONS SECURED HEREBY AND THE LIENS GRANTED HEREUNDER MAY FROM TIME TO TIME BE SUBORDINATED TO THE SENIOR DEBT, THE LIENS OF SENIOR LENDER AND THE RIGHTS AND REMEDIES OF SENIOR LENDER PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is made as of July 19, 2017, by TSS, INC., INNOVATIVE POWER SYSTEMS, INC., VTC, L.L.C., VORTECH, L.L.C., TOTAL SITE SOLUTIONS AZ, LLC and ALLETAG BUILDERS, INC., jointly and severally (collectively, the “ Borrower ”), with an address for purposes of this Agreement of 110 E. Old Settlers Road, Round Rock, Texas 78664, Telephone: (512) 310-1000, Fax: (512) 310-1828, in favor of MHW SPV II, LLC and MHW PARTNERS, LP (collectively, the “ Lender ”), with an address for the purposes of this Agreement of 150 East 52 nd Street, 30 th Floor, New York, New York 10022.

 

IN ORDER TO INDUCE the Lender to enter into the Loan Agreement (as that term is defined below), the Borrower hereby agrees as follows:

 

1.    Definitions; Interpretation .

 

1.1   Definitions. Capitalized terms not otherwise defined in this Agreement (including, without limitation, the header hereto) shall have the meaning set forth or provided for in the Loan Agreement. As used in this Agreement, the term:

 

Collateral ” means all personal property and fixtures of the Borrower, whether now owned or existing or hereafter acquired or created and wherever situated, including, without limitation, all of the Borrower’s (i) accounts, chattel paper, commercial tort claims, deposit accounts, documents, fixtures, general intangibles, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction, whether now owned or existing or hereafter acquired or arising, (ii) insurance policies relating to the foregoing and the right to receive refunds of unearned insurance premiums under those policies, and (iii) cash proceeds and noncash proceeds and products of the foregoing; provided that Collateral shall at no time include any Excluded Property.

Excluded Property ” means (a) any shares of (i) any CFC Holding Company or (ii) of any subsidiary of Borrower or any CFC Holding Company that is a “controlled foreign corporation”; (b) each deposit account of an Borrower that (i) is used for trust, payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of an Borrower’s employees, (ii) solely holds funds not owned by a Borrower that are segregated from such Borrower’s other deposit accounts, or (iii) is a tax withholding account (to the extent maintained by a Borrower exclusively for the purpose of maintaining or holding tax with-holding amounts payable to applicable Governmental Authorities; (c) any rights or interests of a Borrower in any contract, agreement, lease, permit, license, charter or license agreement, as such, if under the terms of such contract, agreement, lease, permit, license, charter or license agreement, or applicable Laws with respect thereto, the grant of a security interest or Lien therein to Lender would constitute or result in a breach, termination or default under such contract, agreement, lease, permit, license, charter or license agreement and such breach, termination or default has not been or is not waived or the consent of the other party to such contract, agreement, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable Laws such prohibition cannot be waived; provided , that , the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the Uniform Commercial Code or other applicable Laws or (ii) so as to limit, impair or otherwise affect Lender’s unconditional continuing security interests in and Liens upon any rights or interests of an Borrower in or to monies due or to become due under or any other proceeds of any such contract, lease, permit, license, charter or license agreement; (d) any United States intent-to-use trademark applications of a Borrower to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law; (e) any interest of any Borrower in real property; and (f) any assets as to which the Lender and Borrower agree, after consultation, that the cost of obtaining a security interest therein is excessive in view of the benefits to be obtained therefrom by the holders of the Obligations.

 

   

 

 

Loan Agreement ” means that certain Amended and Restated Loan Agreement dated on or about the date of this Agreement, among the Lender and the Borrower, as amended, restated, modified, substituted, extended and renewed from time to time.

 

Permitted Liens ” means (a) Liens for taxes that are not delinquent or that are being contested in good faith by appropriate proceedings; (b) deposits or pledges to secure obligations under workers’ compensation, social security or similar Laws, or under unemployment insurance; (c) Liens securing the Obligations and any other Liens in favor of Lender; (d) judgment Liens to the extent the entry of such judgment does not constitute a material adverse effect with respect to the Borrower; (e) Liens arising from the filing of Uniform Commercial Code financing statements relating solely to leases; (f) purchase money security interests securing Purchase Money Debt; (g) Liens in favor of a Senior Lender; (h) deposits to secure the performance of bids, trade contracts and leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (i) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (j) statutory, common law and contractual Liens of landlords and Liens of carriers, warehousemen, commissions merchants, consignees, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business; (k) leases, subleases, licenses or sublicenses granted to others in the ordinary course of business; (l) purported Liens evidenced by the filing of precautionary Uniform Commercial Code financing statements relating solely to operating leases of personal property; (m) rights and interests of licensors under licenses of intellectual property rights to the Borrower; (n) rights of setoff upon deposits of cash in favor of banks or other depository institutions; (o) Liens of a collection bank arising under Section 4-210 of any Uniform Commercial Code on items in the course of collection; (p) any Liens that are junior in priority to the Lender’s Liens; (q) such Liens, if any, as are set forth in the public records as of the date of this Agreement, and any modification, renewal or extension of such Liens in connection with the refinancing or modification of the indebtedness secured thereby and any Lien granted as a replacement or substitute thereof in connection with a modification or refinancing of the indebtedness secured thereby; (r) Permitted Pari Passu Liens; and (s) and Liens under the RTS Factoring Agreement.

 

1.2   Interpretation. The Recitals accurately state the facts, circumstances and intentions of the parties and are hereby incorporated in this Agreement by this reference and made a part hereof. The headings in this Agreement are included in this Agreement for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. As used in this Agreement, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. All terms used in this Agreement that are defined by the Maryland Uniform Commercial Code shall have the same meanings as assigned to them by the Maryland Uniform Commercial Code unless and to the extent varied by this Agreement. References to any one or more of the Loan Documents include the same as amended, restated, modified, substituted, extended and renewed from time to time.

 

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2.    Grant of Security Interest . The Borrower hereby grants to the Lender a security interest in all of the Collateral as security for the Obligations (other than any obligations or liabilities of Borrower to Lender under or with respect to the Warrant).

 

3.    Representations and Warranties . The Borrower represents and warrants to the Lender on the date of this Agreement, and shall be deemed to represent and warrant to the Lender at the time each request for an advance under the Loans is submitted and again at the time any advance is made under the Loans, as follows:

 

3.1   The representations and warranties contained in the Loan Agreement are true and correct in all material respects, except for such representations or warranties the relate solely to a prior date.

 

3.2   The Borrower has good title to the Collateral and the Collateral is free and clear of all Liens, except Permitted Liens.

 

3.3   The Lender has a valid Lien in all of the Collateral, subject to Permitted Liens.

 

4.    Covenants and Warranties .

 

4.1   The Borrower will store and protect Collateral in a manner appropriate for the respective types of Collateral and will take all reasonable steps necessary to preserve and maintain the Collateral.

 

4.2   The Collateral shall be free and clear of all Liens, except Permitted Liens.

 

4.3   The Borrower will maintain hazard insurance with fire and extended coverage and naming the Lender as an additional insured with loss payable to the Lender (subject to holders of other Permitted Liens) as its interest may appear on the on the goods included among the Collateral in an amount determined by the Borrower in its reasonable business judgment.

 

5.    Remedies Upon an Event of Default . Upon the occurrence and during the continuance of an Event of Default:

 

5.1   The Lender may, in the exercise of its sole and absolute discretion, declare all or any part of the Obligations to be immediately due and payable. The Lender shall have all of the rights and remedies of a secured party under the Uniform Commercial Code and other applicable Laws. If the sale or other disposition of the Collateral fails to satisfy all of the Obligations, the Borrower shall remain liable to Lender for any deficiency.

 

5.2   The Lender or its agents may enter upon and remain on the Borrower’s premises to take possession of the Collateral, to remove it, to render it unusable, to collect it, or to sell or otherwise dispose of it and to take any other action permitted to be taken under this Agreement or under applicable Laws.

 

5.3   Any proceeds of the collection, the sale or other disposition of the Collateral will be applied by the Lender to the Obligations, at such time or times and in such order and manner of application as the Lender may from time to time in its sole and absolute discretion determine.

 

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6.    Other Provisions .

 

6.1   This Agreement is one of the Loan Documents. The parties agree that the Lender, with respect to this Agreement, shall have the benefit of the provisions of the Loan Agreement that apply to Loan Documents.

 

6.2   In case one or more provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any Laws, the validity, legality and enforceability of the remaining provisions contained herein shall remain effective and binding on the parties hereto and shall not be affected or impaired thereby.

 

6.3   This Agreement shall be binding upon and inure to the benefit of the Borrower and Lender and their respective successors and assigns.

 

6.4   This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the Laws of the State of Maryland.

 

6.5   All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement shall be given in the manner provided in the Loan Agreement for the giving of notices.

 

6.6   This Agreement may be executed in any number of duplicate originals or counterparts (with any appropriate completions for the respective parties), each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same agreement. Each party to this Agreement agrees that the respective signatures of the parties may be delivered by fax or .pdf and that the parties may rely on a signature so delivered as an original. Any party who chooses to deliver its signature in such manner agrees to provide promptly to the other parties a copy of this Agreement with its inked signature, but the party's failure to deliver a copy of this Agreement with its inked signature shall not affect the validity, enforceability and binding effect of this Agreement.

 

6.7   THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS AGREEMENT AND/OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY, AND VOLUNTARILY MADE BY THE BORROWER AND THE LENDER, AND EACH HEREBY REPRESENTS TO THE OTHER THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF THE BORROWER AND THE LENDER HEREBY FURTHER REPRESENT TO THE OTHER THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

6.8   Each of MHW SPV II, LLC and MHW Partners, LP hereby (i) appoint MHW SPV II, LLC as agent for the purpose of any financing statements or other filings on behalf of the Lender, (ii) appoint the other as agent for the purpose of perfecting the Lender’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by possession or control, and (iii) agree that any action taken under Section 5 hereunder shall be upon the mutual agreement of each such Person.

 

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6.9   This Agreement amends and restates, but does not satisfy nor act as a novation of the obligations under, relating to, or in connection with, that certain Security Agreement dated February 2, 2015 (the “ Existing Agreement ”), executed and delivered by the Borrower in favor of MHW SPV II, LLC .

 

[Signatures Follow on Next Page]

 

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SIGNATURE PAGE TO SECURITY AGREEMENT

 

IN WITNESS WHEREOF, the Borrower has caused this Agreement to be executed and delivered by its duly authorized representatives as of the day and year first above written.

 

BORROWER:  
     
TSS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer and President  
     
INNOVATIVE POWER SYSTEMS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  
     
VTC, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chief Executive Officer  
     
VORTECH, L.L.C.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Chairman  
     
TOTAL SITE SOLUTIONS AZ, LLC  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: Manager  
     
ALLETAG BUILDERS, INC.  
     
By: /s/ Anthony Angelini  
Name: Anthony Angelini  
Title: President  

 

     

 

 

Exhibit 99.5

 

AMENDED AND RESTATED WARRANT

 

THIS AMENDED AND RESTATED WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS AMENDED AND RESTATED WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Warrant Certificate No.: 001

 

Original Issue Date: February 2, 2015

 

Amendment Date: July 19, 2017

 

FOR VALUE RECEIVED, TSS, Inc., a Delaware corporation (the “ Company ”), hereby certifies that MHW SPV II, LLC, a Delaware limited liability company, or its registered assigns (the “ Holder ”) is entitled to purchase from the Company the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share set forth in Section 2 hereof, all subject to the terms, conditions and adjustments set forth below. This Amended and Restated Warrant (this “ Warrant ”) amends and restates that certain warrant issued to the Holder on February 2, 2015, which is superseded and replaced by this Warrant in all respects. Certain capitalized terms used herein are defined in Section 1 hereof.

 

1.           Definitions . As used in this Warrant, the following terms have the respective meanings set forth below:

 

Aggregate Exercise Price ” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 , multiplied by (b) the Exercise Price.

 

Board ” means the board of directors of the Company.

 

 

 

 

Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of New York, New York are authorized or obligated by law or executive order to close.

 

Common Stock ” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

 

Company ” has the meaning set forth in the preamble.

 

Exercise Date ” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Exercise Price.

 

Exercise Agreement has the meaning set forth in Section 3(a)(i) .

 

Exercise Period ” has the meaning set forth in Section 2 .

 

Exercise Price” has the meaning set forth in Section 2 .

 

Fair Market Value ” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided , that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

 

Holder has the meaning set forth in the preamble.

 

Original Issue Date ” means July 19, 2017.

 

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Person ” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

Pink OTC Markets means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

Transaction ” has the meaning set forth in Section 4(b) .

 

Warrant ” means this Amended and Restated Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

Warrant Shares means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

2.           Term of Warrant . Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., eastern time, on July 19, 2022, or, if such day is not a Business Day, on the next preceding Business Day (the “ Exercise Period ”), the Holder of this Warrant may exercise this Warrant for all or any part of the number of Warrant Shares (subject to adjustment as provided herein) at the purchase price per share (the “ Exercise Price ”) set forth below:

 

Number of Shares   Exercise Price
390,539 shares   $0.10 per share
390,539 shares   $0.20 per share
334,748 shares   $0.30 per share

 

3.           Exercise of Warrant .

 

(a)           Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

 

(i)          surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “ Exercise Agreement ”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

 

(ii)         payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b) .

 

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(b)           Payment of the Aggregate Exercise Price . Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

 

(i)          by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

(ii)         by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

 

(iii)        by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

 

(iv)        any combination of the foregoing.

 

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

 

(c)           Delivery of Stock Certificates . Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within twenty (20) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 5 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

 

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(d)           Fractional Shares . The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e)           Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

 

(i)          This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

(ii)         All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

 

(iii)        The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

(iv)        The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided , that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

 

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(f)           Reservation of Shares . During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

 

4.           Adjustment to Exercise Price or Number of Warrant Shares . In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4 ).

 

(a)           Dividend, Subdivision or Combination of Common Stock . If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock payable in shares of Common Stock, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

 

(b)           Transactions . In case at any time the Company shall initiate any transaction or be a party to any transaction (including, without limitation, a merger, consolidation, stock exchange, sale, lease or other disposition of all or substantially all of the Company’s assets, liquidation, recapitalization or reclassification of any of the Common Stock) in connection with which the Common Stock shall be changed into or exchanged for different securities of the Company or capital stock or other securities of another corporation or interests in a non-corporate entity or other property (including cash) or any combination of the foregoing (each such transaction being herein called a “ Transaction ”), then, as a condition of the consummation of the Transaction, lawful, enforceable and adequate provision shall be made so that the Holder shall be entitled to receive (i) a new warrant in form and substance similar to, and in exchange for, this Warrant to purchase all or a portion of such securities or other property, or (ii) the securities or other property (including cash), if any, to which the Holder would have been entitled upon consummation of the Transaction if the Holder had exercised such applicable portion of this Warrant immediately prior thereto (after taking into account payment of the Aggregate Exercise Price). This Section 4(b) shall similarly apply to successive Transactions.

 

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5.           Transfer of Warrant . Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B , together with funds sufficient to pay any transfer taxes required in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

6.           Holder Not Deemed a Stockholder; Limitations on Liability . Except as otherwise specifically provided herein, prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

7.           Replacement on Loss; Division and Combination .

 

(a)           Replacement of Warrant on Loss . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided , that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

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(b)           Division and Combination of Warrant . Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment that may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant, as to any transfer or assignment that may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

8.           Compliance with the Securities Act .

 

(a)           Agreement to Comply with the Securities Act; Legend . The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 8 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “ Securities Act ”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

 

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

  8  

 

 

(b)           Representations of the Holder . In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

 

(i)          The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

 

(ii)         The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

(iii)        The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

9.           Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9 ).

 

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If to the Company: TSS, Inc.
110 E. Old Settler’s Blvd.
Round Rock, Texas 78664
Facsimile: (512) 310-1828
E-mail: jpenver@totalsitesolutions.com
Attention: Chief Financial Officer  
   
with a copy to: Miles & Stockbridge P.C.
100 Light Street
Baltimore, Maryland 21202
Facsimile: (410) 698-4505
E-mail: cjohnson@milesstockbridge.com
Attention:  Christopher R. Johnson
   
If to the Holder: MHW SPV II, LLC
150 East 52 nd Street, 30 th Floor
New York, New York 10022
Facsimile: (212) 486-7580
E-mail: pwoodward@mhwcapital.com
Attention: Managing Member

 

10.         Cumulative Remedies . The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

11.         Equitable Relief . Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

12.         Entire Agreement . This Warrant constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

 

13.         Successor and Assigns . This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

 

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14.         No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

15.         Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

16.         Amendment and Modification; Waiver . Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17.         Severability . If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

18.         Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

 

19.         Submission to Jurisdiction . Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in each case located in the city of Wilmington, Delaware, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

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20.         Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

 

21.         Counterparts . This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

22.         No Strict Construction . This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

  TSS, Inc.
     
  By: /s/ Anthony Angelini
  Name: Anthony Angelini
  Title:   Chief Executive Officer and President

 

Accepted and agreed,  
   
MHW SPV II, LLC  
     
By: /s/ Peter H. Woodward  
Name: Peter H. Woodward  
Title: Managing Member  

 

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Exhibit 99.6

 

WARRANT

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Warrant Certificate No.: 002

 

Original Issue Date: July 19, 2017

 

FOR VALUE RECEIVED, TSS, Inc., a Delaware corporation (the “ Company ”), hereby certifies that MHW Partners, LP, a Delaware limited partnership, or its registered assigns (the “ Holder ”) is entitled to purchase from the Company the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share set forth in Section 2 hereof, all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

1.            Definitions . As used in this Warrant, the following terms have the respective meanings set forth below:

 

Aggregate Exercise Price ” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 , multiplied by (b) the Exercise Price.

 

Board ” means the board of directors of the Company.

 

Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of New York, New York are authorized or obligated by law or executive order to close.

 

     

 

 

Common Stock ” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

 

Company ” has the meaning set forth in the preamble.

 

Exercise Date ” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Exercise Price.

 

Exercise Agreement has the meaning set forth in Section 3(a)(i) .

 

Exercise Period ” has the meaning set forth in Section 2 .

 

Exercise Price” has the meaning set forth in Section 2 .

 

Fair Market Value ” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided , that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

 

Holder has the meaning set forth in the preamble.

 

Original Issue Date ” means July 19, 2017.

 

Person ” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

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Pink OTC Markets means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

Transaction ” has the meaning set forth in Section 4(b) .

 

Warrant ” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

Warrant Shares means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

2.            Term of Warrant . Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., eastern time, on July 19, 2022, or, if such day is not a Business Day, on the next preceding Business Day (the “ Exercise Period ”), the Holder of this Warrant may exercise this Warrant for all or any part of the number of Warrant Shares (subject to adjustment as provided herein) at the purchase price per share (the “ Exercise Price ”) set forth below:

 

Number of Shares   Exercise Price  
268,625 shares   $0.10 per share  
268,625 shares   $0.20 per share  
230,250 shares   $0.30 per share  

 

3.            Exercise of Warrant .

 

(a)            Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

 

(i)           surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “ Exercise Agreement ”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

 

(ii)          payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b) .

 

(b)            Payment of the Aggregate Exercise Price . Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

 

(i)           by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

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(ii)          by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

 

(iii)         by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

 

(iv)         any combination of the foregoing.

 

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

 

(c)            Delivery of Stock Certificates . Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within twenty (20) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 5 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

 

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(d)            Fractional Shares . The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e)            Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

 

(i)           This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

(ii)          All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

 

(iii)         The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

(iv)         The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided , that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

 

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(f)            Reservation of Shares . During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

 

4.            Adjustment to Exercise Price or Number of Warrant Shares . In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4 ).

 

(a)            Dividend, Subdivision or Combination of Common Stock . If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock payable in shares of Common Stock, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

 

(b)            Transactions . In case at any time the Company shall initiate any transaction or be a party to any transaction (including, without limitation, a merger, consolidation, stock exchange, sale, lease or other disposition of all or substantially all of the Company’s assets, liquidation, recapitalization or reclassification of any of the Common Stock) in connection with which the Common Stock shall be changed into or exchanged for different securities of the Company or capital stock or other securities of another corporation or interests in a non-corporate entity or other property (including cash) or any combination of the foregoing (each such transaction being herein called a “ Transaction ”), then, as a condition of the consummation of the Transaction, lawful, enforceable and adequate provision shall be made so that the Holder shall be entitled to receive (i) a new warrant in form and substance similar to, and in exchange for, this Warrant to purchase all or a portion of such securities or other property, or (ii) the securities or other property (including cash), if any, to which the Holder would have been entitled upon consummation of the Transaction if the Holder had exercised such applicable portion of this Warrant immediately prior thereto (after taking into account the payment of the Aggregate Exercise Price. This Section 4(b) shall similarly apply to successive Transactions.

 

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5.            Transfer of Warrant . Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B , together with funds sufficient to pay any transfer taxes required in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

6.            Holder Not Deemed a Stockholder; Limitations on Liability . Except as otherwise specifically provided herein, prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

7.            Replacement on Loss; Division and Combination .

 

(a)            Replacement of Warrant on Loss . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided , that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

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(b)            Division and Combination of Warrant . Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment that may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant, as to any transfer or assignment that may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

8.            Compliance with the Securities Act .

 

(a)            Agreement to Comply with the Securities Act; Legend . The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 8 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “ Securities Act ”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

 

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

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(b)            Representations of the Holder . In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

 

(i)           The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

 

(ii)           The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

(iii)           The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

9.            Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9 ).

 

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If to the Company:

TSS, Inc.

110 E. Old Settler’s Blvd.

Round Rock, Texas 78664

Facsimile: (512) 310-1828

E-mail: jpenver@totalsitesolutions.com

Attention: Chief Financial Officer

   
with a copy to:

Miles & Stockbridge P.C.

100 Light Street

Baltimore, Maryland 21202

Facsimile: (410) 698-4505

E-mail: cjohnson@milesstockbridge.com

Attention: Christopher R. Johnson

   
If to the Holder:

MHW Partners, LP

150 East 52 nd Street, 30 th Floor

New York, New York 10022

Facsimile: (212) 486-7580

E-mail: pwoodward@mhwcapital.com

Attention: Managing Member

 

10.            Cumulative Remedies . The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

11.            Equitable Relief . Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

12.            Entire Agreement . This Warrant constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

 

13.            Successor and Assigns . This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

 

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14.            No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

15.            Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

16.            Amendment and Modification; Waiver . Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17.            Severability . If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

18.            Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

 

19.            Submission to Jurisdiction . Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in each case located in the city of Wilmington, Delaware, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

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20.            Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

 

21.            Counterparts . This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

22.            No Strict Construction . This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

    TSS, Inc.
       
    By: /s/ Anthony Angelini
    Name: Anthony Angelini
    Title: Chief Executive Officer and President

 

Accepted and agreed,    
     
MHW Partners, LP    
       
By: /s/ Peter H. Woodward    
Name: Peter H. Woodward    
Title: Managing Member    

 

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