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
December 21, 2015
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 |
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Round Rock, Texas |
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78664 |
(Address of principal executive offices) |
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(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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. |
Entry into a Definitive Material Agreement. |
Item 2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
On December 21, 2015, TSS, Inc. (the “Company”)
and Gerard J. Gallagher, a director and the Chief Technology Officer of the Company, entered into a Second Amendment to Amended
and Restated Convertible Promissory Note (the “Amendment”), in order to amend that certain Amended and Restated Convertible
Promissory Note, dated May 21, 2013, in the original principal amount of $1,900,000, as amended by that certain Amendment to Amended
and Restated Convertible Promissory Note, dated effective September 30, 2014 (collectively, the “Note”). The Note was
issued by the Company to Mr. Gallagher as consideration in connection with the Company’s acquisition of VTC, L.L.C. and Vortech,
LLC on January 19, 2007.
The Amendment extends the maturity date of the Note from January
1, 2015 to July 1, 2017. Under the terms of the Amendment, the Company will make 14 monthly payments of principal in the amount
of $25,000 beginning January 1, 2016 through February 1, 2017 and is scheduled to make an additional $100,000 payment of principal
on each of March 1, 2017 and July 1, 2017. The Amendment also increases the interest rate from 4% to 5%, effective January 1, 2016.
The Company and Mr. Gallagher also entered into a warrant (the
“Warrant’) granting Mr. Gallagher the right to purchase up to 100,000 shares of the Company’s common stock par
value $0.0001 (the “Common Stock”). The Warrant is exercisable for a period of five years from December 21, 2015
at an exercise price of $0.15 per share. The exercise price and number of shares of Common Stock issuable on exercise of the 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 Note is attached hereto as Exhibit 10.1 and is
incorporated herein by reference. A copy of the Warrant is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the attached Amendment and
Warrant.
Item 3.02 |
Unregistered Sales of Equity Securities |
Reference is made to the disclosure set forth under Item 1.01
of this Report, which disclosure is incorporated herein by reference. The Warrant was issued in reliance on the exemption
from registration provided for under Section 4(2) of the Securities Act of 1933, as amended. Mr. Gallagher represented in the Warrant that
he was an accredited investor, that he was acquiring the Warrant and the underlying shares of common stock for investment
for its own account, and that the Warrant and the underlying shares of common stock are restricted securities under the federal
securities laws.
Item 9.01. |
Financial Statements and Exhibits. |
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99.1 |
Second Amendment to Amended and Restated Convertible Promissory Note, dated as of December 21, 2015, between TSS, Inc. and Gerard J. Gallagher. |
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99.2 |
Warrant between TSS, Inc. and Gerard J. Gallagher |
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.
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TSS, INC. |
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By: |
/s/ Anthony Angelini |
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Anthony Angelini |
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Chief Executive Officer |
Date: December 22, 2015
Exhibit 99.1
SECOND AMENDMENT
TO
AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
This SECOND
AMENDMENT TO AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE (this “Amendment”) is effective as of the
21st day of December, 2015, by and between TSS, INC., a Delaware corporation (f/k/a Fortress International Group, Inc. f/k/a Fortress
America Acquisition Corporation) (“Maker”), and Gerard J. Gallagher (“Holder”). Each of Maker
and Holder are hereinafter individually referred to as a “Party,” and collectively as the “Parties”.
EXPLANATORY STATEMENTS
Maker has issued to
Holder that certain Amended and Restated Convertible Promissory Note, dated May 21, 2013, in the original principal amount of One
Million Nine Hundred Thousand Dollars ($1,900,000) as amended by that certain Amendment to Amended and Restated Convertible Promissory
Note effective September 30, 2014 (as amended, the “Note”). The Parties desire to amend certain terms and conditions
set forth in the Note, all as further described and set forth in this Amendment.
AGREEMENT
NOW, THEREFORE,
in consideration of the foregoing and of other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
1. Amendments to the Note.
(a) Effective January
1, 2016, the Base Interest Rate shall be increased to five percent (5%) per annum.
(b) Section A.1(b)
of the Note is hereby deleted in its entirety and the following is substituted in lieu thereof:
| | (b) Beginning on July 1, 2013 (with the first payment due on such date) (the
“Initial Principal Payment Date”) until January 1, 2015, the principal amount due under this Note shall be payable
by Maker in equal quarterly installments of Twenty Five Thousand and 00/100 Dollars ($25,000.00) each. Each quarterly installment
will be due on the first date of each quarterly period (April 1, July 1, October 1, January 1) for the period beginning on the
Initial Principal Payment Date and ending on January 1, 2015. Beginning February 1, 2015 until July 1, 2015, the principal amount
due under this Note shall be payable by Maker in equal monthly installments of Twenty Five Thousand and 00/100 Dollars ($25,000.00)
each payable on the first date of each month and ending on July 1, 2015. Beginning January 1, 2016 until February 1, 2017, the
principal amount due under this Note shall be payable by Maker in equal monthly installments of Twenty-Five Thousand and 00/100
Dollars ($25,000.00) each payable on the first date of each month and ending on February 1, 2017. In addition to these installments,
Maker will make additional installment payments of principal of (A) One Hundred Thousand and 00/100 Dollars ($100,000.00) on or
before January 3, 2014, (B) Twenty Five Thousand and 00/100 Dollars ($25,000) on or before October 1, 2015, (C) One Hundred Thousand
and 00/100 Dollars ($100,000.00) on or before March 1, 2017, and (D) Nine Hundred Thousand and 00/100 Dollars ($900,000.00) on
May 21, 2013. All outstanding principal and accrued interest thereon not sooner paid shall be immediately due and payable on July
1, 2017 (the “Maturity Date”). |
2. Outstanding Balance.
The aggregate outstanding principal balance under the Note is Five Hundred Fifty Thousand and 00/100 Dollars ($550,000.00) as of
the date of this Amendment.
3. Payment of Fees.
Maker shall reimburse Holder for up to One Thousand and 00/100 Dollars ($1,000.00) of the reasonable legal fees incurred by Holder
in connection with the negotiation, execution, and delivery of this Amendment.
4. Effect of Amendment.
Except as otherwise expressly provided herein, all provisions of the Note shall remain in full force and effect. This Amendment
and the Note contain the entire understanding of the Parties with respect to the subject matter hereof and thereof, and supersede
all prior oral or written communications, agreements and understandings between the Parties with respect to the subject matter
hereof and thereof. This Amendment is intended to modify the provisions of the Note; in the event that there is a conflict between
the terms of this Amendment and the Note, the Parties intend that the provisions of this Amendment should govern their respective
rights and obligations.
5. Miscellaneous.
The Explanatory Statements set forth above form a material basis for this Amendment and are expressly incorporated herein and made
a part hereof. All capitalized terms not otherwise defined in this Amendment shall have the meanings assigned to them in the Note.
All questions concerning the construction, validity, and interpretation of this Amendment and the performance of the obligations
imposed by this Amendment will be governed by the laws of the State governing the Note, without reference to any conflict of laws
rules that would apply the laws of another jurisdiction. This Amendment may be executed simultaneously in multiple counterparts,
each of which will be deemed to be an original copy of this Amendment and all of which together will be deemed to constitute one
and the same agreement. The exchange of copies of this Amendment and of signature pages by facsimile transmission or e-mail delivery
of a .pdf format data file shall constitute effective execution and delivery of this Amendment as to the Parties and may be used
in lieu of the original Amendment and signature pages thereof for all purposes.
IN WITNESS WHEREOF,
the Parties have executed this Amendment as of the day and year first written above.
MAKER: |
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HOLDER: |
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TSS, INC. |
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By: |
/s/ Anthony Angelini |
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/s/ Gerard J. Gallagher |
Name: |
Anthony Angelini |
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Gerard J. Gallagher |
Title: |
President and Chief Executive Officer |
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Exhibit 99.2
WARRANT
THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER
APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER
THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION
SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
Warrant Certificate No.: 002
Original Issue Date: December 21, 2015
FOR VALUE RECEIVED, TSS, Inc., a Delaware
corporation (the “Company”), hereby certifies that Gerard J. Gallagher, or his 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 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 December 21, 2015.
“Person”
means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated
organization or government or department or agency thereof.
“Pink
OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation
system, including OTCQX, OTCQB and OTC Pink.
“Transaction” has the
meaning set forth in Section 4(b).
“Warrant”
means this 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 December 21, 2020, 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 100,000
Warrant Shares (subject to adjustment as provided herein) at a purchase price per share of $0.15 per share (the “Exercise
Price).
3.
Exercise of Warrant.
(a)
Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period,
for all or any part of the unexercised Warrant Shares, upon:
(i)
surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached
hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number
of Warrant Shares to be purchased) and executed; and
(ii)
payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).
(b)
Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of
the Holder as expressed in the Exercise Agreement, by the following methods:
(i)
by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer
of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;
(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.
(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.
(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) 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. This Section
4(b) shall similarly apply to successive Transactions.
(c)
Certificate as to Adjustments. Upon each adjustment of the Exercise Price or number of Warrant Shares, the Company
at its expense shall promptly compute such adjustment, and furnish Holder with a certificate signed by its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish
Holder a certificate setting forth the Exercise Price and number of Warrant Shares in effect upon the date thereof and the series
of adjustments leading to such Exercise Price and number of Warrant Shares.
5.
Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and
all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this
Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form
attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes required in connection with the making
of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant
shall promptly be cancelled, in each case, containing the same transfer restriction legend endorsed hereon.
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, and shall contain the same restrictive transfer legend endorsed hereon.
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”). The 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:
“THE SECURITIES
ISSUABLE HEREUNDER 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.
(b)
Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents,
as of the date hereof, to the Company by acceptance of this Warrant as follows:
(i)
The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities
Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account
and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares,
except pursuant to sales registered or exempted under the Securities Act.
(ii)
The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted
securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving
a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144
under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities
Act.
(iii)
The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and
has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the
investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial
condition of the Company.
9.
Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in
writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received
by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified
or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the
addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this
Section 9).
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: |
Gerard J. Gallagher
5 Tydings Road
Severna Park, Maryland 21146
Facsimile: (410) 423-7320
E-mail: ggallagher@totalsitesolutions.com |
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.
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.
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]
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,
/s/ Gerard J. Gallagher
Gerard J. Gallagher
TSS (QB) (USOTC:TSSI)
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