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

 

 

October 6 , 201 7

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 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

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 October 6, 2017, TSS, Inc. (the “Company”) and its subsidiaries Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions AZ, LLC and Alletag Buildings, Inc. (together with the Company, collectively, the “Borrowers”) entered into a first amendment (the “First Amendment”) and related agreements with MHW SPV II, LLC (“MHW SPV”), MHW Partners, LP (“MHW Partners” and together with MHW SPV, the “Existing Lenders”), Andrew Berg (“Mr. Berg”) and Glen Ikeda (“Mr. Ikeda”, and collectively with Mr. Berg, the “New Lenders”; the New Lenders, MHW SPV and MHW Partners, collectively, the “Lender”). The First Amendment amends the amended and restated multiple advance term loan agreement among the Borrowers and the Existing Lenders dated as of July 19, 2017 (as amended by the First Amendment, the “Loan Agreement”) and the amended and restated security agreement by the Borrowers in favor of the Existing Lenders dated as of July 19, 2017 (as amended by the First Amendment, the “Security Agreement”).

 

The First Amendment adds the New Lenders as lenders under the Loan Agreement and the Security Agreement. In accordance with the terms of the First Amendment, Mr. Ikeda provided a loan to the Borrowers in the amount of $300,000 on October 6, 2017, and Mr. Berg provided a loan to the Borrowers in the amount of $100,000 on October 10, 2017. The Borrowers executed a promissory note (the “Ikeda Promissory Note”) to Mr. Ikeda to evidence the portion of the loan from Mr. Ikeda and the terms of repayment thereof, and a promissory note to Mr. Berg (the “Berg Promissory Note”, and collectively with the Ikeda Promissory Note, the “New Lender Notes”) to evidence the portion of the loan from Mr. Berg and the terms of repayment thereof (such loans, the “New Loans”, and collectively with the loans made by the Existing Lenders pursuant to the Loan Agreement, the “Loans”).

 

The Loan s have a maturity date of July 19, 2022. The New Loans do not bear interest, and the Borrowers are permitted to make optional prepayments at any time without premium or penalty; provided, that if the Borrowers prepay the outstanding principal amount of a New Loan prior to the second anniversary of the date of the applicable New Lender Note, then the total amount of such prepayment will not exceed 95% of the total principal amount of such New Lender Note and any remaining principal amount under such New Lender Note shall be fully and finally cancelled, extinguished, forgiven and terminated without further action of any party.

 

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 Company and Mr. Ikeda also entered into a warrant (the “Ikeda Warrant”) granting Mr. Ikeda the right to purchase up to 954,231 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The Ikeda Warrant is exercisable until July 19, 2022, at an exercise price of $0.10 for the first 498,981 shares, $0.20 for the next 273,981 shares and $0.30 for the final 181,269 shares. The exercise price and number of shares of Common Stock issuable on exercise of the Ikeda Warrant will be subject to adjustment in the event of any stock split, reverse stock split, recapitalization, reorganization or similar transaction.

 

The Company and Mr. Berg also entered into a warrant (the “Berg Warrant”, collectively with the Ikeda Warrant, the “Warrants”) granting Mr. Berg the right to purchase up to 318,077 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The Berg Warrant is exercisable until July 19, 2022, at an exercise price of $0.10 for the first 166,327 shares, $0.20 for the next 91,327 shares and $0.30 for the final 60,423 shares. The exercise price and number of shares of Common Stock issuable on exercise of the Berg Warrant will be subject to adjustment in the event of any stock split, reverse stock split, recapitalization, reorganization or similar transaction.

 

 

 

 

A copy of the First Amendment is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the Ikeda Promissory Note is attached hereto as Exhibit 99.2 and is incorporated herein by reference. A copy of the Berg Promissory Note is attached hereto as Exhibit 99.3 and is incorporated herein by reference. Copies of the Warrants are attached hereto as Exhibit 99.4 and Exhibit 99.5 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 First Amendment, Ikeda Promissory Note, Berg Promissory Note 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 Ikeda Warrant to Mr. Ikeda and on October 10, 2017, the Company issued the Berg Warrant to Mr. Berg. 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 the New Lenders represented in the applicable Warrant that he was an accredited investor, that he was acquiring such Warrant and the underlying shares of common stock for investment for his 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

First Amendment , among TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions AZ, LLC, Alletag Buildings, Inc., MHW Partners, LP, MHW SPV II, LLC, Andrew Berg and Glen Ikeda, dated October 6, 2017

  99. 2

Promissory Note, made by TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions AZ, LLC, and Alletag Buildings, Inc. payable to the order of Glen Ikeda, dated October 6, 2017

  99.3

Promissory Note, made by TSS, Inc. Innovative Power Systems, Inc., VTC, L.L.C., Vortech, L.L.C., Total Site Solutions AZ, LLC, and Alletag Buildings, Inc. payable to the order of Andrew Berg, dated October 10, 2017

  99.4

Warrant between TSS, Inc. and Glen Ikeda, dated October 6, 2017

  99.5

Warrant between TSS, Inc. and Andrew Berg, dated October 10, 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: October 13, 2017

Exhibit 99.1

 

FIRST AMENDMENT

 

THIS FIRST AMENDMENT (this “Amendment”) is made as of this October 6, 2017 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 (the “ Borrower ”), and MHW SPV II, LLC (“ SPV ”), MHW PARTNERS, LP (“ Partners ”) ANDREW BERG (“ Berg ”) and GLEN IKEDA (“ Ikeda ”) and collectively with Berg, the “ New Lender s ”; the New Lenders, SPV and Partners, collectively, the “ Lender ”).

 

RECITALS:

 

A.     Borrower and Lender are parties to that certain Amended and Restated Loan Agreement dated as of July 19, 2017 (as amended, restated, supplemented or otherwise modified and in effect from time to time prior to the date hereof, the “ Existing Loan Agreement ”, and as amended by this Amendment, the “ Loan Agreement ”; capitalized terms used herein and not otherwise defined shall have the meaning given to such terms in the Loan Agreement); and

 

B.     T he Borrower has requested that the New Lenders advance the Remaining Amount Financing (as defined in the Existing Loan Agreement) in the aggregate principal amount of $400,000, to be secured by Permitted Pari Passu Liens (as defined in the Existing Loan Agreement).

 

NOW, THEREFORE, in consideration of the foregoing, the terms and conditions set forth in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the patties hereto hereby agree as follows:

 

1.      Amendment s to Loan Agreement . The Existing Loan Agreement is hereby amended as follows:

 

(a)       T he defined term “Lender” in the introductory paragraph of the Loan Agreement is hereby amended to include the New Lenders, with an address for purposes of the Loan Agreement of 500 Starmont Ct, Danville, CA 94526 for Berg and P.O. Box 3306, Auburn, CA 95604 for Ikeda.

 

(b)       The defined term “ Commitment Amount” in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

Commitment Amount ” means One Million Nine Hundred Ninety-Five Thousand Dollars ($1,995,000).

 

(c)        The defined term “Notes” in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

Notes ” means, collectively, (i) the Amended and Restated Promissory Note dated the Closing Date by the Borrower in favor of MHW SPV II, LLC in original principal face amount of $945,000, (ii) the Promissory Note dated the Closing Date by the Borrower in favor of MHW Partners, LP in original principal face amount of $645,000, (iii) any PIK Notes (as defined in the Notes) delivered by the Borrower to a Lender, (iv) the Promissory Note to be dated October 10, 2017 by the Borrower in favor of Andrew Berg in original principal face amount of $100,000, (v) the Promissory Note dated the First Amendment Closing Date by the Borrower in favor of Glen Ikeda in original principal face amount of $300,000, and (vi) any other promissory note evidencing the Loan, as each may be amended, restated, substituted, replaced or otherwise modified from time to time.

 

 

 

 

(d)       The defined term “Warrants” in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

Warrants ” means, collectively, each of the Warrant and the Amended and Restated Warrant dated as of the Closing Date the Warrant dated as of the First Amendment Closing Date and the Warrant dated as of October 10, 2017, each executed by TSS, Inc. in favor of the applicable Lender, as each may be amended, restated, substituted, replaced or otherwise modified from time to time.

 

(e)       A new defined term “First Amendment Closing Date” shall be added to Section 1 of the Loan Agreement in correct alphabetical order, to read as follows:

 

First Amendment Closing Date ” means October 6, 2017.

 

(f)       Section 2(a ) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

(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) were disbursed by MHW Partners, LP to Borrower on the Closing Date (the “ Partners Loan ”), (iii) proceeds of the Loan of One Hundred Thousand Dollars ($100,000) will be disbursed by Andrew Berg to Borrower on October 10, 2017 (the “ Berg L oan ”) and (iv) proceeds of the Loan of Three Hundred Thousand Dollars ($300,000) were disbursed by Glen Ikeda to Borrower on the First Amendment Closing Date (the “ Ikeda Loan ”). To evidence the Loan and the terms of repayment thereof with interest (if applicable), the Borrower agrees to execute and deliver the Notes.

 

(g)       Section 2(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) The Loans may be prepaid as set forth in the Notes, in such order as the Borrower shall determine in its sole discretion. For the avoidance of doubt, the Borrower may prepay the Loan evidenced by a Note in part or in full and shall not be required to make any corresponding pro rata prepayment to the Loan evidenced by any other Note.

 

2

 

 

(h)       The heading for Section 3 of the Loan Agreement is hereby deleted in its entirety and replaced with the following: “ Security For Obligations; Dell Releases; RTS Factoring .”

 

(i)        Section 3(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) [Reserved].

 

2.      Amendments to Security Agreement . The Security Agreement is hereby amended as follows:

 

(a)     The defined term “Lender” in the introductory paragraph of the Security Agreement is hereby amended to include the New Lenders, with an address for purposes of the Security Agreement of 500 Starmont Ct, Danville, CA 94526 for Berg and P.O. Box 3306, Auburn, CA 95604 for Ikeda.

 

(b)      Section 6.8 of the Security Agreement is hereby deleted in its entirety and replaced with the following:

 

6.8      Each of MHW SPV II, LLC, MHW Partners, LP, Andrew Berg and Glen Ikeda 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 others 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.

 

3.      Agreements of New Lender s . Each New Lender hereby acknowledges and agrees that, by its execution of this Amendment, such New Lender will be deemed to be a Lender under the Loan Agreement and all Loan Documents and shall have all of the obligations and privileges of a Lender thereunder as if it had executed the Loan Agreement.

 

4.      Confirmation of Representations and Warranties . The Borrower hereby confirms that all of the representations and warranties set forth in the Loan Agreement and the other Loan Documents are true, correct and complete in all material respects 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 Borrower each hereby further confirms (i) as of the date hereof, the Loan Agreement, the Loan Documents, other documents required pursuant thereto and security interests and Liens created thereby are in full force and effect; (ii) the Borrower is in compliance with all, and not in violation, breach or default of any, covenants, agreements and/or other provisions of any of the Loan Agreement and Loan Documents; and (iii) after giving effect to this Amendment, no Event of Default has occurred and is continuing. The Borrower represents and warrants that (1) the execution, delivery and performance of this Amendment have been duly authorized by all necessary action, (2) it has duly executed and delivered this Amendment and the other Loan Documents to which it is a party, and (3) each of this Amendment, the Loan Agreement and the other Loan Documents is a legal, valid and binding obligation of the Borrower and constitutes the binding obligations of the Borrower, each enforceable in accordance with their respective terms, except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

 

3

 

 

5.      Conditions to Effectiveness . The obligation of the Lender to enter into this Amendment shall be subject to the satisfaction of each of the following conditions precedent :

 

5.1.     The Lender shall have received the following documents, each duly executed by all of the parties thereto and each in form and substance satisfactory to the Lender: (i) this Amendment; and (ii) such other documents, instruments and/or agreements as the Lender may reasonably request ; and

 

5.2.     The New Lender s shall have received the following documents, each duly executed by all of the parties thereto and each in form and substance satisfactory to the New Lenders: (i) the original Promissory Note dated the date hereof by the Borrower in favor of Berg in original principal amount of $100,000, (ii) the original Promissory Note dated the date hereof by the Borrower in favor of Ikeda in original principal amount of $300,000, (iii) the original Warrant dated the date hereof executed by TSS, Inc. in favor of Berg and (iv) the original Warrant dated the date hereof executed by TSS, Inc. in favor of Ikeda.

 

6.      Reference to and Effect on the Loan Agreement . Upon the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Loan Agreement as modified by this Amendment.

 

7.      Affirmation . Except as specifically modified pursuant to the terms hereof, the Loan Agreement and all other Loan Documents (and all covenants, terms, conditions and agreements therein) shall remain in full force and effect, and are hereby ratified and confirmed in all respects by the Borrower. The Borrower covenants and agrees to comply with all of the terms, covenants and conditions of the Loan Documents, as modified hereby, notwithstanding any prior course of conduct, waivers, releases or other actions or inactions on the Lender’s part which might otherwise constitute or be construed as a waiver of or amendment to such terms, covenants and conditions. The Borrower hereby acknowledges, reaffirms, confirms and ratifies its prior grant to the Lender of a continuing first priority Lien on and security interest in, upon, and to all right, title and interest in and to any and all of the Collateral (as defined in the Security Agreement), and expressly acknowledges that such Lien and security interest secures the Obligations.

 

4

 

 

8.      No Waiver or Novation . The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided in this Amendment, operate as a waiver of any right, power or remedy of the Lender, nor constitute a waiver of any provision of the Loan Agreement, the Loan Documents or any other document, instruments and agreements executed or delivered in connection with any of the foregoing. Nothing herein is intended or shall be construed as a waiver of any existing Events of Default under the Loan Agreement or other Loan Documents or any of the Lender’s rights and remedies in respect of such Events of Default. This Amendment (together with any other document executed in connection herewith) is not intended to be, nor shall it be construed as, a novation of the Loan Agreement or the Obligations .

 

9.      Loan Document . The parties acknowledge and agree that this Amendment and all agreements and instruments delivered to the Lender in connection herewith shall each constitute a “Loan Document” under the Loan Agreement and the other Loan Documents .

 

10.      Governing Law . This Amendment shall be governed by and construed in accordance with the Laws of the State of Maryland .

 

11.      Headings . Section headings in this Amendment are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

 

12.      Counterparts . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by facsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Amendment .

 

[Signatures follow on the next page.]

 

5

 

 

[ Borrower’s Signature Page to First Amendment ]

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed 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

 

 

 

 

[ Lender’ s Signature Page to First Amendment]

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the date first written above.

 

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

 

 

 

  /s/ Andrew Berg                                              

Andrew Berg

 

 

 

  /s/ Glen Ikeda                                                  

Glen Ikeda

 

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.

 

October 6, 2017

 

PROMISSORY N OTE

 

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 GLEN IKEDA (the “ Lender ”), the principal sum of up to Three Hundred Thousand Dollars ($300,000), or so much thereof as may be outstanding under the Ikeda Loan (defined in the Loan Agreement (defined herein)) pursuant to the terms and conditions of the Loan Agreement (the “ Principal Sum ”) 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.

 

Unless sooner paid, the unpaid Principal Sum shall be due and payable in full on the Maturity Date. For the avoidance of doubt, the Principal Sum shall not bear interest.

 

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.

 

T he Borrower may prepay the Principal Sum in whole or in part at any time without premium or penalty; provided, that if the Borrower shall prepay the Principal Sum in whole at any time prior to the 2-year anniversary of the date hereof, the total amount of such prepayment shall not exceed 95% of the total Principal Amount, and any remaining amount of the Principal Sum shall be fully and finally cancelled, extinguished, forgiven and terminated without further action of any party.

 

This Note is one of the “ Note s ” described in that certain Amended and Restated Loan Agreement dated as of July 19, 2017 by and among the Borrower and the Lenders party thereto (including the Lender) (as amended by that certain First Amendment of even date herewith and as otherwise 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.

 

U pon 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.

 

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]

 

-2-

 

 

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                            

Na me: Anthony Angelini

Titl e: 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.

 

October 10 , 2017

 

PROMISSORY N OTE

 

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 ANDREW BERG (the “ Lender ”), the principal sum of up to One Hundred Thousand Dollars ($100,000), or so much thereof as may be outstanding under the Berg Loan (defined in the Loan Agreement (defined herein)) pursuant to the terms and conditions of the Loan Agreement (the “ Principal Sum ”) 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.

 

Unless sooner paid, the unpaid Principal Sum shall be due and payable in full on the Maturity Date. For the avoidance of doubt, the Principal Sum shall not bear interest.

 

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.

 

T he Borrower may prepay the Principal Sum in whole or in part at any time without premium or penalty; provided, that if the Borrower shall prepay the Principal Sum in whole at any time prior to the 2-year anniversary of the date hereof, the total amount of such prepayment shall not exceed 95% of the total Principal Amount, and any remaining amount of the Principal Sum shall be fully and finally cancelled, extinguished, forgiven and terminated without further action of any party.

 

This Note is one of the “ Note s ” described in that certain Amended and Restated Loan Agreement dated as of July 19, 2017 by and among the Borrower and the Lenders party thereto (including the Lender) (as amended by that certain First Amendment dated as of October 6, 2017 and as otherwise 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.

 

U pon 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.

 

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]

 

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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                                

Na me: Anthony Angelini

Titl e: 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

 

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.: 4

 

Original Issue Date: October 6, 2017

 

FOR VALUE RECEIVED, TSS, Inc., a Delaware corporation (the “ Company ”), hereby certifies that Glen Ikeda 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 October 9, 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) .

 

Transfer ” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, this Warrant or any Warrant Shares owned by a Person or any interest (including a beneficial interest) in any shares of Common Stock owned by a Person

 

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
498,981 shares   $0.10 per share
273,981 shares   $0.20 per share
181,269 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

 

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(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;

 

(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.

 

5.      Transfer s .

 

(a)      Restrictions on Transfers . Notwithstanding anything to the contrary set forth in this Warrant, the Holder shall not, directly or indirectly, voluntarily or involuntarily Transfer this Warrant or more than 354,231 Warrant Shares prior to the first anniversary of the Original Issue Date except pursuant to a merger, consolidation, or other business combination involving the Company. Any Transfer or attempted Transfer of this Warrant or more than 354,231 Warrant Shares in violation of the terms of this Warrant shall be null and void, no such Transfer shall be recorded on the Company's books and the purported transferee in any such Transfer shall not be treated (and the purported transferor shall continue be treated) as the owner of the Warrant or such Warrant Shares.

 

(b)      Transfer of Warrant . Subject to Section 5( a ) and 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.

 

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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.

 

(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:

 

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“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO A WARRANT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH WARRANT. THE HOLDER OF THIS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT, BY ACCEPTANCE OF THIS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH WARRANT.

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIE S 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.”

 

(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.

 

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(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.

 

(c)      SEC Filings . The Holder acknowledges that it may be required to file certain reports, schedules, or other filings, including without limitation schedules and reports under Section 13 and Section 16 of the Securities Exchange Act of 1934, with the Securities and Exchange Commission as result of its ownership of the Warrant and the Warrant Shares and that it is responsible for complying with the reporting rules applicable to the filing of those reports, schedule or other filings. The Company shall reasonably assist the Holder in complying with such reporting rules, provided that the Holder promptly notifies the Company of any transaction effected by the Holder in Common Stock and provides the Company all information necessary to prepare and file such reports, schedules or filings. Notwithstanding the foregoing, the Company shall not be liable to the Holder for the Holder’s failure to files such reports, schedules, or other filings.

 

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 ).

 

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:

Glen Ikeda

P.O. Box 3306

Auburn, CA 95604

 

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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.

 

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.

 

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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,

 

Glen Ikeda

 

 

By:    /s/ Glen Ikeda                                  

Name:  Glen Ikeda

 

 

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Exhibit 99.5

 

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.: 5

 

Original Issue Date: October 9, 2017

 

FOR VALUE RECEIVED, TSS, Inc., a Delaware corporation (the “ Company ”), hereby certifies that Andy Berg 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 October 9, 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) .

 

Transfer ” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, this Warrant or any Warrant Shares owned by a Person or any interest (including a beneficial interest) in any shares of Common Stock owned by a Person

 

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
166,327 shares   $0.10 per share
91,327 shares   $0.20 per share
60,423 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

 

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(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;

 

(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.

 

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(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.

 

(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 s .

 

(a)      Restrictions on Transfers . Notwithstanding anything to the contrary set forth in this Warrant, the Holder shall not, directly or indirectly, voluntarily or involuntarily Transfer this Warrant or more than 118,077 Warrant Shares prior to the first anniversary of the Original Issue Date except pursuant to a merger, consolidation, or other business combination involving the Company. Any Transfer or attempted Transfer of this Warrant or more than 118,077 Warrant Shares in violation of the terms of this Warrant shall be null and void, no such Transfer shall be recorded on the Company's books and the purported transferee in any such Transfer shall not be treated (and the purported transferor shall continue be treated) as the owner of the Warrant or such Warrant Shares.

 

(b)      Transfer of Warrant . Subject to Section 5( a ) and 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.

 

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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.

 

(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:

 

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“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO A WARRANT (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH WARRANT. THE HOLDER OF THIS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT, BY ACCEPTANCE OF THIS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH WARRANT.

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIE S 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.”

 

(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.

 

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(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.

 

(c)      SEC Filings . The Holder acknowledges that it may be required to file certain reports, schedules, or other filings, including without limitation schedules and reports under Section 13 and Section 16 of the Securities Exchange Act of 1934, with the Securities and Exchange Commission as result of its ownership of the Warrant and the Warrant Shares and that it is responsible for complying with the reporting rules applicable to the filing of those reports, schedule or other filings. The Company shall reasonably assist the Holder in complying with such reporting rules, provided that the Holder promptly notifies the Company of any transaction effected by the Holder in Common Stock and provides the Company all information necessary to prepare and file such reports, schedules or filings. Notwithstanding the foregoing, the Company shall not be liable to the Holder for the Holder’s failure to files such reports, schedules, or other filings.

 

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 ).

 

 

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:

Andy Berg

500 Starmont Ct.

Danville, CA 94526

 

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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.

 

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.

 

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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,

 

Andy Berg

 

 

By:    /s/ Andy Berg                                        

Name:  Andy Berg

 

 

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