Document:

Exhibit 10.36

WAIVER AND TWELFTH AMENDMENT TO

 SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS WAIVER AND TWELFTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment") is entered into as of March 31, 2015, by and among TELOS CORPORATION, a Maryland corporation ("Telos"), XACTA CORPORATION, a Delaware corporation ("Xacta"; Telos and Xacta are each a "Borrower" and collectively, the "Borrowers"), UBIQUITY.COM, INC., a Delaware corporation ("Ubiquity"), TELOWORKS, INC., a Delaware corporation ("Teloworks"; Ubiquity and Teloworks are each, a "Credit Party" and collectively, the "Credit Parties"; the Credit Parties and the Borrowers are each, a "Company" and collectively, the "Companies"), and WELLS FARGO CAPITAL FINANCE, LLC, (successor by merger to Wells Fargo Capital Finance, Inc., formerly known as Wells Fargo Foothill, Inc.), 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 Second Amended and Restated Loan and Security Agreement dated as of May 17th, 2010, (as amended, restated or otherwise modified from time to time, the "Loan Agreement");

WHEREAS, Borrowers and Credit Parties have notified Agent that an Event of Default exists under Section 8.2 of the Loan Agreement due to the creation of certain Liens in favor of Key Government Finance, Inc. on Telos' assets as evidenced by the Key Government Finance Filings (as defined in Section 6(b) below) in violation of Section 7.2 of the Loan Agreement (such Event of Default, the "Existing Default");

WHEEREAS, Borrowers and Credit Parties have requested that Agent and Lenders waive the Existing Default, and Agent and Lenders have agreed to waive the Existing Default subject to the terms and conditions contained herein; and

WHEREAS, subject to the terms and conditions contained herein, Agent, Required Lenders and Borrowers have agreed to amend the Loan Agreement in certain respects, including in order to extend the Maturity Date from November 13, 2015 to April 1, 2016;

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 5 hereof, and in reliance upon the representations and warranties set forth in Section 7(a) hereof, Agent and Lenders hereby waive the Existing Default.  In addition, the parties hereto agree that no Default or Event of Default shall be deemed to have been in existence prior to the date of this Amendment as a result of the existence of the Liens in favor of Key Government Finance, Inc. evidenced by the Key Government Finance Filings (provided that an immediate Event of Default shall exist if the post-closing covenant with respect thereto set forth in Section 6(b) below is not satisfied by the deadline set forth in Section 6(b)).  Agent's and Lenders' waiver of the Existing Default shall not be deemed to be a waiver of any other existing or hereafter arising Defaults or Events of Default or any other deviation from the express terms of the Loan Agreement or any other Loan Document.  This is a limited waiver and shall not be deemed to constitute a consent or waiver of any other term, provision or condition of the Loan Agreement or any other Loan Document, as applicable, or to prejudice any right or remedy that Agent or any Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Loan Document.

 

3.            Amendments to Loan Agreement.  Subject to the satisfaction of the conditions set forth in Section 4 hereof, and in reliance upon the representations and warranties set forth in Section 7(a) hereof, the Loan Agreement is hereby amended as follows:

(a)            Each of the defined terms set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows:

"Base Rate Margin" has the meaning set forth in the definition of Applicable Margin.

"LIBOR Rate Margin" has the meaning set forth in the definition of Applicable Margin.

"Maximum Revolver Amount" means $20,000,000.

(b)            Each of the following defined terms is hereby added to Section 1.1 of the Loan Agreement in the appropriate alphabetical order:

"Applicable Margin"  means, as of any date of determination and with respect to Base Rate Loans or LIBOR Rate Loans, as applicable, the applicable margin set forth in the following table that corresponds to the most recent EBITDA calculation for an applicable period set forth below contained in a Compliance Certificate delivered to Agent pursuant to Section 6.3(a)(iii) of the Loan Agreement (the "EBITDA Calculation"); provided, that (x) for the period from the Twelfth Amendment Closing Date through the date Agent receives the EBITDA Calculation with respect to the period ending June 30, 2015, the Applicable Margin shall be set at the margin in the row styled "Tier I", and (y) effective April 1, 2016, the Applicable Margin shall be set at the margin in the row styled "Tier I":

	
Tier

	
Applicable Period

	
EBITDA

	
Applicable Margin Relative to Base Rate Loans (the "Base Rate Margin")

	
Applicable Margin Relative to LIBOR Rate Loans (the "LIBOR Rate Margin")

	
I

	
For the six month period ending on June 30, 2015

	
< ($3,309,000)

	
2.25%

	
5.00%

	
For the nine month period ending on September 30, 2015

	
< $427,000

	
For the twelve month period ending on December 31, 2015

	
< ($1,455,000)

	
II

	
For the six month period ending on June 30, 2015

	
≥ ($3,309,000)

	
1.00%

	
3.75%

	
For the nine month period ending on September 30, 2015

	
≥ $427,000

	
For the twelve month period ending on December 31, 2015

	
≥ ($1,455,000)

Except as set forth in the preceding paragraph, the Applicable Margin shall be based upon the most recent EBITDA Calculation, which will be calculated as of the end of the fiscal quarters ending June 30, 2015, September 30, 2015, and December 31, 2015.  Except as set forth in the preceding paragraph, the Applicable Margin shall be re-determined quarterly on the first Business Day of the month following the date of delivery to Agent of a Compliance Certificate containing an EBITDA Calculation pursuant to Section 6.3(a)(iii) of the Loan Agreement; provided, that if Companies fail to provide such certification when such certification is due, Agent may elect to set the Applicable Margin at the margin in the row styled "Tier I" as of the date on which the certification was required to be delivered until the date on which such certification is delivered (on which date (but not retroactively), without constituting a waiver of any Default or Event of Default occasioned by the failure to timely deliver such certification, the Applicable Margin shall be set at the margin based upon the calculation disclosed by such certification).  If at any time an Event of Default occurs, Agent may elect to set the Applicable Margin at the margin in the row styled "Tier I" as of the date on which such Event of Default occurs (or such later date as Agent may elect).  In the event that, during the term of this Loan Agreement, the information regarding EBITDA contained in any Compliance Certificate delivered pursuant to Section 6.3 of the Loan Agreement is shown to be inaccurate, and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for a period (an "Applicable Period") than the Applicable Margin actually applied for such Applicable Period, then (i) Companies shall immediately deliver to Agent a correct certificate for such Applicable Period, (ii) the Applicable Margin shall be determined as if the correct Applicable Margin (as set forth in the table above) were applicable for such Applicable Period, and (iii) Borrowers shall promptly deliver to Agent full payment in respect of the accrued additional interest as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by Agent to the affected Obligations.

"Porter Subordinated Debt" means the Indebtedness evidenced by the Porter Subordinated Debt Documents.

"Porter Subordinated Debt Documents" means collectively, that certain Subordinated Loan Agreement dated as of the Twelfth Amendment Closing Date, by and between Telos and JP Charitable Foundation, that certain Subordinated Loan Agreement dated as of the Twelfth Amendment Closing Date, by and between Telos and Porter Foundation Switzerland, that certain Subordinated Promissory Note dated as of the Twelfth Amendment Closing Date issued by Telos to JP Charitable Foundation, that certain Subordinated Promissory Note dated as of the Twelfth Amendment Closing Date issued by Telos to Porter Foundation Switzerland, and the Porter Subordination Agreements, together with any other agreements, instruments or other documents related thereto or executed in connection therewith.

"Porter Subordination Agreements" means (i) that certain Subordination Agreement dated as of the Twelfth Amendment Closing Date by and among Agent, JP Charitable Foundation and Companies, and (ii) with that certain Subordination Agreement dated as of the Twelfth Amendment Closing Date by and among Agent, Porter Foundation Switzerland and Companies.

"Twelfth Amendment Closing Date" means March 31, 2015.

(c)            The second sentence of Section 2.2 of the Loan Agreement is hereby amended and restated in its entirety as follows:

The principal of the Term Loan shall be repaid in consecutive quarterly installments of $350,000 each on the first day of each calendar quarter (commencing April 1, 2015), with a final installment of the unpaid principal amount of the Term Loan on the Maturity Date.

(d)            Clause (ii) of Section 2.12(a) of the Loan Agreement is hereby amended by replacing the reference therein to "$5,000,000" with a reference to "$1,000,000".

(e)            Section 3.4 of the Loan Agreement is hereby amended by replacing the reference therein to "for a term ending on November 13, 2015 (the "Maturity Date")" with a reference to "for a term ending April 1, 2016 ("the "Maturity Date")".

(f)            Section 5 of the Loan Agreement is hereby amended to add a new Section 5.26 as follows:

5.26.Porter Subordinated Debt.

Companies have delivered to Agent true and correct copies of each of the Porter Subordinated Debt Documents.  No party thereto is in default in the performance or compliance with any provisions thereof and the Porter Subordinated Debt Documents comply in all material respects with all applicable laws.  All Indebtedness under the Porter Subordinated Debt Documents is subordinate to the Obligations pursuant to the applicable Porter Subordination Agreement and is subject to the terms and conditions of the applicable Porter Subordination Agreement.  The Porter Subordinated Debt Documents are in full force and effect as of the Twelfth Amendment Closing Date and have not been terminated, rescinded or withdrawn as of such date.  The execution, delivery and performance of the Porter Subordinated Debt Documents do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority, other than consents or approvals that have been obtained and that are still in full force and effect.  None of the representations or warranties in any Porter Subordinated Debt Document contains any untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading.  The Porter Subordinated Debt is not secured by any assets of Parent or any other Person or guaranteed by any Person.

(g)            Section 6.3(a) of the Loan Agreement is hereby amended by replacing the reference therein to "one of the first 3 fiscal quarters" with a reference to "a fiscal quarter".

(h)            Clause (iii) of Section 6.3(a) of the Loan Agreement is hereby amended by deleting the reference therein to "; provided that (A) subject to clause (B) below, the Compliance Certificate to be delivered pursuant to this Section 6.3(a)(iii) with respect to the month ended December 31, 2014 shall not be required to be delivered until March 31, 2015 and (B) the Compliance Certificate to be delivered with respect to the month ended December 31, 2014 shall not be required to be delivered so long as Administrative Borrower and Required Lenders have agreed to amend Section 7.20 in a manner satisfactory to Required Lenders on or prior to March 31, 2015".

(i)            Section 6.3(a) of the Loan Agreement is hereby amended to add a new clause (iv) at the end thereof as follows:

(iv)a report of TTM Recurring Revenue, by customer contract or product (as applicable) and delineated by month in form and substnace satisfactory to Agent.

(j)            Clause (f) of Section 6.3 of the Loan Agreement is hereby amended by deleting the reference therein to "and" at the end thereof.

(k)            Clause (g) of Section 6.3 of the Loan Agreement is hereby amended and restated and restated in its entirety as follows:

(g)not later than the third (3rd) Business Day of each calendar week, a weekly forecast of Liquidity (as defined in Section 7.20(c)), in form and substance satisfactory to Agent,

(l)            Section 6.3 of the Loan Agreement is hereby amended to add new clauses (h) and (i) at the end thereof as follows:

(h)as soon as available, but in any event within 45 days after the end of each fiscal quarter during each of Parent's fiscal years, software maintenance revenue waterfall report, in form and substance satisfactory to Agent, and

(i)upon the request of Agent, any other report reasonably requested relating to the financial condition of Companies.

(m)            Section 7.1 of the Loan Agreement is hereby amended to add a new clause (e) at the end thereof as follows:

(e)Unsecured Indebtedness in the initial aggregate principal amount of $2,500,000, and in an aggregate principal amount of up to $5,000,000 (if the remainder is funded on or before May 15, 2015), of Telos (and not of any other Company) to JP Charitable Foundation and Porter Foundation Switzerland, severally, so long as such Indebtedness is subject to one of the Porter Subordination Agreements.

(n)            Section 7.8 of the Loan Agreement is hereby amended to add new clauses (e) and (f) at the end thereof as follows:

(e)Make any payment on account of Indebtedness that has been contractually subordinated in right of payment if such payment is not permitted at such time under the subordination terms and conditions (including, without limitation, any payment on account of the Porter Subordinated Debt) if such payment is not expressly permitted at such time under the terms and conditions of the Porter Subordination Agreements.

(f)Directly or indirectly amend, modify, alter, increase or change any of the terms and conditions of any Porter Subordinated Debt Document.

(o)            Sections 7.20(a) and 7.20(b) of the Loan Agreement are hereby amended and restated in their entirety as follows:

(a)Fail to maintain:

	
(i)

	
Minimum EBITDA.  EBITDA, measured on a fiscal quarter-end basis, for each period set forth below, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:

	
Applicable Amount

	 	
Applicable Period

	
$ 

	
(2,125,000

	
)

	
For the three month period ending on

March 31, 2015

	
$ 

	
(4,059,000

	
)

	
For the six month period ending on

June 30, 2015

	
$ 

	
(323,000

	
)

	
For the nine month period ending on

September 30, 2015

	
$ 

	
(2,205,000

	
)

	
For the twelve month period ending on December 31, 2015, and the twelve month period ending on the last day of each fiscal quarter thereafter

	
$

	
195,000

	 	
For the twelve month period ending on March 31, 2016, and the twelve month period ending on the last day of each fiscal quarter thereafter

; and

	
(ii)

	
Minimum Recurring Revenue.  TTM Recurring Revenue measured on a fiscal quarter-end basis for each fiscal quarter ending from and after the fiscal quarter ending March 31, 2015, of at least $4,500,000.

(b)Make:

	
(i)

	
Capital Expenditures.  Capital expenditures in any fiscal year of Parent in excess of $1,500,000.

(p)            Section 7.20(c) of the Loan Agreement is hereby amended and restated in its entirety, effective as of April 3, 2015, as follows:

(c)Fail to maintain:

(i)Liquidity.  Excess Availability (as of any date of determination, "Liquidity"), of least $1,250,000 at any time; provided that if Liquidity shall on any Business Day be less than $1,250,000 when Liquidity was at least $1,250,000 on the preceding Business Day (each such event, a "Liquidity Event"), with respect to the first two Liquidity Events occurring after April 3, 2015 (it being understood that if a third Liquidity Event occurs after April 3, 2015, an immediate Event of Default which may not be cured shall exist) any Event of Default arising as a result of a breach of this Section 7.20(c)(i) shall be deemed cured, so long as Liquidity at no time is less than $1,050,000 (it being understood that if Liquidity is less than $1,050,000 at any time, an immediate Event of Default which may not be cured shall exist), in the event that Liquidity thereafter increases to no less than $1,250,000 within 2 Business Days following the date of the occurrence of such Liquidity Event.(q)            Section 8.9 of the Loan Agreement is hereby amended and restated in its entirety as follows:

 

8.9   If there is (a) a default in any material agreement to which any Company or any of its Subsidiaries is a party and such default (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of the applicable Company's or its Subsidiaries' obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein, or (b) a default under the Porter Subordinated Debt Documents;

(r)            Section 8 of the Loan Agreement is hereby amended to add a new Section 8.16 as follows:

 

8.16   If any Company or any holder of the Porter Subordinated Debt or the Porter Subordinated Debt Documents breaches any provision of any Porter Subordination Agreement.

(s)            Schedule C-1 of the Loan Agreement is hereby amended and restated in its entirety as set forth on Exhibit A attached hereto.

(t)            Schedule 5.20 of the Loan Agreement is hereby amended and restated in its entirety as set forth on Exhibit B attached hereto.

 

4.            Ratification.  This Amendment, subject to satisfaction of the conditions set forth in Section 4 hereof, shall constitute an 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.

 

5.            Conditions to Effectiveness.  This Amendment shall become effective upon the satisfaction of the following conditions precedent:

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

(b)            Companies shall have delivered to Agent the documents set forth on the closing checklist attached as Exhibit C hereto, and 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;

(c)            Agent shall have received $2,500,000 constituting proceeds of the Porter Subordinated Debt funded on the date hereof in a Cash Management Account at Wells Fargo, which proceeds shall be promptly applied by Agent to the outstanding amount of Advances (such application of proceeds will not operate to effect a reduction in the Revolver Commitment or Maximum Revolver Amount);

(d)            No Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of the effectiveness of this Amendment;

(e)            Agent shall have received all fees and expenses due under the Loan Documents as of the date hereof (which condition may be satisfied by Agent charging such amounts to the Borrowers' loan account as an Advance on the date hereof); and

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

 

6.            Post-Effective Date Covenants.

(a)            Telos covenants and agrees that it shall cause all proceeds of the Porter Subordinated Debt funded after the date hereof to be deposited into a Cash Management Account at Wells Fargo and such proceeds shall be applied to the outstanding amount of Advances (such application of proceeds will not operate to effect a reduction in the Revolver Commitment or Maximum Revolver Amount).

(b)            Within 21 days of closing, Telos covenants and agrees that it shall deliver copies of filed UCC-3 terminations of the following financing statements currently filed in favor of Key Government Finance, Inc., as secured party, in the state of Maryland:  filing numbers 0000000181412385 filed January 14, 2011 (which was amended by UCC financing statement 1000362002913657 filed February 22, 2012) and 0000000181418923 filed April 22, 2011 (such financing statements, collectively, are the "Key Government Finance Filings").  Each Company acknowledges and agrees that the failure of Telos to comply with the covenant in this Section 6(b) shall constitute an immediate Event of Default.

 

7.            Reaffirmation and Confirmation.  Each Company hereby ratifies, affirms, acknowledges and agrees that the Loan Agreement and the other Loan Documents represent the valid, enforceable and collectible obligations of such Company, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to the Loan Agreement or any other Loan Document.  Each Company hereby agrees that this Amendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations.  The Liens and rights securing payment of the Obligations are hereby ratified and confirmed by each Company in all respects.

 

8.            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, the Porter Subordinated Debt Documents 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 each Company party thereto 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, the Porter Subordinated Debt Documents 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;

	
(iv)

	
each Company has performed all of its obligations under the Loan Agreement, the Porter Subordinated Debt Documents and the other 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 Default (other than the Existing Default) has occurred; and

	
(v)

	
no  Account currently reported by Borrowers as an Eligible Account, or otherwise included in the Borrowing Base, (i) consists of any amount owing to a Borrower that is subject to a Lien in favor of Key Government Finance, Inc. or (ii) was transferred to or is otherwise owned by Key Government Finance, Inc.

(b)            Expenses.  Each Company hereby agrees that Companies, jointly and severally, shall pay on demand all costs and expenses of Agent and each Lender (including the reasonable fees and expenses of outside counsel) 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, each Company hereby agrees that Companies, jointly and severally, shall 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.  Delivery of an executed counterpart of a signature page of this Amendment by facsimile or by electronic transmission of a portable document file (PDF) or similar file shall be effective as delivery of a manually executed counterpart of this Amendment.

 

9.            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 such Company's 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 the Loan Agreement, any of the Porter Subordinated Debt Documents or any of the other Loan Documents or transactions thereunder or related thereto.

(b)            Each Company hereby acknowledges and agrees that such 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.

(c)            Each Company hereby acknowledges and agrees that such 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]

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.

	
AGENT AND LENDERS:

 

	
WELLS FARGO CAPITAL FINANCE, LLC.

(successor by merger to Wells Fargo Capital Finance, Inc.) as Agent and as a Lender

 

	
By

	
/s/ Jordan E. Hilliard

	
Name

	 Jordan E. Hilliard
	
Title

	
Vice President

	 	 
	
BORROWERS:

	 	 
	
TELOS CORPORATION

	
A Maryland corporation

	 	 
	
By

	
/s/ Jefferson V. Wright

	
Name

	
Jefferson V. Wright

	
Title

	
EVP & General Counsel

	 	 
	
XACTA CORPORATION

	
A Delaware corporation

	 	 
	
By

	
/s/ Jefferson V. Wright

	
Name

	
Jefferson V. Wright

	
Title

	
EVP & General Counsel

	 	 
	
CREDIT PARTIES:

	 	 
	
UBIQUITY.COM, INC.

	
A Delaware corporation

	 	 
	
By

	
/s/ Jefferson V. Wright

	
Name

	
Jefferson V. Wright

	
Title

	
EVP & General Counsel

	 	 
	
TELOWORKS, INC.

	
A Delaware corporation

	 	 
	
By

	
/s/ David S. Easley

	
Name

	
David S. Easley

	
Title

	
President

EXHIBIT A

Schedule C-1

See attached.

Schedule C‐1

 Commitments

	
 

 

Lender

	 	

Revolver Commitment

	 	 	

Term Loan Commitment*

	 	 	

Total Commitment

	 
	
Wells Fargo Capital Finance, LLC

	 	
$

	
20,000,000

	 	 	
$

	
4,250,000

	
1 

	 	
$

	
20,000,000

	 
	
All Lenders

	 	
$

	
20,000,000

	 	 	
$

	
4,250,000

	
1 

	 	
$

	
20,000,000

	 

* The outstanding principal balance of the Term Loan shall reduce Availability on a dollar for dollar basis.

1 The commitment to fund the Term Loan expired upon the making of the Term Loan on the Closing Date and amounts repaid under the Term Loan may not be reborrowed; the amount listed reflects the amount of the Term Loan outstanding as of the Twelfth Amendment Closing Date.

EXHIBIT B

Schedule 5.20

See attached.

 

Schedule 5.20

Existing Indebtedness

See attached spreadsheet of lease commitments.

 

	
TELOS CORPORATION

	 	 	 	 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 		 	 		 	 		 
	
OFFICE LESSOR / SUBLESSOR

	
DESCRIPTION

	
CITY

	
STATE

	
START DATE

	
END DATE

	 	
2014

	 	 	
2015

	 	 	
2016

	 
	
3655 ALAMO PARK PLAZA, LLC (JACK AND DORA GLASER FAMILY TRUST)

	
3655 ALAMO STREET, SUITES # 300,301&303

	
SIMI VALLEY

	
CA

	
03/01/06

	
10/31/15

	 	 	
75,144.00

	 	 	 	
62,620.00

	 	 		 
	
PROGRESS PARTNERS LLC

	
8215 Madison Blvd Suite 130

	
MADISON

	
AL

	
01/01/10

	
12/31/15

	 	 	
15,156.00

	 	 	 	
15,156.00

	 	 		 
	
ST JOHN PROPERTIES, INC

	
6245 Guardian Gateway, Suit 118

	
ABERDEEN PROVING GR

	
MD

	
11/01/10

	
02/29/16

	 	 	
64,714.60

	 	 	 	
66,656.08

	 	 	 	
11,163.54

	 
	
LEIDOS(SAIC)

	
360 Comand View

	
COLORADO SPRINGS

	
CO

	
01/01/11

	
08/31/14

	 	 	
9,611.28

	 	 	 	
3,203.76

	 	 	 	 	 
	
OSTEOCARE, LLC

	
145 Wyckoff Road

	
EATONTOWN

	
NJ

	
04/01/11

	
07/31/16

	 	 	
187,149.88

	 	 	 	
189,807.64

	 	 	 	
111,625.50

	 
	
ARMAND PLACE LLC

	
2112 BIENVILLE BLVD #B-2

	
OCEAN SPRINGS

	
MS

	
08/01/11

	
08/31/14

	 	 	
20,400.00

	 	 	 	 	 	 	 	 	 
	
ST JOHN PROPERTIES/ Attn:MAPLE LAWN OFFICE III, LLC

	
8161  MAPLE LAWN BLVD  SUITE 201

	
FULTON

	
MD

	
05/01/13

	
01/31/24

	 	 	
244,338.80

	 	 	 	
251,669.00

	 	 	 	
259,219.08

	 
	
Metropolitan at Village at Leesburg

	
1500 Balch Drive SE #212

	
LEESBURG

	
VA

	
10/28/13

	
05/27/15

	 	 	
20,140.00

	 	 	 	
8,600.00

	 	 	 	 	 
	
TELOSCO

	
19886 ASHBURN ROAD

	
ASHBURN

	
VA

	
06/01/14

	
10/31/26

	 	 	
1,661,862.60

	 	 	 	
1,807,744.00

	 	 	 	
1,852,937.60

	 
	
TOTAL OFFICE LEASES

	 	 	 	 	     	 	
$

	
2,298,517

	 	 	
$

	
2,405,456

	 	 	
$

	
2,234,946

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
EQUIPMENT LESSOR

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Pitney Bowes Global Financial

	
DM400C Digital Postage Meter

	
ASHBURN

	
VA

	
Apr-12

	
Jul-17

	 	 	
1,236.00

	 	 	 	
1,236.00

	 	 	 	
1,236.00

	 
	
Wells Fargo Equipment Finance

	
Network Equipment Ashburn IT Dept

	
ASHBURN

	
VA

	
Dec-12

	
Nov-15

	 	 	
31,572.48

	 	 	 	
28,941.44

	 	 	 	 	 
	
Canon Financial Services Inc

	
Copiers Lease, Ashburn, NJ, MD

	
ASHBURN, NJ, MD

	
VA

	
Jul-13

	
Jun-18

	 	 	
28,004.28

	 	 	 	
28,004.28

	 	 	 	
28,004.28

	 
	
TOTAL EQUIPMENT LEASES

	 	 	 	 	     	 	
$

	
60,813

	 	 	
$

	
58,182

	 	 	
$

	
29,240

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL OFFICE & EQUIPMENT LEASES

	 	 	 	    	 	
$

	
2,359,330

	 	 	
$

	
2,463,638

	 	 	
$

	
2,264,186

	 

 

 

 

	
OFFICE LESSOR / SUBLESSOR

	
DESCRIPTION

	 	
2017

	 	 	
2018

	 	 	
2019

	 	 	
2021

	 	 	
2022

	 	 	
2023

	 
	
3655 ALAMO PARK PLAZA, LLC (JACK AND DORA GLASER FAMILY TRUST)

	
3655 ALAMO STREET, SUITES # 300,301&303

	 	 		 	 		 	 		 	 		 
	
PROGRESS PARTNERS LLC

	
8215 Madison Blvd Suite 130

	 		 	 		 	 		 	 		 	 		 	 		 
	
ST JOHN PROPERTIES, INC

	
6245 Guardian Gateway, Suit 118

	 		 	 		 	 		 	 		 	 		 	 		 
	
LEIDOS(SAIC)

	
360 Comand View

	 		 	 		 	 		 	 		 	 		 	 		 
	
OSTEOCARE, LLC

	
145 Wyckoff Road

	 		 	 		 	 		 	 		 	 		 	 		 
	
ARMAND PLACE LLC

	
2112 BIENVILLE BLVD #B-2

	 		 	 		 	 		 	 		 	 		 	 		 
	
ST JOHN PROPERTIES/ Attn:MAPLE LAWN OFFICE III, LLC

	
8161  MAPLE LAWN BLVD  SUITE 201

	 	 	
266,995.64

	 	 	 	
275,005.48

	 	 	 	
283,255.60

	 	 	 	
300,505.80

	 	 	 	
309,520.96

	 	 	 	
318,806.60

	 
	
Metropolitan at Village at Leesburg

	
1500 Balch Drive SE #212

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TELOSCO

	
19886 ASHBURN ROAD

	 	 	
1,899,261.04

	 	 	 	
1,946,742.58

	 	 	 	
1,995,411.13

	 	 	 	
2,096,428.82

	 	 	 	
2,148,839.52

	 	 	 	
2,202,560.49

	 
	
TOTAL OFFICE LEASES

	 	 	
$

	
2,166,257

	 	 	
$

	
2,221,748

	 	 	
$

	
2,278,667

	 	 	
$

	
2,396,935

	 	 	
$

	
2,458,360

	 	 	
$

	
2,521,367

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
EQUIPMENT LESSOR

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Pitney Bowes Global Financial

	
DM400C Digital Postage Meter

	 	 	
927.00

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Wells Fargo Equipment Finance

	
Network Equipment Ashburn IT Dept

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Canon Financial Services Inc

	
Copiers Lease, Ashburn, NJ, MD

	 	 	
28,004.28

	 	 	 	
14,002.14

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL EQUIPMENT LEASES

	 	 	
$

	
28,931

	 	 	
$

	
14,002

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
0

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL OFFICE & EQUIPMENT LEASES

	 	
$

	
2,195,188

	 	 	
$

	
2,235,750

	 	 	
$

	
2,278,667

	 	 	
$

	
2,396,935

	 	 	
$

	
2,458,360

	 	 	
$

	
2,521,367

	 

 

	 	 	 		 	 		 	 		 	 		 	 		 	 	
LEASE FILE

	 	 	
SQUARE

	 
	
OFFICE LESSOR / SUBLESSOR

	
DESCRIPTION

	 	
2024

	 	 	
2025

	 	 	
2026

	 	 	
2028

	 	 	
2029

	 	 	 	
#

	 	 	
FEET

	 
	
3655 ALAMO PARK PLAZA, LLC (JACK AND DORA GLASER FAMILY TRUST)

	
3655 ALAMO STREET, SUITES # 300,301&303

	 	 		 	 		 	 		 	 	 	 	 	 	 	
3,093

	 
	
PROGRESS PARTNERS LLC

	
8215 Madison Blvd Suite 130

	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
1,167

	 
	
ST JOHN PROPERTIES, INC

	
6245 Guardian Gateway, Suit 118

	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
2,768

	 
	
LEIDOS(SAIC)

	
360 Comand View

	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	 	 
	
OSTEOCARE, LLC

	
145 Wyckoff Road

	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
10,631

	 
	
ARMAND PLACE LLC

	
2112 BIENVILLE BLVD #B-2

	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	 	 
	
ST JOHN PROPERTIES/ Attn:MAPLE LAWN OFFICE III, LLC

	
8161  MAPLE LAWN BLVD  SUITE 201

	 	 	
26,827.68

	 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
7,224

	 
	
Metropolitan at Village at Leesburg

	
1500 Balch Drive SE #212

	 	 	 	 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	 	 
	
TELOSCO

	
19886 ASHBURN ROAD

	 	 	
2,257,624.50

	 	 	 	
2,314,065.16

	 	 	 	
2,371,916.78

	 	 	 	
2,491,995.05

	 	 	 	
1,048,991.75

	 	 	 	 	 	 	 	
191,700

	 
	
TOTAL OFFICE LEASES

	 	 	
$

	
2,284,452

	 	 	
$

	
2,314,065

	 	 	
$

	
2,371,917

	 	 	
$

	
2,491,995

	 	 	
$

	
1,048,992

	 	 	 	 	 	 	 	
3,093

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
EQUIPMENT LESSOR

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Pitney Bowes Global Financial

	
DM400C Digital Postage Meter

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Wells Fargo Equipment Finance

	
Network Equipment Ashburn IT Dept

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Canon Financial Services Inc

	
Copiers Lease, Ashburn, NJ, MD

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL EQUIPMENT LEASES

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
0

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL OFFICE & EQUIPMENT LEASES

	 	
$

	
2,284,452

	 	 	
$

	
2,314,065

	 	 	
$

	
2,371,917

	 	 	
$

	
2,491,995

	 	 	
$

	
1,048,992

	 	 	 	 	 	 	 	 	 

 

 

 

EXHIBIT C

Closing Checklist

See attached.

 

CLOSING CHECKLIST

Amendment and Extension to

Second Amended and Restated of Loan and Security Agreement by

Wells Fargo Capital Finance, LLC

to

 Telos Corporation and Xacta Corporation

Closing Date:  March 31, 2015

I.            Parties:

	
A.

	
Wells Fargo Capital Finance, LLC (successor by merger to Wells Fargo Capital Finance, Inc., formerly known as Wells Fargo Foothill, Inc.) ("WFCF"), individually and as Agent ("Agent")

One Boston Place, 18th Floor

Boston, Massachusetts  02108

Telephone:(617) 624-4438

Facsimile:(617) 523-1697

	
B.

	
Telos Corporation ("Telos")

Xacta Corporation ("Xacta"; together with Telos, "Borrowers")

19886 Ashburn Road

 Ashburn, Virginia  20147

	
C.

	
Ubiquity.com, Inc. ("Ubiquity")

Teloworks, Inc. ("Teloworks"; together with, Ubiquity, "Credit Parties")

19886 Ashburn Road

 Ashburn, Virginia  20147

II.            Counsel to Parties:

	
A.

	
WFCF:

Goldberg Kohn Ltd.

55 East Monroe Street

Suite 3300

Chicago, Illinois 60603

Telephone:(312) 201-4000

Facsimile:(312) 332-2196

	
B.

	
Borrowers and Credit Parties:

Helen Oh

Assistant General Counsel

Telos Corporation

19886 Ashburn Road

Ashburn, Virginia  20147

Telephone:(703) 726-2270

Facsimile:(703) 724-1468

III.            Closing documents:

		A.	Items pertaining to Borrowers and Credit Parties:

	
1.

	
Twelfth Amendment to Second Amended and Restated Loan and Security Agreement

	
2.

	
Reaffirmation of Loan Documents

	
i)

	
Amended and Restated Guarantee of Credit Parties

	
ii)

	
Collateral Assignment of Business Interruption Insurance

	
iii)

	
Cash Management Agreements

	
iv)

	
Intercompany Subordination Agreement

	
v)

	
Telos Trademark Mortgage

	
vi)

	
Telos Copyright Mortgage

	
vii)

	
Telos Patent Mortgage

	
viii)

	
Telos Stock Pledge Agreement

	
ix)

	
Xacta Trademark Mortgage

	
x)

	
Ubiquity Stock Pledge Agreement

	
3.

	
Supplemental Fee Letter

		B.	Items Pertaining to Telos:

	
4.

	
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Articles of Incorporation

	
5.

	
Certificate of good standing in its jurisdiction of organization

		C.	Items Pertaining to Xacta:

	
6.

	
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation

	
7.

	
Certificate of good standing in its jurisdiction of organization

		D.	Items Pertaining to Ubiquity:

	
8.

	
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation

	
9.

	
Certificate of good standing in its jurisdiction of organization

		E.	Items Pertaining to Teloworks:

	
10.

	
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation

	
11.

	
Certificate of good standing in its jurisdiction of organization

		F.	Items Pertaining to New Shareholder Subordinated Note

	
12.

	
Subordination Agreements

	
i)

	
Porter Foundation Switzerland

	
ii)

	
JP Charitable Foundation

	
13.

	
Subordinated Loan Agreements

	
i)

	
Porter Foundation Switzerland

	
ii)

	
JP Charitable Foundation

	
14.

	
Subordinated Promissory Notes (for up to $5,000,000, in the aggregate)

	
i)

	
Porter Foundation Switzerland

	
ii)

	
JP Charitable Foundation

		G.	Other Items:

	
15.

	
Opinion of counsel to Borrowers and Credit Parties

	
16.

	
Extensions to standby agreements from holders of 70% of private preferred stockExhibit 10.37

THIS SUBORDINATED LOAN AGREEMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT (THE "SUBORDINATION AGREEMENT") DATED AS OF MARCH 31, 2015 AMONG PORTER FOUNDATION SWITZERLAND, TELOS CORPORATION, XACTA CORPORATION, UBQUITY.COM, INC. AND TELOWORKS, INC. (COLLECTIVELY, THE "COMPANIES") AND WELLS FARGO CAPITAL FINANCE, LLC ("AGENT"), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY TELOS CORPORATION AND XACTA CORPORATION (AND GUARANTIED BY UBIQUITY.COM, INC. AND TELOWORKS, INC.) PURSUANT TO THAT CERTAIN SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT DATED AS OF MAY 17, 2010 AMONG THE COMPANIES, AGENT AND THE LENDERS FROM TIME TO TIME PARTY THERETO AND THE OTHER SENIOR DEBT DOCUMENTS (AS DEFINED IN THE SUBORDINATION AGREEMENT), AS SUCH CREDIT AGREEMENT AND OTHER SENIOR DEBT DOCUMENTS HAVE BEEN AND HEREAFTER MAY BE AMENDED, SUPPLEMENTED, RESTATED, AMENDED AND RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME AND TO INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER THOSE AGREEMENTS AS CONTEMPLATED BY THE SUBORDINATION AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

SUBORDINATED LOAN AGREEMENT

THIS SUBORDINATED LOAN AGREEMENT (this "Agreement") is made as of March 31, 2015 (the "Closing Date"), by and among Telos Corporation (the "Borrower"), with an address of 19886 Ashburn Road, Ashburn, VA 20147, in favor of Porter Foundation Switzerland, with an address of Chemin d'Amon 2, Chalet Ty'Fano, 1936 Verbier, Switzerland (referred to herein as "Lender").

RECITALS

A.            The Borrower has requested that Lender provide a term loan, which might be funded through multiple fundings or advances (with no funding or advance to be made later than May 15, 2015), in the amount of up to Five Million Dollars ($5,000,000) (less the amount of any amounts funded to the Borrower from time to time by the JP Charitable Foundation under its Subordinated Note and Subordinated Loan Agreement (the "Other Loan Documents") of even date herewith) in the aggregate (the "Loan").

	
B.

	
The Lender is willing to provide the Loan on the condition that the Borrower enters into this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants and agreements of the parties contained in this Agreement, the parties agree as follows:

	
1.

	
Definitions; Interpretation.

	
1.1

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

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

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

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

"Loan Documents" means this Agreement, any and all promissory notes and any and all other documents, instruments, certificates, agreements, loan agreements, subordination agreements, or other contracts with or for the benefit of the Lender, evidencing or governing payment of the Loan and the Obligations.

"Note" means the subordinated promissory note described in Section 2, as amended, restated, substituted or replaced from time to time.

"Obligations" means all present and future indebtedness, duties, obligations, and liabilities of the Borrower to the Lender with respect to the Loan in accordance with the terms of the Loan Documents.

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

"Refinancing Senior Debt Agreements" shall mean any agreements, instruments and documents which evidence the refinancing or replacement of any of the Senior Debt.

"Senior Agent" shall mean Wells Fargo Capital Finance, LLC or such other person that may from time to time be the administrative agent under the Senior Debt Agreements.

"Senior Credit Agreement" shall mean that certain Second Amended and Restated Loan and Security Agreement dated as of May 17, 2010 among the Borrower, certain of Borrower's affiliates, the financial institutions party thereto from time to time as Senior Lenders and Wells Fargo Capital Finance, LLC ("Wells Fargo"), as Senior Agent for all Senior Lenders, as the same has been and may subsequently be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

"Senior Debt" shall mean all Indebtedness of every nature of the Borrower from time to time owing under the Senior Debt Agreements, including, without limitation, the principal amount of all debts, claims and indebtedness, contingent reimbursement obligations (including without limitation in connection with cash management obligations and hedging, swap, foreign exchange, and other similar obligations and liabilities), accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after an Insolvency Proceeding together with any interest, fees or expenses accruing thereon after the commencement of an Insolvency Proceeding, without regard to whether or not such interest, fees or expenses are an allowed claim; Senior Debt shall be considered to be outstanding whenever any loan commitment under the Senior Debt Agreements is outstanding.

"Senior Debt Agreements" shall mean (i) the Senior Credit Agreement, together with any agreements, instruments and documents related thereto and executed in connection therewith, and (ii) any Refinancing Senior Debt Agreements, in each case as such agreements, instruments and documents may be amended or modified from time to time.

"Senior Lenders" means the Persons from time to time party to the Senior Debt Agreements as "lenders" together with such other Persons as may from time to time constitute "Bank Product Providers" under the Senior Debt Agreements.

"Stock" means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of the Borrower, whether voting or nonvoting, including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11- 1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

"Subordination Agreement" means (a) that certain Subordination and Intercreditor Agreement dated as of even date herewith by and among the Borrower, certain affiliates of Borrower, Lender and Senior Agent, as the same may be amended, restated, substituted, replaced or otherwise modified from time to time, (b) any other subordination agreement which may be required by the Senior Agent or Senior Lenders, as the same may be amended, restated, substituted, replaced or otherwise modified from time to time.

	
1.2

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

	
2.

	
The Loan.

(a)          The Lender hereby agrees to provide the Loan, as follows: (i) proceeds of the Loan in an amount equal to One Million Two Hundred and Fifty Thousand Dollars ($1,250,00.00) on the Closing Date, shall be disbursed by Lender to Borrower on the Closing Date, and (ii) upon further mutual agreement of the Lender and Borrower, proceeds of the Loan in an amount equal to an additional sum of up to Two Million Five Hundred Thousand Dollars ($2,500,00.00), less any amount Borrower borrows from JP Charitable Foundation under the Other Loan Documents shall be disbursed by Lender to Borrower following the date hereof on a date to be mutually agreed between Lender and Borrower but which date shall in any event be on or prior to May 15, 2015.  To evidence the Loan and the terms of repayment thereof with interest, the Borrower agrees to execute a Subordinated Promissory Note dated as of even date herewith.

 

(b)          The Lender shall make all advances under the Loan by transfer of funds to a deposit account of the Borrower in accordance with Borrower's directions, or such other manner as requested by Borrower, each at the Borrower's option.

 

3.    Representations and Warranties.  The Borrower represents and warrants to the Lender on the date of this Agreement, as follows:

	
3.1

	
Borrower is in good standing in the state of its incorporation. The Borrower has full power and authority to borrow the proceeds of the Loan, to execute and deliver the Loan Documents, and to incur and perform the Obligations provided for therein, all of which have been duly authorized by all proper and necessary action of the appropriate governing body the Borrower.

	
3.2

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

	
4.

	
Covenants.

	
4.1

	
The Borrower shall maintain its organizational existence in good standing in its jurisdiction of incorporation.

	
4.2

	
Until full and final payment of the Obligations, the Borrower shall not make any distribution or declare or pay any dividends (in cash or other property, other than common Stock) on, or purchase, acquire, redeem, exchange for indebtedness, or retire any Stock, of any class, whether now or hereafter outstanding (provided that, (a) consistent with the Pension Protection Act of 2006, and Section 401(a)(35) of the Internal Revenue Code and regulations pertaining thereto, the Borrower may purchase common Stock from the Telos 401(k) plan participants at a purchase price determined in good faith by the trustees of the Telos 401(k) plan).

5.    Default.  The Borrower shall be in default under this Agreement upon the occurrence of any one or more of the following (each an "Event of Default"): (a) there occurs any failure to pay any amounts due under the Loan or the other Obligations within ten (10) Business Days after the date when any such amount is due (unless such amounts were not permitted to be paid pursuant to the Subordination Agreement, in which case no Event of Default or other breach of this Agreement or any other Loan Document shall be deemed to have occurred as a result of the failure to make any such payment); or (b) any representation or warranty made in this Agreement shall prove to have been false or misleading when made in any material respect; or (c) the Borrower fails to timely and properly observe, keep or perform, any term, covenant, agreement or condition in this Agreement or in any of the other Loan Documents, which failure is not cured within thirty (30) Business Days from notice by Lender of such failure; or (d) the Borrower terminates its business operations or liquidates, dissolves or terminates its existence; or (e) the Borrower (i) admits in writing its inability generally to pay its debts as they mature or shall make any assignment for the benefit of any of its creditors, or (ii) is the subject of federal or state bankruptcy, insolvency, receivership or trustee proceedings; provided, however, that it shall not be an Event of Default under this clause (ii) if any involuntary proceeding is commenced against Borrower that is dismissed or stayed within ninety (90) days after the filing of the proceeding.

 

6.    Remedies.  During the continuance of an Event of Default, the Lender may, in the exercise of its discretion, declare all the rest or any portion of the Note and all other Obligations remaining unpaid, whether due or not, immediately due and payable, and exercise its rights and remedies under applicable Laws and as otherwise set forth in the Loan Documents.

	
7.

	
Other Agreements.

	
7.1

	
All notices, requests or demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing, hand delivered, sent by nationally recognized overnight courier or mailed, first class postage prepaid, addressed to the Lender and to the Borrower, at the addresses set forth in the initial paragraph to this Agreement, or to such other address as any party may designate by written notice to the other party.  Each such notice, request and demand shall be deemed given or made as follows: (i) if sent by hand delivery or by nationally recognized overnight courier service, upon delivery; or (ii) if sent by mail, first class postage prepaid, upon the earlier of the date of receipt or five (5) days after deposit with the U.S. Postal Service or a national postal service.

	
7.2

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

	
7.3

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

	
7.4

	
This Agreement shall be governed by and construed in accordance with the Laws of the State of Maryland, without regard to conflicts of law principles.  The Lender and Borrower hereby consent to the exclusive jurisdiction of any state or federal court located within the County of Fairfax or Loudoun, Commonwealth of Virginia and irrevocably agrees that all actions or proceedings arising out of or relating to this note shall be litigated in such courts.  The Lender and Borrower expressly submit and consent to the jurisdiction of the aforesaid courts and waive any defense of forum non conveniens.  The Lender and Borrower hereby waive personal service of any and all process and agree that all such service of process may be made upon it by certified or registered mail, return receipt requested, addressed to either party at their respective addresses set forth in this Agreement and service so made shall be complete ten (10) days after the same has been posted.

	
7.5

	
In the event any one or more provisions of this Agreement shall be determined to be invalid or unenforceable by any court of competent jurisdiction, the remaining provisions hereof, to the maximum extent possible, shall be deemed nevertheless to continue to be valid, legal, and enforceable, shall continue in full force and effect, and shall not be affected or impaired thereby.

	
7.6

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

8.    WAIVER OF RIGHT TO JURY TRIAL.  THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS SUBORDINATED LOAN AGREEMENT AND/OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING THE NOTE).  IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF THE IMPORTANT RIGHT OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST THIRD 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 PERSON 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 AND ADVISED BY LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

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

 

10.    Subordination of Loan to Senior Debt.  This Agreement, the related Subordinated Promissory Note, and the obligations and indebtedness evidenced under this Agreement and Note, are subordinated to the Senior Debt of the Borrower and its subsidiaries or affiliates, including specifically the obligations of the Borrower and certain of its subsidiaries and affiliates under the Senior Credit Agreement, the Senior Debt Agreements, and any Refinancing Senior Debt Agreements.  The Lender and any subsequent party to this Agreement or subsequent holder of the Subordinated Promissory Note agree that the Note, this Agreement and the obligations and indebtedness evidenced by the Note shall be subordinated to the Senior Debt, including specifically the Senior Credit Agreement, the Senior Debt Agreements, and any Refinancing Senior Debt Agreements, in accordance with the provisions of the Subordination Agreement, and the Lender and each other holder of the Promissory Note accepts and agrees to be bound in all respects by the terms of such Subordination Agreement.

[Signatures Follow on Next Page]

BORROWER'S SIGNATURE PAGE TO SUBORDINATED LOAN AGREEMENT

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

BORROWER:

Telos Corporation

	
By

	
/s/ John B. Wood

	
Name

	
John B. Wood

	
Title

	
Chairman of the Board and Chief Executive Officer

LENDER'S SIGNATURE PAGE TO SUBORDINATED LOAN AGREEMENT

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

LENDER:

Porter Foundation Switzerland

	
/s/ John R.C. Porter

	
John R.C. Porter, Trustee

	
 

 

/s/ Brian Padgett

	
Brian Padgett, Trustee

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