Amended And Restated Loan And Security Agreement

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT by and Among TELOS CORPORATION and XACTA CORPORATION as Borrowers, and TELOS DELAWARE, INC. UBIQUITY.COM, INC. TELOS INTERNATIONAL CORP. TELOS INTERNATIONAL ASIA, INC. SECURE TRADE, INC. TELOS FIELD ...

Exhibit 10.22

 

 

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

by and among

TELOS CORPORATION

and

XACTA CORPORATION

as Borrowers,

and

TELOS DELAWARE, INC.

UBIQUITY.COM, INC.

TELOS INTERNATIONAL CORP.

TELOS INTERNATIONAL ASIA, INC.

SECURE TRADE, INC.

TELOS FIELD ENGINEERING, INC.

TELOWORKS, INC.

as Credit Parties

THE LENDERS THAT ARE SIGNATORIES HERETO

as the Lenders,

and

WELLS FARGO FOOTHILL, INC.

as the Arranger and Administrative Agent

Dated as of April 3, 2008, but effective as of March 31, 2008

 

 

 


TABLE OF CONTENTS

 

1.    DEFINITIONS AND CONSTRUCTION    1
   1.1.    Definitions    1
   1.2.    Accounting Terms    25
   1.3.    Code    25
   1.4.    Construction    26
   1.5.    Schedules and Exhibits    26
   1.6.    Effect of Amendment and Restatement; No Novation    26
2.    LOAN AND TERMS OF PAYMENT    27
   2.1.    Revolver Advances    27
   2.2.    Intentionally Omitted    28
   2.3.    Borrowing Procedures and Settlements    28
   2.4.    Payments    34
   2.5.    Overadvances    37
   2.6.    Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations    37
   2.7.    Cash Management    39
   2.8.    Crediting Payments; Float Charge    40
   2.9.    Designated Account    40
   2.10.    Maintenance of Loan Account; Statements of Obligations    41
   2.11.    Fees    41
   2.12.    Letters of Credit    42
   2.13.    LIBOR Option    45
   2.14.    Capital Requirements    48
   2.15.    Joint and Several Liability of Borrowers    48
3.    CONDITIONS; TERM OF AGREEMENT    51
   3.1.    Conditions Precedent to the Initial Extension of Credit    51
   3.2.    Intentionally Omitted    53
   3.3.    Conditions Precedent to all Extensions of Credit    53
   3.4.    Term    54
   3.5.    Effect of Termination    54
   3.6.    Early Termination by Borrowers    54
4.    CREATION OF SECURITY INTEREST    55
   4.1.    Grant of Security Interest    55
   4.2.    Negotiable Collateral    55
   4.3.    Collection of Accounts, General Intangibles, and Negotiable Collateral    56
   4.4.    Delivery of Additional Documentation Required    56
   4.5.    Power of Attorney    56
   4.6.    Right to Inspect    57
   4.7.    Control Agreements    57
   4.8.    DDAs    57
   4.9.    Commercial Tort Claims    57

 

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5.    REPRESENTATIONS AND WARRANTIES    58
   5.1.    No Encumbrances    58
   5.2.    Eligible Accounts    58
   5.3.    Copyrights    58
   5.4.    Equipment    58
   5.5.    Location of Inventory and Equipment    59
   5.6.    Inventory Records    59
   5.7.    Location of Chief Executive Office; FEIN    59
   5.8.    Due Organization and Qualification; Subsidiaries    59
   5.9.    Due Authorization; No Conflict    60
   5.10.    Litigation    60
   5.11.    No Material Adverse Change    61
   5.12.    Fraudulent Transfer    61
   5.13.    Employee Benefits    61
   5.14.    Environmental Condition    61
   5.15.    Brokerage Fees    61
   5.16.    Intellectual Property    62
   5.17.    Leases    62
   5.18.    DDAs    62
   5.19.    Complete Disclosure    62
   5.20.    Indebtedness    62
   5.21.    Private Preferred Stock    63
   5.22.    Patriot Act    63
   5.23.    OFAC    63
   5.24.    Inactive Entities    63
6.    AFFIRMATIVE COVENANTS    63
   6.1.    Accounting System    64
   6.2.    Collateral Reporting    64
   6.3.    Financial Statements, Reports, Certificates    65
   6.4.    Government Contracts    67
   6.5.    Return    67
   6.6.    Maintenance of Properties    67
   6.7.    Taxes    67
   6.8.    Insurance    68
   6.9.    Location of Inventory and Equipment    69
   6.10.    Compliance with Laws    69
   6.11.    Leases    69
   6.12.    Brokerage Commissions    69
   6.13.    Existence    70
   6.14.    Environmental    70
   6.15.    Disclosure Updates    70
   6.16.    Intellectual Property    70
   6.17.    Inactive Entities    72

 

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7.    NEGATIVE COVENANTS    72
   7.1.    Indebtedness    72
   7.2.    Liens    73
   7.3.    Restrictions on Fundamental Changes    73
   7.4.    Disposal of Assets    73
   7.5.    Change Name    73
   7.6.    Guarantee    73
   7.7.    Nature of Business    73
   7.8.    Prepayments and Amendments    74
   7.9.    Change of Control    74
   7.10.    Consignments    74
   7.11.    Distributions    74
   7.12.    Accounting Methods    74
   7.13.    Investments    75
   7.14.    Transactions with Affiliates    75
   7.15.    Suspension    75
   7.16.    Compensation    75
   7.17.    Use of Proceeds    75
   7.18.    Change in Location of Chief Executive Office; Inventory and Equipment with Bailees    76
   7.19.    Securities Accounts    76
   7.20.    Financial Covenants    76
   7.21.    Accounts Not Subject to Cash Management Agreements    77
8.    EVENTS OF DEFAULT    77
9.    THE LENDER GROUP’S RIGHTS AND REMEDIES    79
   9.1.    Rights and Remedies    79
   9.2.    Remedies Cumulative    82
10.    TAXES AND EXPENSES    82
11.    WAIVERS; INDEMNIFICATION    82
   11.1.    Demand; Protest; etc.    82
   11.2.    The Lender Group’s Liability for Collateral    82
   11.3.    Indemnification    83
12.    NOTICES    83
13.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER    84
14.    ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS    85
   14.1.    Assignments and Participations    85
   14.2.    Successors    88

 

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15.    AMENDMENTS; WAIVERS    88
   15.1.    Amendments and Waivers    88
   15.2.    Replacement of Holdout Lender    89
   15.3.    No Waivers; Cumulative Remedies    90
16.    AGENT; THE LENDER GROUP    90
   16.1.    Appointment and Authorization of Agent    90
   16.2.    Delegation of Duties    91
   16.3.    Liability of Agent    91
   16.4.    Reliance by Agent    92
   16.5.    Notice of Default or Event of Default    92
   16.6.    Credit Decision    92
   16.7.    Costs and Expenses; Indemnification    93
   16.8.    Agent in Individual Capacity    94
   16.9.    Successor Agent    94
   16.10.    Lender in Individual Capacity    95
   16.11.    Withholding Taxes    95
   16.12.    Collateral Matters    97
   16.13.    Restrictions on Actions by Lenders; Sharing of Payments    98
   16.14.    Agency for Perfection    98
   16.15.    Payments by Agent to the Lenders    99
   16.16.    Concerning the Collateral and Related Loan Documents    99
   16.17.    Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information    99
   16.18.    Several Obligations; No Liability    100
   16.19.    Legal Representation of Agent    101
17.    GENERAL PROVISIONS    101
   17.1.    Effectiveness    101
   17.2.    Section Headings    101
   17.3.    Interpretation    101
   17.4.    Severability of Provisions    102
   17.5.    Amendments in Writing    102
   17.6.    Counterparts; Telefacsimile Execution    102
   17.7.    Revival and Reinstatement of Obligations    102
   17.8.    Integration    102
   17.9.    Parent as Agent for Companies    103
   17.10.    USA PATRIOT Act    103

 

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EXHIBITS AND SCHEDULES

 

Exhibit A-1    Form of Assignment and Acceptance
Exhibit C-1    Form of Compliance Certificate
Exhibit L-1    Form of LIBOR Notice
Exhibit 3.1    Closing Checklist
Schedule A-1    Agent’s Accounts
Schedule C-1    Commitments
Schedule D-1    Designated Accounts
Schedule P-1    Permitted Liens
Schedule 2.7(a)    Cash Management Banks
Schedule 3.1    Copyrights
Schedule 4.9    Commercial Tort Claims
Schedule 5.5    Locations of Inventory and Equipment
Schedule 5.7    Chief Executive Office; FEIN
Schedule 5.8(b)    Capitalization of Parent
Schedule 5.8(c)    Capitalization of Subsidiaries
Schedule 5.10    Litigation
Schedule 5.14    Environmental Matters
Schedule 5.16    Intellectual Property
Schedule 5.18    Demand Deposit Accounts
Schedule 5.20    Permitted Indebtedness
Schedule 7.14    Affiliated Transactions

 

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LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”), is dated as of April 3, 2008, but effective as of March 31, 2008, between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO FOOTHILL, INC. (formerly known as Foothill Capital Corporation), a California corporation, as the arranger and administrative agent for the Lenders (“Agent”), and, on the other hand, 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 INTERNATIONAL CORP., a Delaware corporation (“TIC”), TELOS INTERNATIONAL ASIA, INC., a Delaware corporation (“TIA”), SECURE TRADE, INC., a Delaware corporation (“STI”), TELOS FIELD ENGINEERING, INC., a Delaware corporation (“TFE”), and Teloworks, Inc., a Delaware corporation (“Teloworks”; Telos-Delaware, Ubiquity, TIC, TIA, STI, TFE, and Teloworks are referred to hereinafter each individually as a “Credit Party” and collectively, jointly and severally, as the “Credit Parties”).

Lenders, Agent, Borrowers and Credit Parties were party to a certain Loan and Security Agreement dated as of October 21, 2002 (as previously modified, the “Original Loan and Security Agreement”). The parties to the Original Loan and Security Agreement desire to amend and restate the Original Loan and Security Agreement on the terms provided herein.

The parties agree as follows:

 

1. DEFINITIONS AND CONSTRUCTION.

 

  1.1. Definitions.

As used in this Agreement, the following terms shall have the following definitions:

Account Debtor” means any Person who is or who may become obligated under, with respect to, or on account of, an Account, chattel paper, or a General Intangible.

Accounts” means all of Companies’ now owned or hereafter acquired right, title, and interest with respect to “accounts” (as that term is defined in the Code), and any and all supporting obligations in respect thereof.

ACH Transactions” means any cash management or related services (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) provided by Wells Fargo or its Affiliates for the account of Administrative Borrower or its Subsidiaries.

 

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Additional Documents” has the meaning set forth in Section 4.4.

Administrative Borrower” has the meaning set forth in Section 17.9.

Advances” has the meaning set forth in Section 2.1.

Affiliate” means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of the definition of Eligible Accounts and Section 7.14 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person; (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person; and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person.

Agent” means Foothill, solely in its capacity as agent for the Lenders hereunder, and any successor thereto.

Agent’s Account” means the account identified on Schedule A-1.

Agent Advances” has the meaning set forth in Section 2.3(e)(i).

Agent’s Liens” means the Liens granted by Companies to Agent for the benefit of the Lender Group under this Agreement or the other Loan Documents.

Agent-Related Persons” means Agent together with its Affiliates, officers, directors, employees, and agents.

Agreement” has the meaning set forth in the preamble hereto.

Amended and Restated Fee Letter” means that certain fee letter, dated as of even date herewith, between Borrowers and Agent, in form and substance satisfactory to Agent.

Applicable Prepayment Premium” means, as of any date of determination, an amount equal to (a) during the period of time from and after the Closing Date up to the date that is the first anniversary of the Closing Date, 3% times the Maximum Revolver Amount, (b) during the period of time from and including the date that is the first anniversary of the Closing Date up to the date that is the second anniversary of the Closing Date, 2% times the Maximum Revolver Amount, and (c) during the period of time from and including the date that is the second anniversary of the Closing Date up to the Maturity Date, 1% times the Maximum Revolver Amount.

 

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Assignee” has the meaning set forth in Section 14.1.

Assignment and Acceptance” means an Assignment and Acceptance in the form of Exhibit A-1.

Authorized Person” means any officer or other employee of Administrative Borrower.

Availability” means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Borrowers are entitled to borrow as Advances under Section 2.1 (after giving effect to all then outstanding Obligations (other than Bank Products Obligations) and all sublimits and reserves applicable hereunder).

Availability Block” means an amount equal to $500,000.

Bank Product Agreements” means those certain cash management service agreements entered into from time to time by Administrative Borrower or its Subsidiaries in connection with any of the Bank Products.

Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Administrative Borrower or its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Administrative Borrower or any of its Subsidiaries is obligated to reimburse to Agent or any member of the Lender Group as a result of Agent or such member of the Lender Group purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to Administrative Borrower or its Subsidiaries pursuant to the Bank Product Agreements.

Bank Products” means any service or facility extended to Administrative Borrower or its Subsidiaries by Wells Fargo or any Affiliate of Wells Fargo including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) Hedge Agreements.

Bank Product Reserves” means, as of any date of determination, the amount of reserves that Agent has established (based upon Wells Fargo’s or its Affiliate’s reasonable determination of the credit exposure in respect of then extant Bank Products) for Bank Products then provided or outstanding.

 

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Bankruptcy Code” means the United States Bankruptcy Code, as in effect from time to time.

Base LIBOR Rate” means the greater of (a) 3.00 percent per annum, and (b) the rate per annum rate appearing on Bloomberg L.P.’s (the “Service”) Page BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any successor or substitute page of such Service, or any successor to or substitute for such Service) 2 Business Days prior to the commencement of the requested Interest Period, for a term and in an amount comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrower in accordance with the Agreement, which determination shall be conclusive in the absence of manifest error.

Base Rate” means the greatest of (a) 6.00 percent per annum, (b) the Federal Funds Rate plus  1/2%, and (c) the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate.

Base Rate Loan” means each portion of an Advance that bears interest at a rate determined by reference to the Base Rate.

Base Rate Margin” means 1.00 percentage points.

Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

Board of Directors” means the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf thereof.

Books” means all of each Borrower’s and its Subsidiaries’ now owned or hereafter acquired books and records (including all of its Records indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of each Borrower’s or its Subsidiaries’ Records relating to its or their business operations or financial condition, and all of its or their goods or General Intangibles related to such information).

Borrower” and “Borrowers” have the respective meanings set forth in the preamble to this Agreement.

Borrowing” means a borrowing hereunder consisting of Advances made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance, in each case, to Administrative Borrower.

 

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Borrowing Base” has the meaning set forth in Section 2.1.

Business Day” means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.

Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

Capitalized Lease Obligation” means any Indebtedness represented by obligations under a Capital Lease.

Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody’s, (c) commercial paper maturing no more than 270 days from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody’s, and (d) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2, or better, from S&P or Moody’s, or (ii) certificates of deposit less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation.

Cash Management Bank” has the meaning set forth in Section 2.7(a).

Cash Management Account” has the meaning set forth in Section 2.7(a).

Cash Management Agreements” means those certain cash management service agreements, in form and substance satisfactory to Agent, each of which is among Administrative Borrower, Agent, and one of the Cash Management Banks.

Change of Control” means (a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 10%, or more, of the Stock of Parent having the right to vote for the election of members of the Board of Directors, or (b) John R.C. Porter shall cease to own and control that percentage of the Stock of Parent necessary at all times to elect a majority of the members of the Board of Directors, or (c) a majority of the members of the Board of Directors do not constitute Continuing Directors, or (d) Parent ceases to directly own and control at least 95% of the outstanding capital Stock of Xacta extant as of the Closing Date.

 

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Closing Date” means March 31, 2008.

Closing Date Business Plan” means the set of Projections of Companies for the 2 year period following the Closing Date (on a year by year basis, and for the one year period following the Closing Date, on a month by month basis), in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Agent.

Code” means the Illinois Uniform Commercial Code, as in effect from time to time.

Collateral” means all of each Company’s now owned or hereafter acquired right, title, and interest in and to each of the following:

(a) Accounts,

(b) Books,

(c) Equipment,

(d) General Intangibles,

(e) Inventory,

(f) Investment Property,

(g) Negotiable Collateral,

(h) money or other assets of each such Company that now or hereafter come into the possession, custody, or control of any member of the Lender Group,

(i) deposit accounts of each such Company,

(j) commercial tort claims of each such Company;

(k) all other personal property of each such Company; and

(l) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing, and any and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment Property, Negotiable Collateral, money, deposit accounts, or other tangible or intangible property resulting from the sale, exchange, collection, or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof.

Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in the Equipment or Inventory, in each case, in form and substance satisfactory to Agent.

 

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Collections” means all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of Companies.

Commitment” means, with respect to each Lender, its Revolver Commitment, or its Total Commitment, as the context requires, and, with respect to all Lenders, their Revolver Commitments, or their Total Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1.

Companies” means Borrowers and Credit Parties.

Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 delivered by the chief financial officer of Parent to Agent.

Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Parent on December 31, 2006, and (b) any individual who became or becomes a member of the Board of Directors after December 31, 2006 if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office on December 31, 2006 or the members of the Board of Directors that became members pursuant to clause (b) above in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Parent (as such terms are used in Rule 14a-11 under the Exchange Act) and whose initial assumption of office resulted from such contest or the settlement thereof.

Control Agreement” means a control agreement, in form and substance satisfactory to Agent, executed and delivered by the applicable Company, Agent, and the applicable securities intermediary with respect to a Securities Account or a bank with respect to a deposit account.

Copyrights” means copyrights and copyright registrations, owned by any Company, including, without limitation, the copyright registrations and recordings thereof and all applications in connection therewith listed on Schedule 3.1.

Copyright Security Agreement” means a copyright security agreement executed and delivered by each Company and Agent, the form and substance of which is satisfactory to Agent.

Customer” means the end user of the product or services provided.

Daily Balance” means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day.

 

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DDA” means any checking or other demand deposit account maintained by any Borrower.

Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

Defaulting Lender” means any Lender that fails to make any Advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder.

Defaulting Lender Rate” means (a) the Base Rate for the first 3 days from and after the date the relevant payment is due, and (b) thereafter, at the interest rate then applicable to Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto.

Deferred Revenue Reserve” means reserves established by Agent in its Permitted Discretion for (i) warranty claims that may be asserted against a Borrower, (ii) potential claims under maintenance agreements with respect to which a Borrower is obligated to provide services which services have already been paid for by the applicable Account Debtor, and (iii) potential claims under subscription arrangements with respect to which a Borrower is obligated to provide services or maintain such subscription which services and/or subscription have already been paid for by the applicable Account Debtor. The formula for calculating the Deferred Revenue Reserve shall be as follows: for any of the items described in clauses (i) (ii) or (iii) above, if there is an Eligible Account that is also in the Deferred Revenue Reserve as defined in clauses (i), (ii) or (iii) above and it is owing by the same Customer, the Deferred Revenue Reserve with respect to such Account shall be the lesser of the Eligible Account or the Deferred Revenue Reserve.

Designated Account” means certain DDA of Administrative Borrower identified on Schedule D-1.

Dilution” means, as of any date of determination, a percentage, based upon the experience of the immediately prior 12 months, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Accounts during such period, by (b) Borrowers’ Collections with respect to Accounts during such period (excluding extraordinary items) plus the Dollar amount of clause (a).

Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by one percentage point for each percentage point by which Dilution is in excess of 5%.

Dollars” or “$” means United States dollars.

EBITDA” means, with respect to any fiscal period, Parent’s and its Subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains, interest income, and any software development costs to the extent capitalized during such period, plus non-cash

 

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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.

Eligible Accounts” means those Accounts created by one of Borrowers in the ordinary course of its business, that arise out of its sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made by Borrowers under the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the criteria set forth below; provided, however, that such criteria may be fixed and revised from time to time by Agent in Agent’s Permitted Discretion to address the results of any audit performed by Agent from time to time after the Closing Date or otherwise. In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits and unapplied cash remitted to Borrowers. Eligible Accounts shall not include the following:

(a) Accounts that the Account Debtor has failed to pay within 120 days of original invoice date or within 90 days of due date, or Accounts with selling terms of more than 60 days (unless such Accounts are owing by the United States or any department, agency or instrumentality of the United States in which case such selling terms shall not be more than 30 days),

(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,

(c) Accounts with respect to which the Account Debtor is an employee, Affiliate, or agent of any Borrower,

(d) Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold (unless such Account is owing by the United States or any department, agency or instrumentality of the United States, such goods are segregated from such Borrower’s other goods, and either (1) within 14 days of the date such goods are segregated, such Account Debtor shall have executed a DD250 document accepting such goods that are held by a Borrower (provided, that the aggregate amount of such Accounts that may be Eligible Accounts under this clause (d)(1) with respect to which a DD250 has not been issued shall not exceed $250,000), or (2) the contract under which such goods are sold authorizes such Borrower to bill such Account Debtor prior to delivery of such goods and Agent has consented to include such Accounts as Eligible Accounts), or any other terms by reason of which the payment by the Account Debtor may be conditional,

(e) Accounts that are not payable in Dollars,

(f) Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States, or (ii) is not organized under the laws

 

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of the United States or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Agent and is directly drawable by Agent, or (z) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, satisfactory to Agent,

(g) Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which either the applicable Borrower has complied, to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 U.S.C. § 3727, 41 U.S.C. §15 or Agent has otherwise agreed not to require compliance with the Assignment of Claims Act, 31 U.S.C. §3727, 41 U.S.C. §15 with respect to any particular Account or group of Accounts (provided, that Borrowers acknowledge and agree that Agent’s agreement not to require such compliance may be revoked by Agent at any time)), or (ii) any state of the United States (exclusive, however, of (y) Accounts owed by any state that does not have a statutory counterpart to the Assignment of Claims Act or (z) Accounts owed by any state that does have a statutory counterpart to the Assignment of Claims Act as to which the applicable Borrower has complied to Agent’s satisfaction),

(h) Accounts with respect to which the Account Debtor is a creditor of any Borrower, has or has asserted a right of setoff, has disputed its liability, or has made any claim with respect to its obligation to pay the Account, to the extent of such claim, right of setoff, or dispute,

(i) Accounts with respect to an Account Debtor (other than the United States or any department, agency or instrumentality of the United States) whose total obligations owing to Borrowers exceed 10% (such percentage as applied to a particular Account Debtor being subject to reduction by Agent in its Permitted Discretion if the creditworthiness of such Account Debtor deteriorates) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage,

(j) Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which a Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor,

(k) Accounts with respect to which the Account Debtor is located in the states of New Jersey, Minnesota, or West Virginia (or any other state that requires a creditor to file a business activity report or similar document in order to bring suit or otherwise enforce its remedies against such Account Debtor in the courts or through any judicial process of such state), unless the applicable Borrower has qualified to do business in New Jersey, Minnesota, West Virginia, or such other states, or has filed a business activities report with the applicable division of taxation, the department of revenue, or with such other state offices, as appropriate, for the then-current year, or is exempt from such filing requirement,

 

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(l) Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor’s financial condition,

(m) Accounts that are not subject to a valid and perfected first priority Agent’s Lien,

(n) Accounts with respect to which the goods giving rise to such Account have not been shipped (unless such Account is owing by the United States or any department, agency or instrumentality of the United States, such goods are segregated from Borrower’s other goods and either (1) within 14 days of the date such goods are segregated, such Account Debtor shall have executed a DD250 document accepting such goods that are held by a Borrower (provided, that the aggregate amount of such Accounts that may be Eligible Accounts under this clause (d)(1) with respect to which a DD250 has not been issued shall not exceed $250,000), or (2) the contract under which such goods are sold authorizes such Borrower to bill such Account Debtor prior to delivery of such goods and Agent has consented to include such Accounts as Eligible Accounts) and billed to the Account Debtor,

(o) Accounts which are unbilled, or

(p) Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by the applicable Borrower of the subject contract for goods or services, unless such progress payments or advance billings are unconditionally owing by such Account Debtor and not subject to offset regardless of whether the applicable Borrower completes performance under the subject contract (Agent reserves the right to review such contracts to determine the offset rights of the Account Debtors thereunder).

Eligible Transferee” means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $250,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets in excess of $250,000,000, provided that such bank is acting through a branch or agency located in the United States, (c) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender that was party hereto as of the Closing Date, (e) so long as no Event of Default has occurred and is continuing, any other Person approved by Agent and Administrative Borrower, and (f) during the continuation of an Event of Default, any other Person approved by Agent.

Environmental Actions” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from

 

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(a) any assets, properties, or businesses of any Company or any predecessor in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by any Company or any predecessor in interest.

Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Companies, relating to the environment, employee health and safety, or Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq; the Toxic Substances Control Act, 15 U.S.C., § 2601 et seq; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; and the Occupational Safety and Health Act, 29 U.S.C. §651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

Environmental Liabilities and Costs” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action.

Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

Equipment” means all of Companies’ now owned or hereafter acquired right, title, and interest with respect to equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods (other than consumer goods, farm products, or Inventory), wherever located, including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of a Company under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of a Company under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any

 

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organization subject to ERISA that is a member of an affiliated service group of which a Company is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with a Company and whose employees are aggregated with the employees of a Company under IRC Section 414(o).

Event of Default” has the meaning set forth in Section 8.

Excess Availability” means the amount, as of the date any determination thereof is to be made, equal to Availability minus the aggregate amount, if any, of all trade payables of Borrowers aged in excess of their historical levels with respect thereto and all book overdrafts in excess of their historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion.

Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by it.

FEIN” means Federal Employer Identification Number.

Foothill” means Wells Fargo Foothill, Inc. (formerly known as Foothill Capital Corporation), a California corporation, currently an Affiliate of Wells Fargo.

Foreign Transfer Account” means that certain bank account number 2000024576136 maintained by Teloworks, Inc. with Wachovia Bank, N.A..

Funding Date” means the date on which a Borrowing occurs.

Funding Losses” has the meaning set forth in Section 2.13(b)(ii).

GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

General Intangibles” means all of Companies’ now owned or hereafter acquired right, title, and interest with respect to general intangibles (including payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information

 

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contained on computer disks or tapes, software, literature, reports, catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), and any and all supporting obligations in respect thereof, and any other personal property other than goods, Accounts, Investment Property, and Negotiable Collateral.

Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

Governmental Authority” means any federal, state, local, or other governmental or administrative body, instrumentality, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

Hedge Agreement” means any and all transactions, agreements, or documents now existing or hereafter entered into between Administrative Borrower or its Subsidiaries and Wells Fargo or its Affiliates, which provide for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Administrative Borrower’s or its Subsidiaries’ exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

Indebtedness” means (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of a Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations owing under Hedge Agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement were terminated on the date of determination), and (g) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold

 

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with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (f) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets securing such obligation.

Indemnified Liabilities” has the meaning set forth in Section 11.3.

Indemnified Person” has the meaning set forth in Section 11.3.

Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

Intellectual Property Licenses” means all of the rights under or interest in any patent, trademark, copyright or other intellectual property, including software license agreements that Grantor has with any other party, whether the applicable Grantor is a licensee or licensor under any such license agreement.

Intercompany Subordination Agreement” means a subordination agreement executed and delivered by Borrowers and Agent, the form and substance of which is satisfactory to Agent.

Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, or 3 months after the date on which the Interest Period began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf thereof) may not elect an Interest Period which will end after the Maturity Date.

 

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Inventory” means all Companies’ now owned or hereafter acquired right, title, and interest with respect to inventory, including goods held for sale or lease or to be furnished under a contract of service, goods that are leased by a Company as lessor, goods that are furnished by a Company under a contract of service, and raw materials, work in process, or materials used or consumed in a Company’s business.

Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the ordinary course of business consistent with past practices), purchases or other acquisitions for consideration of Indebtedness or Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

Investment Property” means all of Companies’ now owned or hereafter acquired right, title, and interest with respect to “investment property” as that term is defined in the Code, and any and all supporting obligations in respect thereof.

IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

Issuing Lender” means Foothill or any other Lender that, at the request of Administrative Borrower and with the consent of Agent agrees, in such Lender’s sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant to Section 2.12.

Joint and Several Guaranty” means that certain general continuing guaranty executed and delivered by Credit Parties in favor of Agent, for the benefit of the Lender Group, in form and substance satisfactory to Agent.

L/C” has the meaning set forth in Section 2.12(a).

L/C Disbursement” means a payment made by the Issuing Lender pursuant to a Letter of Credit.

L/C Undertaking” has the meaning set forth in Section 2.12(a).

Lender” and “Lenders” have the respective meanings set forth in the preamble to this Agreement, and shall include any other Person made a party to this Agreement in accordance with the provisions of Section 14.1.

Lender Group” means, individually and collectively, each of the Lenders (including the Issuing Lender) and Agent.

Lender Group Expenses” means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by a Company under any of the Loan Documents that are paid or incurred by the Lender Group, (b) fees or charges paid or

 

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incurred by Agent in connection with the Lender Group’s transactions with Companies, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic Collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) costs and expenses incurred by Agent in the disbursement of funds to or for the account of Borrowers (by wire transfer or otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Agent related to audit examinations of the Books to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement, (g) reasonable costs and expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or the Lender Group’s relationship with any Company or any guarantor of the Obligations, (h) Agent’s reasonable fees and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the Loan Documents, and (i) Agent’s and each Lender’s reasonable fees and expenses (including attorneys fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning any Company or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral.

Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s Affiliates, and the officers, directors, employees, and agents of such Lender.

Letter of Credit” means an L/C or an L/C Undertaking, as the context requires.

Letter of Credit Usage” means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the amount of outstanding time drafts accepted by an Underlying Issuer as a result of drawings under Underlying Letters of Credit and not reimbursed by Borrowers.

LIBOR Deadline” has the meaning set forth in Section 2.13(b)(i).

LIBOR Notice” means a written notice in the form of Exhibit L-1.

 

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LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate per annum determined by Agent by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

LIBOR Rate Loan” means each portion of an Advance that bears interest at a rate determined by reference to the LIBOR Rate.

LIBOR Rate Margin” means 4.00 percentage points.

Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property.

Loan Account” has the meaning set forth in Section 2.10.

Loan Documents” means this Agreement, the Bank Product Agreements, the Cash Management Agreements, the Control Agreements, the Copyright Security Agreement, the Amended and Restated Fee Letter, the Joint and Several Guaranty, the Letters of Credit, the Officers’ Certificate, the Patent Security Agreement, the Stock Pledge Agreements, the Trademark Security Agreement, the Intercompany Subordination Agreement, any note or notes executed by a Borrower in connection with this Agreement and payable to a member of the Lender Group, and any other agreement entered into, now or in the future, by any Company and the Lender Group in connection with this Agreement or the Original Loan and Security Agreement.

Material Adverse Change” means (a) a material adverse change in the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrowers taken as a whole, (b) a material impairment of a Company’s ability to perform its obligations under the Loan Documents to which it is a party or of the Lender Group’s ability to enforce the Obligations or realize upon the Collateral, or (c) a material impairment of the enforceability or priority of the Agent’s Liens with respect to the Collateral as a result of an action or failure to act on the part of a Company.

Maturity Date” has the meaning set forth in Section 3.4.

Maximum Revolver Amount” means $25,000,000.

Negotiable Collateral” means all of Companies’ now owned and hereafter acquired right, title, and interest with respect to letters of credit, letter of credit rights,

 

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instruments, promissory notes, drafts, documents, and chattel paper (including electronic chattel paper and tangible chattel paper), and any and all supporting obligations in respect thereof.

Net Cash Proceeds” means, with respect to the issuance by a Company or any of its Subsidiaries of any shares of its Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Company or such Subsidiary in connection with such issuance, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by such Company or such Subsidiary in connection with such issuance, (ii) taxes paid or payable to any taxing authorities by such Company or such Subsidiary in connection with such issuance, to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of a Company or any of its Subsidiaries, and are properly attributable to such transaction.

Obligations” means (a) all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), contingent reimbursement obligations with respect to outstanding Letters of Credit, premiums, liabilities (including all amounts charged to Borrowers’ Loan Account pursuant hereto), obligations, fees (including the fees provided for in the Amended and Restated Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties (including, without limitation, obligations under the Joint and Several Guaranty), covenants, and duties of any kind and description owing by Companies, or any of them, to the Lender Group pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Group Expenses that Companies, or any of them, are required to pay or reimburse by the Loan Documents, by law, or otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding.

OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

Officers’ Certificate” means the representations and warranties of officers form submitted by Agent to Administrative Borrower, together with Companies’ completed responses to the inquiries set forth therein, the form and substance of such responses to be satisfactory to Agent.

Original Loan and Security Agreement” has the meaning set forth in the Recitals hereto.

 

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Original Obligations” means all Obligations under and as defined in the Original Loan and Security Agreement.

Originating Lender” has the meaning set forth in Section 14.1(e).

Overadvance” has the meaning set forth in Section 2.5.

Parent” has the meaning set forth in the preamble to this Agreement.

Participant” has the meaning set forth in Section 14.1(e).

Patents” means patents and patent applications, owned by any Company.

Patent Security Agreement” means a patent security agreement executed and delivered by Companies and Agent, the form and substance of which is satisfactory to Agent.

Patriot Act” has the meaning specified therefor in Section 5.22 of the Agreement.

Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

Permitted Dispositions” means (a) sales or other dispositions by Administrative Borrower or its Subsidiaries of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales by Administrative Borrower or its Subsidiaries of Inventory to buyers in the ordinary course of business, and (c) the use or transfer of money or Cash Equivalents by Administrative Borrower or its Subsidiaries in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents.

Permitted Holders” means the holders of the Class A Common Stock and Class B Common Stock of Parent set forth in Part III, Item 12 of Parent’s Form 10-K filing for the fiscal year ending December 31, 2006.

Permitted Indebtedness” means the Indebtedness evidenced by the Series B Senior Subordinated Secured Notes attached as Exhibit A-1 to the Subordination Agreement and the Series C Senior Subordinated Unsecured Notes attached as Exhibit A-2 to the Subordination Agreement, issued by Parent.

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

 

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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 made on or prior to October 20, 2007.

Permitted Liens” means (a) Liens held by Agent for the benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors under operating leases, (e) purchase money Liens or the interests of lessors under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as such Lien attaches only to the asset purchased or acquired and the proceeds thereof, (f) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising from deposits made in connection with obtaining worker’s compensation or other unemployment insurance, (h) Liens or deposits to secure performance of bids, tenders, or leases incurred in the ordinary course of business and not in connection with the borrowing of money, (i) Liens granted as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business, (j) Liens resulting from any judgment or award that is not an Event of Default hereunder, and (k) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof.

Permitted Protest” means the right of Administrative Borrower or any of its Subsidiaries, as applicable to protest any Lien (other than any such Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the Books in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Administrative Borrower or any of its Subsidiaries, as applicable, in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Agent’s Liens.

Permitted Purchase Money Indebtedness” means, as of any date of determination, Purchase Money Indebtedness incurred after the Closing Date in an aggregate amount outstanding at any one time not in excess of $2,000,000.

Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

Preferred Stockholders Standby Agreement” means the Preferred Stockholders Standby Agreement, in form and substance satisfactory to Agent, executed and delivered by each holder of the Private Preferred Stock and Agent.

 

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Private Preferred Stock “ means the Series A-1 Redeemable Preferred Stock and the Series A-2 Redeemable Preferred Stock, in each case as more particularly described in the Parent’s Articles of Amendment and Restatement dated as of January 14, 1992.

Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Parent’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

Pro Rata Share” means:

(a) with respect to a Lender’s obligation to make Advances and receive payments of principal, interest, fees, costs, and expenses with respect thereto, the percentage obtained by dividing (i) such Lender’s Revolver Commitment, by (ii) the aggregate Revolver Commitments of all Lenders,

(b) with respect to a Lender’s obligation to participate in Letters of Credit, to reimburse the Issuing Lender, and to receive payments of fees with respect thereto, the percentage obtained by dividing (i) such Lender’s Revolver Commitment, by (ii) the aggregate Revolver Commitments of all Lenders, and

(c) with respect to all other matters (including the indemnification obligations arising under Section 16.7), the percentage obtained by dividing (i) such Lender’s Total Commitment, by (ii) the aggregate amount of Total Commitments of all Lenders; provided, however, that, in each case, in the event all Commitments have been terminated, Pro Rata Share shall be determined according to the Commitments in effect immediately prior to such termination.

Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but including Capitalized Lease Obligations), incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof.

Real Property” means any estates or interests in real property now owned or hereafter acquired by any Company and the improvements thereto.

Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (d) conduct any other actions authorized by 42 U.S.C. § 9601.

 

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Report” has the meaning set forth in Section 16.17.

Required Availability” means Excess Availability and unrestricted cash and Cash Equivalents in an amount of not less than $1,000,000.

Required Lenders” means, at any time, Lenders whose Pro Rata Shares aggregate 66.67% of the Total Commitments, or if the Commitments have been terminated irrevocably, 66.67% of the Obligations (other than Bank Product Obligations) then outstanding.

Required Library” means, as of any date of determination, the copyrights of the Companies that are based on or derived from those computer software programs or other technology of the Companies that at the time account for not less than 80% of the total amount of the net product and subscription revenues of the Parent and its Subsidiaries for the immediately preceding fiscal quarter.

Reserve Percentage” means, on any day, for any Lender, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental Authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.

Revolver Commitment” means, with respect to each Lender, its Revolver Commitment, and, with respect to all Lenders, their Revolver Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1.

Revolver Usage” means, as of any date of determination, the sum of (a) the then extant amount of outstanding Advances, plus (b) the then extant amount of the Letter of Credit Usage.

Risk Participation Liability” means, as to each Letter of Credit, all reimbursement obligations of Borrowers to the Issuing Lender with respect to an L/C Undertaking, consisting of (a) the amount available to be drawn or which may become available to be drawn, (b) all amounts that have been paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed by Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid interest, fees, and expenses payable with respect thereto.

Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be a resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

 

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Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

SEC” means the United States Securities and Exchange Commission and any successor thereto.

Securities Account” means a “securities account” as that term is defined in the Code.

Settlement” has the meaning set forth in Section 2.3(f)(i).

Settlement Date” has the meaning set forth in Section 2.3(f)(i).

Solvent” means, with respect to any Person on a particular date, that such Person is not insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).

Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, 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).

Stock Pledge Agreement” means a stock pledge agreement, in form and substance satisfactory to Agent, executed and delivered by each Company that owns Stock of a Subsidiary of Parent other than TIMS LLC.

Subordination Agreement” means a subordination agreement, in form and substance satisfactory to Agent, executed and delivered by each creditor that holds a Series B Senior Subordinated Secured Note or a Series C Subordinated Unsecured Note, State Street Bank and Trust Company, and Agent, as amended from time to time.

Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

Swing Lender” means Foothill or any other Lender that, at the request of Administrative Borrower and with the consent of Agent agrees, in such Lender’s sole discretion, to become the Swing Lender hereunder.

Swing Loan” has the meaning set forth in Section 2.3(d)(i).

Taxes” has the meaning set forth in Section 2.2.

 

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

Total Commitment” means, with respect to each Lender, its Total Commitment, and, with respect to all Lenders, their Total Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 attached hereto or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.1.

Trademarks” means trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, owned by any Company, and (i) all renewals thereof and (ii) the goodwill of each Company’s business symbolized by the foregoing and connected therewith.

Trademark Security Agreement” means a trademark security agreement executed and delivered by each Company and Agent, the form and substance of which is satisfactory to Agent.

Underlying Issuer” means a third Person which is the beneficiary of an L/C Undertaking and which has issued a letter of credit at the request of the Issuing Lender for the benefit of Borrowers.

Underlying Letter of Credit” means a letter of credit that has been issued by an Underlying Issuer.

Voidable Transfer” has the meaning set forth in Section 17.7.

Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

 

  1.2. Accounting Terms.

All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and schedules thereto. Whenever the term “Borrowers” or the term “Parent” is used in respect of a financial covenant or a related definition, it shall be understood to mean Parent and its Subsidiaries on a consolidated basis unless the context clearly requires otherwise.

 

  1.3. Code.

Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein.

 

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  1.4. Construction.

Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

 

  1.5. Schedules and Exhibits.

All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

 

  1.6. Effect of Amendment and Restatement; No Novation.

On the Closing Date, all of the Original Obligations shall continue in full force and effect, but shall be “Obligations” under, and governed by the terms and conditions set forth in, this Agreement. The outstanding Original Obligations, together with any and all additional liabilities incurred by Borrowers under this Agreement or under any of the other Loan Documents, shall continue to be secured by, among other things, the Collateral, whether now existing or hereafter acquired and wheresoever located, all as more specifically set forth in the Loan Documents. Each Company hereby reaffirms its obligations, liabilities, grants of security interests, pledges and the validity of all covenants by such Company contained in any and all Loan Documents. The execution and delivery of this Agreement shall not constitute a novation or repayment of the indebtedness outstanding under the Original Loan and Security Agreement. Each Company hereby acknowledges and agrees that on and after the Closing Date any and all references in any Loan Documents to the Original Loan and Security Agreement shall be deemed to be amended to refer to this Agreement. Each Company hereby reaffirms its obligations, liabilities and indebtedness arising under each of the Loan Documents (as amended or otherwise modified through and including the Closing Date), in each case after giving effect to the provisions of the preceding sentence.

 

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2. LOAN AND TERMS OF PAYMENT.

 

  2.1. Revolver Advances.

(a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender with a Revolver Commitment agrees (severally, not jointly or jointly and severally) to make advances (“Advances”) to Borrowers in an amount at any one time outstanding not to exceed such Lender’s Pro Rata Share of an amount equal to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, “Borrowing Base,” as of any date of determination, shall mean the result of:

 

  (x) the lesser of

 

  (i) 85% of the amount of Eligible Accounts (net of the Deferred Revenue Reserve), less the amount, if any, of the Dilution Reserve, and

 

  (ii) an amount equal to Borrowers’ Collections with respect to Accounts for the immediately preceding 60 day period, minus

 

  (y) the sum of (i) the Bank Products Reserve, (ii) the Availability Block, and (iii) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b).

(b) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right to establish reserves in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, against the Borrowing Base, including reserves with respect to (i) sums that Companies are required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay under any Section of this Agreement or any other Loan Document, and (ii) amounts owing by Companies to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than any existing Permitted Lien set forth on Schedule P-1 which is specifically identified thereon as entitled to have priority over the Agent’s Liens), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral.

(c) The Lenders with Revolver Commitments shall have no obligation to make additional Advances hereunder to the extent such additional Advances would cause the Revolver Usage to exceed the Maximum Revolver Amount.

 

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(d) Amounts borrowed pursuant to this Section may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

 

  2.2. Intentionally Omitted.

 

  2.3. Borrowing Procedures and Settlements.

(a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Agent (which notice must be received by Agent no later than 10:00 a.m. (California time) on the Business Day prior to the date that is the requested Funding Date in the case of a request for an Advance specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day; provided, however, that in the case of a request for Swing Loan in an amount of $5,000,000, or less, such notice will be timely received if it is received by Agent no later than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date) specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day. At Agent’s election, in lieu of delivering the above-described written request, any Authorized Person may give Agent telephonic notice of such request by the required time, with such telephonic notice to be confirmed in writing within 24 hours of the giving of such notice.

(b) Agent’s Election. Promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i) to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d) in the amount of the requested Borrowing; provided, however, that if Swing Lender declines in its sole discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to have the terms of Section 2.3(c) apply to such requested Borrowing.

(c) Making of Advances.

(i) In the event that Agent shall elect to have the terms of this Section 2.3(c) apply to a requested Borrowing as described in Section 2.3(b), then promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day immediately preceding the Funding Date applicable thereto, by telecopy, telephone, or other similar form of transmission, of the requested Borrowing. Each Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, not later than 10:00 a.m. (California time) on the Funding Date applicable thereto. After Agent’s receipt of the proceeds of such Advances, upon satisfaction of the applicable conditions precedent set forth in Section 3 hereof, Agent shall make the proceeds thereof available to Administrative Borrower on the applicable Funding Date by transferring immediately available funds equal to such proceeds received by Agent to Administrative Borrower’s Designated Account; provided, however, that, subject to

 

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the provisions of Section 2.3(i), Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any Advance if Agent shall have actual knowledge that (1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date.

(ii) Unless Agent receives notice from a Lender on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least 1 Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to Agent for the account of Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrowers on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to Agent in immediately available funds and Agent in such circumstances has made available to Borrowers such amount, that Lender shall on the Business Day following such Funding Date make such amount available to Agent, together with interest at the Defaulting Lender Rate for each day during such period. A notice submitted by Agent to any Lender with respect to amounts owing under this subsection shall be conclusive, absent manifest error. If such amount is so made available, such payment to Agent shall constitute such Lender’s Advance on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Administrative Borrower of such failure to fund and, upon demand by Agent, Borrowers shall pay such amount to Agent for Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances composing such Borrowing. The failure of any Lender to make any Advance on any Funding Date shall not relieve any other Lender of any obligation hereunder to make an Advance on such Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on any Funding Date.

(iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrowers to Agent for the Defaulting Lender’s benefit, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments to each other non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender’s Advance was funded by the other members of the Lender Group) or, if so directed by Administrative Borrower and if no Default or Event of Default had occurred and is continuing (and to the extent such Defaulting Lender’s Advance was not funded by the Lender Group), retain same to be re-advanced to Borrowers as if such Defaulting Lender had made Advances to Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the account

 

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of such Defaulting Lender the amount of all such payments received and retained by it for the account of such Defaulting Lender. Solely for the purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero. This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Agent, and Administrative Borrower shall have waived such Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Borrowers of their duties and obligations hereunder to Agent or to the Lenders other than such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Administrative Borrower at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be acceptable to Agent and Borrowers. In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance Agreement in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being repaid its share of the outstanding Obligations (other than Bank Product Obligations) (including an assumption of its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind whatsoever; provided further, however, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Groups’ or Borrowers’ rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund.

(d) Making of Swing Loans.

(i) In the event Agent shall elect, with the consent of Swing Lender, as a Lender, to have the terms of this Section 2.3(d) apply to a requested Borrowing as described in Section 2.3(b), Swing Lender as a Lender shall make such Advance in the amount of such Borrowing (any such Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(d) being referred to as a “Swing Loan” and such Advances being referred to collectively as “Swing Loans”) available to Borrowers on the Funding Date applicable thereto by transferring immediately available funds to Administrative Borrower’s Designated Account. Each Swing Loan is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Swing Loan shall be eligible for the LIBOR Option and all payments on any Swing Loan shall be payable to Swing

 

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Lender as a Lender solely for its own account (and for the account of the holder of any participation interest with respect to such Swing Loan). Subject to the provisions of Section 2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender shall not make, any Swing Loan if Agent has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (ii) the requested Borrowing would exceed the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making, in its sole discretion, any Swing Loan.

(ii) The Swing Loans shall be secured by the Agent’s Liens, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans.

(e) Agent Advances.

(i) Agent hereby is authorized by Borrowers and the Lenders, from time to time in Agent’s sole discretion, (1) after the occurrence and during the continuance of a Default or an Event of Default, or (2) at any time that any of the other applicable conditions precedent set forth in Section 3 have not been satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in its Permitted Discretion deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of repayment of the Obligations (other than the Bank Product Obligations), or (C) to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement, including Lender Group Expenses and the costs, fees, and expenses described in Section 10 (any of the Advances described in this Section 2.3(e) shall be referred to as “Agent Advances”). Each Agent Advance is an Advance hereunder and shall be subject to all the terms and conditions applicable to other Advances, except that no such Agent Advance shall be eligible for the LIBOR Option and all payments thereon shall be payable to Agent solely for its own account (and for the account of the holder of any participation interest with respect to such Agent Advance).

(ii) The Agent Advances shall be repayable on demand and secured by the Agent’s Liens granted to Agent under the Loan Documents, shall constitute Advances and Obligations hereunder, and shall bear interest at the rate applicable from time to time to Advances that are Base Rate Loans.

 

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(f) Settlement. It is agreed that each Lender’s funded portion of the Advances is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of or enforceable by Borrowers) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to the Advances, the Swing Loans, and the Agent Advances shall take place on a periodic basis in accordance with the following provisions:

(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly basis, or on a more frequent basis if so determined by Agent, (1) on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect to Collections received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. (California time) on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the “Settlement Date”). Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Advances, Swing Loans, and Agent Advances for the period since the prior Settlement Date. Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)): (y) if a Lender’s balance of the Advances, Swing Loans, and Agent Advances exceeds such Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. (California time) on the Settlement Date, transfer in immediately available funds to the account of such Lender as such Lender may designate, an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances, and (z) if a Lender’s balance of the Advances, Swing Loans, and Agent Advances is less than such Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall no later than 12:00 p.m. (California time) on the Settlement Date transfer in immediately available funds to the Agent’s Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent Advances. Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loan or Agent Advance and, together with the portion of such Swing Loan or Agent Advance representing Swing Lender’s Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.

(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and Agent Advances is less than, equal to, or greater than such Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such Lender after such application, such net amount shall be distributed by Agent to that Lender as part of such next Settlement.

 

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(iii) Between Settlement Dates, Agent, to the extent no Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Advances, for application to Swing Lender’s Pro Rata Share of the Advances. If, as of any Settlement Date, Collections received since the then immediately preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding Advances of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances. During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Agent Advances, and each Lender (subject to the effect of letter agreements between Agent and individual Lenders) with respect to the Advances other than Swing Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable.

(g) Notation. Agent shall record on its books the principal amount of the Advances owing to each Lender, including the Swing Loans owing to Swing Lender, and Agent Advances owing to Agent, and the interests therein of each Lender, from time to time. In addition, each Lender is authorized, at such Lender’s option, to note the date and amount of each payment or prepayment of principal of such Lender’s Advances in its books and records, including computer records, such books and records constituting conclusive evidence, absent manifest error, of the accuracy of the information contained therein.

(h) Lenders’ Failure to Perform. All Advances (other than Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Advance (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder.

(i) Optional Overadvances. Any contrary provision of this Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Advances (including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be created, so long as (i) after giving effect to such Advances (including a Swing Loan), the Revolver Usage does not exceed the Borrowing Base by more than $2,500,000, (ii) after giving effect to such Advances (including a Swing Loan) the outstanding Revolver Usage (except for and

 

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excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount, and (iii) at the time of the making of any such Advance (including a Swing Loan), Agent does not believe, in good faith, that the Overadvance created by such Advance will be outstanding for more than 90 days. The foregoing provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrowers in any way. The Advances and Swing Loans, as applicable, that are made pursuant to this Section 2.3(i) shall be subject to the same terms and conditions as any other Advance or Swing Loan, as applicable, except that they shall not be eligible for the LIBOR Option and the rate of interest applicable thereto shall be the rate applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof without regard to the presence or absence of a Default or Event of Default.

(i) In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the preceding paragraph, regardless of the amount of, or reason for, such excess, Agent shall notify Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers and intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to Borrowers to an amount permitted by the preceding paragraph. In the event Agent or any Lender disagrees over the terms of reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders.

(ii) Each Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(f) for the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(i), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses.

 

  2.4. Payments.

(a) Payments by Borrowers.

(i) Except as otherwise expressly provided herein, all payments by Borrowers shall be made to Agent’s Account for the account of the Lender Group and shall be made in immediately available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment received by Agent later than 11:00 a.m. (California time), shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day.

 

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(ii) Unless Agent receives notice from Administrative Borrower prior to the date on which any payment is due to the Lenders that Borrowers will not make such payment in full as and when required, Agent may assume that Borrowers have made (or will make) such payment in full to Agent on such date in immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Borrowers do not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid.

(b) Apportionment and Application.

(i) Except as otherwise provided with respect to Defaulting Lenders and except as otherwise provided in the Loan Documents (including letter agreements between Agent and individual Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and payments of fees and expenses (other than fees or expenses that are for Agent’s separate account, after giving effect to any letter agreements between Agent and individual Lenders) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee relates. All payments shall be remitted to Agent and all such payments (other than payments received while no Default or Event of Default has occurred and is continuing and which relate to the payment of principal or interest of specific Obligations or which relate to the payment of specific fees), and all proceeds of Accounts or other Collateral received by Agent, shall be applied as follows:

(A) first, to pay any Lender Group Expenses then due to Agent under the Loan Documents, until paid in full,

(B) second, to pay any Lender Group Expenses then due to the Lenders under the Loan Documents, on a ratable basis, until paid in full,

(C) third, to pay any fees then due to Agent (for its separate accounts, after giving effect to any letter agreements between Agent and the individual Lenders) under the Loan Documents until paid in full,

(D) fourth, to pay any fees then due to any or all of the Lenders (after giving effect to any letter agreements between Agent and individual Lenders) under the Loan Documents, on a ratable basis, until paid in full,

(E) fifth, to pay interest due in respect of all Agent Advances, until paid in full,

 

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(F) sixth, ratably to pay interest due in respect of the Advances (other than Agent Advances) and the Swing Loans until paid in full,

(G) seventh, to pay the principal of all Agent Advances until paid in full,

(H) eighth, to pay the principal of all Swing Loans until paid in full,

(I) ninth, so long as no Event of Default has occurred and is continuing, and at Agent’s election (which election Agent agrees will not be made if an Overadvance would be created thereby), to pay amounts then due and owing by Administrative Borrower or its Subsidiaries in respect of Bank Products, until paid in full,

(J) tenth, so long as no Event of Default has occurred and is continuing, to pay the principal of all Advances until paid in full,

(K) eleventh, if an Event of Default has occurred and is continuing, ratably (i) to pay the principal of all Advances until paid in full, and (ii) to Agent, to be held by Agent, for the benefit of Wells Fargo or its Affiliates, as applicable, as cash collateral in an amount up to the amount of the Bank Products Reserve established prior to the occurrence of, and not in contemplation of, the subject Event of Default until Administrative Borrower’s and its Subsidiaries’ obligations in respect of the then extant Bank Products have been paid in full or the cash collateral amount has been exhausted,

(L) twelfth, if an Event of Default has occurred and is continuing, to Agent, to be held by Agent, for the ratable benefit of Issuing Lender and those Lenders having a Revolver Commitment, as cash collateral in an amount up to 105% of the then extant Letter of Credit Usage until paid in full,

(M) thirteenth, to pay any other Obligations (including Bank Product Obligations) until paid in full, and

(N) fourteenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

(ii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(h).

(iii) In each instance, so long as no Event of Default has occurred and is continuing, Section 2.4(b) shall not be deemed to apply to any payment by Borrowers specified by Borrowers to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement.

 

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(iv) For purposes of the foregoing, “paid in full” means payment of all amounts owing under the Loan Documents according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not the same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

(v) In the event of a direct conflict between the priority provisions of this Section 2.4 and other provisions contained in any other Loan Document, it is the intention of the parties hereto that such priority provisions in such documents shall be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.4 shall control and govern.

(c) Mandatory Prepayments.

(i) Equity. Within 1 Business Day of the date of the issuance by any Company or any of its Subsidiaries of any shares of its or their Stock (other than the issuance of Stock of Parent to directors, officers and employees of a Company pursuant to employee stock option plans (or other employee incentive plans or other compensation arrangements) approved by the Board of Directors), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(b) in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such issuance. The provisions of this Section 2.4(c)(i) shall not be deemed to be implied consent to any such issuance otherwise prohibited by the terms and conditions of this Agreement.

 

  2.5. Overadvances.

If, at any time or for any reason, the amount of Obligations (other than Bank Product Obligations) owed by Borrowers to the Lender Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or percentage limitations set forth in Sections 2.1 or 2.12, (an “Overadvance”), Borrowers immediately shall pay to Agent, in cash, the amount of such excess, which amount shall be used by Agent to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b). In addition, Borrowers hereby promise to pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full to the Lender Group as and when due and payable under the terms of this Agreement and the other Loan Documents.

 

  2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in clause (c) below, all Obligations (except for undrawn Letters of Credit and except for Bank Product Obligations) that have

 

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been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof as follows: (i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin.

(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of the Lenders with a Revolver Commitment, subject to any letter agreement between Agent and individual Lenders), a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at a rate equal to 2.25% per annum times the Daily Balance of the undrawn amount of all outstanding Letters of Credit.

(c) Default Rate. Upon the occurrence and during the continuation of an Event of Default (and at the election of Agent or the Required Lenders),

(i) all Obligations (except for undrawn Letters of Credit and except for Bank Product Obligations) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 4 percentage points above the per annum rate otherwise applicable hereunder, and

(ii) the Letter of Credit fee provided for above shall be increased to 4 percentage points above the per annum rate otherwise applicable hereunder.

(d) Payment. Interest, Letter of Credit fees, and all other fees payable hereunder shall be due and payable, in arrears, on the first day of each month at any time that Obligations or Commitments are outstanding. Borrowers hereby authorize Agent, from time to time, without prior notice to Borrowers, to charge such interest and fees, all Lender Group Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.12(e) (as and when accrued or incurred), the fees and costs provided for in Section 2.11 (as and when accrued or incurred), and all other payments as and when due and payable under any Loan Document (including any amounts due and payable to Wells Fargo or its Affiliates in respect of Bank Products up to the amount of the then extant Bank Products Reserve) to Borrowers’ Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being charged to Borrowers’ Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder.

(e) Computation. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate.

 

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(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrowers and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

 

  2.7. Cash Management.

(a) Companies shall (i) establish and maintain cash management services of a type and on terms satisfactory to Agent at one or more of the banks set forth on Schedule 2.7(a) (each a “Cash Management Bank”), and shall request in writing and otherwise take such reasonable steps to ensure that all of its Account Debtors forward payment of the amounts owed by them directly to such Cash Management Bank, and (ii) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all Collections (including those sent directly by Account Debtors to a Cash Management Bank) into a bank account in Agent’s name (a “Cash Management Account”) at one of the Cash Management Banks.

(b) Each Cash Management Bank shall establish and maintain Cash Management Agreements with Agent and Companies, in form and substance acceptable to Agent. Each such Cash Management Agreement shall provide, among other things, that (i) all items of payment deposited in such Cash Management Account and proceeds thereof are held by such Cash Management Bank agent or bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of setoff or recoupment or any other claim against the applicable Cash Management Account, other than for payment of its service fees and other charges directly related to the administration of such Cash Management Account and for returned checks or other items of payment, and (iii) it immediately will forward by daily sweep all amounts in the applicable Cash Management Account to the Agent’s Account.

(c) So long as no Default or Event of Default has occurred and is continuing, Administrative Borrower may amend Schedule 2.7(a) or (b) to add or replace a Cash Management Account Bank or Cash Management Account; provided, however, that (i) such prospective Cash Management Bank shall be satisfactory to Agent and Agent shall have consented in writing in advance to the opening of such Cash Management Account with the prospective Cash Management Bank, and (ii) prior to the time of the opening of such Cash Management Account, Companies and such prospective Cash Management Bank shall have executed and delivered to Agent a Cash Management Agreement. Companies shall close any of their Cash Management Accounts (and establish replacement cash management accounts in accordance with the foregoing sentence) promptly and in any event within 30

 

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days of notice from Agent that the creditworthiness of any Cash Management Bank is no longer acceptable in Agent’s reasonable judgment, or as promptly as practicable and in any event within 60 days of notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the Cash Management Bank with respect to Cash Management Accounts or Agent’s liability under any Cash Management Agreement with such Cash Management Bank is no longer acceptable in Agent’s reasonable judgment.

(d) The Cash Management Accounts shall be cash collateral accounts, with all cash, checks and similar items of payment in such accounts securing payment of the Obligations, and in which Companies are hereby deemed to have granted a Lien to Agent.

 

  2.8. Crediting Payments; Float Charge.

The receipt of any payment item by Agent (whether from transfers to Agent by the Cash Management Banks pursuant to the Cash Management Agreements or otherwise) shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to the Agent’s Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into the Agent’s Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is received into the Agent’s Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day. From and after the Closing Date, Agent shall be entitled to charge Borrowers for 1 Business Day of ‘clearance’ or ‘float’ at the rate applicable to Base Rate Loans under Section 2.6 on all Collections that are received by Borrowers (regardless of whether forwarded by the Cash Management Banks to Agent). This across-the-board 1 Business Day clearance or float charge on all Collections is acknowledged by the parties to constitute an integral aspect of the pricing of the financing of Borrowers and shall apply irrespective of whether or not there are any outstanding monetary Obligations; the effect of such clearance or float charge being the equivalent of charging 1 Business Day of interest on such Collections. The parties acknowledge and agree that the economic benefit of the foregoing provisions of this Section 2.8 shall be for the exclusive benefit of Agent.

 

  2.9. Designated Account.

Agent is authorized to make the Advances, and Issuing Lender is authorized to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.6(d). Administrative Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances requested by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower, any Advance, Agent Advance, or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be made to the Designated Account.

 

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  2.10. Maintenance of Loan Account; Statements of Obligations.

Agent shall maintain an account on its books in the name of Borrowers (the “Loan Account”) on which Borrowers will be charged with all Advances (including Agent Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account, the Letters of Credit issued by Issuing Lender for Borrowers’ account, and with all other payment Obligations hereunder or under the other Loan Documents (except for Bank Product Obligations), including, accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be credited with all payments received by Agent from Borrowers or for Borrowers’ account, including all amounts received in the Agent’s Account from any Cash Management Bank. Agent shall render statements regarding the Loan Account to Administrative Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Group Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and the Lender Group unless, within 30 days after receipt thereof by Administrative Borrower, Administrative Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements.

 

  2.11. Fees.

Borrowers shall pay to Agent the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter) and shall be apportioned among the Lenders in accordance with the terms of letter agreements between Agent and individual Lenders:

(a) Unused Line Fee. On the first day of each month during the term of this Agreement, an unused line fee in the amount equal to 0.5% per annum times the result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the average Daily Balance of Advances that were outstanding during the immediately preceding month, plus (ii) the average Daily Balance of the Letter of Credit Usage during the immediately preceding month,

(b) Amended and Restated Fee Letter Fees. As and when due and payable under the terms of the Amended and Restated Fee Letter, Borrowers shall pay to Agent the fees set forth in the Amended and Restated Fee Letter, and

(c) Audit, Appraisal, and Valuation Charges. For the separate account of Agent, audit, appraisal, and valuation fees and charges as follows, (i) a fee of $1,000 per day, per auditor, plus out-of-pocket expenses for each financial audit of a Borrower performed by personnel employed by Agent, (ii) if implemented, a fee of $1,000 per day, per applicable individual, plus out of pocket expenses for the establishment of electronic collateral reporting systems, and (iii) the actual charges paid or incurred by Agent for each

 

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appraisal of the Collateral, and (iv) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits or quality of earnings analyses of Borrowers or their Subsidiaries, to establish electronic collateral reporting systems, to appraise the Collateral, or any portion thereof, or to assess a Borrower’s or its subsidiaries’ business valuation.

 

  2.12. Letters of Credit

(a) Subject to the terms and conditions of this Agreement, the Issuing Lender agrees to issue letters of credit for the account of Borrowers (each, an “L/C”) or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an “L/C Undertaking”) with respect to letters of credit issued by an Underlying Issuer (as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or extension of an outstanding L/C or L/C Undertaking), Administrative Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the requested date of issuance, amendment, renewal, or extension) a notice requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be amended, renewed, or extended, the date of issuance, amendment, renewal, or extension, the date on which such L/C or L/C Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name and address of the beneficiary thereof (or of the Underlying Letter of Credit, as applicable), and such other information as shall be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing Lender, Borrowers also shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing Lender shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested Letter of Credit:

(i) the Letter of Credit Usage would exceed the Borrowing Base less the amount of outstanding Advances, or

(ii) the Letter of Credit Usage would exceed $5,000,000, or

(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the then extant amount of outstanding Advances.

Borrowers and the Lender Group acknowledge and agree that certain Underlying Letters of Credit may be issued to support letters of credit that already are outstanding as of the Closing Date. Each Letter of Credit (and corresponding Underlying Letter of Credit) shall be in form and substance acceptable to the Issuing Lender (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars. If Issuing Lender is obligated to advance funds under a Letter of Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount equal to such L/C Disbursement not later than 11:00

 

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a.m., California time, on the date that such L/C Disbursement is made, if Administrative Borrower shall have received written or telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by Administrative Borrower prior to such time on such date, then not later than 11:00 a.m., California time, on (i) the Business Day that Administrative Borrower receives such notice, if such notice is received prior to 10:00 a.m., California time, on the date of receipt, and, in the absence of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances that are Base Rate Loans under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C Disbursement shall be discharged and replaced by the resulting Advance. Promptly following receipt by Agent of any payment from Borrowers pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or, to the extent that Lenders have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interest may appear.

(b) Promptly following receipt of a notice of L/C Disbursement pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection on the same terms and conditions as if Borrowers had requested such Advance and Agent shall promptly pay to Issuing Lender the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Lender or the Lenders with Revolver Commitment, the Issuing Lender shall be deemed to have granted to each Lender with a Revolver Commitment, and each Lender with a Revolver Commitment shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing Lender under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender with a Revolver Commitment hereby absolutely and unconditionally agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the date due as provided in clause (a) of this Section, or of any reimbursement payment required to be refunded to Borrowers for any reason. Each Lender with a Revolver Commitment acknowledges and agrees that its obligation to deliver to Agent, for the account of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant to this Section 2.12(b) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender fails to make available to Agent the amount of such Lender’s Pro Rata Share of any payments made by the Issuing Lender in respect of such Letter of Credit as provided in this Section, Agent (for the account of the Issuing Lender) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in full.

 

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(c) Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred by the Lender Group arising out of or in connection with any Letter of Credit; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. Each Borrower agrees to be bound by the Underlying Issuer’s regulations and interpretations of any Underlying Letter of Credit or by Issuing Lender’s interpretations of any L/C issued by Issuing Lender to or for such Borrower’s account, even though this interpretation may be different from such Borrower’s own, and each Borrower understands and agrees that the Lender Group shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrowers’ instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto, except for those errors, negligence or mistakes that constitute the gross negligence or willful misconduct of the Lender Group. Each Borrower understands that the L/C Undertakings may require Issuing Lender to indemnify the Underlying Issuer for certain costs or liabilities arising out of claims by Borrowers against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability incurred by the Lender Group under any L/C Undertaking as a result of the Lender Group’s indemnification of any Underlying Issuer; provided, however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost, expense, or liability that is caused by the gross negligence or willful misconduct of the Issuing Lender or any other member of the Lender Group. Nothing herein shall constitute a waiver of any claim under applicable law that Borrowers, as account parties, may have against the Issuing Lender or the Underlying Issuer in connection with an L/C or an L/C Undertaking, including without limitation a claim for wrongful payment.

(d) Each Borrower hereby authorizes and directs any Underlying Issuer to deliver to the Issuing Lender all instruments, documents, and other writings and property received by such Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the Issuing Lender’s instructions with respect to all matters arising in connection with such Underlying Letter of Credit and the related application.

(e) Any and all charges, commissions, fees, and costs incurred by the Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes of this Agreement and immediately shall be reimbursable by Borrowers to Agent for the account of the Issuing Lender; it being acknowledged and agreed by each Borrower that, as of the Closing Date, the issuance charge imposed by the prospective Underlying Issuer is .825% per annum times the face amount of each Underlying Letter of Credit, that such issuance charge may be changed from time to time, and that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings, and renewals.

(f) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto):

(i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or

 

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(ii) there shall be imposed on the Underlying Issuer or the Lender Group any other condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by the Lender Group, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Administrative Borrower, and Borrowers shall pay on demand such amounts as Agent may specify to be necessary to compensate the Lender Group for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

 

  2.13. LIBOR Option.

(a) Interest and Interest Payment Dates. In lieu of having interest charged at the rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR Option”) to have interest on all or a portion of the Advances be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which the Required Lenders or Agent on behalf thereof elect to accelerate the maturity of all or any portion of the Obligations, or (iii) termination of this Agreement pursuant to the terms hereof. On the last day of each applicable Interest Period, unless Administrative Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has occurred and is continuing, Borrowers no longer shall have the option to request that Advances bear interest at the LIBOR Rate and Agent shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.

(b) LIBOR Election.

(i) Administrative Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California time) at least 3

 

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Business Days prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”). Notice of Administrative Borrower’s election of the LIBOR Option for a permitted portion of the Advances and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time) on the same day. Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the Lenders having a Revolver Commitment.

(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold Agent and the Lenders harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (a) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, “Funding Losses”). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the amount determined by Agent or such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period therefor), minus (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which Agent or such Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market. A certificate of Agent or a Lender delivered to Administrative Borrower setting forth any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error.

(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any given time. Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess thereof.

(c) Prepayments. Borrowers may prepay LIBOR Rate Loans at any time; provided, however, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any automatic prepayment through the required application by Agent of proceeds of Collections in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with clause (b) above.

 

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(d) Special Provisions Applicable to LIBOR Rate.

(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the Reserve Percentage, which additional or increased costs would increase the cost of funding loans bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give Administrative Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Administrative Borrower may, by notice to such affected Lender (y) require such Lender to furnish to Administrative Borrower a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made (together with any amounts due under clause (b)(ii) above).

(ii) In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Advances or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Administrative Borrower and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

(e) No Requirement of Matched Funding. Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans.

 

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  2.14. Capital Requirements.

If, after the date hereof, any Lender determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change in the interpretation or application thereof by any Governmental Authority charged with the administration thereof, or (ii) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), the effect of reducing the return on such Lender’s or such holding company’s capital as a consequence of such Lender’s Commitments hereunder to a level below that which such Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration such Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by such Lender to be material, then such Lender may notify Administrative Borrower and Agent thereof. Following receipt of such notice, Borrowers agree to pay such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by such Lender of a statement in the amount and setting forth in reasonable detail such Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error). In determining such amount, such Lender may use any reasonable averaging and attribution methods.

 

  2.15. Joint and Several Liability of Borrowers.

(a) Each of Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Agent and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.

(b) Each of Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 2.15), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Person composing Borrowers without preferences or distinction among them.

(c) If and to the extent that any of Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Persons composing Borrowers will make such payment with respect to, or perform, such Obligation.

(d) The Obligations of each Person composing Borrowers under the provisions of this Section 2.15 constitute the absolute and unconditional, full recourse Obligations of each Person composing Borrowers enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.

 

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(e) Except as otherwise expressly provided in this Agreement, each Person composing Borrowers hereby waives notice of acceptance of its joint and several liability, notice of any Advances or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Person composing Borrowers hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or Lenders at any time or times in respect of any default by any Person composing Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Person composing Borrowers. Without limiting the generality of the foregoing, each of Borrowers assents to any other action or delay in acting or failure to act on the part of any Agent or Lender with respect to the failure by any Person composing Borrowers to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 2.15 afford grounds for terminating, discharging or relieving any Person composing Borrowers, in whole or in part, from any of its Obligations under this Section 2.15, it being the intention of each Person composing Borrowers that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Person composing Borrowers under this Section 2.15 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Person composing Borrowers under this Section 2.15 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Person composing Borrowers or any Agent or Lender. The joint and several liability of the Persons composing Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, constitution or place of formation of any of the Persons composing Borrowers or any Agent or Lender.

(f) Each Person composing Borrowers represents and warrants to Agent and Lenders that such Borrower is currently informed of the financial condition of Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Person composing Borrowers further represents and warrants to Agent and Lenders that such Borrower has read and understands the terms

 

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and conditions of the Loan Documents. Each Person composing Borrowers hereby covenants that such Borrower will continue to keep informed of Borrowers’ financial condition, the financial condition of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations.

(g) The provisions of this Section 2.15 are made for the benefit of the Agent, the Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all of the Persons composing Borrowers as often as occasion therefor may arise and without requirement on the part of any such Agent, Lender, successor or assign first to marshal any of its or their claims or to exercise any of its or their rights against any of the other Persons composing Borrowers or to exhaust any remedies available to it or them against any of the other Persons composing Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.15 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by any Agent or Lender upon the insolvency, bankruptcy or reorganization of any of the Persons composing Borrowers, or otherwise, the provisions of this Section 2.15 will forthwith be reinstated in effect, as though such payment had not been made.

(h) Each of the Persons composing Borrowers hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Persons composing Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to the Agent or the Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to any Agent or Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.

(i) Each of the Persons composing Borrowers hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such indebtedness, such

 

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amounts shall be collected, enforced and received by such Borrower as trustee for the Agent, and the Agent shall deliver any such amounts to the Administrative Agent for application to the Obligations in accordance with Section 2.4(b).

(j) Each of the Credit Parties has jointly and severally guaranteed the Obligations of Borrowers pursuant to the Joint and Several Guaranty.

 

3. CONDITIONS; TERM OF AGREEMENT.

 

  3.1. Conditions Precedent to the Initial Extension of Credit.

The effectiveness of this Agreement is subject to the fulfillment, to the satisfaction of Agent, of each of the conditions precedent set forth below:

(a) Agent shall have received each of the documents listed on Exhibit 3.1, each such document to be in form and substance satisfactory to Agent, duly executed, and in full force and effect;

(b) Agent shall have received a certificate from the Secretary of each Borrower attesting to the resolutions of such Borrower’s Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which such Borrower is a party and authorizing specific officers of such Borrower to execute the same;

(c) Agent shall have received copies of each Borrower’s Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of such Borrower;

(d) Agent shall have received a certificate of status with respect to each Borrower, dated within 20 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Borrower, which certificate shall indicate that such Borrower is in good standing in such jurisdiction;

(e) Agent shall have received certificates of status with respect to each Borrower, each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Borrower) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that such Borrower is in good standing in such jurisdictions;

(f) Agent shall have received a certificate from the Secretary of each Credit Party attesting to the resolutions of such Credit Party’s Board of Directors authorizing its execution, delivery, and performance of the Loan Documents to which such Credit Party is a party and authorizing specific officers of such Credit Party to execute the same;

 

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(g) Agent shall have received copies of each Credit Party’s Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of such Credit Party;

(h) Agent shall have received a certificate of status with respect to each Credit Party, dated within 20 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Credit Party, which certificate shall indicate that such Credit Party is in good standing in such jurisdiction;

(i) Agent shall have received certificates of status with respect to each Credit Party, each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Credit Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that such Credit Party is in good standing in such jurisdictions;

(j) Agent shall have received a certificate of insurance, together with the endorsements thereto, as required by Section 6.8, the form and substance of which shall be satisfactory to Agent;

(k) Agent shall have received opinions of Companies’ counsel in form and substance satisfactory to Agent;

(l) Agent shall have received satisfactory evidence (including a certificate of the chief financial officer of Parent) that all tax returns required to be filed by Companies have been timely filed and all taxes upon Companies or their properties, assets, income, and franchises (including Real Property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Permitted Protest;

(m) Borrowers shall have the Required Availability after giving effect to the initial extensions of credit hereunder;

(n) Each Borrower shall have registered all of its copyrights that constitute a material asset, constitute copyrightable software, or are necessary to the operation of its business, including the copyrights listed on Schedule 3.1.

(o) Agent shall have completed its business, legal, and collateral due diligence, including (i) a collateral audit and review of Companies’ books and records and verification of Companies’ representations and warranties to the Lender Group, the results of which shall be satisfactory to Agent, and (ii) an inspection of each of the locations where Inventory is located, the results of which shall be satisfactory to Agent;

(p) Agent shall have received completed reference checks with respect to Borrowers’ senior management, the results of which are satisfactory to Agent in its sole discretion;

 

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(q) the holders of at least 70% of the Private Preferred Stock shall have agreed to extend the redemption date of such Stock from October 31, 2008 to no earlier than December 31, 2011;

(r) each creditor that holds a Series B Senior Subordinated Secured Note or a Series C Subordinated Unsecured Note shall have agreed to extend the maturity date of such bites from October 31, 2008 to no earlier than December 31, 2011.

(s) Agent shall have received Borrowers’ Closing Date Business Plan;

(t) Agent shall have completed its review of Borrowers’ government contracts and be satisfied with the results thereof, and Borrower shall have complied with the Assignment of Claims Act for each of their government contracts;

(u) Borrowers shall pay all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; and

(v) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Agent.

 

  3.2. Intentionally Omitted.

 

  3.3. Conditions Precedent to all Extensions of Credit.

The obligation of the Lender Group (or any member thereof) to make all Advances (or to extend any other credit hereunder) shall be subject to the following conditions precedent:

(a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality, Material Adverse Effect or a dollar threshold in the text thereof) on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof; and

(c) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against any Company, Agent, any Lender, or any of their Affiliates.

 

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  3.4. Term.

This Agreement shall become effective upon the execution and delivery hereof by Companies, Agent, and the Lenders and shall continue in full force and effect for a term ending on September 30, 2011 (the “Maturity Date”). The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.

 

  3.5. Effect of Termination.

On the date of termination of this Agreement, all Obligations (including contingent reimbursement obligations of Borrowers with respect to any outstanding Letters of Credit and including all Bank Products Obligations) immediately shall become due and payable without notice or demand (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations). No termination of this Agreement, however, shall relieve or discharge Borrowers of their duties, Obligations, or covenants hereunder and the Agent’s Liens in the Collateral shall remain in effect until all Obligations have been fully and finally discharged and the Lender Group’s obligations to provide additional credit hereunder have been terminated. When this Agreement has been terminated and all of the Obligations have been fully and finally discharged and the Lender Group’s obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and deliver any UCC termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent’s Liens and all notices of security interests and liens previously filed by Agent with respect to the Obligations.

 

  3.6. Early Termination by Borrowers.

Borrowers have the option, at any time upon 90 days prior written notice by Administrative Borrower to Agent, to terminate this Agreement by paying to Agent, for the benefit of the Lender Group, in cash, the Obligations (including (a) either (i) providing cash collateral to be held by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations), in full, together with the Applicable Prepayment Premium (to be allocated based upon letter agreements between Agent and individual Lenders). If Administrative Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall terminate and Borrowers shall be obligated to repay the Obligations (including (a) either (i) providing cash collateral to be held

 

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by Agent for the benefit of those Lenders with a Revolver Commitment in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash collateral to be held by Agent for the benefit of Wells Fargo or its Affiliates with respect to the then extant Bank Products Obligations), in full, together with the Applicable Prepayment Premium, on the date set forth as the date of termination of this Agreement in such notice; provided, that Borrowers shall not be obligated to pay the Applicable Prepayment Premium if the Obligations are repaid in full with proceeds of a financing provided by Wells Fargo. In the event of the termination of this Agreement and repayment of the Obligations at any time prior to the Maturity Date, for any other reason, including (a) termination upon the election of the Required Lenders to terminate after the occurrence of an Event of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise of the Obligations by the confirmation of a plan of reorganization, or any other plan of compromise, restructure, or arrangement in any Insolvency Proceeding, then, in view of the impracticability and extreme difficulty of ascertaining the actual amount of damages to the Lender Group or profits lost by the Lender Group as a result of such early termination, and by mutual agreement of the parties as to a reasonable estimation and calculation of the lost profits or damages of the Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to be allocated based upon letter agreements between Agent and individual Lenders), measured as of the date of such termination.

 

4. CREATION OF SECURITY INTEREST.

 

  4.1. Grant of Security Interest.

Each Company hereby grants to Agent, for the benefit of the Lender Group (and hereby reaffirms its prior grant pursuant to the terms of the Original Loan and Security Agreement to Agent for the benefit of the Lender Group, of), a continuing security interest in all of its right, title, and interest in all currently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all of the Obligations in accordance with the terms and conditions of the Loan Documents and in order to secure prompt performance by Companies of each of their covenants and duties under the Loan Documents. The Agent’s Liens in and to the Collateral shall attach to all Collateral without further act on the part of Agent or Companies. Anything contained in this Agreement or any other Loan Document to the contrary notwithstanding, except for Permitted Dispositions, Companies have no authority, express or implied, to dispose of any item or portion of the Collateral. It is the intention of the parties to this Agreement that the security interests granted hereby are a continuation and reaffirmation of the security interests granted under the Original Loan and Security Agreement.

 

  4.2. Negotiable Collateral.

In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, and if and to the extent that perfection or priority of Agent’s security interest is dependent on or enhanced by possession, the applicable Company, immediately upon the request of Agent, shall endorse and deliver physical possession of such Negotiable Collateral to Agent.

 

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  4.3. Collection of Accounts, General Intangibles, and Negotiable Collateral.

At any time after the occurrence and during the continuation of an Event of Default, Agent or Agent’s designee may (a) notify Account Debtors of Companies that the Accounts, chattel paper, or General Intangibles have been assigned to Agent or that Agent has a security interest therein, or (b) collect the Accounts, chattel paper, or General Intangibles directly and charge the collection costs and expenses to the Loan Account. Each Company agrees that it will hold in trust for the Lender Group, as the Lender Group’s trustee, any Collections that it receives and immediately will deliver said Collections to Agent or a Cash Management Bank in their original form as received by the applicable Company.

 

  4.4. Delivery of Additional Documentation Required.

At any time upon the request of Agent, Companies shall execute and deliver to Agent, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, and all other documents (the “Additional Documents”) that Agent may request in its Permitted Discretion, in form and substance satisfactory to Agent, to perfect and continue perfected or better perfect the Agent’s Liens in the Collateral (whether now owned or hereafter arising or acquired), to create and perfect Liens in favor of Agent in any Real Property acquired after the Closing Date, and in order to fully consummate all of the transactions contemplated hereby and under the other Loan Documents. To the maximum extent permitted by applicable law, each Company authorizes Agent to execute any such Additional Documents in the applicable Company’s name and authorize Agent to file such executed Additional Documents in any appropriate filing office. In addition, on a quarterly basis (or more frequent periodic basis as Agent shall require), Companies shall (a) provide Agent with a report of all new patentable, copyrightable, or trademarkable materials acquired or generated by Companies during the prior period, (b) cause all patents, copyrights, and trademarks acquired or generated by Companies that are not already the subject of a registration with the appropriate filing office (or an application therefor diligently prosecuted) to be registered with such appropriate filing office in a manner sufficient to impart constructive notice of Companies’ ownership thereof, and (c) cause to be prepared, executed, and delivered to Agent supplemental schedules to the applicable Loan Documents to identify such patents, copyrights, and trademarks as being subject to the security interests created thereunder.

 

  4.5. Power of Attorney.

Each Company hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent’s officers, employees, or agents designated by Agent) as such Company’s true and lawful attorney, with power to (a) if such Company refuses to, or fails timely to execute and deliver any of the documents described in Section 4.4, sign the name of such Company on any of the documents described in Section 4.4, (b) at any time that an Event of

 

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Default has occurred and is continuing, sign such Company’s name on any invoice or bill of lading relating to the Collateral, drafts against Account Debtors, or notices to Account Debtors, (c) send requests for verification of Accounts, (d) endorse such Company’s name on any Collection item that may come into the Lender Group’s possession, (e) at any time that an Event of Default has occurred and is continuing, make, settle, and adjust all claims under such Company’s policies of insurance and make all determinations and decisions with respect to such policies of insurance, and (f) at any time that an Event of Default has occurred and is continuing, settle and adjust disputes and claims respecting the Accounts, chattel paper, or General Intangibles directly with Account Debtors, for amounts and upon terms that Agent determines to be reasonable, and Agent may cause to be executed and delivered any documents and releases that Agent determines to be necessary. The appointment of Agent as each Company’s attorney, and each and every one of its rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed and the Lender Group’s obligations to extend credit hereunder are terminated.

 

  4.6. Right to Inspect.

Agent and each Lender (through any of their respective officers, employees, or agents) shall have the right, from time to time hereafter to inspect the Books and to check, test, and appraise the Collateral in order to verify Companies’ financial condition or the amount, quality, value, condition of, or any other matter relating to, the Collateral.

 

  4.7. Control Agreements.

Each Company agrees that it will not transfer assets out of any Securities Accounts other than as permitted under Section 7.19 and, if to another securities intermediary, unless each of the applicable Company, Agent, and the substitute securities intermediary have entered into a Control Agreement. No arrangement contemplated hereby or by any Control Agreement in respect of any Securities Accounts or other Investment Property shall be modified by Companies without the prior written consent of Agent. Upon the occurrence and during the continuance of a Default or Event of Default, Agent may notify any securities intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to the Agent’s Account.

 

  4.8. DDAs.

No Company shall establish any DDA or other deposit account after the Closing Date unless contemporaneously with the establishment of each such DDA or other deposit account, the bank at which the DDA or other deposit account is established enters into a Control Agreement with Agent.

 

  4.9. Commercial Tort Claims.

As of the Closing Date, no Company holds any commercial tort claims, except as set forth on Schedule 4.9. Each Company agrees that it shall notify Agent if it obtains any commercial tort claim and take such actions as Agent shall request to perfect Agent’s lien on such commercial tort claim.

 

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5. REPRESENTATIONS AND WARRANTIES.

In order to induce the Lender Group to enter into this Agreement, each Company makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects, as of the date hereof, and shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of the making of each Advance (or other extension of credit) made thereafter, as though made on and as of the date of such Advance (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

 

  5.1. No Encumbrances.

Each Company has good and indefeasible title to its Collateral and the Real Property, free and clear of Liens except for Permitted Liens.

 

  5.2. Eligible Accounts.

The Eligible Accounts are bona fide existing payment obligations of Account Debtors created by the sale and delivery of Inventory or the rendition of services to such Account Debtors in the ordinary course of Borrowers’ business, owed to Borrowers without defenses, disputes, offsets, counterclaims, or rights of return or cancellation. As to each Account that is identified by Administrative Borrower as an Eligible Account in a borrowing base report submitted to Agent, such Account is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Accounts. Without limiting the foregoing, any Account identified by a Borrower as an Eligible Account that is owing by the United States, or any department, agency or instrumentality of the United States (i) arises under a contract that does not prohibit the assignment thereof, (ii) arises under a contract that specifies payments totaling $1,000 or more, and (iii) has been assigned to Agent in compliance with the Assignment of Claims Act, 31 U.S.C. § 3727.

 

  5.3. Copyrights.

Schedule 3.1 lists all copyrights of any Borrower that constitute a material asset, constitute copyrightable software or are necessary to the operation of the business of such Borrower.

 

  5.4. Equipment.

All of the Equipment is used or held for use in Companies’ business and is fit for such purposes.

 

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  5.5. Location of Inventory and Equipment.

The Inventory and Equipment are not stored with a bailee, warehouseman, or similar party and are located only at the locations identified on Schedule 5.5.

 

  5.6. Inventory Records.

Each Company keeps correct and accurate records itemizing and describing the type, quality, and quantity of its Inventory and the book value thereof.

 

  5.7. Location of Chief Executive Office; FEIN.

The chief executive office of each Company is located at the address indicated in Schedule 5.7 and each Company’s FEIN is identified in Schedule 5.7.

 

  5.8. Due Organization and Qualification; Subsidiaries

(a) Each Company is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where the failure to be so qualified reasonably could be expected to have a Material Adverse Change.

(b) Set forth on Schedule 5.8(b), is a complete and accurate description of the authorized capital Stock of each Company, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 5.8(b), there are no subscriptions, options, warrants, or calls relating to any shares of each Company’s capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Company is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital Stock or any security convertible into or exchangeable for any of its capital Stock.

(c) Set forth on Schedule 5.8(c), is a complete and accurate list of each Company’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization; (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries; and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by the applicable Company. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable.

(d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options, warrants, or calls relating to any shares of any Company’s Subsidiaries’ capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. No Company or any of its respective Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of any Company’s Subsidiaries’ capital Stock or any security convertible into or exchangeable for any such capital Stock.

 

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  5.9. Due Authorization; No Conflict.

(a) As to each Company, the execution, delivery, and performance by such Company of this Agreement and the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Company.

(b) As to each Company, the execution, delivery, and performance by such Company of this Agreement and the Loan Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation applicable to any Company, the Governing Documents of any Company, or any order, judgment, or decree of any court or other Governmental Authority binding on any Company, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of any Company, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Company, other than Permitted Liens, or (iv) require any approval of any Company’s interestholders or any approval or consent of any Person under any material contractual obligation of any Company.

(c) Other than the filing of financing statements and fixture filings, the execution, delivery, and performance by each Company of this Agreement and the Loan Documents to which such Company is a party 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 or other Person.

(d) As to each Company, this Agreement and the other Loan Documents to which such Company is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Company will be the legally valid and binding obligations of such Company, enforceable against such Company in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

(e) The Agent’s Liens are validly created, perfected, and first priority Liens, subject only to Permitted Liens

 

  5.10. Litigation.

Other than those matters disclosed on Schedule 5.10, there are no actions, suits, or proceedings pending or, to the best knowledge of Companies, threatened against Companies, or any of their Subsidiaries, as applicable, except for (a) matters that are fully covered by insurance (subject to customary deductibles), and (b) matters arising after the Closing Date that, if decided adversely to Companies, or any of their Subsidiaries, as applicable, reasonably could not be expected to result in a Material Adverse Change.

 

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  5.11. No Material Adverse Change.

All financial statements relating to Companies that have been delivered by Companies to the Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, Companies’ financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Companies since December 31, 2006.

 

  5.12. Fraudulent Transfer.

(a) Each Borrower is Solvent.

(b) No transfer of property is being made by any Company and no obligation is being incurred by any Company in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Companies.

 

  5.13. Employee Benefits.

None of Companies, any of their Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.

 

  5.14. Environmental Condition.

Except as set forth on Schedule 5.14, (a) to Companies’ knowledge, none of Companies’ properties or assets has ever been used by Companies or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such production, storage, handling, treatment, release or transport was in violation, in any material respect, of applicable Environmental Law, (b) to Companies’ knowledge, none of Companies’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) none of Companies have received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by Companies, and (d) none of Companies have received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by any Company resulting in the releasing or disposing of Hazardous Materials into the environment.

 

  5.15. Brokerage Fees.

Companies have not utilized the services of any broker or finder in connection with Companies’ obtaining financing from the Lender Group under this Agreement and no brokerage commission or finders fee is payable by Companies in connection herewith.

 

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  5.16. Intellectual Property.

Each Company owns, or holds licenses in, all trademarks, trade names, copyrights, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted. Attached hereto as Schedule 5.16 (as updated within 30 days of the end of each fiscal quarter of Parent) is a true, correct, and complete listing of all material patents, patent applications, trademarks, trademark applications, copyrights, and copyright registrations as to which each Company is the owner or is an exclusive licensee. Except as listed on Schedule 5.16, no Company is a party to any license of any trademark, copyright or patent.

 

  5.17. Leases.

Companies enjoy peaceful and undisturbed possession under all leases material to the business of Companies and to which Companies are a party or under which Companies are operating. All of such leases are valid and subsisting and no material default by Companies exists under any of them.

 

  5.18. DDAs.

Set forth on Schedule 5.18 are all of the DDAs of each Company, including, with respect to each depository (i) the name and address of that depository, and (ii) the account numbers of the accounts maintained with such depository.

 

  5.19. Complete Disclosure.

All factual information (taken as a whole) furnished by or on behalf of Companies in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Companies in writing to the Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Closing Date Projections represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent Companies’ good faith best estimate of its future performance for the periods covered thereby.

 

  5.20. Indebtedness.

Set forth on Schedule 5.20 is a true and complete list of all Indebtedness of each Company outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principal terms thereof.

 

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  5.21. Private Preferred Stock.

Each holder of the Private Preferred Stock other than North Atlantic Smaller Companies Investment Trust LLP and North Atlantic Value LLP A/C B has executed and delivered a Preferred Stockholders Standby Agreement pursuant to which such holder has agreed not to request the redemption of the Private Preferred Stock until the Obligations are repaid in full.

 

  5.22. Patriot Act.

To the extent applicable, each Company is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the proceeds of the loans made hereunder will be used, directly or indirectly, for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

  5.23. OFAC.

No Company nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC. No Company nor any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has more than 10% of its assets located in Sanctioned Entities, or (c) derives more than 10% of its revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of any Advance will not be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

  5.24. Inactive Entities

Each of Telos Field Engineering, Inc., Telos International Corp., Telos International Asia, Inc., Secure Trade, Inc., Telos Filinvest, Inc. and ubIQuity Philippines, Inc. is an inactive entity that conducts no business and has no assets or liabilities.

 

6. AFFIRMATIVE COVENANTS.

Each Company covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Companies shall and shall cause each of their respective Subsidiaries to do all of the following:

 

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  6.1. Accounting System.

Maintain a system of accounting that enables Companies to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time reasonably may be requested by Agent. Companies also shall keep an inventory reporting system that shows all additions, sales, claims, returns, and allowances with respect to the Inventory.

 

  6.2. Collateral Reporting.

Provide Agent (and if so requested by Agent, with copies for each Lender) with the following documents at the following times in form satisfactory to Agent:

 

Daily   

(a)    a sales journal, collection journal, and credit register since the last such schedule and a calculation of the Borrowing Base as of such date, and

 

(b)    notice of all returns, disputes, or claims;

Monthly (not later than the 5th day of each month)   

(c)    a detailed calculation of the Borrowing Base (including detail regarding those Accounts that are not Eligible Accounts),

 

(d)    a detailed aging, by total, of the Accounts, together with a reconciliation to the detailed calculation of the Borrowing Base previously provided to Agent, and

 

(e)    a summary aging, by vendor, of Companies’ accounts payable and any book overdraft.

Monthly (not later than the 15th day of each month)   

(f)     a calculation of Dilution for the prior month.

Quarterly   

(g)    a detailed list of each Borrower’s customers, and

 

(h)    a report regarding each Company’s accrued, but unpaid, ad valorem taxes;

Upon request by Agent   

(i)     copies of invoices in connection with the Accounts, credit memos, remittance advices, deposit slips, shipping and delivery documents in connection with the Accounts and, for Inventory and Equipment acquired by Companies, purchase orders and invoices, and

 

(j)     such other reports as to the Collateral, or the financial condition of Companies as Agent may request in its Permitted Discretion.

In addition, each Company agrees to cooperate fully with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth above.

 

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  6.3. Financial Statements, Reports, Certificates.

Deliver to Agent, with copies to each Lender:

(a) as soon as available, but in any event within 30 days (45 days in the case of a month that is the end of one of the first 3 fiscal quarters in a fiscal year) after the end of each month during each of Parent’s fiscal years,

(i) a company prepared consolidated balance sheet, income statement, and statement of cash flow covering Parent’s and its Subsidiaries’ operations during such period,

(ii) a certificate signed by the chief financial officer of Parent to the effect that:

(A) the financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to year-end audit adjustments) and fairly present in all material respects the financial condition of Parent and its Subsidiaries,

(B) the representations and warranties of Companies contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), and

(C) there does not exist any condition or event that constitutes a Default or Event of Default (or, to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Companies have taken, are taking, or propose to take with respect thereto), and

(iii) for each month that is the date on which a financial covenant in Section 7.20 is to be tested, a Compliance Certificate demonstrating, in reasonable detail, compliance at the end of such period with the applicable financial covenants contained in Section 7.20, and

(b) as soon as available, but in any event within 90 days after the end of each of Parent’s fiscal years (provided, that for any fiscal year of Parent for which Parent receives a 15-day extension to its deadline to file audited financial statements with the SEC, the items listed in this Section 6.3(b) shall be delivered as soon as available, but in any event within 105 days after the end of such fiscal year),

(i) financial statements of Parent and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants’ letter to management),

 

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(ii) a certificate of such accountants addressed to Agent and the Lenders stating that such accountants do not have knowledge of the existence of any Default or Event of Default under Section 7.20,

(c) as soon as available, but in any event within 30 days prior to the start of each of Parent’s fiscal years,

(i) copies of Companies’ Projections, in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, in its sole discretion, for the forthcoming three years, year by year, and for the forthcoming fiscal year, month by month, certified by the chief financial officer of Parent as being such officer’s good faith best estimate of the financial performance of Parent and its Subsidiaries during the period covered thereby,

(d) if and when filed by any Company,

(i) 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,

(ii) any other filings made by any Company with the SEC,

(iii) copies of Companies’ federal income tax returns, and any amendments thereto, filed with the Internal Revenue Service, and

(iv) any other information that is provided by Parent to its shareholders generally,

(e) if and when filed by any Company and as requested by Agent, satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which (i) any Company conducts business or is required to pay any such excise tax, (ii) where any Company’s failure to pay any such applicable excise tax would result in a Lien on the properties or assets of any Company, or (iii) where any Company’s failure to pay any such applicable excise tax reasonably could be expected to result in a Material Adverse Change,

(f) as soon as a Company has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative action that Companies propose to take with respect thereto, and

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

In addition to the financial statements referred to above, Companies agree to deliver financial statements prepared on both a consolidated and consolidating basis and that no Company, or any Subsidiary of a Company, will have a fiscal year different from that of

 

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Parent. Companies agree that their independent certified public accountants are authorized to communicate with Agent and to release to Agent whatever financial information concerning Companies that Agent reasonably may request. Each Company waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Agent pursuant to or in accordance with this Agreement, and agree that Agent may contact directly any such accounting firm or service bureau in order to obtain such information.

 

  6.4. Government Contracts.

Deliver a certificate, in form and substance satisfactory to Agent, summarizing each contract that a Borrower enters into with the United States, or any department, agency, or instrumentality of the United States. Without limitation, such certificate shall certify the names of the contracting officer, the disbursing officer and any sureties under such contract and certify that such contract does not prohibit the assignment thereof to Agent. At the request of Agent, Borrowers shall furnish Agent with a copy of each government contract.

 

  6.5. Return.

Cause returns and allowances as between Companies and their Account Debtors, to be on the same basis and in accordance with the usual customary practices of the applicable Company, as they exist at the time of the execution and delivery of this Agreement. If, at a time when no Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to any Company, the applicable Company promptly shall determine the reason for such return and, if the applicable Company accepts such return, issue a credit memorandum (with a copy to be sent to Agent) in the appropriate amount to such Account Debtor. If, at a time when an Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to any Company, the applicable Company promptly shall determine the reason for such return and, if Agent consents (which consent shall not be unreasonably withheld), issue a credit memorandum (with a copy to be sent to Agent) in the appropriate amount to such Account Debtor.

 

  6.6. Maintenance of Properties.

Maintain and preserve all of its properties which are necessary or useful in the proper conduct to its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which it is a party as lessee, so as to prevent any loss or forfeiture thereof or thereunder.

 

  6.7. Taxes.

Cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against Companies or any of their assets to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest. Companies will make timely payment or deposit of all tax payments and

 

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withholding taxes required of it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Agent with proof satisfactory to Agent indicating that the applicable Company has made such payments or deposits. Companies shall deliver satisfactory evidence of payment of applicable excise taxes in each jurisdictions in which any Company is required to pay any such excise tax.

 

  6.8. Insurance.

(a) At Borrowers’ expense, maintain insurance respecting its property and assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Companies also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory to Agent. Companies shall deliver copies of all such policies to Agent with a satisfactory lender’s loss payable endorsement naming Agent as sole loss payee or additional insured, as appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30 days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever.

(b) Administrative Borrower shall give Agent prompt notice of any loss covered by such insurance. Agent shall have the exclusive right to adjust any losses payable under any such insurance policies in excess of $50,000, without any liability to Companies whatsoever in respect of such adjustments. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to Agent to be applied at the option of the Required Lenders either to the prepayment of the Obligations or shall be disbursed to Administrative Borrower under staged payment terms reasonably satisfactory to the Required Lenders for application to the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items or property destroyed prior to such damage or destruction.

(c) Companies shall not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 6.8, unless Agent is included thereon as named insured with the loss payable to Agent under a lender’s loss payable endorsement or its equivalent. Administrative Borrower immediately shall notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent.

(d) At Companies’ expense, maintain key man life insurance policies with respect to the following individuals and in the following amounts:

 

Name

   Amount

John B. Wood

   $ 5,000,000

 

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Notwithstanding the foregoing, in the event either of the foregoing individuals are no longer employed by a Company, Companies will not be required to maintain key man life insurance policies on such individual that is no longer employed so long as no Event of Default exists and Companies’ obtain a replacement key man life insurance policy (in substantially the same form as the policy being replaced) in the amount of $5,000,000 on the life of such individual’s successor at Companies. Companies shall furnish Agent with an “Absolute Assignment” of each such key man life insurance policy, shall record each such “Absolute Assignment” with the issuer of the respective policy, and shall furnish proof of such issuer’s acceptance of such assignment. All proceeds payable under such key man life insurance policies shall be payable to Agent to be applied on account of the Obligations in accordance with Section 2.4(b).

 

  6.9. Location of Inventory and Equipment.

Keep the Inventory and Equipment only at the locations identified on Schedule 5.5; provided, however, that Administrative Borrower may amend Schedule 5.5 so long as such amendment occurs by written notice to Agent not less than 30 days prior to the date on which the Inventory or Equipment is moved to such new location, so long as such new location is within the continental United States, and so long as, at the time of such written notification, the applicable Company provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent’s Liens on such assets and also provides to Agent a Collateral Access Agreement.

 

  6.10. Compliance with Laws.

Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, including the Fair Labor Standards Act and the Americans With Disabilities Act, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not result in and reasonably could not be expected to result in a Material Adverse Change.

 

  6.11. Leases.

Pay when due all rents and other amounts payable under any leases to which any Company is a party or by which any Company’s properties and assets are bound, unless such payments are the subject of a Permitted Protest.

 

  6.12. Brokerage Commissions.

Pay any and all brokerage commission or finders fees incurred in connection with or as a result of Companies’ obtaining financing from the Lender Group under this Agreement. Companies agree and acknowledge that payment of all such brokerage

 

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commissions or finders fees shall be the sole responsibility of Companies, and each Company agrees to indemnify, defend, and hold Agent and the Lender Group harmless from and against any claim of any broker or finder arising out of Companies’ obtaining financing from the Lender Group under this Agreement.

 

  6.13. Existence.

At all times preserve and keep in full force and effect each Company’s valid existence and good standing and any rights and franchises material to Companies’ businesses; provided, that any of the Credit Parties may be dissolved in accordance with applicable law or merged into another Credit Party or a Borrower.

 

  6.14. Environmental.

(a) Keep any property either owned or operated by any Company free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material of any reportable quantity from or onto property owned or operated by any Company and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Agent with written notice within 10 days of the receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of any Company, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against any Company, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change.

 

  6.15. Disclosure Updates.

Promptly and in no event later than 5 Business Days after obtaining knowledge thereof, (a) notify Agent if any written information, exhibit, or report furnished to the Lender Group contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof.

 

  6.16. Intellectual Property.

(a) Upon request of Agent, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office, each Company shall execute and deliver to Agent one or more Copyright Security Agreements, Trademark Security Agreements, or Patent Security Agreements to further evidence Agent’s Lien on such Company’s Patents, Trademarks, or Copyrights, and the General Intangibles of such Company relating thereto or represented thereby;

 

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(b) Each Company shall have the duty, to the extent necessary or economically desirable in the operation of such Company’s business, (A) to promptly sue for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation, or dilution, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, and (D) to take all reasonably and necessary action to preserve and maintain all of such Company’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings. Subject to Section 6.16(d) below, each Company shall promptly file an application with the United States Copyright Office for any Copyright that has not been registered with the United States Copyright Office if such Copyright constitutes a portion of the Required Library. Any expenses incurred in connection with the foregoing shall be borne by the appropriate Company. Each Company further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property License that is necessary or economically desirable in the operation of such Company’s business;

(c) Companies acknowledge and agree that the Lender Group shall have no duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without limiting the generality of this Section 6.16(c), Companies acknowledge and agree that no member of the Lender Group shall be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any other Person, but any member of the Lender group may do so at its option from and after the occurrence and during the continuation of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of Borrowers and shall be chargeable to the Loan Account;

(d) In no event shall any Company, either itself or through any agent, employee, licensee, or designee, (i) file an application for the registration of any Copyright with the United States Copyright Office without giving Agent prior written notice thereof, without filing such application via expedited service, and without filing a Copyright Security Agreement contemporaneously with such Copyright, or (ii) file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office without giving Agent written notice thereof promptly thereafter. Promptly upon any such filing of a Patent or Trademark, each Company shall comply with Section 6.16(a) hereof;

(e) As of May 5, 2008, Copyrights constituting the Required Library shall have been registered with the United States Copyright Office.

 

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  6.17. Inactive Entities

At all times each of Telos Field Engineering, Inc., Telos International Corp., Telos International Asia, Inc., Secure Trade, Inc., Telos Filinvest, Inc. and ubIQuity Philippines, Inc. shall be an inactive entity that conducts no business and has no assets or liabilities.

 

7. NEGATIVE COVENANTS.

Each Company covenants and agrees that, so long as any credit hereunder shall be available and until full and final payment of the Obligations, Companies will not and will not permit any of their respective Subsidiaries to do any of the following:

 

  7.1. Indebtedness.

Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except:

(a) Indebtedness evidenced by this Agreement and the other Loan Documents, together with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit;

(b) Indebtedness set forth on Schedule 5.20;

(c) Permitted Purchase Money Indebtedness;

(d) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not, in Agent’s judgment, materially impair the prospects of repayment of the Obligations by Borrowers or materially impair Borrowers’ creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of, or interest rate with respect to, the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions, that, taken as a whole, are materially more burdensome or restrictive to the applicable Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness; and

(e) Indebtedness composing Permitted Indebtedness.

 

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  7.2. Liens.

Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness).

 

  7.3. Restrictions on Fundamental Changes.

(a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock; provided, that any of the Credit Parties may merge into another Credit Party or a Borrower.

(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution); provided, however, that any of the Credit Parties may be dissolved in accordance with applicable law.

(c) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets.

(d) Create, establish or acquire any Subsidiary after the Closing Date.

 

  7.4. Disposal of Assets.

Other than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of the assets of any Company.

 

  7.5. Change Name.

Change any Company’s name, state of incorporation, FEIN, corporate structure or identity, or add any new fictitious name; provided, however, that a Company may change its name upon at least 30 days prior written notice by Administrative Borrower to Agent of such change and so long as, at the time of such written notification, such Company provides any financing statements or fixture filings necessary to perfect and continue perfected Agent’s Liens.

 

  7.6. Guarantee.

Guarantee or otherwise become in any way liable with respect to the obligations of any third Person except by endorsement of instruments or items of payment for deposit to the account of Companies or which are transmitted or turned over to Agent.

 

  7.7. Nature of Business.

Make any change in the principal nature of Companies’ business.

 

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  7.8. Prepayments and Amendments.

(a) Except in connection with a refinancing permitted by Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any Company, other than the Obligations in accordance with this Agreement, and

(b) Except in connection with a refinancing permitted by Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 7.1(b) or (c).

(c) Amend, modify, alter, increase, or change any of the terms or conditions of the Permitted Indebtedness or Private Preferred Stock; or prepay, redeem, defease, purchase, exchange or otherwise acquire any of the Permitted Indebtedness.

 

  7.9. Change of Control.

Cause, permit, or suffer, directly or indirectly, any Change of Control.

 

  7.10. Consignments.

Consign any Inventory or sell any Inventory on bill and hold (unless such Inventory is purchased by the United States or any department, agency or instrumentality of the United States, such Inventory is segregated from Borrower’s other goods and within 14 days of the date such Inventory is segregated, such Account Debtor shall have executed a DD250 document accepting such goods that are held by a Borrower), sale or return, sale on approval, or other conditional terms of sale.

 

  7.11. Distributions.

Other than distributions or declaration and payment of dividends by a Company to a Borrower, 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 of any Company’s Stock, of any class, whether now or hereafter outstanding (provided that the Private Preferred Stock may be redeemed so long as the Obligations are contemporaneously repaid in full in accordance with Section 3.6.).

 

  7.12. Accounting Methods.

Modify or change its method of accounting (other than as may be required to conform to GAAP) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Companies’ accounting records without said accounting firm or service bureau agreeing to provide Agent information regarding the Collateral or Companies’ financial condition.

 

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  7.13. Investments.

Except for Permitted Investments, directly or indirectly, make or acquire any Investment, or incur any liabilities (including contingent obligations) for or in connection with any Investment; provided, however, that Administrative Borrower and its Subsidiaries shall not have Permitted Investments (other than in the Cash Management Accounts or in the Foreign Transfer Account) in deposit accounts or Securities Accounts in excess of $25,000 outstanding at any one time unless the Administrative Borrower or any of its Subsidiaries, as applicable, and the applicable securities intermediary or bank have entered into Control Agreements or similar arrangements governing such Permitted Investments, as Agent shall determine in its Permitted Discretion, to perfect (and further establish) the Agent’s Liens in such Permitted Investments.

 

  7.14. Transactions with Affiliates.

Directly or indirectly enter into or permit to exist any transaction with any Affiliate of any Company except for transactions that are in the ordinary course of Companies’ business, upon fair and reasonable terms, that are fully disclosed to Agent, and that are no less favorable to Companies than would be obtained in an arm’s length transaction with a non-Affiliate. Except for Permitted Investments under clauses (d) and (e) of the definition thereof and as described on Schedule 7.14, without limiting the foregoing, no Borrower shall make any Investments, distributions, transfers or payments to any Credit Party, TIMS LLC, or Enterworks, Inc. Parent shall not exercise its option to purchase additional shares of Enterworks, Inc. under the Warrant To Purchase Shares of Common Stock of Enterworks, Inc. dated December 31, 2007 issued by Enterworks, Inc. to Parent if the consideration to be paid in connection with such exercise would exceed $25,000.

 

  7.15. Suspension.

Suspend or go out of a substantial portion of its business.

 

  7.16. Compensation.

Increase the annual fee or per-meeting fees paid to the members of its Board of Directors during any year by more than 15% over the prior year; pay or accrue total cash compensation (other than bonuses based on the successful performance of Borrowers, consistent with past practices of Borrowers and reflected in the Projections), during any year, to its officers and senior management employees in an aggregate amount in excess of 115% of such cash compensation paid or accrued in the prior year.

 

  7.17. Use of Proceeds.

Use the proceeds of the Advances for any purpose other than (a) on or about the Closing Date, to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter, consistent with the terms and conditions hereof, for its lawful and permitted purposes.

 

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  7.18. Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.

Relocate its chief executive office to a new location without Administrative Borrower providing 30 days prior written notification thereof to Agent and so long as, at the time of such written notification, the applicable Company provides any financing statements or fixture filings necessary to perfect and continue perfected the Agent’s Liens and also provides to Agent a Collateral Access Agreement with respect to such new location. The Inventory and Equipment shall not at any time now or hereafter be stored with a bailee, warehouseman, or similar party without Agent’s prior written consent.

 

  7.19. Securities Accounts.

Establish or maintain any Securities Account unless Agent shall have received a Control Agreement in respect of such Securities Account. Companies agree to not transfer assets out of any Securities Account; provided, however, that, so long as no Event of Default has occurred and is continuing or would result therefrom, Companies may use such assets (and the proceeds thereof) to the extent not prohibited by this Agreement.

 

  7.20. Financial Covenants.

(a) Fail to maintain:

(i) Minimum EBITDA. EBITDA, measured on a fiscal month-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

$      (2,831,000)    For the 1 month period ending January 31, 2008
$      (3,738,000)    For the 2 month period ending February 29, 2008
$      (3,505,000)    For the 3 month period ending March 31, 2008
$      (4,043,000)    For the 4 month period ending April 30, 2008
$      (3,126,000)    For the 5 month period ending May 31, 2008
$      (2,442,000)    For the 6 month period ending June 30, 2008

 

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Applicable Amount

  

Applicable Period

$      (1,846,000)    For the 7 month period ending July 31, 2008)
$         (445,000)    For the 8 month period ending August 31, 2008
$        1,186,000    For the 9 month period ending September 30, 2008
$        1,049,000    For the 10 month period ending October 31, 2008
$        2,570,000    For the 11 month period ending November 30, 2008
$        2,570,000    For the 12 month period ending December 31, 2008
80% 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    For the 12 month period ending January 31, 2009 and the 12 month period ending on the last day of each fiscal month thereafter

(ii) Reserved.

(b) Make:

(i) Capital Expenditures. Capital expenditures in any fiscal year of Parent in excess of $2,000,000.

 

  7.21. Foreign Transfer Account.

Maintain more than $1,000 at any time in the Foreign Transfer Account; provided that Teloworks, Inc. may maintain amounts in excess of $1,000 in the Foreign Transfer Account for a period not to exceed 2 Business Days so long as all such amounts are transferred to Teloworks Philippines, Inc. during such 2 Business Day period.

 

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

8.1 If Companies fail to pay when due and payable or when declared due and payable, all or any portion of the Obligations (whether of principal, interest (including

 

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any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts constituting Obligations);

8.2 (a) If any Company fails to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in Section 6.2 or 6.3 hereof and such failure or neglect continues for a period of 5 days after the date on which such failure or neglect first occurs, (b) if any Company fails to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in Section 6.1, 6.5, 6.6, 6.7, 6.10, 6.11, 6.12, 6.14 or 6.15 hereof and such failure or neglect continues for a period of 15 days after the date on which such failure or neglect first occurs, or (c) if any Company fails to perform, keep, or observe any other term, provision, condition, covenant, or agreement contained in this Agreement (other than any such term, provision, condition, covenant, or agreement that is expressly dealt with elsewhere in this Section 8) or in any of the other Loan Documents;

8.3 If any material portion of any Company’s or any of its Subsidiaries’ assets is attached, seized, subjected to a writ or distress warrant, levied upon, or comes into the possession of any third Person;

8.4 If an Insolvency Proceeding is commenced by any Company or any of its Subsidiaries;

8.5 If an Insolvency Proceeding is commenced against any Company, or any of its Subsidiaries, and any of the following events occur: (a) the applicable Company or the Subsidiary consents to the institution of the Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 45 calendar days of the date of the filing thereof; provided, however, that, during the pendency of such period, Agent (including any successor agent) and each other member of the Lender Group shall be relieved of their obligation to extend credit hereunder, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, any Company or any of its Subsidiaries, or (e) an order for relief shall have been entered therein;

8.6 If any Company or any of its Subsidiaries is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs;

8.7 If a notice of Lien, levy, or assessment is filed of record with respect to any Company’s or any of its Subsidiaries’ assets by the United States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon any Company’s or any of its Subsidiaries’ assets and the same is not paid on the payment date thereof;

 

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8.8 If a judgment or other claim becomes a Lien or encumbrance upon any material portion of any Company’s or any of its Subsidiaries’ properties or assets;

8.9 If there is a default in any material agreement to which any Company or any of its Subsidiaries is a party and such default (a) occurs at the final maturity of the obligations thereunder, or (b) 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;

8.10 If any Company or any of its Subsidiaries makes any payment on account of Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness;

8.11 If any misstatement or misrepresentation exists now or hereafter in any warranty, representation, statement, or Record made to the Lender Group by any Company, its Subsidiaries, or any officer, employee, agent, or director of any Company or any of its Subsidiaries;

8.12 If the obligation of any Credit Party under the Joint and Several Guaranty is limited or terminated by operation of law or by such Credit Party thereunder;

8.13 If this Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Collateral covered hereby or thereby;

8.14 Any provision of any Loan Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Company, or a proceeding shall be commenced by any Company, or by any Governmental Authority having jurisdiction over any Company, seeking to establish the invalidity or unenforceability thereof, or any Company shall deny that any Company has any liability or obligation purported to be created under any Loan Document;

8.15 Any Credit Party engages in any type of business activity other than the ownership of the equity interests in a Company and performance of its obligations under the Loan Documents to which it is a party.

 

9. THE LENDER GROUP’S RIGHTS AND REMEDIES.

 

  9.1. Rights and Remedies.

Upon the occurrence, and during the continuation, of an Event of Default, the Required Lenders (at their election but without notice of their election and without demand) may authorize and instruct Agent to do any one or more of the following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by Companies:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;

 

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(b) Cease advancing money or extending credit to or for the benefit of Borrowers under this Agreement, under any of the Loan Documents, or under any other agreement between Borrowers and the Lender Group;

(c) Terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of the Lender Group, but without affecting any of the Agent’s Liens in the Collateral and without affecting the Obligations;

(d) Settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which Agent considers advisable, and in such cases, Agent will credit the Loan Account with only the net amounts received by Agent in payment of such disputed Accounts after deducting all Lender Group Expenses incurred or expended in connection therewith;

(e) Cause Companies to hold all returned Inventory in trust for the Lender Group, segregate all returned Inventory from all other assets of Companies or in Companies’ possession and conspicuously label said returned Inventory as the property of the Lender Group;

(f) Without notice to or demand upon any Company, make such payments and do such acts as Agent considers necessary or reasonable to protect its security interests in the Collateral. Each Company agrees to assemble the Collateral if Agent so requires, and to make the Collateral available to Agent at a place that Agent may designate which is reasonably convenient to both parties. Each Company authorizes Agent to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any Lien that in Agent’s determination appears to conflict with the Agent’s Liens and to pay all expenses incurred in connection therewith and to charge Borrowers’ Loan Account therefor. With respect to any of Companies’ owned or leased premises, each Company hereby grants Agent a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of the Lender Group’s rights or remedies provided herein, at law, in equity, or otherwise;

(g) Without notice to any Company (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of the Code), set off and apply to the Obligations any and all (i) balances and deposits of any Company held by the Lender Group (including any amounts received in the Cash Management Accounts), or (ii) Indebtedness at any time owing to or for the credit or the account of any Company held by the Lender Group;

 

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(h) Hold, as cash collateral, any and all balances and deposits of any Company held by the Lender Group, and any amounts received in the Cash Management Accounts, to secure the full and final repayment of all of the Obligations;

(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Each Company hereby grants to Agent a license or other right to use, without charge, such Company’s labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and such Company’s rights under all licenses and all franchise agreements shall inure to the Lender Group’s benefit;

(j) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Companies’ premises) as Agent determines is commercially reasonable. It is not necessary that the Collateral be present at any such sale;

(k) Agent shall give notice of the disposition of the Collateral as follows:

(i) Agent shall give Administrative Borrower (for the benefit of the applicable Company) a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made; and

(ii) The notice shall be personally delivered or mailed, postage prepaid, to Administrative Borrower as provided in Section 12, at least 10 days before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the Collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market;

(l) Agent, on behalf of the Lender Group may credit bid and purchase at any public sale;

(m) Agent may seek the appointment of a receiver or keeper to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a receiver without the requirement of prior notice or a hearing;

(n) The Lender Group shall have all other rights and remedies available to it at law or in equity pursuant to any other Loan Documents; and

(o) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Companies. Any excess will be returned, without interest and subject to the rights of third Persons, by Agent to Administrative Borrower (for the benefit of the applicable Company).

 

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  9.2. Remedies Cumulative.

The rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative. The Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.

 

10. TAXES AND EXPENSES.

If any Company fails to pay any monies (whether taxes, assessments, insurance premiums, or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its sole discretion and without prior notice to any Company, may do any or all of the following: (a) make payment of the same or any part thereof, (b) set up such reserves in Borrowers’ Loan Account as Agent deems necessary to protect the Lender Group from the exposure created by such failure, or (c) in the case of the failure to comply with Section 6.8 hereof, obtain and maintain insurance policies of the type described in Section 6.8 and take any action with respect to such policies as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall not constitute an agreement by the Lender Group to make similar payments in the future or a waiver by the Lender Group of any Event of Default under this Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing.

 

11. WAIVERS; INDEMNIFICATION.

 

  11.1. Demand; Protest; etc.

Each Company waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which any such Company may in any way be liable.

 

  11.2. The Lender Group’s Liability for Collateral.

Each Company hereby agrees that: (a) so long as the Lender Group complies with its obligations, if any, under the Code, Agent shall not in any way or manner be liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by Companies.

 

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  11.3. Indemnification.

Each Company shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons with respect to each Lender, each Participant, and each of their respective officers, directors, employees, agents, and attorneys-in-fact (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the “Indemnified Liabilities”). The foregoing to the contrary notwithstanding, Companies shall have no obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Companies were required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Companies with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

12. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by Companies or Agent to the other relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Administrative Borrower or Agent, as applicable, may designate to each other in accordance herewith), or telefacsimile to Companies in care of Administrative Borrower or to Agent, as the case may be, at its address set forth below:

 

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If to Administrative Borrower:   

TELOS CORPORATION

19886 Ashburn Road

Ashburn, Virginia 20147

Attn: Michele Nakazawa

Fax No. (703) 724-1468

with copies to:   

TELOS CORPORATION

19886 Ashburn Road

Ashburn, Virginia 20147

Attn: Michael P. Flaherty, General Counsel

Fax No. (703) 723-1468

If to Lender:   

WELLS FARGO FOOTHILL, INC.

One Boston Place, 18th Floor

Boston, Massachusetts 02108

Attn: Technology Finance Division Manager

Fax No. (617) 523-1697

with copies to:   

GOLDBERG, KOHN, BELL, BLACK,

ROSENBLOOM & MORITZ, LTD.

55 East Monroe Street

Suite 3300

Chicago, Illinois 60603

Attn: Gary Zussman, Esq.

Fax No. (312) 863-7440

Agent and Companies may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 12, other than notices by Agent in connection with enforcement rights against the Collateral under the provisions of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Each Company acknowledges and agrees that notices sent by the Lender Group in connection with the exercise of enforcement rights against Collateral under the provisions of the Code shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above.

 

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR

 

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THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

COMPANIES AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. COMPANIES AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

 

  14.1. Assignments and Participations.

(a) Any Lender may, with the written consent of Agent (provided that no written consent of Agent shall be required in connection with any assignment and delegation by a Lender to an Eligible Transferee), assign and delegate to one or more assignees (each an “Assignee”) all, or any ratable part of all, of the Obligations, the Commitments and the other rights and obligations of such Lender hereunder and under the other Loan Documents, in a minimum amount of $5,000,000 (provided, that so long as no Event of Default exists and the Maximum Revolving Amount does not exceed $25,000,000, there shall be no more than four Lenders holding commitments at any time); provided, however, that Companies and Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given

 

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to Administrative Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have delivered to Administrative Borrower and Agent an Assignment and Acceptance in form and substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has paid to Agent for Agent’s separate account a processing fee in the amount of $5,000. Anything contained herein to the contrary notwithstanding, the consent of Agent shall not be required (and payment of any fees shall not be required) if such assignment is in connection with any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of the business or loan portfolio of such Lender.

(b) From and after the date that Agent notifies the assignor Lender (with a copy to Administrative Borrower) that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 11.3 hereof) and be released from its obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto), and such assignment shall affect a novation between Borrowers and the Assignee.

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (1) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto, (2) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Companies or the performance or observance by Companies of any of their obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, (5) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together with such powers as are reasonably incidental thereto, and (6) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

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(d) Immediately upon each Assignee’s making its processing fee payment under the Assignment and Acceptance and receipt and acknowledgment by Agent of such fully executed Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

(e) Any Lender may at any time, with the written consent of Agent, sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of such Lender (a “Participant”) participating interests in its Obligations, the Commitment, and the other rights and interests of that Lender (the “Originating Lender”) hereunder and under the other Loan Documents (provided that no written consent of Agent shall be required in connection with any sale of any such participating interests by a Lender to an Eligible Transferee); provided, however, that (i) the Originating Lender shall remain a “Lender” for all purposes of this Agreement and the other Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and the Originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Companies, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender’s rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or a material portion of the Collateral or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender, or (E) change the amount or due dates of scheduled principal repayments or prepayments or premiums; and (v) all amounts payable by Companies hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Loan Documents or any direct rights as to the other Lenders, Agent, Companies, the Collections, the Collateral, or otherwise in respect of the Obligations. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves.

 

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(f) In connection with any such assignment or participation or proposed assignment or participation, a Lender may disclose all documents and information which it now or hereafter may have relating to Companies or Companies’ business.

(g) Any other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR § 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

 

  14.2. Successors.

This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Companies may not assign this Agreement or any rights or duties hereunder without the Lenders’ prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by the Lenders shall release any Company from its Obligations. A Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 14.1 hereof and, except as expressly required pursuant to Section 14.1 hereof, no consent or approval by any Company is required in connection with any such assignment.

 

15. AMENDMENTS; WAIVERS.

 

  15.1. Amendments and Waivers.

No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by Companies therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and Administrative Borrower (on behalf of all Companies) and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders affected thereby and Administrative Borrower (on behalf of all Companies) and acknowledged by Agent, do any of the following:

(a) increase or extend any Commitment of any Lender,

(b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Loan Document,

 

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(c) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document,

(d) change the percentage of the Commitments that is required to take any action hereunder,

(e) amend this Section or any provision of the Agreement providing for consent or other action by all Lenders,

(f) release Collateral other than as permitted by Section 16.12,

(g) change the definition of “Required Lenders”,

(h) contractually subordinate any of the Agent’s Liens,

(i) release any Company from any obligation for the payment of money, or

(j) change the definition of Borrowing Base or the definitions of Eligible Accounts, Maximum Revolver Amount, or change Section 2.1(b); or

(k) amend any of the provisions of Section 16.

and, provided further, however, that no amendment, waiver or consent shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable, under this Agreement or any other Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Companies, shall not require consent by or the agreement of Companies.

 

  15.2. Replacement of Holdout Lender.

If any action to be taken by the Lender Group or Agent hereunder requires the unanimous consent, authorization, or agreement of all Lenders, and a Lender (“Holdout Lender”) fails to give its consent, authorization, or agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders (each, a “Replacement Lender”), and the Holdout Lender shall have not right to refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given.

Prior to the effective date of such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver an Assignment and Acceptance Agreement, subject only to the Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of its Pro Rata Share of the Risk Participation Liability) without

 

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any premium or penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment and Acceptance Agreement prior to the effective date of such replacement, the Holdout Lender shall be deemed to have executed and delivered such Assignment and Acceptance Agreement. The replacement of any Holdout Lender shall be made in accordance with the terms of Section 14.1. Until such time as the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s Pro Rata Share of Advances and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Letter of Credit.

 

  15.3. No Waivers; Cumulative Remedies.

No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or, any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent’s and each Lender’s rights thereafter to require strict performance by Companies of any provision of this Agreement. Agent’s and each Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Agent or any Lender may have.

 

16. AGENT; THE LENDER GROUP.

 

  16.1. Appointment and Authorization of Agent.

Each Lender hereby designates and appoints Foothill as its representative under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 16. The provisions of this Section 16 are solely for the benefit of Agent, and the Lenders, and Companies shall have no rights as a third party beneficiary of any of the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent; it being expressly understood and agreed that the use of the word “Agent” is for convenience only, that Foothill is merely the representative of the Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or

 

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refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, the Collections, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as provided in the Loan Documents, (d) exclusively receive, apply, and distribute the Collections as provided in the Loan Documents, (e) open and maintain such bank accounts and cash management accounts as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes with respect to the Collateral and the Collections, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Companies, the Obligations, the Collateral, the Collections, or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Loan Documents.

 

  16.2. Delegation of Duties.

Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or willful misconduct.

 

  16.3. Liability of Agent.

None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by any Company or any Subsidiary or Affiliate of any Company, or any officer or director thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Books or properties of Companies or the books or records or properties of any of Companies’ Subsidiaries or Affiliates.

 

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  16.4. Reliance by Agent.

Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Companies or counsel to any Lender), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable. If Agent so requests, it shall first be indemnified to its reasonable satisfaction by Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

 

  16.5. Notice of Default or Event of Default.

Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Administrative Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a “notice of default.” Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to its Participants, if any. Subject to Section 16.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, however, that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.

 

  16.6. Credit Decision.

Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Companies and their Subsidiaries or Affiliates, shall be deemed to

 

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constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Companies and any other Person (other than the Lender Group) party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Companies and any other Person (other than the Lender Group) party to a Loan Document. Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrowers and any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons.

 

  16.7. Costs and Expenses; Indemnification.

Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs, reasonable attorneys fees and expenses, costs of collection by outside collection agencies and auctioneer fees and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Companies are obligated to reimburse Agent or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient amounts from Collections received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent is not reimbursed for such costs and expenses from Collections received by Agent, each Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount of such Lender’s Pro Rata Share thereof. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of Companies and without limiting the obligation of Companies to do so), according to their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender’s ratable share of any costs or out-of-pocket expenses (including attorneys fees and expenses) incurred by

 

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Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Companies. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent.

 

  16.8. Agent in Individual Capacity.

Foothill and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Companies and their Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Loan Documents as though Foothill were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, Foothill or its Affiliates may receive information regarding Companies or their Affiliates and any other Person (other than the Lender Group) party to any Loan Documents that is subject to confidentiality obligations in favor of Companies or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them. The terms “Lender” and “Lenders” include Foothill in its individual capacity.

 

  16.9. Successor Agent.

Agent may resign as Agent upon 45 days notice to the Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term “Agent” shall mean such successor Agent and the retiring Agent’s appointment, powers, and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.

 

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  16.10. Lender in Individual Capacity.

Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Companies and their Subsidiaries and Affiliates and any other Person (other than the Lender Group) party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group. The other members of the Lender Group acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Companies or their Affiliates and any other Person (other than the Lender Group) party to any Loan Documents that is subject to confidentiality obligations in favor of Companies or such other Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender not shall be under any obligation to provide such information to them. With respect to the Swing Loans and Agent Advances, Swing Lender shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the sub-agent of the Agent.

 

  16.11. Withholding Taxes.

(a) If any Lender is a “foreign corporation, partnership or trust” within the meaning of the IRC and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and Companies, to deliver to Agent and Administrative Borrower:

(i) if such Lender claims an exemption from withholding tax pursuant to its portfolio interest exception, (a) a statement of the Lender, signed under penalty of perjury, that it is not a (i) a “bank” as described in Section 881(c)(3)(A) of the IRC, (ii) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or (iii) a controlled foreign corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Administrative Borrower;

(ii) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Form W-8BEN before the first payment of any interest under this Agreement and at any other time reasonably requested by Agent or Administrative Borrower;

(iii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the first payment of any interest is due under this Agreement and at any other time reasonably requested by Agent or Administrative Borrower;

 

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(iv) such other form or forms as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.

Such Lender agrees promptly to notify Agent and Administrative Borrower of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Companies to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Companies to such Lender. To the extent of such percentage amount, Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.

(c) If any Lender is entitled to a reduction in the applicable withholding tax, Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to Agent, then Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section, together with all costs and expenses (including attorneys fees and expenses). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent.

(e) All payments made by Companies hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense, except as required by applicable law other than for Taxes (as defined below). All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction (other than the United States) or by any political subdivision or taxing authority thereof or therein (other than of the United States) with respect to such payments (but excluding, any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (i) measured by or based on the net

 

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income or net profits of a Lender, or (ii) to the extent that such tax results from a change in the circumstances of the Lender, including a change in the residence, place of organization, or principal place of business of the Lender, or a change in the branch or lending office of the Lender participating in the transactions set forth herein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”). If any Taxes are so levied or imposed, each Company agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any note, including any amount paid pursuant to this Section 16.11(e) after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Companies shall not be required to increase any such amounts payable to Agent or any Lender (i) that is not organized under the laws of the United States, if such Person fails to comply with the other requirements of this Section 16.11, or (ii) if the increase in such amount payable results from Agent’s or such Lender’s own willful misconduct or gross negligence. Companies will furnish to Agent as promptly as possible after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Companies.

 

  16.12. Collateral Matters.

(a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Companies of all Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Administrative Borrower certifies to Agent that the sale or disposition is permitted under Section 7.4 of this Agreement or the other Loan Documents (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which no Company owned any interest at the time the security interest was granted or at any time thereafter, or (iv) constituting property leased to a Company under a lease that has expired or is terminated in a transaction permitted under this Agreement. Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or Administrative Borrower at any time, the Lenders will confirm in writing Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 16.12; provided, however, that (1) Agent shall not be required to execute any document necessary to evidence such release on terms that, in Agent’s opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of Companies in respect of) all interests retained by Companies, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by Companies or is cared for, protected, or

 

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insured or has been encumbered, or that the Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein.

 

  16.13. Restrictions on Actions by Lenders; Sharing of Payments.

(a) Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to Companies or any deposit accounts of Companies now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral the purpose of which is, or could be, to give such Lender any preference or priority against the other Lenders with respect to the Collateral.

(b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations arising under, or relating to, this Agreement or the other Loan Documents, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender’s ratable portion of all such distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

 

  16.14. Agency for Perfection.

Agent hereby appoints each other Lender as its agent (and each Lender hereby accepts such appointment) for the purpose of perfecting the Agent’s Liens in assets which, in

 

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accordance with Article 9 of the UCC can be perfected only by possession. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

 

  16.15. Payments by Agent to the Lenders.

All payments to be made by Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent. Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, or interest of the Obligations.

 

  16.16. Concerning the Collateral and Related Loan Documents.

Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan Documents relating to the Collateral, for the benefit of the Lender Group. Each member of the Lender Group agrees that any action taken by Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders.

 

  16.17. Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information.

By becoming a party to this Agreement, each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a “Report” and collectively, “Reports”) prepared by Agent, and Agent shall so furnish each Lender with such Reports,

(b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report,

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any audit or examination will inspect only specific information regarding Companies and will rely significantly upon the Books, as well as on representations of Companies’ personnel,

(d) agrees to keep all Reports and other material, non-public information regarding Companies and their Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner; it being understood and agreed by Companies that in any event such Lender may make disclosures (a) to counsel for and other advisors, accountants, and auditors to such Lender, (b) reasonably required by any bona fide

 

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potential or actual Assignee or Participant in connection with any contemplated or actual assignment or transfer by such Lender of an interest herein or any participation interest in such Lender’s rights hereunder, (c) of information that has become public by disclosures made by Persons other than such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as required or requested by any court, governmental or administrative agency, pursuant to any subpoena or other legal process, or by any law, statute, regulation, or court order; provided, however, that, unless prohibited by applicable law, statute, regulation, or court order, such Lender shall notify Administrative Borrower of any request by any court, governmental or administrative agency, or pursuant to any subpoena or other legal process for disclosure of any such non-public material information concurrent with, or where practicable, prior to the disclosure thereof, and

(e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Companies, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or loans of Companies; and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Companies to Agent that has not been contemporaneously provided by Companies to such Lender, and, upon receipt of such request, Agent shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the Loan Documents, to request additional reports or information from Companies, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender’s notice to Agent, whereupon Agent promptly shall request of Administrative Borrower the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Administrative Borrower a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender.

 

  16.18. Several Obligations; No Liability.

Notwithstanding that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the

 

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amount of their respective Commitments. Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any liability for the acts or any other member of the Lender Group. No Lender shall be responsible to any Company or any other Person for any failure by any other Lender to fulfill its obligations to make credit available hereunder, nor to advance for it or on its behalf in connection with its Commitment, nor to take any other action on its behalf hereunder or in connection with the financing contemplated herein.

 

  16.19. Legal Representation of Agent.

In connection with the negotiation, drafting, and execution of this Agreement and the other Loan Documents, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of remedies, Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. (“GK”) only has represented and only shall represent Foothill in its capacity as Agent and as a Lender. Each other Lender hereby acknowledges that GK does not represent it in connection with any such matters.

 

17. GENERAL PROVISIONS.

 

  17.1. Effectiveness.

This Agreement shall be binding and deemed effective when executed by Companies, Agent, and each Lender whose signature is provided for on the signature pages hereof.

 

  17.2. Section Headings.

Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

 

  17.3. Interpretation.

Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against the Lender Group or Companies, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

 

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  17.4. Severability of Provisions.

Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

  17.5. Amendments in Writing.

This Agreement only can be amended by a writing in accordance with Section 15.1.

 

  17.6. Counterparts; Telefacsimile Execution.

This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

 

  17.7. Revival and Reinstatement of Obligations.

If the incurrence or payment of the Obligations by any Company or the transfer to the Lender Group of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if the Lender Group is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender Group is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto, the liability of Companies automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

 

  17.8. Integration.

This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

 

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  17.9. Parent as Agent for Companies.

Each Company hereby irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all Companies (the “Administrative Borrower”) which appointment shall remain in full force and effect unless and until Agent shall have received prior written notice signed by each Company that such appointment has been revoked and that another Company has been appointed Administrative Borrower. Each Company hereby irrevocably appoints and authorizes the Administrative Borrower (i) to provide Agent with all notices with respect to Advances and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (ii) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Advances and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. It is understood that the handling of the Loan Account and Collateral of Companies in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Companies in order to utilize the collective borrowing powers of Companies in the most efficient and economical manner and at their request, and that Lender Group shall not incur liability to any Company as a result hereof. Each Company expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the Collateral in a combined fashion since the successful operation of each Company is dependent on the continued successful performance of the integrated group. To induce the Lender Group to do so, and in consideration thereof, each Company hereby jointly and severally agrees to indemnify each member of the Lender Group and hold each member of the Lender Group harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lender Group by any Company or by any third party whosoever, arising from or incurred by reason of (a) the handling of the Loan Account and Collateral of Companies as herein provided, (b) the Lender Group’s relying on any instructions of the Administrative Borrower, or (c) any other action taken by the Lender Group hereunder or under the other Loan Documents, except that Companies will have no liability to the relevant Agent-Related Person or Lender-Related Person under this Section 17.9 with respect to any liability that has been finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be.

 

  17.10. USA PATRIOT Act.

Each Lender that is subject to the requirements of the Patriot Act hereby notifies the Borrowers that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender to identify the Borrowers in accordance with the Patriot Act.

[Signature page to follow.]

 

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

 

BORROWERS:
TELOS CORPORATION,
a Maryland corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
EVP, General Counsel, Chief Administrative Officer
XACTA CORPORATION,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President

 

-104-


CREDIT PARTIES:
TELOS DELAWARE, INC.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President
UBIQUITY.COM, INC.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President
TELOS INTERNATIONAL CORP.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President
TELOS INTERNATIONAL ASIA, INC.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President

 

-105-


SECURE TRADE, INC.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President
TELOS FIELD ENGINEERING, INC.,
a Delaware corporation

/s/ Michael P. Flaherty

Michael P. Flaherty
Executive Vice President
TELOWORKS, INC.,
a Delaware corporation

/s/ Richard P. Tracy

Richard P. Tracy
President

 

-106-


AGENT:
WELLS FARGO FOOTHILL, INC. (formerly
known as Foothill Capital Corporation),
a California corporation
By  

/s/ David Sanchez

Title   V.P.

 

-107-


EXHIBIT A-1

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered into as of                      between                      (“Assignor”) and                      (“Assignee”). Reference is made to the Agreement described in Item 2 of Annex I annexed hereto (the “Loan Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement.

1. In accordance with the terms and conditions of Section 14 of the Loan Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor’s rights and obligations under the Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor’s portion of the Total Commitments and the Revolver Commitments all as specified in Item 4.b and Item 4.c of Annex I. After giving effect to such sale and assignments, the Assignee’s portion of the Total Commitments and the Revolver Commitments will be as set forth in Item 4.b of Annex I. After giving effect to such sale and assignment the Assignor’s amount and portion of the Total Commitments and the Revolver Commitments will be as set forth in Item 4.d and Item 4.e of Annex I.

2. The Assignor (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance or observance by Borrowers of any of their obligations under the Loan Documents or any other instrument or document furnished pursuant thereto.

3. The Assignee (a) confirms that it has received copies of the Loan Agreement and the other Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance, as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (c) confirms that it is eligible as an assignee under the terms of the Loan Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender [and (f) attaches the forms

 

- 1 -


prescribed by the Internal Revenue Service of the United States certifying as to the Assignee’s status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Loan Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.]

4. Following the execution of this Assignment Agreement by the Assignor and Assignee, it will be delivered by the Assignor to the Agent for recording by the Agent. The effective date of this Assignment (the “Settlement Date”) shall be the later of (a) the date of the execution hereof by the Assignor and the Assignee, the payment by Assignor or Assignee to Agent for Agent’s sole and separate account a processing fee in the amount of $5,000, and the receipt of any required consent of the Agent, and (b) the date specified in item 5 of Annex I.

5. Upon recording by the Agent, as of the Settlement Date (a) the Assignee shall be a party to the Loan Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Loan Agreement and the other Loan Documents.

6. Upon recording by the Agent, from and after the Settlement Date, the Agent shall make all payments under the Loan Agreement and the other Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments or principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor the Assigned Share (as set forth in Item 4.b of Annex I) of the principal amount of any outstanding loans under the Loan Agreement and the other Loan Documents. The Assignor and Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the other Loan Documents for periods prior to the Settlement Date directly between themselves on the Settlement Date.

7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.

[Remainder of page left intentionally blank.]

 

- 2 -


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

 

[NAME OF ASSIGNOR], as Assignor
By  

 

Title  

 

[NAME OF ASSIGNEE], as Assignee
By  

 

Title  

 

ACCEPTED this          day of                     

 

WELLS FARGO FOOTHILL, INC.,

as Agent

By  

 

Title  

 

 

- 3 -


ANNEX FOR ASSIGNMENT AND ACCEPTANCE

ANNEX I

 

1.      Borrowers:

  

2.      Name and Date of Loan Agreement:

 

Amended and Restated Loan and Security Agreement, dated as of April 3, 2008 but effective as of March 31, 2008, among Borrowers, certain Credit Parties from time to time a party thereto, the lenders signatory thereto as the Lenders, and Wells Fargo Foothill, Inc. (formerly Foothill Capital Corporation), a California corporation, as the arranger and administrative agent for the Lenders.

  

3.      Date of Assignment Agreement:

  

4.      Amounts:

  

a.      Assignor’s Total Commitment

   $                    

i.       Assignor’s Revolver Commitment

   $                    

b.      Assigned Share of Total Commitment

                       %

i.       Assigned Share of Revolver Commitment

                       %

c.      Assigned Amount of Total Commitment

   $                    

i.       Assigned Amount of Revolver Credit Commitment to make

   $                    

d.      Resulting Amount of Assignor’s Total Commitment after giving effect to the sale and Assignment to Assignee

   $                    

i.       Resulting Amount of Assignor’s Revolver Commitment

   $                    

e.      Assignor’s Resulting Share of Total Commitment after giving effect to the Assignment to Assignee

                       %

i.       Assignor’s Resulting Share of Revolving Credit Commitment

                       %

5.      Settlement Date:

  
    

 

- 4 -


6.      Notice and Payment Instructions, etc.

Assignee:     Assignor:   

 

   

 

  

 

   

 

  

 

   

 

  

 

   

 

  

7.      Agreed and Accepted:

[ASSIGNOR]

   

[ASSIGNEE]

  
By  

 

    By   

 

  
Title  

 

    Title   

 

  

 

Accepted:

WELLS FARGO FOOTHILL, INC., as Agent

By

 

 

Title

 

 

 

- 5 -


EXHIBIT C-1

(Form of Compliance Certificate)

[on Borrowers’ letterhead]

To: Wells Fargo Foothill, Inc., as Agent

under the below-referenced Loan Agreement

One Boston Place, 18th Floor

Boston, Massachusetts 02108

Attn: Business Finance Division Manager

 

  Re: Compliance Certificate dated                     

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated Loan and Security Agreement, dated as of April 3, 2008, but effective as of March 31, 2008 (the “Loan Agreement”), among Telos Corporation, a Maryland corporation (“Telos”), Xacta Corporation, a Delaware corporation (“Xacta”; Telos and Xacta are each referred to hereinafter individually as a “Borrower” and collectively as “Borrowers”), certain Credit Parties from time to time party thereto, the lenders signatory thereto (the “Lenders”), and Wells Fargo Foothill, Inc. (formerly known as Foothill Capital Corporation), a California corporation, as the arranger and administrative agent for the Lenders (“Agent”). Capitalized terms used in this Compliance Certificate have the meanings set forth in the Loan Agreement unless specifically defined herein.

Pursuant to Section 6.3 of the Loan Agreement, the undersigned officer of Borrower hereby certifies that:

1. The financial information of Parent and its Subsidiaries furnished in Schedule 1 attached hereto, has been prepared in accordance with GAAP (except for year-end adjustments and the lack of footnotes, in the case of financial statements delivered under Section 6.3(a) of the Loan Agreement) and fairly presents the financial condition of Parent and its Subsidiaries.

2. Such officer has reviewed the terms of the Loan Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and condition of Parent and its Subsidiaries during the accounting period covered by the financial statements delivered pursuant to Section 6.3 of the Loan Agreement.

3. Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on Schedule 2 attached hereto, specifying the nature and period of existence thereof and what action Borrowers have taken, are taking or propose to take with respect thereto.


4. Borrowers are in timely compliance with all representations, warranties, and covenants set forth in the Loan Agreement and the other Loan Documents, except as set forth on Schedule 2 attached hereto. Without limiting the generality of the foregoing, Borrowers are in compliance with the covenants contained in Section 7.20 of the Loan Agreement as demonstrated on Schedule 3 hereof.

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this          day of                     , 200    .

 

TELOS CORPORATION, a Maryland corporation, as a Borrower
By  

 

Name  

 

Title  

 

XACTA CORPORATION, a Delaware corporation, as a Borrower
By  

 

Name  

 

Title  

 

 

- 2 -


SCHEDULE 1


SCHEDULE 2


SCHEDULE 3

 

1. Minimum EBITDA.

(a) EBITDA for the                      ending                     ,                      is $            , which amount [is/is not] greater than or equal to the amount set forth in Section 7.20(a)(i) of the Loan Agreement for the corresponding period.

 

2. Maximum Capital Expenditures.

(a) The aggregate amount of capital expenditures made or committed to be made to date in the current fiscal year is $            .

(b) The aggregate amount set forth above [is/is not] less than or equal to the amount set forth in Section 7.20(b)(i) of the Loan Agreement for the corresponding period.


EXHIBIT L-1

FORM OF LIBOR NOTICE

Wells Fargo Foothill, Inc.,

as Agent under the below referenced Loan Agreement

One Boston Place, 18th Floor

Boston, Massachusetts 02108

Attention:                                         

Ladies and Gentlemen:

Reference hereby is made to that certain Amended and Restated Loan and Security Agreement, dated as of April 3, 2008, but effective as of March 31, 2008 (the “Loan Agreement”), among Telos Corporation, a Maryland corporation (“Telos”), Xacta Corporation, a Delaware corporation (“Xacta”; Telos and Xacta are each referred to hereinafter individually as a “Borrower” and collectively as “Borrowers”), certain Credit Parties from time to time party thereto, the lenders signatory thereto (the “Lenders”), and Wells Fargo Foothill, Inc. (formerly known as Foothill Capital Corporation), a California corporation, as the arranger and administrative agent for the Lenders (“Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.

This LIBOR Notice represents Borrowers’ request to elect the LIBOR Option with respect to outstanding Advances in the amount of $             (the “LIBOR Rate Advance”)[, and is a written confirmation of the telephonic notice of such election given to Agent].

Such LIBOR Rate Advance will have an Interest Period of [1, 2, or 3] month(s) commencing on                     .

This LIBOR Notice further confirms Borrowers’ acceptance, for purposes of determining the rate of interest based on the LIBOR Rate under the Loan Agreement, of the LIBOR Rate as determined pursuant to the Loan Agreement.

Borrowers represent and warrant that (i) as of the date hereof, each representation or warranty contained in or pursuant to any Loan Document, any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any Loan Document, and as of the effective date of any advance, continuation or conversion requested above is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (ii) each of the covenants and agreements contained in any Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), and (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above.


Wells Fargo Foothill, Inc.

Page 2

 

Dated:  

 

TELOS CORPORATION, a Maryland corporation, as a Borrower
By  

 

Name  

 

Title  

 

Dated:  

 

XACTA CORPORATION, a Delaware corporation, as a Borrower
By  

 

Name  

 

Title  

 

 

Acknowledged by:

WELLS FARGO FOOTHILL, Inc.,

as Agent

By  

 

Name  

 

Title  

 


EXHIBIT 3.1

CLOSING CHECKLIST

See Attached


CLOSING CHECKLIST

Amendment and Restatement of Loans by

Wells Fargo Foothill, Inc.

to

Telos Corporation and Xacta Corporation

 

I. Parties:

 

  A. Wells Fargo Foothill, Inc. (“Foothill”), 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. Telos Delaware, Inc. (“Telos-Delaware”)

Ubiquity.com, Inc. (“Ubiquity”)

Telos International Corp. (“TIC”)

Telos International Asia, Inc. (“TIA”)

Secure Trade, Inc. (“STI”)

Telos Field Engineering, Inc. (“TFE”)

Teloworks, Inc. (“Teloworks”; together with Telos-Delaware, Ubiquity, TIC, TIA, STI and Teloworks , “Credit Parties”) 19886 Ashburn Road

Ashburn, Virginia 20147

 

II. Counsel to Parties:

 

  A. Foothill:

Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd.

55 East Monroe Street

Suite 3300

Chicago, Illinois 60603

Telephone:   (312) 201-4000
Facsimile:   (312) 332-2196


  B. Borrowers and Credit Parties:

Michael P. Flaherty

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. Amended and Restated Loan and Security Agreement, together with Schedules and Exhibits

 

  2. Amended and Restated Continuing Guaranty

 

  3. Amended and Restated Fee Letter

 

  4. Amended and Restated Subordination Agreement, together with Exhibits

 

  5. Representations and Warranties of Officers (for Borrowers, Credit Parties, and Telos Identity Management Solutions, LLC)

 

  6. Items to be delivered with respect to each Borrower’s and each Credit Party’s insurance:

 

  a) Certificates of insurance with respect to (i) property and boiler and machinery and business interruption policies, showing Agent as certificate holder and loss payee, with lender’s loss payable clause in favor of Agent; (ii) liability and other third party policies, showing Agent as certificate holder and additional insured party

 

  7. Cash Management Agreements

 

  8. Closing Certificate

 

  9. Reaffirmation of Loan Documents

 

  a) Collateral Assignment of Business Interruption Insurance

 

  b) Collateral Assignment of Key Man Life Insurance Policies

 

- 2 -


  c) Accountant’s Letter

 

  d) Cash Management Agreements

 

  e) Intercompany Subordination Agreement

 

  f) Telos Trademark Mortgage

 

  g) Telos Copyright Mortgage

 

  h) Telos Patent Mortgage

 

  i) Telos Stock Pledge Agreement

 

  j) Xacta Trademark Mortgage

 

  k) Ubiquity Stock Pledge Agreement

 

  l) TIC Stock Pledge Agreement

 

  m) TIA Stock Pledge Agreement

 

  B. Items Pertaining to Telos:

 

  10. Second Amendment to Stock Pledge Agreement

 

  a) Teloworks original stock certificate and stock power

 

  b) Enterworks, Inc. original stock certificates and stock powers

 

  11. Second Amendment to Copyright Mortgage

 

  12. Original promissory note with allonge thereto and original warrant re Enterworks, Inc. shares

 

  13. Secretary’s Certificate with respect to resolutions of directors, incumbency of officer, bylaws and Articles of Incorporation

 

  14. Certified copy of Articles of Incorporation

 

  15. Certificates of good standing in each state in which it is qualified to do business

 

  C. Items Pertaining to Xacta:

 

  16. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

- 3 -


  17. Certified copy of Certificate of Incorporation

 

  18. Certificates of good standing in each state in which it is qualified to do business

 

  D. Items Pertaining to Telos-Delaware:

 

  19. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  20. Certified copy of Certificate of Incorporation

 

  21. Certificates of good standing in each state in which it is qualified to do business

 

  E. Items Pertaining to Ubiquity:

 

  22. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  23. Certified copy of Certificate of Incorporation

 

  24. Certificates of good standing in each state in which it is qualified to do business

 

  F. Items Pertaining to TIC:

 

  25. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  26. Certified copy of Certificate of Incorporation

 

  27. Certificates of good standing in each state in which it is qualified to do business

 

  G. Items Pertaining to TIA:

 

  28. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  29. Certified copy of Certificate of Incorporation

 

  30. Certificates of good standing in each state in which it is qualified to do business

 

- 4 -


  H. Items Pertaining to STI:

 

  31. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  32. Certified copy of Certificate of Incorporation

 

  33. Certificates of good standing in each state in which it is qualified to do business

 

  I. Items Pertaining to TFE:

 

  34. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  35. Certified copy of Certificate of Incorporation

 

  36. Certificates of good standing in each state in which it is qualified to do business

 

  J. Items Pertaining to Teloworks

 

  37. Uniform Commercial Code (“UCC”) Financing Statement re Teloworks

 

  38. Joinder to Intercompany Subordination Agreement

 

  39. Secretary’s Certificate with respect to resolutions of directors, incumbency of officers, bylaws and Certificate of Incorporation

 

  40. Certified copy of Certificate of Incorporation

 

  41. Certificates of good standing in each state in which it is qualified to do business

 

  K. Other Items:

 

  42. Summary of pre-closing searches

 

  43. Copies of UCC Financing Statements listed on Exhibit A

 

  44. Opinion of counsel to Borrowers and Credit Parties

 

  45. Certified copy of Series B Notes and the Series C Notes and Subordination Agreement executed by each holder of the Series B Notes and the Series C Notes and State Street Bank and Trust Company

 

- 5 -


  46. Extensions by each holder of the Series B and Series C Notes to December 31, 2011

 

  47. Certified Copy of Preferred Stockholder Standby Agreement executed by each holder of the Private Preferred Stock

 

  48. Extensions by holders of the Private Preferred Stock

 

  49. Preferred Stockholder Standby Agreements

 

  a) North Atlantic Smaller Companies Investment Trust LLP

 

  b) North Atlantic Value LLP A/C B

 

  L. Post-Closing Items

 

  50. Post-Closing Searches (Teloworks)

 

  51. Post-Closing Letter

 

  52. Stock Pledge Agreement by Teloworks re stock of Teloworks Philippines, Inc.

 

  53. Third Amendment to Copyright Mortgage

 

  54. Assignment of Claims Act Filings

 

- 6 -


EXHIBIT A

UCC FINANCING STATEMENTS

 

Location of Filing State/County

   UCC File Number    Date Filed
Maryland (Telos)    0000000181130692    9/17/02
Loudoun County, VA (Telos) (fixture)    020000717    9/30/02
Delaware (Xacta)    22331175    9/16/02
Loudoun County, VA (Xacta) (fixture)    020000718    9/30/02
Delaware (Telos-Delaware)    22331100    9/16/02
Delaware (Ubiquity)    22331167    9/16/02
Delaware (TIC)    22331159    9/16/02
Delaware (TIA)    22331142    9/16/02
Delaware (STI)    22331084    9/16/02
Delaware (TFE)    22331126    9/16/02

 

A-1


Schedule A-1

Agent’s Accounts

An account at a bank designated by Agent from time to time as the account into which Borrowers shall make all payments to Agent for the benefit of the Lender Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other Loan Documents; unless and until Agent notifies Administrative Borrower and the Lender Group to the contrary, Agent’s Account shall be that certain deposit account bearing account number 323-266193 and maintained by Agent with JPMorgan Chase Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA #021000021.


Schedule C-1

Commitments

 

Lender

   Revolver Commitment    Total Commitment

Wells Fargo Foothill, Inc.

   $ 25,000,000    $ 25,000,000
     
     
     
     

All Lenders

   $ 25,000,000    $ 25,000,000


Schedule D-1

Designated Account

Account number 4945018786 of Administrative Borrower maintained with Administrative Borrower’s Designated Account Bank, or such other deposit account of Administrative Borrower (located within the United States) that has been designed as such, in writing, by Administrative Borrower to Agent.

Designated Account Bank” means Wells Fargo, whose office is located at 201 Third Street, 11th Floor, San Francisco, CA 94103, and whose ABA number is 121000248.


Schedule P-1

Permitted Liens

Telos Corporation

Maryland, State Department of Assessments and Taxation

 

Date

  

File Number

  

Secured Party/Lien Activity

  

Collateral

8/19/02    181128488    State Street Bank and Trust Company, as Trustee    All real or personal property now or hereafter owned, leased or operated by debtor; all of debtor’s equipment and fixtures, incl. furniture, machinery, vehicles and trade fixtures; all products or proceeds of such property; but excluding Accounts, Chattel Paper, Instruments (except as proceeds to the collateral) and Inventory.
6/30/03    181158562   

Hitachi Credit America Corp.

ePlus Government, Inc.

   Prime Contract Delivery Order and Equipment pursuant to Order No. T0603BN1367
10/2/03    181167085    Hewlett-Packard Financial Services Company    Payments due under Delivery Order No. T04030DE1143 issued under GSA Schedule Contract No. GS-35F-4315D, as amended
1/13/04    181177048    Hewlett-Packard Financial Services Company    All payments due under Contract No. DAAB15-99-D-0001, DO No. YK49
3/24/04    181184880    Hewlett-Packard Financial Services Company    All payments due under Contract No. DAAB15-99-D-0001, DO No. YK49
12/16/05    181252785   

U.S. Bank National Association

Previously: State Street Bank and Trust Company

   All real or personal property now or hereafter owned, leased or operated by debtor; all of debtor’s equipment and fixtures, incl. furniture, machinery, vehicles and trade fixtures; all products or proceeds of such property; but excluding Accounts, Chattel Paper, Instruments (except as proceeds to the collateral) and Inventory.
12/16/05    181252786   

U.S. Bank National Association

Previously: State Street Bank and Trust Company

   All real or personal property now or hereafter owned, leased or operated by debtor; all of debtor’s equipment and fixtures, incl. furniture, machinery, vehicles and trade fixtures; all products or proceeds of such property; all products or proceeds of such property; but excluding Accounts, Chattel Paper, Instruments (except as proceeds to the collateral) and Inventory.
12/16/05    181252787   

U.S. Bank National Association

Previously: State Street Bank and Trust Company

   All real or personal property now or hereafter owned, leased or operated by debtor; all of debtor’s equipment and fixtures, incl. furniture, machinery, vehicles and trade fixtures; all products or proceeds of such property; all products or proceeds of such property; but excluding Accounts, Chattel Paper, Instruments (except as proceeds to the collateral) and Inventory.

 

Permitted Liens Schedule

Page 1 of 2


Date

  

File Number

  

Secured Party/Lien Activity

  

Collateral

4/20/07    181303794    Dell Marketing, LP    Depository account No. 001038377 with Wells Fargo Bank, National Association, and all instruments, documents and other writings evidencing the account.
10/11/07    181322209    Ikon Financial Services    Specific leased equipment

Virginia, Secretary of State

 

Date

  

File Number

  

Secured Party/Lien Activity

  

Collateral

11/2/05    0511027009-2    CMS Communications, Inc.    Specific equipment provided by CMS Communications, Inc.
11/2/05    0511027010-5    CMS Communications    Specific equipment provided by CMS Communications
11/2/05    0511027011-7    CMS Communications    Specific equipment provided by CMS Communications
11/2/05    0511027012-9    CMS Communications    Specific equipment provided by CMS Communications
11/2/05    0511027013-1    CMS Communications    Specific equipment provided by CMS Communications
11/2/05    0511027014-3    CMS Communications    Specific equipment provided by CMS Communications
3/3/06    0603037176-2    IOS Capital    Specific leased equipment
4/12/07    0704127128-4    Simplex Financial Service    Specific leased equipment

 

Permitted Liens Schedule

Page 2 of 2


Schedule 2.7(a)

Cash Management Banks

Wells Fargo Bank


Schedule 3.1

Copyrights

(see attached)


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

UNITED STATES
WEB C&A v2.00    Registration No. TXu 1-001-763    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Detect v2.0    Registration No. TXu 1-001-764    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Detect v2.1.1    Registration No. TXu 1-001-765    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v.3.00    Registration No. TXu 1-001-766    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v3.01    Registration No. TXu 1-001-767    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.21    Registration No. TXu 1-001-768    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.21    Registration No. TXu 1-001-769    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.22    Registration No. TXu 1-001-770    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.20    Registration No. TXu 1-001-771    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v.3.10    TXu-1-001-772    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097

 

Page 1 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

WEB C&A v2.10    Registration No. TXu 1-001-773    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.20    Registration No. TXu 1-001-774    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A/Xacta Commerce Trust v3.30    Registration No. TXu 1-001-775    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Commerce Trust reference manual: v.4.0    Registration No. TX-6-092-272    User’s manual    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A Trust reference manual    Registration No. TX-6-092-273    Computer program and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A v.4.0 (SP1)    Registration No. TX-6-092-274    Computer program and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A v.4.0 (SP2)    Registration No. TX-6-092-275    CD-ROM and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Commerce Trust reference manual v.4.0 (SP1)    TX-6-092-276    Text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Commerce Trust reference manual v.4.0 (SP2)    TX-6-092-277    Text    Registered 1/13/05    Renewal due 1/13/2100
Telos Site Survey Automation Tool    Registration No. TXu1-302-904    Computer program    Registered 4/4/06    Renewal due 4/4/2101
Telos ARISS Administration    Registration No. Pending    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos Service Management (TSM)    Registration No. TXu1-294-185    Computer program    Registered 4/21/06    Renewal due 4/21/2101

 

Page 2 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Content Management Tool (CMT)    Registration No. TXu1-299-084    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos Store    Registration No. TXu1-296-787    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos AMHS 2001sp2    Registration No. TX 6-501-275    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 2003    Registration No. TX 6-500-647    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 2005    Registration No. TX 6-500-644    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 5.0.2    Registration No. TX 6-500-643    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 5.1-2P    Registration No. TX 6-500-645    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 6.0    Registration No. TX 6-500-646    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS USMTF Editor    Registration No. TX 6-501-274    Computer program    Registered 1/24/07    Renewal due 1/24/2102
PENDING REGISTRATION APPLICATIONS:    Telos Reference         
Telos CAISI Bridge Module (CBM) Step-by-Step Instruction Guide    None    Manual      
Xacta Customer Service Center v.2.0 Build 60 (SP4)    1-4    Computer program      
Xacta Certificate Management Utility (SP4)    3-4    Computer program      
Xacta Distribution Manager (SP4)    5-4    Computer program      

 

Page 3 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta Detect Client v.4.1 Build 211 (SP4)    6-4    Computer program      
Xacta Detect Server v.4.1. Build 254 (SP4)    7-4    Computer program      
Xacta Host Info for Unix v.1.1.6 (SP4)    9-4    Computer program      
Xacta Host Info Agent for Windows v.1.00.02 (SP4)    10-4    Computer program      
Xacta IA Manager – Assessment Engine (SP4)    11-4    Computer program      
Xacta Customer Service Center Reference Manual for Customers (SP4)    14-4    Manual      
Xacta Customer Service Center Reference Manual for Administrator (SP4)    15-4    Manual      
Xacta IA Manager Distribution Manager Reference Manual (SP4)    16-4    Manual      
Xacta FISMA Accelerator Reference Manual (SP4)    17-4    Manual      
Xacta IA Manager Assessment Engine Getting Started Guide (SP4)    18-4    Manual      
Xacta IA Manager Assessment Engine Reference Manual (SP4)    19-4    Manual      

 

Page 4 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta IA Manager Assistant Manual (SP4)    20-4    Manual      
Xacta Detect Client v.4.4 Build 253 (SP5)    1-5    Computer program      
Xacta Customer Service Center (CSC) v.2.0 Build 108 (SP5)    2-5    Computer program      
Xacta Certificate Management Utility (SP5)    3-5    Computer program      
Xacta Database Management Utility (SP5)    4-5    Computer program      
Xacta Detect Server v.4.4 Build 280 (SP5)    5-5    Computer program      
Xacta Distribution Manager (SP5)    6-5    Computer program      
Xacta File Digest Checker Utility (SP5)    7-5    Computer program      
Xacta Host Info Agent for Windows v.1.00.04 (SP5)    8-5    Computer program      
Xacta Host Info Agent for Unix v.1.1.6 (SP5)    9-5    Computer program      
Xacta IA Manager Assistant (SP5)    10-5    Computer program      

 

Page 5 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta IA Manager Assessment Engine (SP5)    11-5    Computer program      
Xacta Automated Script Language Manual (SP5)    13-5    Manual      
Xacta Customer Service Center Reference Manual – for Administrator (SP5)    14-5    Manual      
Xacta Customer Service Center Reference Manual – for Customers (SP5)    15-5    Manual      
Xacta IA Manager Distribution Manager Reference Manual (SP5)    16-5    Manual      
Xacta Secure Enterprise Process Handler Flow (SP5)    17-5    Manual      

 

Page 6 of 6


Schedule 4.9

Commercial Tort Claims

None


Schedule 5.5

Location of Inventory and Equipment

 

Location Address

 

Description

   
19886 Ashburn Road   Inventory and Equipment  
Ashburn, VA 20147    
1300 Connecticut Ave NW #300   Equipment only  
Washington, D.C.    
3655 Alamo Street   Equipment only  
Suites # 300,301&303    
Simi Valley, CA    
81 Hartwell Avenue   Equipment only  
Lexington, MA    
656 Shrewsbury Avenue   Equipment only  
1st, 2nd Floors, Basement    
Shrewsbury, NJ    
6 Friendrichstasse   Equipment only  
Schwetzingen    
Germany    


Schedule 5.7

Location of Chief Executive Office

 

Company

  

Chief Executive Location

  

FEIN

Telos Corporation   

19886 Ashburn Road

Ashburn, VA 20147

   52-0880974
Xacta Corporation   

19886 Ashburn Road

Ashburn, VA 20147

   54-1983375
ubIQuity.com, Inc.   

19886 Ashburn Road

Ashburn, VA 20147

   54-1983379
Telos Delaware, Inc.   

19886 Ashburn Road

Ashburn, VA 20147

   54-1982362
Teloworks, Inc.   

19886 Ashburn Road

Ashburn, VA 20147

   54-2057777
Telos Field Engineering, Inc.   

19886 Ashburn Road

Ashburn, VA 20147

   54-1750791
Telos International Corp.   

19886 Ashburn Road

Ashburn, VA 20147

   54-1786007
Telos International Asia   

19886 Ashburn Road

Ashburn, VA 20147

   54-2041625
Secure Trade, Inc.   

19886 Ashburn Road

Ashburn, VA 20147

   54-2041623
Telos Identity Management Solutions, LLC   

19886 Ashburn Road

Ashburn, VA 20147

   20-8829067


Schedule 5.8(b)

Capitalization of Telos Corporation

 

Class of Shares

   Authorized
Shares
   Outstanding
shares
   Subscriptions    Options    Warrants    Calls    Obligation
to
repurchase/

retire/
Exchange
shares

Class A Common

   50,000,000    21,171,202    0    3,839,249    0    0    No

Class B Common

   5,000,000    4,037,628    0    0    0    0    No

12% Cumulative Exchangeable Redeemable Preferred

   6,000,000    3,185,586    0    0    0    0    Conditional

Senior Exchangeable Preferred

   3,000    0    0    0    0    0    N/A

Series A-1 Redeemable Preferred

   1,250    1,250    0    0    0    0    Y

Series A-2 Redeemable Preferred

   1,750    1,750    0    0    0    0    Y


Schedule 5.8(c)

Capitalization of Subsidiaries and Affiliates

 

Company

   Class of Shares    Authorized Shares    Outstanding Shares    Options

Xacta Corporation

   Common    10,000,000    6,500,000    2,568,010

Telos Delaware

   Common    10,000,000    6,500,000    1,097,699

Ubiquity.com, Inc.

   Common    10,000,000    6,500,100    0

Teloworks

   Common    100    100    0

Telos Field Engineering, Inc.

   Common    3,000    3,000    0

Telos International Corp.

   Common    3,000    1,000    0

Telos International Asia, Inc.

   Common    3,000    100    0

Secure Trade, Inc.

   Common    5,000,000    100    0

Telos Identity Management Solutions, LLC d/b/a Xacta Identity Management Solutions: a limited liability company, membership interest held by Telos Corporation (60%) and Hoya ID Fund A, LLC (40%)


Schedule 5.10

Description of litigation

Costa Brava Partnership III, L.P. et al. v. Telos Corporation, et al., In the Circuit Court for Baltimore City, Case No. 24-C-05-009296

Costa Brava Partnership III, L.P. (“Costa Brava”), a holder of the Telos Corporation’s (“Telos”) 12% Cumulative Exchangeable Redeemable Preferred Stock (“Public Preferred Stock”), filed a lawsuit (hereinafter the ‘Complaint”) on October 17, 2005 in the Circuit Court of Baltimore City in the State of Maryland (“Complaint”) against Telos, its directors, and certain of its officers.

The Complaint alleges that Telos and its officers and directors have engaged in tactics to avoid paying mandatory dividends on the Public Preferred Stock, and asserts that the Public Preferred Stock has characteristics of debt instruments even though issued by Telos in the form of stock. Costa Brava alleges, among other things, that Telos and an independent committee of the Board of Directors have done nothing to improve what they claim to be Telos’ insolvency, or its ability to redeem the Public Preferred Stock and pay accrued dividends. They also challenge the bonus payments to Telos’ officers and directors, and consulting fees paid to the holder of a majority of Telos’ common stock.

On December 22, 2005, Telos’ Board of Directors established a special litigation committee (“Special Litigation Committee”) comprised of independent directors to review and evaluate the matters raised in the derivative suit filed against Telos by Costa Brava relating to Telos’ Public Preferred Stock.

On January 9, 2006, Telos filed a motion to dismiss the Complaint or, in the alternative, to stay the action until the Special Litigation Committee had sufficient time to properly investigate and respond to Costa Brava’s demands. On March 30, 2006, Judge Albert J. Matricciani granted the motions in part and denied them in part, but also denied the alternative request for a stay.

On May 31, 2006, an Amended Complaint was filed in which Wynnefield joined as a Plaintiff.

On May 26, 2006, Plaintiffs filed a motion for a preliminary injunction to prevent the sale or disposal of Xacta Corporation or any of its assets until the lawsuit is resolved on the merits. The motion was denied without prejudice

On August 30, 2006, Plaintiffs filed a motion for receivership following the resignations of six of the nine members of the Board of Directors on August 16, 2006. However, three new independent board members were added within a week and two additional independent board members joined on October 31, 2006, bringing the total board membership to eight. Thus, the board and all board committees, including the Special Litigation Committee, were fully reconstituted. The Plaintiffs’ motion for receivership was denied on November 29, 2006.

On February 15, 2007, the Plaintiffs filed their second motion for preliminary injunction to prevent the sale or disposal of any corporate assets outside the ordinary course until such time


that two new Class D directors have been elected. This followed the Plaintiff’s February 7, 2007 letter to the corporate secretary requesting a special meeting to elect new Class D directors to replace the two board seats left vacant by the resignations in August 2006. At the special meeting, two Class D directors were elected by the holders of Public Preferred Stock. After a hearing, Judge Matricciani denied the Plaintiffs’ motion.

On February 27, 2007, the Plaintiffs filed a Second Amended Complaint and added Mr. John R. C. Porter, Telos’ majority shareholder, as a defendant. The Court denied Telos’ motion to strike the second amended complaint and the motion for partial summary judgment, but it granted the motion to dismiss in part and denied it in part. The following counts were dismissed: Count I alleging fraudulent conveyance; Count II requesting a permanent and preliminary injunction related to the fraudulent conveyance allegations; and Count V allegation against Mr. John Porter for shareholder oppression. The following counts were not dismissed: Count III requesting appointment of a receiver; Count IV requesting to dissolve the corporation; Count VI regarding the fiduciary duty of the directors; and Count VII regarding the fiduciary duty of the officers.

On May 29, 2007, Telos filed a counterclaim against the Plaintiffs alleging interference with its relationship with Wells Fargo Foothill, and a related motion for a preliminary injunction. On June 4, 2007, the Court entered a consent order in which the Plaintiffs agreed to cease and desist communications with Wells Fargo Foothill regarding a proceeding in England that settled over three years ago. The Court granted Telos’ motion.

On July 20, 2007, counsel for the Special Litigation Committee issued its final report and found that there was no evidence to support the derivative claims, and no instance of bad faith, breach of duty or self-interested action or inaction. Further, Special Litigation Committee counsel recommended that Telos take all action necessary and appropriate that is consistent with these findings.

Telos filed a motion to dismiss the derivative claims as recommended by the Special Litigation Committee and its report. On January 7, 2008, the Court granted Telos’ motion to dismiss, Counts VI and VII of the Second Amended Complaint, the derivative claims, with only Counts III and IV remaining. Accordingly, all counts against the individual defendants were dismissed.

On September 14, 2007 Plaintiffs filed a motion to challenge Telos’ designation of certain highly confidential materials. Telos filed its opposition to Plaintiffs’ motion on September 24, 2007 and Plaintiffs filed their reply on October 2, 2007. On November 6, 2007, following a hearing on November 5, 2007, the Court issued a discovery order denying Plaintiffs’ request to reclassify the challenged documents as “confidential.” Such Court order also applies to any and all documents produced to Plaintiffs in the Hamot et al. v. Telos Corporation litigation as well as to documents provided to Messrs. Hamot and Siegel in their capacity as Class D directors of Telos.

On February 12, 2008, the Plaintiff’s filed a Third Amended Complaint which included all the previous counts from the original Complaint and the Second Amended Complaint as well as additional counts. The additional counts are as follows: Count VIII (breach of contract against Telos); Count IX (preliminary and permanent injunction) to prevent Telos from entering into a transaction to dispose of assets that would unjustly enrich the officers and directors); and Count


X (accounting) alleging that Telos failed to prepare financial statements as required under Maryland law. Telos filed a Motion to Dismiss or to Strike the Third Amended Complaint or to Dismiss or for Summary Judgment.

On March 3, 2008, the Plaintiffs and all the Defendants to the litigation entered into a Stipulation regarding the Third Amended Complaint. All parties stipulated that the Third Amended Complaint alleges cause of action against Telos only (Counts III, IV, VIII, IX and X) and not the individual defendants (Counts 1, II, V, VI, and VII). Plaintiffs asserted that the previous dismissed counts were included in the Third Amended Complaint by the Plaintiffs only for the purposes of appellate preservation. The Plaintiffs stipulated that they are not seeking reconsideration of the previously dismissed counts. On March 7, 2008, Judge Matricciani entered an Order dismissing the counts per Stipulation.

The hearing on Telos’ Motion to Strike or Dismiss or Motion for Summary Judgment was held on March 11, 2008 before Judge Matricciani.

At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to Plaintiffs’ success in any of their assertions. Although there can be no assurance as to the ultimate outcome of this litigation, Telos and its officers and directors strenuously deny Plaintiffs’ claims, will continue to vigorously defend the matter and oppose the relief sought.

Seth Hamot and Andre R. Siegel v. Telos Corporation, In the Circuit Court for Baltimore City, Case No. 24-C-07-005603

On August 2, 2007, Mr. Seth W. Hamot and Mr. Andrew R. Siegel, principals of Costa Brava Partnership III L.P. and recently elected to the Board as Class D Directors, filed a complaint against Telos and a motion for a temporary restraining order with the Maryland Circuit Court for the City of Baltimore. The complaint alleged that certain company documents and records had not been promptly provided to them as requested, and that these documents are necessary to fulfill their fiduciary duty as directors. On the same day, this matter was assigned to Judge Matricciani. The Court issued an order stating that the Plaintiffs should sign a temporary confidentiality order that would allow them to receive the documents requested. The Court further stated that Telos may redact any such documents provided to Plaintiffs for privilege regarding matters related to the Costa Brava litigation, and temporarily for highly confidential information. The Court reserved on the final determination of the issue of highly confidential information and also on the option for a temporary restraining order until the hearing scheduled for August 27, 2007.

Plaintiffs failed to sign the temporary confidentiality order and as a result were not provided with any documentation for a Board meeting held on August 9, 2007. On August 22, 2007 Plaintiffs filed an amended complaint which alleged that Telos was denying them the ability to effectively review, examine, consider and question future regulatory filings and all other important actions and undertakings of Telos.

On August 28, 2007, the Court converted Plaintiffs’ motion for temporary restraining order into a preliminary injunction and stated that Plaintiffs were entitled to documents in response to reasonable requests for information pertinent and necessary to perform their duties as members


of the Board. In addition, the Court noted that during the pendency of the shareholder litigation, it was not inclined to permit Messrs. Hamot and Siegel, through the guise of their newly acquired director status, to avoid their currently binding commitments under the stipulation and protective order entered on July 7, 2006. Pursuant to the terms of such order Telos is entitled to designate documents produced in discovery or submitted to the Court as “confidential” or “highly confidential” and to withhold from Plaintiffs information protected by the work product doctrine or attorney-client privilege.

On September 24, 2007, Plaintiffs filed a new motion for temporary restraining order as well as a second amended verified complaint with the Circuit Court for Baltimore City in which they requested that the Court “compel Telos to adhere to the Telos Amended and Restated Bylaws” and alleged that provisions concerning the noticing of Board committee meetings and the recording of Board meeting minutes had been violated and that in addition, Mr. Wood’s service as both CEO and Chairman of the Board was improper and impermissible under Telos’ Bylaws. The Court denied the Plaintiffs’ motion on October 12, 2007. On the same day, the Court issued an amended preliminary injunction order stating that Plaintiffs are entitled to receive written responses to requests for board of directors or board committee minutes within 7 days of any such requests and copies of such minutes within 15 days of any such requests, as well as written responses to all other requests for information and/or documents related to Plaintiffs’ duties as directors within 7 days of such requests and all board of directors appropriate information and/or documents within 30 days of any such requests. The Court further stated that in all other respects, the preliminary injunction order of August 28, 2007 shall remain in full force and effect.

As noted above under Costa Brava Partnership III, L.P., the Court issued a discovery order denying Plaintiffs’ request to reclassify the challenged documents as “confidential.” Such Court order also applies to any and all documents produced in the Hamot et al. v Telos Corporation litigation as well as documents provided to Messrs. Hamot and Siegel in their capacity as Class D directors of Telos.

At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to Plaintiffs’ success in any of their assertions. Although there can be no assurance as to the ultimate outcome of this litigation, Telos and its officers and directors strenuously deny Plaintiffs’ claims, will vigorously defend the matter, and continue to oppose the relief sought.

January 14, 2008 Letter from Dr. Eric Lepler

Telos received a letter from Dr. Eric Lepler, dated January 14, 2008. He alleged that a press release of January 7, 2008 by Telos as it related to the Costa Brava litigation was misleading. Dr. Lepler alleges that he suffered a loss of $28,520 that was directly related to the press release,. Telos responded on February 4, 2008, disagreeing with his interpretation of the press release. Dr. Lepler responded by letter on February 15, 2008, stating that he will be filing a complaint with the U.S. Securities & Exchange Commission (“SEC”), writing a letter to the Telos Board of Directors on or after March 15, 2008, and intends to file suit in Santa Clara County in San Jose, California to recover his losses and punitive damages. On April 3, 2008, John Wood, CEO of Telos Corporation, received a letter from Dr. Lepler dated March 31, 2008. The letter states that he intends to file a suit against Telos seeking damages in the amount of $5,028,520 plus costs, and that he intends to file a formal complaint with the SEC. Telos has not received any notice of a similar claim from any other shareholder.


Schedule 5.14

Environmental Matters

None


Schedule 5.16

Intellectual Property

See attached charts:

 

   

Telos Patent Portfolio (one TIMS entry)

 

   

Telos and Xacta Copyright Status Chart

 

   

Telos Trademark Status chart

 

   

Xacta Trademark Status chart

Licenses: In the regular course of business, Telos Corporation for its AMHS business and Xacta Corporation enter into software license agreement with their customers. For the purpose of office operations, Telos Corporation and Xacta Corporation hold numerous licenses with software and other providers, including Microsoft Corporation.


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

Telos Patent Portfolio

 

Sonnenschein Ref

    (Cooley Ref)

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

TELO-001 Family

30000156-0011

 

(TELO-001/00US)

  

60/223,982

 

August 9, 2000

      Wilson, Catlin, Smith, Berman    Web Certification and Accreditation System, Method and Medium   

Two-page abstract.

 

Expired (12-month pendency over)

30000156-0012

 

(TELO-001/01US)

  

09/794,386

 

February 28, 2001

  

6,901,346

 

May 31, 2005

  

Tracy, Smith,

Berman, Catlin,

Wilson, Barrett,

Hall

   System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Maintenance fee due November 30, 2008.

 

U.S. Patent Number 6,901,346 issued May 31, 2005

30000156-0010

 

(TELO-001/02US)

  

09/822,868

 

April 2, 2001

  

6,993,448

 

January 31, 2006

  

Tracy, Barrett,

Berman, Catlin

   System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Maintenance fee due July 31, 2009.

 

U.S. Patent Number 6,993,448 issued January 31, 2006.

30000156-0015

 

(TELO-001/02WO)

  

PCT/US00/09842

 

Int’l filing date:

  April 1, 2002

 

Priority date:

  April 2, 2001

   WO 02/079944 A3   

Tracy, Barrett,

Berman, Catlin

   System, Method, and Medium for Certifying and Accrediting Requirements Compliance    Entered European phase on October 2, 2003 (see 30000156-0007).

 

- 1 -


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

 

Sonnenschein Ref

    (Cooley Ref)

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

30000156-0007

 

(TELO-001/02EP)

  

EP 02721628.2

 

Int’l filing date:

April 1, 2002

 

Priority date:

April 2, 2001

     

Tracy, Barrett,

Berman, Catlin

   System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Annuity due April 1, 2008 (with a grace period until the end of the month of April).

 

European phase of 30000156-0015.

 

Entered European phase on October 2, 2003.

30000156-0003

 

(TELO-001/03US)

  

US 09/946,164

 

September 5, 2001

  

US-2003-0050718-A1

 

March 13, 2003

  

Tracy, Barrett,

Berman, Catlin,

Dimtsios

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Notice of Allowance received. Payment of issue fee due April 25, 2008.

 

CIP of 30000156-0012.

30000156-0017

 

(TELO-001/03WO)

  

PCT/US02/28179

 

Int’l filing date:

September 5, 2002

 

Priority date:

September 5, 2001

  

WO 03/021398A3

 

March 13, 2003

  

Tracy, Barrett,

Berman, Catlin,

Dimtsios

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance    Entered European phase on March 31, 2004.

30000156-0020

 

(TELO-001/03EP)

  

EP 02775750.9

 

Int’l filing date:

September 5, 2002

 

Priority date:

September 5, 2001

     

Tracy, Barrett,

Berman, Catlin,

Dimtsios

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Annuity due September 5, 2008.

 

European phase of 30000156-0017.

30000156-0004

 

(TELO-001/04US)

  

US 11/341,502

 

January 30, 2006

     

Tracy, Barrett,

Berman, Catlin

   System, Method, and Medium for Certifying and Accrediting Requirements Compliance   

Office Action issued August 23, 2007 based on New Art. Abandonment instructions received on February 23, 2008 and confirmed via email on February 26, 2008.

 

Continuation of 30000156-0003.

 

- 2 -


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

 

Sonnenschein Ref

    (Cooley Ref)

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

TELO-002 Family

30000156-0009

 

(TELO-002/00US)

  

US 10/304,825

 

November 27, 2002

  

6,983,221

 

January 3, 2006

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Robust Risk Assessment Model   

Maintenance fee due July 3, 2009.

 

U.S. Patent Number 6,983,221 issued January 3, 2006.

30000156-0014

 

(TELO-002/00WO)

  

PCT/US03/37603

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

  

WO 2004/051406 A2

 

June 17, 2004

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Robust Risk Assessment Model    Entered European Phase.

30000156-0019

 

(TELO-002/00EP)

  

EP 03787115.9

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

     

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Robust Risk Assessment Model   

Annuity due November 26, 2008

 

European Phase initiated June 24, 2005 following claims being rewritten to avoid excess claim fees.

 

- 3 -


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

 

Sonnenschein Ref

    (Cooley Ref)

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

TELO-003 Family

30000156-0006

 

(TELO-003/00US)

  

US 10/304,826

 

November 27, 2002

  

6,980,927

 

December 27, 2005

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Continuous Risk Assessment   

Maintenance fee due June 27, 2009.

 

U.S. Patent Number 6,980,927 issued December 27, 2005.

30000156-0013

 

(TELO-003/00WO)

  

PCT/US03/37605

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

  

WO 2004/051407 A2

 

June 17, 2004

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Continuous Risk Assessment    Entered European Phase

30000156-0005

 

(TELO-003/00EP)

  

EP 03790011.5

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

     

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Continuous Risk Assessment   

Annuity due November 26, 2008

 

European Phase initiated June 24, 2005 following claims being rewritten to avoid excess claim fees.

 

- 4 -


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

 

Sonnenschein Ref

    (Cooley Ref)

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

TELO-004 Family

30000156-0002

 

(TELO-004/00US)

  

10/304,824

 

November 27, 2002

  

US-2004-0103309-A1

 

May 27, 2004

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Threat Vulnerability Feed    Allowed to Expire as of 1/29/07

30000156-0016

 

(TELO-004/00WO)

  

PCT/US03/37608

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

  

WO 2004/051408 A2

 

June 17, 2004

  

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Threat Vulnerability Feed    Entered European Phase

30000156-0018

 

(TELO-004/00EP)

  

EP 03790014.9

 

Int’l filing date:

November 26, 2003

 

Priority date:

November 27, 2002

     

Tracy, Barrett,

Catlin

   Enhanced System, Method, and Medium for Certifying and Accrediting Requirements Compliance Utilizing Threat Vulnerability Feed   

Annuity due November 26, 2008

 

European Phase initiated June 24, 2005 following claims being rewritten to avoid excess claim fees.

 

- 5 -


CONFIDENTIAL    Status as of 3/19/08
COMPANY-PROPRIETARY   

 

Sonnenschein Ref

    (Cooley Ref)

    ((H&D Ref))

  

Application S/N

Filing Date

  

Patent / Pub No.

Issue / Pub Date

  

Named Inventor(s)

  

Title

  

Comments/Status

TELO-005 Family

30000156-0008

 

(TELO-005/00US)

  

60/866,619

 

November 21, 2006

         Method and System for Identification Token Extension   

Provisional patent application filed November 21, 2006.

 

Converted to utility application on November 20, 2007.

30000156-0022   

11/943,318

 

November 20, 2007

      Ayers    Method and System for Remote Security Token Extension   

Utility patent application filed November 20, 2007

 

Awaiting first Office Action

   Filed by TIMS            

 

- 6 -


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

UNITED STATES
WEB C&A v2.00    Registration No. TXu 1-001-763    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Detect v2.0    Registration No. TXu 1-001-764    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Detect v2.1.1    Registration No. TXu 1-001-765    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v.3.00    Registration No. TXu 1-001-766    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v3.01    Registration No. TXu 1-001-767    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.21    Registration No. TXu 1-001-768    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.21    Registration No. TXu 1-001-769    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.22    Registration No. TXu 1-001-770    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.20    Registration No. TXu 1-001-771    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v.3.10    TXu-1-001-772    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097

 

Page 1 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

WEB C&A v2.10    Registration No. TXu 1-001-773    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.20    Registration No. TXu 1-001-774    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A/Xacta Commerce Trust v3.30    Registration No. TXu 1-001-775    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Commerce Trust reference manual: v.4.0    Registration No. TX-6-092-272    User’s manual    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A Trust reference manual    Registration No. TX-6-092-273    Computer program and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A v.4.0 (SP1)    Registration No. TX-6-092-274    Computer program and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Web C&A v.4.0 (SP2)    Registration No. TX-6-092-275    CD-ROM and text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Commerce Trust reference manual v.4.0 (SP1)    TX-6-092-276    Text    Registered 1/13/05    Renewal due 1/13/2100
Xacta Commerce Trust reference manual v.4.0 (SP2)    TX-6-092-277    Text    Registered 1/13/05    Renewal due 1/13/2100
Telos Site Survey Automation Tool    Registration No. TXu1-302-904    Computer program    Registered 4/4/06    Renewal due 4/4/2101
Telos ARISS Administration    Registration No. Pending    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos Service Management (TSM)    Registration No. TXu1-294-185    Computer program    Registered 4/21/06    Renewal due 4/21/2101

 

Page 2 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Content Management Tool (CMT)    Registration No. TXu1-299-084    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos Store    Registration No. TXu1-296-787    Computer program    Registered 4/21/06    Renewal due 4/21/2101
Telos AMHS 2001sp2    Registration No. TX 6-501-275    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 2003    Registration No. TX 6-500-647    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 2005    Registration No. TX 6-500-644    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 5.0.2    Registration No. TX 6-500-643    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 5.1-2P    Registration No. TX 6-500-645    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS 6.0    Registration No. TX 6-500-646    Computer program    Registered 1/24/07    Renewal due 1/24/2102
Telos AMHS USMTF Editor    Registration No. TX 6-501-274    Computer program    Registered 1/24/07    Renewal due 1/24/2102
PENDING REGISTRATION APPLICATIONS:    Telos Reference         
Telos CAISI Bridge Module (CBM) Step-by-Step Instruction Guide    None    Manual      
Xacta Customer Service Center v.2.0 Build 60 (SP4)    1-4    Computer program      
Xacta Certificate Management Utility (SP4)    3-4    Computer program      
Xacta Distribution Manager (SP4)    5-4    Computer program      

 

Page 3 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta Detect Client v.4.1 Build 211 (SP4)    6-4    Computer program      
Xacta Detect Server v.4.1. Build 254 (SP4)    7-4    Computer program      
Xacta Host Info for Unix v.1.1.6 (SP4)    9-4    Computer program      
Xacta Host Info Agent for Windows v.1.00.02 (SP4)    10-4    Computer program      
Xacta IA Manager – Assessment Engine (SP4)    11-4    Computer program      
Xacta Customer Service Center Reference Manual for Customers (SP4)    14-4    Manual      
Xacta Customer Service Center Reference Manual for Administrator (SP4)    15-4    Manual      
Xacta IA Manager Distribution Manager Reference Manual (SP4)    16-4    Manual      
Xacta FISMA Accelerator Reference Manual (SP4)    17-4    Manual      
Xacta IA Manager Assessment Engine Getting Started Guide (SP4)    18-4    Manual      
Xacta IA Manager Assessment Engine Reference Manual (SP4)    19-4    Manual      

 

Page 4 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta IA Manager Assistant Manual (SP4)    20-4    Manual      
Xacta Detect Client v.4.4 Build 253 (SP5)    1-5    Computer program      
Xacta Customer Service Center (CSC) v.2.0 Build 108 (SP5)    2-5    Computer program      
Xacta Certificate Management Utility (SP5)    3-5    Computer program      
Xacta Database Management Utility (SP5)    4-5    Computer program      
Xacta Detect Server v.4.4 Build 280 (SP5)    5-5    Computer program      
Xacta Distribution Manager (SP5)    6-5    Computer program      
Xacta File Digest Checker Utility (SP5)    7-5    Computer program      
Xacta Host Info Agent for Windows v.1.00.04 (SP5)    8-5    Computer program      
Xacta Host Info Agent for Unix v.1.1.6 (SP5)    9-5    Computer program      
Xacta IA Manager Assistant (SP5)    10-5    Computer program      

 

Page 5 of 6


CONFIDENTIAL    COMPANY-PROPRIETARY

Telos Corporation

(a Maryland Corporation)

Copyright Status Chart as of March 20, 2008

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta IA Manager Assessment Engine (SP5)    11-5    Computer program      
Xacta Automated Script Language Manual (SP5)    13-5    Manual      
Xacta Customer Service Center Reference Manual – for Administrator (SP5)    14-5    Manual      
Xacta Customer Service Center Reference Manual – for Customers (SP5)    15-5    Manual      
Xacta IA Manager Distribution Manager Reference Manual (SP5)    16-5    Manual      
Xacta Secure Enterprise Process Handler Flow (SP5)    17-5    Manual      

 

Page 6 of 6


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

UNITED STATES

NETFLOW

 

United States

 

Telos Corporation

   Application No. 75/058,754    Class 9: Computer software for work flow management on a global computer network    Filed 1/30/96 (on the basis of intended use); Abandoned 7/22/98    None – Abandoned

TELOS

 

United States

 

Telos Corporation

   Registration No. 2,828,747   

Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks

 

TELOS means GOAL in Greek.

   Filed 12/1/98 (claiming a first use date of 6/97); Registered 4/6/04    Declaration of Use due 4/6/10; Renewal due 4/6/14

TELOS (Stylized)

 

LOGO

 

United States

 

Telos Corporation

   Registration No. 2,327,739    Class 9: Computer hardware and peripherals; portable computers; computer hardware integration equipment; computer ruggedization equipment; computer workstations; and computer networking products, namely computer servers, workstations, peripherals and software suites for use in communications, data management and data integration    Filed 1/26/98 (claiming a first use date of 4/95); Registered 3/14/00    Declaration of Use due 9/14/06 (end of grace period); Renewal due 3/14/10

 

Page 1 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

TELOS

 

United States

 

Telos Corporation

   Registration No. 1,395,174   

Class 37: Computer hardware maintenance services for others

 

Class 42: Design of computer software for others

   Filed 4/26/82 (claiming a first use date of 2/16/76 for Class 37 and a first use date of 4/11/69 and first use in commerce on 6/5/72 for Class 42); Registered 5/27/86; Declaration of Use accepted 8/5/92    Renewal due 5/27/06 (grace period deadline 11/27/06)

UBIQUITY

 

United States

 

ubIQuity.com, Inc.

   Application No. 76/068,227    Class 36: Investment and business development services to others in the field of e-commerce    Filed 6/12/00 (on the basis of intended use); Abandoned 9/10/01    None – Abandoned
AUSTRALIA

TELOS

 

Australia

 

Telos Corporation

   Application No. 795858    Class 38: Telecommunications services, namely, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer networks, telephones and television sets interfacing with local and wide area networks    Filed 5/31/99; Abandoned 9/25/00    None – Abandoned

 

Page 2 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

CANADA

TELOS

 

Canada

 

Telos Corporation

   Application No. 1017423    Services: Telecommunications services, namely, providing technology, management and support services to improve the security of wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer networks, telephones and television sets interfacing with local and wide area networks; excluding local and long distance telephone services, paging services, leasing of telecommunications equipment and systems   

Filed 6/2/99;

 

Published 7/7/04;

 

Opposition filed 8/5/04 by Telus Corporation

 

Application abandoned

   None
CHINA

TELOS

 

China

 

Telos Corporation

   Registration No. 1445885    Class 38: Message sending, electronic mail, cellular telephone communications, communications by computer terminals, communications by telegrams, communications by telephone, communications by wire services, communications by fiber optics, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wider area networks    Filed 6/1/99; Registered 9/14/00    Renewal due 9/13/10

 

Page 3 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

EUROPEAN COMMUNITY

TELOS

 

European Community

 

Telos Corporation

   Application no. 1196161    Class 38: Telecommunications services; the providing of connections to existing information technology utilizing wired and wireless technology; the electronic transmission of voice, video, data, facsimile, messages, mail and live video conversations through personal computers, computer networks, the global computer network, telephones and television sets interfacing with local and wide area networks    Filed 6/4/99; Opposition filed 7/25/00 by Teles AG (TELES, CTM App. No. 275933 and German Reg. No. 1124760) and assigned Opposition No. B289480; Opposition filed 9/4/00 by TLS Corporation (TELOS, CTM Reg. No. 441360) and assigned Opposition No. B302481; Opposition No. B289480 has been closed in Teles AG’s favor    None – Abandoned

 

Page 4 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

INDIA

TELOS

 

India

 

Telos Corporation

   Application No. 858645    Class 16: Printed matter, including brochures, pamphlets, manuals, operating instructions, user guides, catalogues, newsletters, instructional and teaching materials for use in connection with telecommunications services, namely the providing of connections to exiting information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks; all being goods included in Class 16   

Filed 5/31/99;

 

Published 2/8/06 for 90 days (until 5/8/06)

   Check status of application 9/1/06
JAPAN

TELOS

 

Japan

 

Telos Corporation

   Application No. 11-48340    Class 38: Communications via movable phones; communications via telex; communications via computer terminals; communications via telegraphs; communications via telephones; communications via facsimile; paging by radios; providing conferences, calls and communications via television systems; sending sounds, images, messages and data via communication networks; communications via email; television broadcasting; cable television broadcasting; radio broadcasting; leasing of telephones, facsimiles an other communications equipment; providing news to broadcasters    Filed 5/31/99; Abandoned 1/4/01    None – Abandoned

 

Page 5 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

MALAYSIA

TELOS

 

Malaysia

 

Telos Corporation

   Registration No. 99004686    Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computer, the global computer networks, telephones and television sets interfacing with local and wide area networks; all included in Class 38   

Registered 5/31/99 (claiming 12/1/98 priority date)

 

Grant date: 2/14/05

   Use in Malaysia by 2/14/08; Renew registration by 12/1/08
MEXICO

TELOS

 

Mexico

 

Telos Corporation

   Registration No. 377438    Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks   

Registered 6/1/99

 

Grant date: 3/22/05

   Use in Mexico by 3/22/08; Renew registration by 6/1/09

 

Page 6 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

NEW ZEALAND

TELOS

 

New Zealand

 

Telos Corporation

   Registration No. 310401    Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks   

Filed 5/31/99; Registered 12/20/99

 

Not renewed as of 12/1/05

   None – Abandoned
PHILIPPINES

TELOS

 

Philippines

 

Telos Corporation

   Application No. 4-1999-03810    Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks    Filed 6/2/99; Abandoned 5/24/02    None – Abandoned

 

Page 7 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

MARK

COUNTRY

OWNER

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

SINGAPORE

TELOS

 

Singapore

 

Telos Corporation

   Registration No. T99/05520F    Class 38: Telecommunications services, namely the electronic transmission of voices, video, data, images and messages by means of facsimile, telephone, television, computers, electronic network communications and electronic mail; providing telecommunication connections to the internet and communications by computer terminals; all included in Class 38    Filed 5/31/99; Registered 12/1/98    Renewal due 12/1/08
SOUTH KOREA

TELOS

 

South Korea

 

Telos Corporation

   Registration No. 62149    Class 38: Telecommunications services, the providing of connections to existing information technology utilizing wired and wireless technology, namely, the electronic transmission of voice, video, data, facsimile, electronic messages, mail and live video conversations, conferencing and communications and information through personal computers, the global computer network, telephones and television sets interfacing with local and wide area networks    Filed 5/31/99; Registered 6/23/00    Renewal due 6/23/10

 

Page 8 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

UNITED STATES
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.20    Registration No. TXu 1-001-771    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.21    Registration No. TXu 1-001-768    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001/Xacta Commerce Trust 2001 v3.22    Registration No. TXu 1-001-770    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A/Xacta Commerce Trust v3.30    Registration No. TXu 1-001-775    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Commerce Trust v.4.0    TX-6-092-272    Text of user’s manual    Registered 1/13/05   
Xacta Commerce Trust, v.4.0 (SP1)    TX-6-092-276    Text of user’s manual    Registered 1/13/05   
Xacta Commerce Trust, v.4.0 (SP2)    TX-6-092-277    Text of user’s manual    Registered 1/13/05   
Xacta Web C&A    TX-6-092-273    Text of user’s manual    Registered 1/13/05   
Xacta Web C&A 2001 v.3.00    Registration No. TXu 1-001-766    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v3.01    Registration No. TXu 1-001-767    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Web C&A 2001 v.3.10    TXu-1-001-772    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097

 

Page 9 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

Xacta Web C&A v.4.0 (SP1)    TX-6-092-274    Text of user’s manual    Registered 1/13/05   
Xacta Web C&A v.4.0 (SP2)    TX-6-092-275    Entire computer program    Registered 1/13/05   
Xacta Detect v2.0    Registration No. TXu 1-001-764    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
Xacta Detect v2.1.1    Registration No. TXu 1-001-765    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.00    Registration No. TXu 1-001-763    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.01    Registration No. TXu 1-001-769    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.10    Registration No. TXu 1-001-773    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
WEB C&A v2.20    Registration No. TXu 1-001-774    Entire computer program and text of user’s manual    Registered 8/22/02    Renewal due 8/22/2097
TELOS SERVICE MANAGEMENT (TSM)   

Registration No.

Pending

   Computer program    Filed 4/20/06   
TELOS SITE SERVICE AUTOMATION TOOL   

Registration No.

Pending

   Computer program    Filed 4/20/06   
TELOS ARISS ADMINISTRATION   

Registration No.

Pending

   Computer program    Filed 4/20/06   
CONTENT MANAGEMENT TOOL (CTM)   

Registration No.

Pending

   Computer program    Filed 4/20/06   

 

Page 10 of 11

July 31, 2006


PRIVILEGED AND CONFIDENTIAL    ATTORNEY-CLIENT COMMUNICATION

Telos Corporation

(a Maryland Corporation)

Trademark Status Chart

 

TITLE

  

REGISTRATION NO.

  

NATURE OF WORK

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

TELOS STORE   

Registration No.

Pending

   Computer program    Filed 4/20/06   

 

Page 11 of 11

July 31, 2006


CONFIDENTIAL    COMPANY-PROPRIETARY

Xacta Corporation

(a Delware Corporation)

Trademark Status Chart

 

MARK

COUNTRY

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

UNITED STATES

Design Only

 

LOGO

 

United States

   Registration No. 2,759,323    Class 9: E-commerce software to allow users to perform business transactions via a global computer network; computer software for others engaged in e-commerce, namely, process automation and service management, system and network health monitoring, automated job scheduling and notification, remote monitoring of systems and workstations, automated delivery of software, automated hardware and software inventory, automated cross platform data backup and recovery, cross-platform user administration from a single console, integrated call management to address change/problem management and service level agreements, integrated management of help desk and physical hardware and network assets; computer software to allow users to engage in e-commerce, namely, security certification and accreditation support, security policy and operational procedure development, security architecture design and implementation, network security testing and evaluation, vulnerability analysis and rectification, malicious code analysis, security risk assessment    Filed 4/6/00 (claiming a first use date of 8/15/00); Registered 9/2/03    Declaration of Use due 9/2/09; Renewal due 9/2/13

Design Only

 

LOGO

 

United States

   Registration No. 2,737,331    Class 42: Computer software design for others, namely, computer system and network security services for others engaged in e-commerce, namely, security certification and accreditation support, security policy and operational procedure development, security architecture design and implementation, network security testing and evaluation, vulnerability analysis and rectification, malicious code analysis, and security risk assessment    Filed 4/6/00 (claiming a first use date of 2/00); Registered 7/15/03    Declaration of Use due 7/15/09; Renewal due 7/15/13

 

Page 1 of 4

May 26, 2006


CONFIDENTIAL    COMPANY-PROPRIETARY

Xacta Corporation

(a Delware Corporation)

Trademark Status Chart

 

MARK

COUNTRY

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

XACTA

 

United States

   Registration No. 2,737,276    Class 42: Computer software design for others, namely, computer system and network security services for others engaged in e-commerce, namely, security certification and accreditation support, security policy and operational procedure development, security architecture design and implementation, network security testing and evaluation, vulnerability analysis and rectification, malicious code analysis, and security risk assessment    Filed 2/25/00 (claiming a first use date of 2/00); Registered 7/15/03    Declaration of Use due 7/15/09; Renewal due 7/15/13

XACTA

 

United States

   Registration No. 2,640,307    Class 9: Computer software to allow users to perform e-commerce    Filed 2/25/00 (claiming a first use date of 2/00); Registered 10/22/02    Declaration of Use due 10/22/08; Renewal due 10/22/12

XACTA & Design

 

LOGO

 

United States

   Registration No. 2,845,219    Class 9: E-commerce software to allow users to perform business transactions via a global computer network; computer software for others engaged in e-commerce, namely, process automation and service management, system and network health monitoring, automated job scheduling and notification, remote monitoring of systems and workstations, automated delivery of software, automated hardware and software inventory, automated cross platform data backup and recovery, cross-platform user administration from a single console, integrated call management to address change/problem management and service level agreements, integrated management of help desk and physical hardware and network assets; computer software to allow users to engage in e-commerce, namely, security certification and accreditation support, security policy and operational procedure development, security architecture design and implementation, network security testing and evaluation, vulnerability analysis and rectification, malicious code analysis, security risk assessment    Filed 4/6/00 (claiming first use date of 8/15/00); Registered 5/25/04    Declaration of Use due 5/25/10; Renewal due 5/25/14

 

Page 2 of 4

May 26, 2006


CONFIDENTIAL    COMPANY-PROPRIETARY

Xacta Corporation

(a Delware Corporation)

Trademark Status Chart

 

MARK

COUNTRY

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

XACTA & Design

 

LOGO

 

United States

   Registration No. 2,790,067    Class 42: Computer software design for others, namely, computer system and network security services for others engaged in e-commerce, namely, security certification and accreditation support, security policy and operational procedure development, security architecture design and implementation, network security testing and evaluation, vulnerability analysis and rectification, malicious code analysis, security risk assessment    Filed 4/6/00 (claiming a first use date of 2/00); Registered 12/9/03    Declaration of Use due 12/9/09; Renewal due 12/9/13

XACTA COMMERCE TRUST

 

United States

   Registration No. 2,741,810    Class 9: Computer software to automate and manage compliance assessment, in accordance with security standards, regulations, policies and practices    Filed 1/28/02 (claiming a first use date of 5/01 and first use in commerce in 11/01); Registered 7/29/03    Declaration of Use due 7/29/09; Renewal due 7/29/13

XACTA WEB C&A

 

United States

   Registration No. 2,824,917   

Class 9: Computer software to automate and manage compliance assessment, in accordance with security standards, regulations, policies and practices

 

Disclaims: WEB

   Filed 1/28/02 (claiming a first use date of 3/00 and first use in commerce on 8/15/00); Registered 3/23/04    Declaration of Use due 3/23/10; Renewal due 3/23/14
CZECH REPUBLIC

XACTA COMMERCE TRUST

 

Czech Republic

   Registration No. 254596    Class 9: Software to automate and manage compliance assessment in accordance with security standards, regulations, policies and practices    Filed 9/18/02; Registered 5/26/03    Use after registration by 9/18/07; Renewal due 9/18/12

XACTA WEB C&A

 

Czech Republic

   Registration No. 258821    Class 9: Software to automate and manage compliance assessment in accordance with security standards, regulations, polices and practices    Filed 9/18/03; Registration issued 11/27/03    Must use in the Czech Republic by 9/18/08; Renewal due 9/18/12

 

Page 3 of 4

May 26, 2006


CONFIDENTIAL    COMPANY-PROPRIETARY

Xacta Corporation

(a Delware Corporation)

Trademark Status Chart

 

MARK

COUNTRY

  

APPLICATION/
REGISTRATION NO.

  

CLASS/GOODS/SERVICES

  

BACKGROUND AND
CURRENT STATUS

  

NEXT ACTION DUE

EUROPEAN COMMUNITY

XACTA COMMERCE TRUST

 

European Community

   Registration No. 2857951    Class 9: Software to automate and manage compliance assessment in accordance with security standards, regulations, polices and practices    Filed 9/17/02; Registration issued 1/19/04    Must use in the European Community by 1/19/09; Renewal due 9/17/12

XACTA WEB C&A

 

European Community

   Registration No. 2857944    Class 9: Software to automate and manage compliance assessment in accordance with security standards, regulations, polices and practices    Filed 9/17/02; Registration issued 2/8/05    Must use in the European Community by 2/8/10; Renewal due 9/17/12

 

Page 4 of 4

May 26, 2006


Schedule 5.18

Demand Deposit Accounts

TELOS CORPORATION

DEMAND DEPOSIT ACCOUNTS

 

G/L Account

  

G/L Account Name

   Bank Account No.   

Bank Account Name

10-100-040

   Cash - WF Operating    4945018786   

(1)    Telos Corporation, 19886 Ashburn Road, Ashburn, VA 20147

10-100-050

   Cash - WF Payroll    4945018794   

(1)    Telos Corporation, 19886 Ashburn Road, Ashburn, VA 20147

10-100-070

   Cash - WF A/P    9600035593   

(1)    Telos Corporation, 19886 Ashburn Road, Ashburn, VA 20147

10-100-100

   Cash - Germany PR Tax    1004089981   

(2)    Telos

10-100-030

   Cash - Germany Checking USD    72621395   

(3)    Telos Europe

10-100-030

   Cash - Germany Checking EURO    25014502   

(3)    Telos Europe

10-100-300

   Cash-WF-TIMS-A/P    9600094966   

(1)    Telos Identity Management Solutions LLC

10-100-310

   Cash-WF-TIMS-OPER/PR    412-1569602   

(1)    Telos Identity Management Solutions LLC

   Cash - Payroll & Operating Expenses    2000024576136   

(5)    Teloworks, Inc

   Cash - Payroll & Operating Expenses    01-103-301070-0   

(6)    Teloworks Philippines, Inc.

   Cash - Payroll & Operating Expenses    103-148327-8   

(6)    Teloworks BPO Solutions Philippines, Inc.

Financial Institution’s Name and Address:

 

  (1)    Wells Fargo Bank    (4)    Wells Fargo Bank, N.A.
     Wholesale Services Group       Corporate and Municipal Markets Group
     201 Third Street       One Ward Parkway
     11th Floor       MAC N2744-030
     San Francisco CA 94103       Kansas City, MO 64112
     MAC-AO187-216       Attn: Carole Mosher
     Fax #415-979-0662    (5)    Wachovia Bank, N.A.
           1753 Pinnacle Drive, 3rd Floor
  (2)   

Stadtsparkasse Düsseldorf

Postfach 10 10 30

40001 Düsseldorf

Germany

     

McLean, VA 22102

Note: Account used to transfer funds to Philippine bank account to pay for operating expenses.

  (3)    Sparkasse Heidelberg    (6)    United Coconut Planters Bank (Philippines)
    

Postfach 10 14 60

Kurfurstenanlage 10-12

D-69004 Heidelberg

Germany

      Note: This is a local account used to pay operating expenses at our Philippine entities.
          


Schedule 5.20

Permitted indebtedness

See attached list of leases

Subordinated Debt Notes

 

Type

  

Noteholder

   Interest     Maturity Date    Amount

Series B

   Zollikon Investments SA    16.97 %   12/31/2011    $ 209,497.49

Series B

   John Porter    14.00 %   10/31/2008    $ 861,745.92

Series B

   Toxford    14.00 %   12/31/2011    $ 1,466,626.53

Series C

   Zollikon Investments SA    16.97 %   12/31/2011    $ 860,961.42

Series C

   Toxford    14.00 %   12/31/2011    $ 1,744,722.79

Total Subordinated Debt Notes

           $ 5,143,554.15


TELOS CORPORATION

 

OFFICE LESSOR/SUBLESSOR

       

DESCRIPTION

   CITY    STATE    START
DATE

I.A.M NATIONAL PENSION FUND

   1300 CONN AVE NW #300    WASHINGTON    DC    10/01/03

JACK AND DORA GLASER FAMILY TRUST, dba J.D REALTY

   3655 ALAMO STREET, SUITES # 300,301&303    SIMI VALLEY    CA    03/01/06

KILN BROOK REALTY/(FARLEY WHITE 2006)

   81 HARTWELL AVENUE    LEXINGTON    MA    02/15/05

STAVOLA LEASING COMPANY