Exhibit 10.18

CONSENT, WAIVER AND FOURTEENTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT

THIS CONSENT, WAIVER AND FOURTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
(this “Amendment”) is entered into as of April 20, 2007 by and among TELOS
CORPORATION, a Maryland corporation (“Parent”), XACTA CORPORATION, a Delaware
corporation (“Xacta”; Parent and Xacta are referred to hereinafter each
individually as a “Borrower”, and individually and collectively, jointly and
severally, as the “Borrowers”), TELOS DELAWARE, INC., a Delaware corporation
(“Telos-Delaware”), UBIQUITY.COM, INC., a Delaware corporation (“Ubiquity”),
TELOS.COM, INC., a Delaware corporation (“Telos.com”), TELOS INTERNATIONAL
CORP., a Delaware corporation (“TIC”), TELOS INTERNATIONAL ASIA, INC., a
Delaware corporation (“TIA”), SECURE TRADE, INC., a Delaware corporation
(“STI”), KUWAIT INTERNATIONAL, INC., a Delaware corporation (“KII”), TELOS
INFORMATION SYSTEMS, INC., a Delaware corporation (“TIS”), TELOS FIELD
ENGINEERING, INC., a Delaware corporation (“TFE”), and TELOS FEDERAL SYSTEMS,
INC., a Delaware corporation (“TFS”; Telos-Delaware, Ubiquity, Telos.com, TIC,
TIA, STI, KII, TIS, TFE and TFS are referred to hereinafter each individually as
a “Credit Party” and collectively, jointly and severally, as the “Credit
Parties”), and WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital
Corporation), as agent (“Agent”) for the Lenders (defined below) and as a
Lender.

WHEREAS, Borrowers, Credit Parties, Agent and certain other financial
institutions from time to time party thereto (the “Lenders”) are parties to that
certain Loan and Security Agreement dated as of October 21, 2002 (as amended
from time to time, the “Loan Agreement”);

WHEREAS, the Companies (A) failed to deliver to Agent (x) the audited financial
statements for the fiscal year ended December 31, 2006 required by
Section 6.3(b) and (y) the Compliance Certificates for each of the months ended
January 31, 2007 and February 28, 2007 required by Section 6.3(a), which
resulted in Events of Default under Section 8.2 of the Loan Agreement and
(B) failed to have the minimum Sales for each of the 5 week periods ending
June 2, 2006, June 9, 2006 and June 16, 2006 as required by Section 7.20(a)(iii)
of the Loan Agreement, which resulted in Events of Default under Section 8.2 of
the Loan Agreement (all of the foregoing, collectively, the “Existing
Defaults”); and

WHEREAS, Borrowers have notified Agent that Parent desires to form a new
Subsidiary (“New Subsidiary”) and contribute the assets described on Exhibit A
hereto relating to its identity management business to the New Subsidiary in
exchange for 99.999% of the membership interests of the New Subsidiary, as set
forth in greater detail in the Contribution Agreement attached hereto as Exhibit
B (“Contribution Agreement”);

WHEREAS, Parent further desires to sell 39.999% of its membership interest in
New Subsidiary to Hoya ID Fund A, LLC, a California limited liability company
(“Investor LLC”) for an aggregate purchase price of $6,000,000 (the “Sale of
Interests”) pursuant to the Membership Interest Purchase & Assignment Agreement
attached hereto as Exhibit C (the “Purchase Agreement”);

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WHEREAS, in connection with the Sale of Interests, the New Subsidiary desires to
adopt the Amended and Restated Operating Agreement attached hereto as Exhibit D
(the “Operating Agreement”);

WHEREAS, absent the prior written consent of Agent and the undersigned Lenders,
(i) the formation of New Subsidiary and contribution of assets to New Subsidiary
pursuant to the Contribution Agreement, (ii) the consummation of the Sale of
Interests and (iii) the adoption of the Operating Agreement (collectively, the
transactions described in clauses (i), (ii) and (iii) above, the “Joint Venture
Transaction”) would constitute a breach of Sections 7.4, 7.5 and 7.13 of the
Loan Agreement, constituting separate Events of Default pursuant to
Section 8.2(c) of the Loan Agreement, and Borrowers have requested that Agent
and the Lenders consent to the consummation thereof so as to avoid any such
Events of Default;

WHEREAS, subject to the terms and conditions contained herein, Borrowers, Credit
Parties, Agent and Lenders have agreed to waive the Existing Defaults, consent
to the Joint Venture Transaction and amend the Loan Agreement in certain
respects.

NOW THEREFORE, in consideration of the premises and mutual agreements herein
contained, the parties hereto agree as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Loan Agreement.

2. Waiver. Subject to the satisfaction of the conditions set forth in Section 6
hereof, Agent and the undersigned Lenders hereby waive the Existing Defaults.
The foregoing waiver shall not constitute a waiver of any other Event of Default
that may exist, or a waiver of any future Event of Default that may occur.

3. Consent. Subject to the satisfaction of the conditions set forth in Section 6
hereof, Agent and the undersigned Lenders hereby consent to the Joint Venture
Transaction as such transaction is described in the Contribution Agreement,
Purchase Agreement and Operating Agreement. Except as expressly set forth in
this Section 3, the foregoing consent shall not constitute a consent to any
transaction other than the Joint Venture Transaction or a waiver of any Event of
Default that may arise from any such transaction or the Joint Venture
Transaction.

4. Amendments to Loan Agreement. Subject to the satisfaction of the conditions
set forth in Section 6 hereof, the Loan Agreement is amended in the following
respects:

(a) The definition of “Availability Block” as set forth in Section 1.1 of the
Loan Agreement is amended and restated in its entirety, as follows:

“Availability Block” means an amount equal to $500,000; provided, that
Availability Block shall mean an amount equal to $0 for the period from
October 27, 2006 through and including April 30, 2007.

 

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(b) The definition of “EBITDA” as set forth in Section 1.1 of the Loan Agreement
is amended and restated in its entirety, as follows:

“EBITDA” means, with respect to any fiscal period, Parent’s and its
Subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains,
plus non-cash extraordinary losses, plus interest expense, income taxes, and
depreciation and amortization for such period, as determined in accordance with
GAAP. Notwithstanding anything herein to the contrary, for purposes of the
determination of EBITDA, TIMS LLC shall not be deemed to be a Subsidiary of
Parent.

(c) The definition of “Permitted Investments” as set forth in Section 1.1 of the
Loan Agreement is amended and restated in its entirety, as follows:

“Permitted Investments” means (a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) investments by any Borrower in any other Borrower or any Credit
Party provided that if any such investment is in the form of Indebtedness, such
Indebtedness investment shall be subject to the terms and conditions of the
Intercompany Subordination Agreement and provided, further, that Borrowers may
not invest more than $50,000 in the aggregate in the Credit Parties and then
only so long as the proceeds of such investments are used to facilitate the
dissolution of such Credit Parties and (e) investments by Parent of up to
$1,000,000 in the aggregate in TIMS LLC provided, that investments pursuant to
this clause (e) may only be made (i) during the period on or prior to October
20, 2007 and (ii) if Excess Availability after giving effect to such investment
is equal to or greater than $1,000,000.

(d) The following defined term is hereby added in Section 1.1 of the Loan
Agreement in alphabetical order therein:

“TIMS LLC” means Telos Identity Management Solutions, LLC (d/b/a XACTA Identity
Management Solutions), a Delaware limited liability company.

(e) Section 7.20(a)(i) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

(i) Minimum EBITDA. EBITDA, measured on a fiscal month-end basis, for each
period set forth below, of not less than the required amount set forth in the
following table for the applicable period set forth opposite thereto;

 

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Applicable Amount

  

Applicable Period

$(307,767)    For the 1 month period ending January 31, 2007 $(295,624)    For
the 2 month period ending February 28, 2007 $(2,827,784)    For the 3 month
period ending March 31, 2007 $(5,031,612)    For the 4 month period ending April
30, 2007 $(6,427,164)    For the 5 month period ending May 31, 2007 $(6,232,277)
   For the 6 month period ending June 30, 2007 $(5,773,289)    For the 7 month
period ending July 31, 2007 $(4,460,556)    For the 8 month period ending August
30, 2007 $(3,185,384)    For the 9 month period ending September 30, 2007
$(211,780)    For the 10 month period ending October 31, 2007 $1,741,025    For
the 11 month period ending November 30, 2007 $2,140,200    For the 12 month
period ending December 31, 2007 85% of EBITDA for such period as reflected in
the most recent Projections delivered to Agent pursuant to Section 6.3(c) and
approved by Required Lenders but in no event less than $2,140,200    For the 12
month period ending January 31, 2008 and the 12 month period ending on the last
day of each fiscal month thereafter

 

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5. Ratification; Other Agreements. This Amendment, subject to satisfaction of
the conditions set forth in Section 6 below, shall constitute a waiver and
amendment to the Loan Agreement and all of the Loan Documents as appropriate to
express the agreements contained herein. Except as specifically set forth
herein, the Loan Agreement and the Loan Documents shall remain unchanged and in
full force and effect in accordance with their original terms. Notwithstanding
anything in the Loan Agreement or any other Loan Document to the contrary, none
of the Borrowers nor any other Credit Party may make any Investment, or transfer
funds or property to, or enter into any transaction with, Telos Identity
Management Solutions, LLC (d/b/a XACTA Identity Management Solutions), a
Delaware limited liability company (“TIMS LLC”) except as expressly provided in
this Amendment. Any breach of the foregoing covenant shall constitute an Event
of Default.

6. Conditions to Effectiveness. This Amendment shall become effective as of the
date hereof upon the satisfaction of the following conditions precedent
(provided, that the amendments set forth in Section 4 shall become effective
retroactive to January 1, 2007 upon the satisfaction of such conditions
precedent):

(a) Each party hereto shall have executed and delivered this Amendment to Agent;

(b) Agent shall have received the fee described in Section 7 hereof;

(c) Borrowers shall have delivered to Agent fully executed copies of all
documents, agreements and instruments delivered in connection with the Joint
Venture Transaction;

(d) Borrowers shall have delivered to Agent such other documents, agreements and
instruments as may be requested or required by Agent in connection with this
Amendment, each in form and content acceptable to Agent;

(e) The aggregate cash consideration for the Sale of Interests shall be not less
than $6,000,000 and such cash consideration shall be wire transferred directly
to Agent for application to the Obligations in accordance with the terms of the
Loan Agreement;

(f) No Default or Event of Default other than the Existing Defaults shall have
occurred and be continuing on the date hereof or as of the date of the
effectiveness of this Amendment; and

(g) All proceedings taken in connection with the transactions contemplated by
this Amendment and all documents, instruments and other legal matters incident
thereto shall be satisfactory to Agent and its legal counsel.

7. Amendment Fee. To induce Agent and Lenders to enter into this Amendment,
Borrowers shall pay to Agent, for the benefit of Lenders, a non-refundable
additional amendment fee equal to $150,000, which shall be due and payable on
the date hereof.

 

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8. Covenants. Companies agree to deliver to Agent, on or before April 30, 2007:

(a) the audited financial statements for the fiscal year ended December 31, 2006
required by Section 6.3(b) of the Loan Agreement; and

(b) a fully executed pledge agreement, in form and substance satisfactory to
Agent, pursuant to which Parent shall have pledged and granted to Agent, for its
benefit and the benefit of Lenders, a security interest in all of its membership
interests in the New Subsidiary.

Failure to deliver to Agent the items set forth in (a) and (b) above on or prior
to April 30, 2007 shall constitute an Event of Default.

9. Miscellaneous.

(a) Warranties and Absence of Defaults. To induce Agent and Lenders to enter
into this Amendment, each Company hereby represents and warrants to Agent and
Lenders that:

(i) The execution, delivery and performance by it of this Amendment and each of
the other agreements, instruments and documents contemplated hereby are within
its corporate power, have been duly authorized by all necessary corporate
action, have received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any provision of
law applicable to it, its articles of incorporation and by-laws, any order,
judgment or decree of any court or governmental agency, or any agreement,
instrument or document binding upon it or any of its property;

(ii) Each of the Loan Agreement and the other Loan Documents, as amended by this
Amendment, are the legal, valid and binding obligation of it enforceable against
it in accordance with its terms, except as the enforcement thereof may be
subject to (A) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditor’s rights
generally, and (B) general principles of equity;

(iii) The representations and warranties contained in the Loan Agreement and the
other Loan Documents are true and accurate as of the date hereof with the same
force and effect as if such had been made on and as of the date hereof; and

(iv) It has performed all of its obligations under the Loan Agreement and the
Loan Documents to be performed by it on or before the date hereof and as of the
date hereof, it is in compliance with all applicable terms and provisions of the
Loan Agreement and each of the Loan Documents to be observed and performed by it
and no event of default or other event which upon notice or lapse of time or
both would constitute an event of default has occurred.

 

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(b) Expenses. Companies, jointly and severally, agree to pay on demand all costs
and expenses of Agent (including the reasonable fees and expenses of outside
counsel for Agent) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Companies agree, jointly and severally, to
pay, and save Agent harmless from all liability for, any stamp or other taxes
which may be payable in connection with the execution or delivery of this
Amendment or the Loan Agreement, as amended hereby, and the execution and
delivery of any instruments or documents provided for herein or delivered or to
be delivered hereunder or in connection herewith. All obligations provided
herein shall survive any termination of the Loan Agreement as amended hereby.

(c) Governing Law. This Amendment shall be a contract made under and governed by
the internal laws of the State of Illinois.

(d) Counterparts. This Amendment may be executed in any number of counterparts,
and by the parties hereto on the same or separate counterparts, and each such
counterpart, when executed and delivered, shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Amendment.

10. Release.

(a) In consideration of the agreements of Agent and Lenders contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, each Company, on behalf of itself and its successors,
assigns, and other legal representatives, hereby absolutely, unconditionally and
irrevocably releases, remises and forever discharges Agent and Lenders, and
their successors and assigns, and their present and former shareholders,
affiliates, subsidiaries, divisions, predecessors, directors, officers,
attorneys, employees, agents and other representatives (Agent, each Lender and
all such other Persons being hereinafter referred to collectively as the
“Releasees” and individually as a “Releasee”), of and from all demands, actions,
causes of action, suits, covenants, contracts, controversies, agreements,
promises, sums of money, accounts, bills, reckonings, damages and any and all
other claims, counterclaims, defenses, rights of set-off, demands and
liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of
every name and nature, known or unknown, suspected or unsuspected, both at law
and in equity, which such Company or any of its successors, assigns, or other
legal representatives may now or hereafter own, hold, have or claim to have
against the Releasees or any of them for, upon, or by reason of any
circumstance, action, cause or thing whatsoever which arises at any time on or
prior to the day and date of this Amendment, including, without limitation, for
or on account of, or in relation to, or in any way in connection with any of the
Loan Agreement, or any of the other Loan Documents or transactions thereunder or
related thereto.

(b) Each Company understands, acknowledges and agrees that the release set forth
above may be pleaded as a full and complete defense and may be used as a basis
for an injunction against any action, suit or other proceeding which may be
instituted, prosecuted or attempted in breach of the provisions of such release.

 

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(c) Each Company agrees that no fact, event, circumstance, evidence or
transaction which could now be asserted or which may hereafter be discovered
shall affect in any manner the final, absolute and unconditional nature of the
release set forth above.

[signature pages follow]

 

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

 

BORROWERS: TELOS CORPORATION, a Maryland corporation By  

/s/ Michael P. Flaherty

Title  

 

XACTA CORPORATION,

a Delaware corporation

By  

/s/ Michael P. Flaherty

Title  

 

CREDIT PARTIES:

TELOS DELAWARE, INC.,

a Delaware corporation

By  

/s/ Michael P. Flaherty

Title  

 

UBIQUITY.COM, INC.,

a Delaware corporation

By  

/s/ Michael P. Flaherty

Title  

 

Signature Page to Waiver and Fourteenth Amendment to Loan and Security Agreement

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TELOS.COM, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

TELOS INTERNATIONAL CORP., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

TELOS INTERNATIONAL ASIA, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

SECURE TRADE, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

KUWAIT INTERNATIONAL, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

Signature Page to Waiver and Fourteenth Amendment to Loan and Security Agreement

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TELOS INFORMATION SYSTEMS, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

TELOS FIELD ENGINEERING, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

TELOS FEDERAL SYSTEMS, INC., a Delaware corporation By  

/s/ Michael P. Flaherty

Title  

 

AGENT AND LENDER: WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital
Corporation) By  

/s/ David Sanchez

Title   V.P.

Signature Page to Waiver and Fourteenth Amendment to Loan and Security Agreement