þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland
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52-0880974
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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19886 Ashburn Road, Ashburn, Virginia
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20147
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Item
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Page
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PART I
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Item 1.
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3
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Item 1A.
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8
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Item 1B.
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11
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Item 2.
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11
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Item 3.
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11
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Item 4.
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11
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PART II
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Item 5.
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12
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Item 6.
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12
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Item 7.
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13
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Item 7A.
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23
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Item 8.
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24
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Item 9.
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54
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Item 9A
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54
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Item 9B.
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55
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PART III
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Item 10.
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56
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Item 11.
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56
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Item 12.
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56
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Item 13.
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56
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Item 14.
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56
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PART IV
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Item 15.
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57
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59
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· | Cyber Operations and Defense – Secure wired and wireless network solutions for Department of Defense (“DoD”) and other federal agencies. We provide an extensive range of wired and wireless voice, data, and video secure network solutions and mobile application development to support defense and civilian missions. In July 2011, we acquired all of the assets of ITL and incorporated such assets into our Secure Networks business solutions. Our software products and consulting services automate, streamline, and enforce IT security and risk management processes enterprise-wide. We offer information assurance consulting services and Xacta brand GRC (governance, risk, and compliance) solutions to protect and defend IT systems, ensuring their availability, integrity, authentication, and confidentiality. |
· | Secure Communications – The next-generation messaging solution supporting warfighters throughout the world. Telos Secure Information eXchange (T-6) and the AMHS platform offer secure, automated, Web-based capabilities for distributing and managing enterprise messages formatted for the Defense Messaging System as well as collaborating in real-time through video, text, whiteboarding, and document sharing. |
· | Telos ID – End-to-end logical and physical security from the gate to the network. Our identity management solutions provide control of physical access to bases, offices, workstations, and other facilities, as well as control of logical access to databases, host systems, and other IT resources. |
· | Techniques: We employ development and production methodologies such as Agile and ISO 9001 to ensure predictability, repeatability, and quality. Techniques such as continuous integration are employed to accelerate the solution development and testing process while at the same time reducing cost and improving quality. We believe such techniques are critical for providing our customers with a high quality user experience. |
· | Architecture: The nature of our customers’ missions requires our solutions to be highly secure and scalable. Aside from architecting our solutions with these core objectives in mind, we also employ open standards and technologies that afford a high degree of flexibility and interoperability needed to support web-based and netcentric operations. |
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2013
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2012
|
2011
|
|||||||||||||||||||||
|
(dollar amounts in thousands)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
Federal
|
$
|
203,917
|
98.3
|
%
|
$
|
224,010
|
99.1
|
%
|
$
|
188,162
|
99.1
|
%
|
||||||||||||
Commercial
|
3,477
|
1.7
|
%
|
2,086
|
0.9
|
%
|
1,726
|
0.9
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Total
|
$
|
207,394
|
100.0
|
%
|
$
|
226,096
|
100.0
|
%
|
$
|
189,888
|
100.0
|
%
|
|
Always
with integrity, at Telos we:
|
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Build trusted relationships,
|
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Work hard together,
|
|
Design and deliver superior solutions,
and
|
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Have fun doing it.
|
· | impose specific and unique cost accounting practices that may differ from U.S. generally accepted accounting principles (GAAP) and therefore require reconciliation; |
· | impose acquisition regulations that define reimbursable and non-reimbursable costs; and |
· | restrict the use and dissemination of information classified for national security purposes and the export of certain products and technical data. |
· | diversion of management attention from running our existing business; |
· | possible material weaknesses in internal control over financial reporting; |
· | increased expenses including legal, administrative and compensation expenses related to newly hired or terminated employees; |
· | increased costs to integrate the technology, personnel, customer base and business practices of the acquired company with us; |
· | potential exposure to material liabilities not discovered in the due diligence process; |
· | potential adverse effects on reported operating results due to possible write-down of goodwill and other intangible assets associated with acquisitions; and |
· | unavailability of acquisition financing or unavailability of such financing on reasonable terms. |
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Years Ended December 31,
|
|||||||||||||||||||
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
|
(amounts in thousands)
|
|||||||||||||||||||
Sales
|
$
|
207,394
|
$
|
226,096
|
$
|
189,888
|
$
|
225,797
|
$
|
275,681
|
||||||||||
Operating income
|
6,111
|
17,700
|
12,687
|
15,006
|
13,713
|
|||||||||||||||
Income before income taxes
|
867
|
16,725
|
6,741
|
8,952
|
6,572
|
|||||||||||||||
Net (loss) income attributable to Telos Corporation
|
(2,618
|
)
|
7,435
|
1,454
|
3,047
|
1,277
|
|
As of December 31,
|
|||||||||||||||||||
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
|
(amounts in thousands)
|
|||||||||||||||||||
Total assets
|
$
|
88,609
|
$
|
79,156
|
$
|
89,837
|
$
|
74,804
|
$
|
104,927
|
||||||||||
Senior credit facility, long-term (1)
|
19,141
|
18,559
|
17,501
|
13,786
|
9,198
|
|||||||||||||||
Senior subordinated debt (1)
|
----
|
----
|
----
|
----
|
4,179
|
|||||||||||||||
Note payable (1)
|
----
|
----
|
12,056
|
----
|
----
|
|||||||||||||||
Capital lease obligations, long-term (2)
|
14,901
|
3,803
|
4,948
|
5,950
|
6,896
|
|||||||||||||||
Senior redeemable preferred stock (3)
|
1,891
|
4,010
|
8,227
|
10,190
|
10,294
|
|||||||||||||||
Public preferred stock (3)
|
116,274
|
112,451
|
108,628
|
104,806
|
100,983
|
(1) | See Note 7 to the Consolidated Financial Statements in Item 8 regarding our debt obligations. |
(2) | See Note 11 to the Consolidated Financial Statements in Item 8 regarding our capital lease obligations. |
(3) | See Note 8 to the Consolidated Financial Statements in Item 8 regarding our redeemable preferred stock. |
· | Cyber Operations and Defense – Secure wired and wireless network solutions for Department of Defense (“DoD”) and other federal agencies. We provide an extensive range of wired and wireless voice, data, and video secure network solutions and mobile application development to support defense and civilian missions. In July 2011, we acquired all of the assets of IT Logistics, Inc. (“ITL”) and incorporated such assets into our Secure Networks business solutions. Our software products and consulting services automate, streamline, and enforce IT security and risk management processes enterprise-wide. We offer information assurance consulting services and Xacta brand GRC (governance, risk, and compliance) solutions to protect and defend IT systems, ensuring their availability, integrity, authentication, and confidentiality. |
· | Secure Communications – The next-generation messaging solution supporting warfighters throughout the world. Telos Secure Information eXchange (T-6) and the AMHS platform offer secure, automated, Web-based capabilities for distributing and managing enterprise messages formatted for the Defense Messaging System as well as collaborating in real-time through video, text, whiteboarding, and document sharing. |
· | Telos ID – End-to-end logical and physical security from the gate to the network. Our identity management solutions provide control of physical access to bases, offices, workstations, and other facilities, as well as control of logical access to databases, host systems, and other IT resources. |
|
Years Ended December 31,
|
|||||||||||||||||||||||
|
2013
|
2012
|
2011
|
|||||||||||||||||||||
|
(dollar amounts in thousands)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
Revenue
|
$
|
207,394
|
100.0
|
%
|
$
|
226,096
|
100.0
|
%
|
$
|
189,888
|
100.0
|
%
|
||||||||||||
Cost of sales
|
168,794
|
81.4
|
171,290
|
75.8
|
142,345
|
74.9
|
||||||||||||||||||
Selling, general and administrative expenses
|
32,489
|
15.7
|
37,106
|
16.4
|
34,856
|
18.4
|
||||||||||||||||||
|
||||||||||||||||||||||||
Operating income
|
6,111
|
2.9
|
17,700
|
7.8
|
12,687
|
6.7
|
||||||||||||||||||
Other income (expenses):
|
||||||||||||||||||||||||
Gain on early extinguishment of debt
|
----
|
----
|
5,187
|
2.3
|
----
|
----
|
||||||||||||||||||
Non-operating income
|
239
|
0.1
|
470
|
0.2
|
319
|
0.2
|
||||||||||||||||||
Interest expense
|
(5,483
|
)
|
(2.6
|
)
|
(6,632
|
)
|
(2.9
|
)
|
(6,265
|
)
|
(3.3
|
)
|
||||||||||||
|
||||||||||||||||||||||||
Income before income taxes
|
867
|
0.4
|
16,725
|
7.4
|
6,741
|
3.6
|
||||||||||||||||||
Provision for income taxes
|
(1,678
|
)
|
(0.8
|
)
|
(7,230
|
)
|
(3.2
|
)
|
(3,238
|
)
|
(1.7
|
)
|
||||||||||||
Net (loss) income
|
(811
|
)
|
(0.4
|
)
|
9,495
|
4.2
|
3,503
|
1.9
|
||||||||||||||||
Less: Net income attributable to non-controlling interest
|
(1,807
|
)
|
(0.9
|
)
|
(2,060
|
)
|
(0.9
|
)
|
(2,049
|
)
|
(1.1
|
)
|
||||||||||||
Net (loss) income attributable to Telos Corporation
|
$
|
(2,618
|
)
|
(1.3
|
)%
|
$
|
7,435
|
3.3
|
%
|
$
|
1,454
|
0.8
|
%
|
|
December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
|
(amounts in thousands)
|
|||||||||||
Commercial and subordinated note interest incurred
|
$
|
1,557
|
$
|
1,786
|
$
|
1,745
|
||||||
Preferred stock interest accrued
|
3,926
|
4,051
|
4,159
|
|||||||||
ITL note accretion
|
----
|
795
|
361
|
|||||||||
Total
|
$
|
5,483
|
$
|
6,632
|
$
|
6,265
|
|
|
Payments due by Period
|
||||||||||||||||||
|
Total
|
2014
|
2015 - 2017
|
2018 - 2020
|
2021 and later
|
|||||||||||||||
|
|
|
|
|||||||||||||||||
Capital lease obligations (1)
|
$
|
22,435
|
$
|
1,533
|
$
|
4,762
|
$
|
5,093
|
$
|
11,047
|
||||||||||
Senior revolving credit facility (2)
|
19,829
|
688
|
19,141
|
----
|
----
|
|||||||||||||||
Operating lease obligations
|
3,721
|
645
|
1,256
|
864
|
956
|
|||||||||||||||
|
$
|
45,985
|
$
|
2,866
|
$
|
25,159
|
$
|
5,957
|
$
|
12,003
|
||||||||||
|
||||||||||||||||||||
Senior preferred stock (3)
|
$
|
1,891
|
||||||||||||||||||
Public preferred stock (4)
|
116,274
|
|||||||||||||||||||
|
$
|
118,165
|
||||||||||||||||||
Total
|
$
|
164,150
|
||||||||||||||||||
(1) Includes interest expense:
|
$
|
6,877
|
$
|
875
|
$
|
2,379
|
$
|
1,905
|
$
|
1,718
|
(2) | Amount does not include interest on the Facility as we are unable to predict the amounts of interest due to the short-term nature of the advances and repayments. Interest expense for 2013 was $0.6 million. |
(3) | In accordance with ASC 480, the senior preferred stock was reclassified from equity to liability in July 2003. Amount represents the carrying value as of December 31, 2013, and includes accrual of accumulated dividends of $1.4 million. Payment of such amount presumes conditions precedent being satisfied (See Note 8 – Redeemable Preferred Stock) and as such, redemption date is unknown and accordingly payment is not reflected in a particular period. Amount does not reflect additional dividends through the redemption date as such date is unknown. Such additional dividends accrue annually in the amount of $67,000. |
(4) | In accordance with ASC 480, the public preferred stock was reclassified from equity to liability in July 2003. Amount represents the carrying value as of December 31, 2013, and includes accrual of accumulated dividends and accretion of $109.9 million. Payment of such amount presumes conditions precedent being satisfied (See Note 8 – Redeemable Preferred Stock) and as such, redemption date is unknown and accordingly payment is not reflected in a particular period. Amount does not reflect additional dividends and accretion through the redemption date as such date is unknown. Such additional dividends accrue annually in the amount of $3.8 million. Such accretion has been fully accreted as of December 31, 2008. |
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm
|
25
|
|
|
Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011
|
26
|
|
|
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2013, 2012 and 2011
|
27
|
|
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
28 - 29
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012, and 2011
|
30 - 31
|
|
|
Consolidated Statements of Changes in Stockholders' Deficit for the Years Ended December 31, 2013, 2012, and 2011
|
32
|
|
|
Notes to Consolidated Financial Statements
|
33 – 54
|
|
Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Revenue (Note 6)
|
|
|
|
|||||||||
Services
|
$
|
143,489
|
$
|
177,266
|
$
|
124,988
|
||||||
Products
|
63,905
|
48,830
|
64,900
|
|||||||||
|
207,394
|
226,096
|
189,888
|
|||||||||
Costs and expenses
|
||||||||||||
Cost of sales – Services
|
109,676
|
131,906
|
91,353
|
|||||||||
Cost of sales – Products
|
59,118
|
39,384
|
50,992
|
|||||||||
|
168,794
|
171,290
|
142,345
|
|||||||||
Selling, general and administrative expenses
|
32,489
|
37,106
|
34,856
|
|||||||||
|
||||||||||||
Operating income
|
6,111
|
17,700
|
12,687
|
|||||||||
Other income (expenses)
|
||||||||||||
Gain on early extinguishment of debt (Note 3)
|
----
|
5,187
|
----
|
|||||||||
Non-operating income
|
239
|
470
|
319
|
|||||||||
Interest expense
|
(5,483
|
)
|
(6,632
|
)
|
(6,265
|
)
|
||||||
Income before income taxes
|
867
|
16,725
|
6,741
|
|||||||||
Provision for income taxes (Note 10)
|
(1,678
|
)
|
(7,230
|
)
|
(3,238
|
)
|
||||||
|
||||||||||||
Net (loss) income
|
(811
|
)
|
9,495
|
3,503
|
||||||||
|
||||||||||||
Less: Net income attributable to non-controlling interest (Note 2)
|
(1,807
|
)
|
(2,060
|
)
|
(2,049
|
)
|
||||||
Net (loss) income attributable to Telos Corporation
|
$
|
(2,618
|
)
|
$
|
7,435
|
$
|
1,454
|
|
Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Net (loss) income
|
$
|
(811
|
)
|
$
|
9,495
|
$
|
3,503
|
|||||
Other comprehensive income (loss):
|
||||||||||||
Foreign currency translation adjustments
|
(24
|
)
|
(19
|
)
|
8
|
|||||||
Actuarial gain on pension liability adjustments, net of tax
|
----
|
56
|
53
|
|||||||||
Total other comprehensive income (loss), net of tax
|
(24
|
)
|
37
|
61
|
||||||||
Comprehensive income attributable to non-controlling interest
|
(1,807
|
)
|
(2,060
|
)
|
(2,049
|
)
|
||||||
Comprehensive (loss) income attributable to Telos Corporation
|
$
|
(2,642
|
)
|
$
|
7,472
|
$
|
1,515
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Current assets (Note 7)
|
|
|
||||||
Cash and cash equivalents
|
$
|
94
|
$
|
229
|
||||
Accounts receivable, net of reserve of $321 and $319, respectively (Note 6)
|
45,632
|
33,879
|
||||||
Inventories, net of obsolescence reserve of $417 and $416, respectively
|
4,885
|
10,277
|
||||||
Deferred income taxes (Note 10)
|
----
|
192
|
||||||
Deferred program expenses
|
576
|
5,281
|
||||||
Other current assets
|
1,271
|
2,254
|
||||||
Total current assets
|
52,458
|
52,112
|
||||||
Property and equipment (Note 7)
|
||||||||
Furniture and equipment
|
11,008
|
10,829
|
||||||
Leasehold improvements
|
2,756
|
1,941
|
||||||
Property and equipment under capital leases
|
25,170
|
14,148
|
||||||
|
38,934
|
26,918
|
||||||
Accumulated depreciation and amortization
|
(24,316
|
)
|
(23,035
|
)
|
||||
|
14,618
|
3,883
|
||||||
Goodwill (Note 4)
|
14,916
|
14,916
|
||||||
Other intangible assets (Note 4)
|
5,643
|
7,900
|
||||||
Other assets (Note 7)
|
974
|
345
|
||||||
Total assets
|
$
|
88,609
|
$
|
79,156
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Current liabilities
|
|
|
||||||
Accounts payable and other accrued payables (Note 7)
|
$
|
23,290
|
$
|
23,138
|
||||
Accrued compensation and benefits
|
5,941
|
4,965
|
||||||
Deferred revenue
|
2,768
|
6,095
|
||||||
Deferred income taxes – current (Note 10)
|
25
|
191
|
||||||
Senior credit facility – short-term (Note 7)
|
688
|
375
|
||||||
Capital lease obligations – short-term (Note 11)
|
657
|
1,241
|
||||||
Other current liabilities
|
1,782
|
1,070
|
||||||
Total current liabilities
|
35,151
|
37,075
|
||||||
Senior revolving credit facility (Note 7)
|
19,141
|
18,559
|
||||||
Capital lease obligations (Note 11)
|
14,901
|
3,803
|
||||||
Deferred income taxes (Note 10)
|
169
|
----
|
||||||
Senior redeemable preferred stock (Note 8)
|
1,891
|
4,010
|
||||||
Public preferred stock (Note 8)
|
116,274
|
112,451
|
||||||
Other liabilities
|
490
|
53
|
||||||
Total liabilities
|
188,017
|
175,951
|
||||||
Commitments,contingencies and subsequent events (Notes 11 and 14)
|
----
|
----
|
||||||
|
||||||||
Stockholders’ deficit (Note 9)
|
||||||||
Telos stockholders’ deficit
|
||||||||
Class A common stock, no par value, 50,000,000 shares authorized, 40,218,461 and 35,908,961 shares issued and outstanding, respectively
|
65
|
65
|
||||||
Class B common stock, no par value, 5,000,000 shares authorized, 4,037,628 shares issued and outstanding
|
13
|
13
|
||||||
Additional paid-in capital
|
146
|
103
|
||||||
Accumulated other comprehensive income
|
48
|
72
|
||||||
Accumulated deficit
|
(100,134
|
)
|
(97,516
|
)
|
||||
Total Telos stockholders’ deficit
|
(99,862
|
)
|
(97,263
|
)
|
||||
Non-controlling interest in subsidiary (Note 2)
|
454
|
468
|
||||||
Total stockholders’ deficit
|
(99,408
|
)
|
(96,795
|
)
|
||||
Total liabilities, redeemable preferred stock, and stockholders’ deficit
|
$
|
88,609
|
$
|
79,156
|
|
Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Operating activities:
|
|
|
|
|||||||||
Net (loss) income
|
$
|
(811
|
)
|
$
|
9,495
|
$
|
3,503
|
|||||
Adjustments to reconcile net (loss) income to cash provided by operating activities:
|
||||||||||||
Gain on early extinguishment of debt
|
----
|
(5,187
|
)
|
----
|
||||||||
Gain on redemption of senior preferred stock
|
(222
|
)
|
(444
|
)
|
(230
|
)
|
||||||
Stock-based compensation
|
43
|
----
|
----
|
|||||||||
Dividends of preferred stock as interest expense
|
3,926
|
4,050
|
4,159
|
|||||||||
Accretion of notes payable
|
----
|
655
|
361
|
|||||||||
Depreciation and amortization
|
3,817
|
3,812
|
2,728
|
|||||||||
Provision for inventory obsolescence
|
1
|
111
|
51
|
|||||||||
Provision (benefit) for doubtful accounts receivable
|
2
|
(53
|
)
|
17
|
||||||||
Amortization of debt issuance costs
|
71
|
71
|
71
|
|||||||||
Deferred income tax provision (benefit)
|
195
|
2,039
|
(809
|
)
|
||||||||
Changes in assets and liabilities:
|
||||||||||||
(Increase) decrease in accounts receivable
|
(11,755
|
)
|
3,120
|
17,122
|
||||||||
Decrease (increase) in inventories
|
5,391
|
4,323
|
(7,232
|
)
|
||||||||
Decrease (increase) in deferred program expenses
|
4,705
|
(2,645
|
)
|
22
|
||||||||
Decrease (increase) in other current assets and other assets
|
259
|
589
|
(64
|
)
|
||||||||
Increase (decrease) in accounts payable and other accrued payables
|
390
|
(71
|
)
|
(5,677
|
)
|
|||||||
Increase (decrease) in accrued compensation and benefits
|
976
|
(3,126
|
)
|
1,211
|
||||||||
(Decrease) increase in deferred revenue
|
(3,327
|
)
|
1,708
|
1
|
||||||||
Increase (decrease) in other current liabilities and other liabilities
|
1,149
|
(2,397
|
)
|
(334
|
)
|
|||||||
Cash provided by operating activities
|
4,810
|
16,050
|
14,900
|
|||||||||
Investing activities:
|
||||||||||||
Acquisition of ITL (Note 3)
|
----
|
----
|
(8,000
|
)
|
||||||||
Purchases of property and equipment
|
(539
|
)
|
(591
|
)
|
(596
|
)
|
||||||
Cash used in investing activities
|
(539
|
)
|
(591
|
)
|
(8,596
|
)
|
||||||
Financing activities:
|
||||||||||||
Proceeds from senior credit facility
|
244,746
|
260,717
|
257,023
|
|||||||||
Repayments of senior credit facility
|
(243,476
|
)
|
(259,284
|
)
|
(252,933
|
)
|
||||||
Repayments of term loan
|
(375
|
)
|
(375
|
)
|
(375
|
)
|
||||||
(Decrease) increase in book overdrafts
|
(238
|
)
|
1,262
|
(1,309
|
)
|
|||||||
Repayments of notes payable
|
----
|
(10,860
|
)
|
(3,500
|
)
|
|||||||
Payments under capital lease obligations
|
(1,242
|
)
|
(937
|
)
|
(914
|
)
|
||||||
Redemptions of senior preferred stock
|
(2,000
|
)
|
(4,000
|
)
|
(2,070
|
)
|
||||||
Distributions to Telos ID Class B membership unit – non-controlling interest
|
(1,821
|
)
|
(1,973
|
)
|
(2,122
|
)
|
||||||
Cash used in financing activities
|
(4,406
|
)
|
(15,450
|
)
|
(6,200
|
)
|
||||||
(Decrease) increase in cash and cash equivalents
|
(135
|
)
|
9
|
104
|
||||||||
Cash and cash equivalents, beginning of the year
|
229
|
220
|
116
|
|||||||||
Cash and cash equivalents, end of year
|
$
|
94
|
$
|
229
|
$
|
220
|
|
Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|||||||||
Cash paid during the year for:
|
|
|
|
|||||||||
Interest
|
$
|
1,585
|
$
|
1,807
|
$
|
1,727
|
||||||
Income taxes
|
$
|
849
|
$
|
5,903
|
$
|
4,485
|
||||||
|
||||||||||||
Noncash: Interest on redeemable preferred stock
|
$
|
3,926
|
$
|
4,050
|
$
|
4,159
|
||||||
Net assets of acquired company
|
$
|
----
|
$
|
----
|
$
|
26,673
|
||||||
Acquisition financed through issuance of notes payable
|
$
|
----
|
$
|
----
|
$
|
18,673
|
||||||
Financing of capital leases
|
$
|
11,712
|
$
|
99
|
$
|
----
|
|
Telos Corporation
|
|
|
|||||||||||||||||||||||||
|
Class A
Common
Stock
|
Class B
Common
Stock
|
AdditionalPaid –in
Capital
|
Accumulated
Other Comprehen-sive Income
|
Accumulated
Deficit
|
Non-Controlling Interest
|
Total
Stockholders’
Deficit
|
|||||||||||||||||||||
Balance December 31, 2010
|
$
|
65
|
$
|
13
|
$
|
103
|
$
|
(26
|
)
|
$
|
(106,405
|
)
|
$
|
454
|
$
|
(105,796
|
)
|
|||||||||||
Net income for the year
|
----
|
----
|
----
|
----
|
1,454
|
2,049
|
3,503
|
|||||||||||||||||||||
Foreign currency translation income
|
----
|
----
|
----
|
8
|
----
|
----
|
8
|
|||||||||||||||||||||
Pension liability adjustments
|
----
|
----
|
----
|
53
|
----
|
----
|
53
|
|||||||||||||||||||||
Distributions
|
----
|
----
|
----
|
----
|
----
|
(2,122
|
)
|
(2,122
|
)
|
|||||||||||||||||||
Balance December 31, 2011
|
$
|
65
|
$
|
13
|
$
|
103
|
$
|
35
|
$
|
(104,951
|
)
|
$
|
381
|
$
|
(104,354
|
)
|
||||||||||||
Net income for the year
|
----
|
----
|
----
|
----
|
7,435
|
2,060
|
9,495
|
|||||||||||||||||||||
Foreign currency translation loss
|
----
|
----
|
----
|
(19
|
)
|
----
|
----
|
(19
|
)
|
|||||||||||||||||||
Pension liability adjustments
|
----
|
----
|
----
|
56
|
----
|
----
|
56
|
|||||||||||||||||||||
Distributions
|
----
|
----
|
----
|
----
|
----
|
(1,973
|
)
|
(1,973
|
)
|
|||||||||||||||||||
Balance December 31, 2012
|
$
|
65
|
$
|
13
|
$
|
103
|
$
|
72
|
$
|
(97,516
|
)
|
$
|
468
|
$
|
(96,795
|
)
|
||||||||||||
Net (loss) income for the year
|
----
|
----
|
----
|
----
|
(2,618
|
)
|
1,807
|
(811
|
)
|
|||||||||||||||||||
Foreign currency translation loss
|
----
|
----
|
----
|
(24
|
)
|
----
|
----
|
(24
|
)
|
|||||||||||||||||||
Stock-based compensation
|
----
|
----
|
43
|
----
|
----
|
----
|
43
|
|||||||||||||||||||||
Distributions
|
----
|
----
|
----
|
----
|
----
|
(1,821
|
)
|
(1,821
|
)
|
|||||||||||||||||||
Balance December 31, 2013
|
$
|
65
|
$
|
13
|
$
|
146
|
$
|
48
|
$
|
(100,134
|
)
|
$
|
454
|
$
|
(99,408
|
)
|
|
Balance
Beginning of
Year
|
Additions Charge to Costs and Expense
|
Deductions
|
Balance
End of
Year
|
||||||||||||
|
|
|
|
|
||||||||||||
Year Ended December 31, 2013
|
$
|
416
|
$
|
1
|
$
|
----
|
$
|
417
|
||||||||
Year Ended December 31, 2012
|
$
|
315
|
$
|
111
|
$
|
(10
|
)
|
$
|
416
|
|||||||
Year Ended December 31, 2011
|
$
|
319
|
$
|
51
|
$
|
(55
|
)
|
$
|
315
|
Buildings
|
20 Years
|
Machinery and equipment
|
3-5 Years
|
Office furniture and fixtures
|
5 Years
|
Leasehold improvements
|
Lesser of life of lease or useful life of asset
|
|
2013
|
2012
|
2011
|
|||||||||
Non-controlling interest, beginning of period
|
$
|
468
|
$
|
381
|
$
|
454
|
||||||
Net income
|
1,807
|
2,060
|
2,049
|
|||||||||
Distributions
|
(1,821
|
)
|
(1,973
|
)
|
(2,122
|
)
|
||||||
Non-controlling interest, end of period
|
$
|
454
|
$
|
468
|
$
|
381
|
|
December 31, 2013
|
Dcember 31, 2012
|
||||||||||||||
|
Cost
|
Accumulated
Amortization
|
Cost
|
Accumulated
Amortization
|
||||||||||||
Intangible assets
|
$
|
11,286
|
$
|
5,643
|
$
|
11,286
|
$
|
3,386
|
||||||||
|
$
|
11,286
|
$
|
5,643
|
$
|
11,286
|
$
|
3,386
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Billed accounts receivable
|
$
|
29,492
|
$
|
21,476
|
||||
Unbilled receivables
|
16,461
|
12,722
|
||||||
Allowance for doubtful accounts
|
(321
|
)
|
(319
|
)
|
||||
|
$
|
45,632
|
$
|
33,879
|
|
Balance Beginning
of Year
|
Bad Debt
Expenses (1)
|
Deductions (2)
|
Balance
End
of Year
|
||||||||||||
|
|
|
|
|
||||||||||||
Year ended December 31, 2013
|
$
|
319
|
$
|
2
|
$
|
----
|
$
|
321
|
||||||||
Year ended December 31, 2012
|
$
|
375
|
$
|
(53
|
)
|
$
|
(3
|
)
|
$
|
319
|
||||||
Year ended December 31, 2011
|
$
|
358
|
$
|
17
|
$
|
----
|
$
|
375
|
(1) | Accounts receivable reserves and reversal of allowance for subsequent collections, net |
(2) | Accounts receivable written-off and subsequent recoveries, net |
|
2013
|
2012
|
2011
|
|||||||||||||||||||||
|
(dollar amounts in thousands)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
Federal
|
$
|
203,917
|
98.3
|
%
|
$
|
224,010
|
99.1
|
%
|
$
|
188,162
|
99.1
|
%
|
||||||||||||
Commercial
|
3,477
|
1.7
|
%
|
2,086
|
0.9
|
%
|
1,726
|
0.9
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Total
|
$
|
207,394
|
100.0
|
%
|
$
|
226,096
|
100.0
|
%
|
$
|
189,888
|
100.0
|
%
|
|
2014
|
2015
|
Total
|
|||||||||
Short-term:
|
|
|
|
|||||||||
Term loan
|
$
|
688
|
$
|
----
|
$
|
688
|
1
|
|||||
Long-term:
|
||||||||||||
Term loan
|
$
|
----
|
$
|
5,500
|
$
|
5,500
|
1
|
|||||
Revolving credit
|
----
|
13,641
|
13,641
|
2
|
||||||||
Subtotal
|
$
|
----
|
$
|
19,141
|
$
|
19,141
|
||||||
Total
|
$
|
688
|
$
|
19,141
|
$
|
19,829
|
1 | The principal will be repaid in 2 quarterly installments of $93,750 in the first half of 2014, and effective July 1, 2014, quarterly installments of $250,000, with a final installment of the unpaid principal amount payable on November 13, 2015. |
2 | Balance due represents balance as of December 31, 2013, with fluctuating balances based on working capital requirements of the Company. |
|
Number of Shares
(000’s)
|
Weighted Average
Exercise Price
|
||||||
2013 Stock Option Activity
|
|
|
||||||
|
|
|
||||||
Outstanding at beginning of year
|
20
|
$
|
0.62
|
|||||
Granted
|
----
|
----
|
||||||
Exercised
|
----
|
----
|
||||||
Canceled
|
----
|
----
|
||||||
Outstanding at end of year
|
20
|
$
|
0.62
|
|||||
Exercisable at end of year
|
20
|
$
|
0.62
|
|||||
|
||||||||
2012 Stock Option Activity
|
||||||||
|
||||||||
Outstanding at beginning of year
|
30
|
$
|
1.33
|
|||||
Granted
|
----
|
----
|
||||||
Exercised
|
----
|
----
|
||||||
Canceled
|
(10
|
)
|
2.72
|
|||||
Outstanding at end of year
|
20
|
$
|
0.62
|
|||||
Exercisable at end of year
|
20
|
$
|
0.62
|
|||||
|
||||||||
2011 Stock Option Activity
|
||||||||
|
||||||||
Outstanding at beginning of year
|
55
|
$
|
1.75
|
|||||
Granted
|
----
|
----
|
||||||
Exercised
|
----
|
----
|
||||||
Canceled
|
(25
|
)
|
2.27
|
|||||
Outstanding at end of year
|
30
|
$
|
1.33
|
|||||
Exercisable at end of year
|
30
|
$
|
1.33
|
|
For the Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Current provision
|
|
|
|
|||||||||
Federal
|
$
|
1,219
|
$
|
4,362
|
$
|
3,426
|
||||||
State
|
264
|
829
|
621
|
|||||||||
|
||||||||||||
Total current
|
1,483
|
5,191
|
4,047
|
|||||||||
|
||||||||||||
Deferred provision (benefit)
|
||||||||||||
Federal
|
133
|
1,881
|
(718
|
)
|
||||||||
State
|
62
|
158
|
(91
|
)
|
||||||||
|
||||||||||||
Total deferred
|
195
|
2,039
|
(809
|
)
|
||||||||
|
||||||||||||
Total provision
|
$
|
1,678
|
$
|
7,230
|
$
|
3,238
|
|
For the Years Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Computed expected income tax provision
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||||||
State income taxes, net of federal income tax benefit
|
(17.3
|
)
|
3.6
|
3.5
|
||||||||
Change in valuation allowance for deferred tax assets
|
(0.3
|
)
|
(1.3
|
)
|
(1.4
|
)
|
||||||
Cumulative deferred adjustments
|
(16.9
|
)
|
----
|
----
|
||||||||
Provision to return adjustments
|
(11.5
|
)
|
----
|
----
|
||||||||
Other permanent differences
|
(15.4
|
)
|
(0.1
|
)
|
1.0
|
|||||||
Dividend and accretion on preferred stock
|
(146.0
|
)
|
10.7
|
34.1
|
||||||||
FIN 48 liability
|
(5.9
|
)
|
0.6
|
(1.6
|
)
|
|||||||
R&D credit
|
----
|
----
|
(1.8
|
)
|
||||||||
Other
|
----
|
0.8
|
0.2
|
|||||||||
|
(178.3
|
)%
|
49.3
|
%
|
69.0
|
%
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Deferred tax assets:
|
|
|
||||||
Accounts receivable, principally due to allowance for doubtful accounts
|
$
|
124
|
$
|
123
|
||||
Allowance for inventory obsolescence and amortization
|
356
|
628
|
||||||
Accrued liabilities not currently deductible
|
2,071
|
2,071
|
||||||
Accrued compensation
|
527
|
686
|
||||||
Amortization and depreciation
|
2,442
|
2,149
|
||||||
Telos ID basis difference
|
150
|
81
|
||||||
Net operating loss carryforwards - state
|
213
|
446
|
||||||
|
||||||||
Total gross deferred tax assets
|
5,883
|
6,184
|
||||||
Less valuation allowance
|
(1,901
|
)
|
(2,084
|
)
|
||||
|
||||||||
Total deferred tax assets, net of valuation allowance
|
3,982
|
4,100
|
||||||
Deferred tax liabilities:
|
||||||||
Unbilled accounts receivable, deferred for tax purposes
|
(1,413
|
)
|
(1,373
|
)
|
||||
Section 481(a) adjustment - inventory
|
----
|
(221
|
)
|
|||||
Goodwill basis adjustment and amortization
|
(2,763
|
)
|
(2,505
|
)
|
||||
|
||||||||
Total deferred tax liabilities
|
(4,176
|
)
|
(4,099
|
)
|
||||
|
||||||||
Net deferred tax assets
|
$
|
(194
|
)
|
$
|
1
|
|
Balance Beginning of Period
|
Additions
|
Deductions
|
Balance End
of Period
|
||||||||||||
|
|
|
|
|
||||||||||||
December 31, 2013
|
$
|
2,084
|
$
|
----
|
$
|
183
|
$
|
1,901
|
||||||||
December 31, 2012
|
$
|
2,281
|
$
|
----
|
$
|
197
|
$
|
2,084
|
||||||||
December 31, 2011
|
$
|
2,348
|
$
|
----
|
$
|
67
|
$
|
2,281
|
|
2013
|
2012
|
2011
|
|||||||||
Unrecognized tax benefits, beginning of period
|
$
|
534
|
$
|
400
|
$
|
501
|
||||||
Gross increases—tax positions in prior period
|
55
|
34
|
20
|
|||||||||
Gross increases—tax positions in current period
|
18
|
100
|
90
|
|||||||||
Settlements
|
----
|
----
|
(211
|
)
|
||||||||
Unrecognized tax benefits, end of period
|
$
|
607
|
$
|
534
|
$
|
400
|
|
Property
|
Equipment
|
Total
|
|||||||||
2014
|
$
|
1,500
|
$
|
33
|
$
|
1,533
|
||||||
2015
|
1,538
|
30
|
1,568
|
|||||||||
2016
|
1,576
|
1
|
1,577
|
|||||||||
2017
|
1,616
|
1
|
1,617
|
|||||||||
2018
|
1,656
|
----
|
1,656
|
|||||||||
Remainder
|
14,484
|
----
|
14,484
|
|||||||||
|
||||||||||||
Total minimum obligations
|
22,370
|
65
|
22,435
|
|||||||||
Less amounts representing interest (ranging from 5.8% to 18.8%)
|
(6,876
|
)
|
(1
|
)
|
(6,877
|
)
|
||||||
|
||||||||||||
Net present value of minimum obligations
|
15,494
|
64
|
15,558
|
|||||||||
Less current portion
|
(625
|
)
|
(32
|
)
|
(657
|
)
|
||||||
|
||||||||||||
Long-term capital lease obligations at December 31, 2013
|
$
|
14,869
|
$
|
32
|
$
|
14,901
|
2014
|
$
|
645
|
||
2015
|
551
|
|||
2016
|
410
|
|||
2017
|
295
|
|||
2018
|
289
|
|||
Remainder
|
1,531
|
|||
Total minimum lease payments
|
$
|
3,721
|
|
Balance
Beginning
of Year
|
Accruals
|
Warranty
Expenses
|
Balance
End
of Year
|
||||||||||||
|
(amount in thousands)
|
|||||||||||||||
|
|
|
|
|
||||||||||||
Year Ended December 31, 2013
|
$
|
226
|
$
|
70
|
$
|
(183
|
)
|
$
|
113
|
|||||||
Year Ended December 31, 2012
|
$
|
953
|
$
|
(393
|
)
|
$
|
(334
|
)
|
$
|
226
|
||||||
Year Ended December 31, 2011
|
$
|
1,079
|
$
|
257
|
$
|
(383
|
)
|
$
|
953
|
|
Quarters Ended
|
|||||||||||||||
|
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
||||||||||||
2013
|
|
|
|
|
||||||||||||
Revenue
|
$
|
47,578
|
$
|
55,214
|
$
|
49,279
|
$
|
55,323
|
||||||||
Gross profit
|
8,018
|
8,884
|
8,799
|
12,899
|
||||||||||||
(Loss) income before income taxes and non-controlling interest
|
(2,067
|
)
|
(502
|
)
|
(291
|
)
|
3,727
|
|||||||||
Net (loss) income attributable to Telos Corporation (1)(2)
|
(1,000
|
)
|
454
|
3,706
|
(5,778
|
)
|
||||||||||
|
||||||||||||||||
2012
|
||||||||||||||||
Revenue
|
$
|
54,429
|
$
|
56,338
|
$
|
66,916
|
$
|
48,413
|
||||||||
Gross profit
|
14,054
|
14,603
|
14,903
|
11,246
|
||||||||||||
Income before income taxes and non-controlling interest
|
3,724
|
4,378
|
2,404
|
6,219
|
||||||||||||
Net income attributable to Telos Corporation (1)(3)
|
1,803
|
1,973
|
543
|
3,116
|
(1) | Changes in net income are the result of several factors, including seasonality of the government year-end buying season, as well as the nature and timing of other deliverables. |
(2) | ASC 740-270 requires the use of an annualized effective tax rate approach in estimating taxes for interim periods. Changes in projected profits and losses can affect the effective tax rate from one period to another. The Company realized significant pre-tax profits during the fourth quarter which produced a tax provision of $9.1 million for the fourth quarter. Through the nine months ended September 30, 2013, the Company properly recorded a benefit for income taxes in accordance with applying the annualized effective tax rate approach to its nine months’ pre-tax loss. |
(3) | Reflects gain on early extinguishment of ITL Note in December 2012. |
1. | Financial Statements |
2. | Financial Statement Schedules |
3. | Exhibits: |
Exhibit Number
|
Description
|
3.1
|
Articles of Amendment and Restatement of C3, Inc. (Incorporated by reference to the Company’s Registration Statement No. 2-84171 filed June 2, 1983)
|
3.2
|
Articles of Amendment of C3, Inc. dated August 31, 1981 (Incorporated by reference to the Company’s Registration Statement No. 2-84171 filed June 2, 1983)
|
3.3
|
Articles supplementary of C3, Inc. dated May 31, 1984 (Incorporated by reference to the Company's Form 10-K report for the fiscal year ended March 31, 1987)
|
3.4
|
Articles of Amendment of C3, Inc. dated August 18, 1988 (Incorporated by reference to the Company’s Form 10-K report for the fiscal year ended March 31, 1989)
|
3.5
|
Articles of Amendment and Restatement Supplementary to the Articles of Incorporation dated August 3, 1990. (Incorporated by reference to C3, Inc. 10-Q for the quarter ended June 30, 1990)
|
3.6
|
Articles of Amendment of C3, Inc. dated April 13, 1995 (Incorporated by reference to Exhibit 3.7 filed with the Company’s Form 10-K report for the year ended December 31, 1995)
|
3.7
|
Amended and Restated Bylaws of the Company, as amended on October 3, 2007 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on October 5, 2007)
|
10.1*
|
1996 Stock Option Plan (Incorporated by reference to Exhibit 10.74 filed with the Company’s Form 10-Q report for the quarter ended March 31, 1996)
|
10.2
|
Membership Interest Purchase & Assignment Agreement and Other Related Transaction Documents among the Company, Telos Identity Management Solutions, LLC and Hoya ID Fund A, LLC (Incorporated by reference to Exhibit 10.19 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2007)
|
10.3*
|
Telos Corporation 2008 Omnibus Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.21 filed with the Company’s Form 10-K report for the year ended December 31, 2007)
|
10.4
|
Preferred Stockholders Standby Agreement between Wells Fargo Foothill, Inc. and North Atlantic Smaller Companies Investment Trust PLC, dated April 14, 2008 (Incorporated by reference to Exhibit 10.15 filed with the Company’s Form 10-K report for the year ended December 31, 2008)
|
10.5
|
Series A-1 and Series A-2 Redeemable Preferred Stock Extension of Redemption Date – North Atlantic Smaller Companies Investment Trust PLC, dated April 6, 2008 (Incorporated by reference to Exhibit 10.17 filed with the Company’s Form 10-K report for the year ended December 31, 2008)
|
10.6
|
Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated May 17, 2010 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Form 8-K report on May 21, 2010)
|
10.7
|
Preferred Stockholders Standby Agreement between Wells Fargo Foothill, Inc. and Toxford Corporation, dated May 17, 2010 (Incorporated by reference to Exhibit 99.2 filed with the Company’s Form 8- K report on May 21, 2010)
|
10.8
|
Series A-1 and Series A-2 Redeemable Preferred Stock Extension of Redemption Date – Toxford Corporation, dated May 17, 2010 (Incorporated by reference to Exhibit 10.24 filed with the Company’s Form 10-K report for the year ended December 31, 2010)
|
10.9
|
First Amendment of Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated September 27, 2010 (Incorporated by reference to Exhibit 10.28 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2010)
|
10.10
|
Series A-1 and Series A-2 Redeemable Preferred Stock Consent Letter pursuant to the First Amendment of Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated September 27, 2010 – Graphite Enterprise Trust LP (Incorporated by reference to Exhibit 10.26 filed with the Company’s Form 10-K report for the year ended December 31, 2010)
|
10.11
|
Series A-1 and Series A-2 Redeemable Preferred Stock Consent Letter pursuant to the First Amendment of Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated September 27, 2010 – Graphite Enterprise Trust PLC (Incorporated by reference to Exhibit 10.27 filed with the Company’s Form 10-K report for the year ended December 31, 2010)
|
10.12
|
Series A-1 and Series A-2 Redeemable Preferred Stock Consent Letter pursuant to the First Amendment of Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated September 27, 2010– North Atlantic Smaller Companies Investment Trust PLC (Incorporated by reference to Exhibit 10.28 filed with the Company’s Form 10-K report for the year ended December 31, 2010)
|
10.13
|
Series A-1 and Series A-2 Redeemable Preferred Stock Consent Letter pursuant to the First Amendment of Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated September 27, 2010 – Toxford Corporation (Incorporated by reference to Exhibit 10.30 filed with the Company’s Form 10-K report for the year ended December 31, 2010)
|
10.14
|
Asset Purchase Agreement, dated as of July 1, 2011, by and among Telos Corporation, IT Logistics, Inc. and Tim Wilbanks (Incorporated by reference to Exhibit 2 filed with the Company’s Form 8-K report on July 8, 2011)
|
10.15
|
Subordinated Non-Transferrable Promissory Note, dated July 1, 2011, issued to IT Logistics, Inc. by Telos Corporation in the principal amount of $15 million (Incorporated by reference to Exhibit 4 filed with the Company’s Form 8-K report on July 8, 2011)
|
10.16*
|
Agreement, effective as of March 31, 2012, between Michael P. Flaherty and Telos Corporation (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on April 3, 2012)
|
10.17
|
Second Amendment to Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated May 11, 2012 (Incorporated by reference to Exhibit 10 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2012)
|
10.18*
|
Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and John B. Wood (Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012)
|
10.19*
|
Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and Edward L. Williams (Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012)
|
10.20*
|
Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and Michele Nakazawa (Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012)
|
10.21*
|
Amendment to Employment Agreement, dated as of November 12, 2012, between the Company and Brendan D. Malloy (Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012)
|
10.22*
|
Form of Employment Agreement between the Company and six of its executive officers (Incorporated by reference to Exhibit 10.5 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012)
|
10.23*
|
Telos Corporation 2013 Omnibus Long-Term Incentive Plan (Incorporated by reference to Appendix A filed with the Company’s Definitive Proxy Statement on Schedule 14A on April 16, 2013)
|
10.24*
|
Form Restricted Stock Agreement (Incorporated by reference to Exhibit 99.2 filed with the Company’s Current Report on Form 8-K on May 15, 2013)
|
10.25
|
Third Amendment to Second Amended and Restated Loan and Security Agreement and First Amendment to Amended and Restated General Continuing Guaranty between the Company and Wells Fargo Capital Finance, LLC dated June 11, 2013 (Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2013)
|
10.26
|
Fourth Amendment to Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, LLC dated July 31, 2013 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on August 6, 2013)
|
Telos Corporation Senior Officer Incentive Program
|
|
Waiver and Fifth Amendment to Second Amended and Restated Loan and Security Agreement between the Company and Wells Fargo Capital Finance, Inc. dated March 27, 2014
|
|
Employment Agreement, dated as of January 4th, between the Company and Jefferson V. Wright
|
|
List of subsidiaries of Telos Corporation
|
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
|
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
|
|
Certification pursuant to 18 USC Section 1350.
|
|
101.INS^
|
XBRL Instance Document
|
101.SCH^
|
XBRL Taxonomy Extension Schema
|
101.CAL^
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF^
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB^
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE^
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
TELOS CORPORATION
|
||
By:
|
/s/ John B. Wood
|
||
|
John B. Wood
Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
|
||
Date:
|
March 31, 2014
|
Signature
|
Title
|
Date
|
||
/s/ John B. Wood
|
|
|
||
John B. Wood
|
Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
|
March 31, 2014
|
||
|
|
|
||
/s/ Michele Nakazawa
|
|
|
||
Michele Nakazawa
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
March 31, 2014
|
||
|
|
|
||
/s/ Bernard C. Bailey
|
|
|
||
Bernard C. Bailey
|
Director
|
March 31, 2014
|
||
|
|
|
||
/s/ David Borland
|
|
|
||
David Borland
|
Director
|
March 31, 2014
|
||
|
|
|
||
/s/ William M. Dvoranchik
|
|
|
||
William M. Dvoranchik
|
Director
|
March 31, 2014
|
||
|
|
|
||
|
|
|
||
Seth W. Hamot
|
Director
|
|
||
|
|
|
||
/s/ Bruce R. Harris
|
|
|
||
Bruce R. Harris, Lt. Gen., USA (Ret.)
|
Director
|
March 31, 2014
|
||
|
|
|
||
/s/ Charles S. Mahan
|
|
|
||
Charles S. Mahan, Jr. Lt. Gen., USA (Ret)
|
Director
|
March 31, 2014
|
||
|
|
|
||
/s/ John W. Maluda
|
|
|
||
John W. Maluda, Major Gen,, USAF (Ret)
|
Director
|
March 31, 2014
|
||
|
|
|
||
/s/ Robert J. Marino
|
|
|
||
Robert J. Marino
|
Director
|
March 31, 2014
|
||
|
|
|
||
|
|
|
||
|
|
|
||
Andrew R. Siegel
|
Director
|
|
||
|
|
|
||
/s/ Jerry O. Tuttle
|
|
|
||
Jerry O. Tuttle, Vice Admiral, USN (Ret.)
|
Director
|
March 31, 2014
|
|
AGENT AND LENDERS:
|
|
|
|
|
|
WELLS FARGO CAPITAL FINANCE, LLC.
(successor by merger to Wells Fargo Capital Finance,
Inc.), as Agent and as a Lender
|
|
|
|
|
|
By
|
/s/ David Sanchez |
|
Name
|
David Sanchez |
|
Title
|
Director |
|
BORROWERS:
|
|
|
|
|
|
TELOS CORPORATION
,
|
|
|
a Maryland corporation
|
|
|
|
|
|
By
|
/s/ Jefferson V. Wright |
|
Title
|
EVP, General Counsel
|
|
XACTA CORPORATION
,
|
|
|
a Delaware corporation
|
|
|
|
|
|
By
|
/s/ Jefferson V. Wright |
|
Title
|
EVP, General Counsel |
|
CREDIT PARTIES:
|
|
|
|
|
|
UBIQUITY.COM, INC.
,
|
|
|
a Delaware corporation
|
|
|
|
|
|
By
|
/s/ Jefferson V. Wright |
|
Title
|
EVP, General Counsel |
|
TELOWORKS, INC.
,
|
|
|
a Delaware corporation
|
|
|
|
|
|
By
|
/s/ David S. Easley |
|
Title
|
President |
I.
|
Parties
:
|
|
A.
|
Wells Fargo Capital Finance, LLC (successor by merger to Wells Fargo Capital Finance, Inc., formerly known as Wells Fargo Foothill, Inc.) ("WFCF"), individually and as Agent ("Agent")
|
|
Telephone:
|
(617) 624-4438
|
|
Facsimile:
|
(617) 523-1697
|
|
B.
|
Telos Corporation ("Telos")
|
|
C.
|
Ubiquity.com, Inc. ("Ubiquity")
|
II.
|
Counsel to Parties
:
|
|
A.
|
WFCF:
|
|
Telephone:
|
(312) 201-4000
|
|
Facsimile:
|
(312) 332-2196
|
|
B.
|
Borrowers and Credit Parties:
|
|
Telephone:
|
(703) 726-2270
|
|
Facsimile:
|
(703) 724-1468
|
III.
|
Closing documents
:
|
|
A.
|
Items pertaining to Borrowers and Credit Parties:
|
|
1.
|
Waiver and Fifth Amendment to Second Amended and Restated Loan and Security Agreement
|
|
2.
|
Reaffirmation of Loan Documents
|
|
a)
|
Amended and Restated Guarantee of Credit Parties
|
|
b)
|
Collateral Assignment of Business Interruption Insurance
|
|
c)
|
Cash Management Agreements
|
|
d)
|
Intercompany Subordination Agreement
|
|
e)
|
Telos Trademark Mortgage
|
|
f)
|
Telos Copyright Mortgage
|
|
g)
|
Telos Patent Mortgage
|
|
h)
|
Telos Stock Pledge Agreement
|
|
i)
|
Xacta Trademark Mortgage
|
|
j)
|
Ubiquity Stock Pledge Agreement
|
|
B.
|
Items Pertaining to Telos
:
|
|
3.
|
Amendment to Trademark Mortgage re new Trademark Applications (executed pre-closing)
|
|
4.
|
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Articles of Incorporation
|
|
5.
|
Certificate of good standing in its jurisdiction of organization
|
|
C.
|
Items Pertaining to Xacta
:
|
|
6.
|
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation
|
|
7.
|
Certificate of good standing in its jurisdiction of organization
|
|
D.
|
Items Pertaining to Ubiquity
:
|
|
8.
|
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation
|
|
9.
|
Certificate of good standing in its jurisdiction of organization
|
|
E.
|
Items Pertaining to Teloworks
:
|
|
10.
|
Secretary's Certificate with respect to resolutions of directors, incumbency of officers, bylaws and certified Certificate of Incorporation
|
|
11.
|
Certificate of good standing in each state in its jurisdiction of organization
|
|
F.
|
Other Items
:
|
|
12.
|
Opinion of counsel to Borrowers and Credit Parties
|
|
G.
|
Post-Closing Items
|
|
13.
|
Extensions to standby agreements from holders of 70% of private preferred stock
|
|
14.
|
Sixth Amendment to Credit Agreement re EBITDA covenant levels for March, June and September 2014
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(a) | Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its Executive Vice President and General Counsel during the Agreement Term (as defined below). |
(b) | During the Agreement Term, the Executive shall devote full time (paid time off and other authorized leave excepted) and best efforts, energies and talents to serving the Company as an employee. |
(c) | The Executive agrees to perform his duties faithfully, efficiently and with integrity subject to the direction of the Company. The Executive will have such authority, power, responsibilities and duties as are inherent in such position and necessary to carry out such responsibilities and the duties required hereunder, as well as any additional duties and authority granted to him by the Company’s Chief Executive Officer and/or Board of Directors (the “Board of Directors”). |
(d) | Notwithstanding the foregoing, including paragraph 1 (b) above, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including activities involving professional, charitable, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other profit or not-for-profit organizations, and similar activities, to the extent that such other activities do not, in the sole discretion of the Company, inhibit or prohibit the performance of the Executive’s duties under this Agreement or conflict in any material way with the Company’s business. Company acknowledges and agrees that Executive may remain associated with the law firm, Miles & Stockbridge P.C. (the “Firm”), in an “Of Counsel” capacity where he will be able to perform non-billable work (including mentoring of more junior lawyers), engage in business development efforts for clients other than the Company, and perform limited billable work for clients other than the Company. Executive agrees that all work performed for Company by Executive will be in his capacity as an employee and officer of Company and not in his capacity as Of Counsel for the Firm, and that none of the work performed as Of Counsel for the Firm will be for or related to the Company. In order to avoid any conflicts of interest, the compensation arrangement agreed to by Executive with the Firm is structured so that no compensation that the Executive will earn from the Firm will be related to or earned as a result of work performed by either Executive or other lawyers at the Firm for Company or as a result of any business relationship between Company and the Firm. Executive’s cumulative work for the Firm as permitted in this subparagraph will not exceed approximately 200 hours per year. |
(e) | The Executive shall not be required to perform services under this Agreement during any period in which determined as Disabled (as defined below). |
(f) | The “Agreement Term” shall be the period beginning on January 1, 2013 for a one year period, and thereafter shall automatically renew for consecutive one year periods unless terminated in accordance with the provisions hereof. |
(a) | Base Salary . The Executive shall receive an annual base salary of Three Hundred and Fifty Thousand Dollars ($350,000.00), effective as of December 31, 2012 (the “Salary”), plus any salary increases authorized during the Agreement Term, if any, payable in accordance with the Company’s payroll cycle. |
(b) | Bonus . The Executive shall have the opportunity to participate in a bonus plan for which he is eligible under the terms and conditions as defined by the Company. Any bonus for the Executive shall be subject to the then-existing requirements of the Company governing internal recommendation and approval of such bonus. Any such bonus payment shall be paid to the Executive per the bonus plan. |
(c) | Stock Options and Restricted Stock Grants . The Executive shall be eligible for additional stock options and restricted stock grants under any of the Company’s stock option and restricted stock plans in an amount recommended by the Management Development and Compensation Committee and approved by the Board of Directors. Such options and/or grants shall be subject to the terms and conditions of the applicable standard stock option and restricted stock plans and agreements adopted by the Company. |
(d) | Expense Reimbursement . While the Agreement is in effect, the Company will reimburse the Executive for all reasonable and necessary business expenses incurred by the Executive in connection with the performance of his duties for the Company, including dues for bar associations and professional organizations. Such reimbursement is subject to the submission to the Company by the Executive of appropriate documentation and/or vouchers, and will be made in accordance with the customary business procedures of the Company for expense reimbursement, as may from time to time be established. |
(e) | Paid Time Off . While the Agreement is in effect, in each fiscal year of the Company, the Executive shall be eligible to accrue paid time off, subject to the terms of the current benefits policy. |
(f) | Other Benefits . The Executive shall be eligible to participate in any and all plans maintained by the Company to provide benefits for its salaried senior executives, including, without limitation, any pension, profit sharing or other retirement plan, any life, accident, disability, medical, hospital or similar group insurance program and any other benefit plan, subject to the normal terms and conditions of such plans. |
(a)
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Death
. The Executive’s employment hereunder shall terminate upon his death.
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(b) | Disability . If the Executive becomes Disabled, the Company may terminate Executive’s employment. For purposes of this Agreement, the Executive shall be deemed to be “Disabled” if (i) eligible for disability benefits under the Company’s long-term disability plan, or (ii) has a physical or mental disability which renders Executive incapable, after reasonable accommodation, of performing substantially all of Executive’s duties hereunder for a period of 180 days (which need not be consecutive) in any 12-month period. In the event of a dispute as to whether the Executive is Disabled, the Company may, at its expense, refer Executive to a licensed practicing physician of the Company’s choice and the Executive agrees to submit to such tests and examination as such physician shall deem customary and appropriate. |
(c) | Cause . The Company may terminate the Executive’s employment hereunder immediately and at any time for Cause by written notice to the Executive detailing the basis for the Cause termination. For purposes of this Agreement, “Cause” means (i) gross negligence or willful and continued failure by the Executive to substantially perform his duties as an employee of the Company (other than any such failure resulting from incapacity due to physical or mental illness); (ii) Executive’s dishonesty, fraudulent misrepresentation, willful misconduct, malfeasance, violation of fiduciary duty relating to the business of the Company; or (iii) conviction of a felony. |
(d) | Without Cause . The Company may terminate the Executive’s employment hereunder immediately and at any time without Cause by written notice to the Executive. |
(e) | Termination by Executive . The Executive may terminate his employment hereunder at any time for any reason by giving the Company prior written notice not less than thirty (30) days prior to such termination. |
(f) | Termination upon a Change in Control . The Executive’s employment hereunder shall terminate automatically and such termination shall be considered to be without Cause (as defined above) upon the occurrence of a Change in Control (as defined below). |
(g) | Mutual Agreement . This Agreement may be terminated at any time by mutual written agreement of the parties. |
(h) | Date of Termination . “Date of Termination” means the last day that the Executive is employed by the Company under the terms of this Agreement or, in the event of a Change in Control, the date of the Change in Control, provided that Executive’s employment is terminated in accordance with one of the foregoing provisions in this paragraph 3. |
(a) | If, prior to the occurrence of a Change in Control, the Company terminates the Executive’s employment for Cause in accordance with paragraph 3(c) above, or if the Executive terminates his employment in accordance with paragraph 3(e) above, the Company shall pay to the Executive: |
(i) | A lump-sum payment equivalent to the remaining unpaid portion of the Executive’s Salary for the period ending on the Date of Termination. |
(ii) | A lump-sum payment for all accrued and unused Paid Time Off. |
(iii) | Any other payments or benefits to be provided to the Executive by the Company pursuant to any employee benefit plans or arrangements adopted by the Company, to the extent such payments and benefits are earned and vested as of the Date of Termination, or are required by law to be offered for periods following the Date of Termination. In addition, any bonus which has been earned by Executive and approved by the appropriate corporate authorities but which remains unpaid as of the date of Date of Termination shall be paid to Executive at such time and in such manner as if Executive had continued to be employed by the Company. |
(b) | If, prior to the occurrence of a Change in Control, the Company terminates the Executive’s employment without Cause in accordance with paragraph 3(d) above, by mutual agreement in accordance with paragraph 3(g) above, or due to Disability in accordance with paragraph 3(b) above, the Executive shall be entitled to the amounts payable under paragraph 4(a), and in addition, the Executive shall be entitled to monthly payments over a 18-month period of an amount equal to the amount of monthly salary which the Executive was being paid as of the Date of Termination. Such payments will commence as of the month following the date that the Executive incurs a separation from service, as such term is defined in the context of Section 409A of the Code (as defined below). Such payments will continue over the 18-month period in accordance with the Company’s normal payroll cycle. In the event that the Executive dies prior to the completion of the 18-month payment cycle, any amounts remaining unpaid as of the date of Executive’s death will be paid to Executive’s estate in lump sum. |
(c) | If, prior to the occurrence of a Change in Control, the Executive’s employment is terminated due to death, the Executive’s estate shall be entitled to the amounts payable under paragraph 4(a), and in addition, the Executive’s estate shall be entitled to a lump-sum payment of an amount equal to the amount of monthly salary which the Executive was being paid as of the Date of Termination times 18 months. |
(d) | Upon termination of the Executive’s employment as a result of a Change in Control in accordance with paragraph 3(f), Executive shall be entitled to the amounts payable under paragraph 4(a), and in addition, the Executive shall be entitled to a lump-sum payment of an amount equal to the following: (1) the amount of monthly salary which the Executive was being paid as of the Date of Termination times 18 months; plus (2) one and one-half (1 ½) times the Average Bonus Amount (as defined below). For purposes of this Agreement, “Average Bonus Amount” shall equal (x) if, at the time the Change in Control occurs, the Executive has been employed by the Company for two years or more, the average amount of the bonus to be earned for the then-current year (i.e. the year in which the Change in Control occurs) and the bonuses received for the two immediately prior years; (y) if, at the time the Change in Control occurs, the Executive has been employed by the Company for more than one year but less than two years, the average amount of the bonus to be earned for the then-current year and the bonuses received for the prior year; and (z) if, at the time the Change in Control occurs, the Executive has been employed by the Company for less than one year, the amount of the bonus to be earned for the then-current year. For purposes of calculating the Average Bonus Amount, the amount of the bonus for the then-current year shall equal the amount earned or scheduled to be earned by the Executive as if the bonus targets set in the bonus plan have been met. Such payments in lump sum shall be made contemporaneously with the consummation of the transaction or the election of directors that constitutes the Change in Control. “Change in Control” means an occasion upon which (i) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than a member of the Board of Directors or fiduciary holding securities under an employee benefit plan of the Company or a corporation controlled by the Company, acquires (either directly and/or through becoming the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act)), directly or indirectly, securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities (or has acquired securities representing 50% or more of the combined voting power of the Company’s then outstanding securities during the 12-month period ending on the date of the most recent acquisition of Company securities by such person); or (ii) during any period of twelve (12) consecutive months , a majority of the members of the Board of Directors is replaced by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election; or (iii) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) all, or substantially all, of the Company’s assets. Each Change in Control event described in this paragraph is intended to constitute a change in ownership or effective control of the Company or in the ownership of a substantial portion of the Company’s assets within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended (“Code”), and the IRS guidance issued thereunder and this Agreement shall be interpreted accordingly. Notwithstanding anything to the contrary set forth in this Agreement, the Executive shall not be entitled to any payments under paragraphs 4(a), 4(b), or 4(c) upon Termination if the Executive receives the payments under this paragraph 4(d) upon a Change in Control. |
(e) | In the event that the Executive’s employment is terminated for any reason discussed in paragraphs 4(b), 4(c) or 4(d), in addition to the amounts payable under paragraphs 4(b), 4(c) or 4(d) as applicable, the Executive or the Executive’s estate shall be entitled to the following: |
(i) | Immediate vesting of the unvested portion of any outstanding stock option and any outstanding share of restricted stock, notwithstanding any contrary terms in any stock option or restricted stock agreement applicable to Executive. |
(ii) | Cash payments equal to eighteen (18) months of premium payments for medical and dental coverage. The amount of the monthly payments shall be equal to the amount of the “applicable premium” as determined pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) (without regard to whether or not the Executive elects COBRA continuation coverage) based on the Executive’s choices under the Company’s plan as of the Date of Termination and further based upon the current premiums as of the Date of Termination, less the amount that the Executive was contributing for coverage. The Company benefits package in which the Executive participated will cease as of the Date of Termination. |
(iii) | Cash payments equal to 18 months of benefit premiums based upon the premium rate at the Date of Termination under the terms of the Company’s Group Life Policy issued by CIGNA which allows the option to convert to an individual policy for basic life and accidental death and dismemberment (AD&D) coverage. However, the cash payments shall be no more than the amount of the premiums that the Company was paying as if the Executive was still employed. This paragraph shall not apply if the Executive’s employment is terminated per section 4(c). |
(iv) | Company will continue to pay the premiums to continue the Executive Life Policy in which the Executive is the holder of the policy, for 18 months after the Date of Termination. The annual premium payment shall be imputed to the Executive as income. This shall not apply if the Executive’s employment is terminated per section 4(c). |
(v) | Cash payments equal to the employer matching contribution, as if the Executive was still a plan participant that would otherwise have been contributed on Executive's behalf to the Code Section 401(k) program maintained by the Company with respect to the 18-month period commencing on the Date of Termination under the following assumptions: |
(a) | Executive would have made a voluntary salary reduction contribution to the Code Section 401(k) program with respect to the 18-month period based upon the salary reduction election in effect on behalf of the Executive as of the Date of Termination. |
(b) | No additional "constructive matching" payments will be made under this provision with respect to a calendar year once the combination of the actual matching contributions made on behalf of Executive to the Code Section 401(k) program for such calendar year plus the "constructive matching" payments made to Executive pursuant to this provision for such calendar equal the maximum amount of matching contributions that could have been allocated to Executive's account under the terms of the Code Section 401(k) program with respect to such calendar year. |
(c) | Except as otherwise contemplated by paragraph 4(e)(vi) below, the "constructive matching" payments will be made at such times as the Company remits the actual matching contributions to the Code Section 401(k) program. |
(vi) | If the Executive’s employment is terminated per paragraph 4(b), all payments under paragraph this 4(e) shall be made on a periodic basis on the same schedule as such benefits otherwise would have been payable as if the Executive was still employed at the Company. If the Executive’s employment is terminated per paragraph 4(c) or paragraph 4(d), all payments under this paragraph 4(e) shall be paid in a lump-sum payment at the same time the lump sum payment is paid in accordance with paragraph 4(c) or paragraph 4(d). Notwithstanding anything to the contrary set forth in this Agreement, the Executive shall not be entitled to receive the payments contemplated by this paragraph 4(e) upon the termination of the Executive’s employment with the Company if the Executive receives the payments under this paragraph 4(e) upon the termination of the Executive’s employment as a result of a Change in Control. |
(vii) | If the Executive was receiving other benefits as of the Date of Termination that are not listed above, and to the extent such payments or benefits are earned and vested or are required by law to be offered to the Executive for the 18-month period following the Date of Termination, then the cash equivalent or arrangements for continuing coverage will be determined at that time. However, the cash payments shall be no more than the amount that the Company was paying as if the Executive was still employed. |
(viii) | If any of the benefits listed above are no longer available to the Executive as of the Date of Termination, then there will be no such payments made to continue the benefits after the Date of Termination or its cash equivalent. |
(f) | The undertakings of the Company in connection with paragraphs 4(b), 4(c), 4(d),and 4(e), above, are contingent upon Executive’s or his estate’s compliance with Sections 5, 6, 7 and 8 following termination or a Change in Control. |
(g) | To the extent required by Section 409A of the Code, if the Executive separates from service with the Company for any reason other than death and the Executive constitutes a “specified employee” as defined in Section 409A(2)(B)(i) of the Code at the time of separation from service, then payment to the Executive of any amounts pursuant to Section 4(b) or 4(d) and payment of any cash amounts pursuant to Section 4(e) shall not be paid or commence until a date that is six months following the date of the Executive’s separation from service with the Company. Upon the date which is six months following the date of Executive’s separation from service, all previously accrued monthly amounts shall be payable in a lump-sum and future amounts will continue to be paid pursuant to the remaining term of the 18-month payment cycle. The above-referenced six month delay in payment shall only apply to the extent required by Section 409A of the Code, such that such delay shall not apply to payments made in connection with an involuntary termination of employment provided such payments fall within the dollar threshold described in Treas. Reg. § 1.409A-1(b)(9)(iii). |
(h) | The Executive understands and agrees that he is obligated to pay all local, state and federal taxes that are or may be owed from the payments specified in this paragraph 4, and, as applicable, the payments will be subject to appropriate tax withholding by the Company. |
(a) | The Executive recognizes that the Company incurs significant expense in training employees to provide services in accordance with the Company’s Business and that the Company will disclose Confidential Information to each such employee. The Executive promises that, during the Agreement Term and for a period of 24 months subsequent to the Date of Termination, the Executive will not, without the prior written consent of the Company, knowingly hire, directly or indirectly, any person then employed by the Company, or knowingly solicit, directly or indirectly, such a person either to terminate or diminish employment with the Company, or to work for any other person or entity, whether or not a competitor, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. |
(b) | The Executive also acknowledges that the Company incurs significant expense in developing business partners, licensees, customers and clients. The Executive promises that, during the Agreement Term and for a period of 24 months subsequent to the Date of Termination, the Executive will not, without the prior written consent of the Company, knowingly directly or indirectly, solicit any customer, business partner, licensee or client of the Company to terminate or diminish its business relationship with the Company or to purchase any product or service that is or may be used as a substitute for any product or service of the Company, and the Executive shall not knowingly approach any such customer, supplier, lessor or lessee for such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. |
(c) | Notwithstanding anything to the contrary set forth in this Agreement, the provisions of this paragraph 7 shall survive the termination of the Executive’s employment hereunder and the termination of this Agreement. |
To the Company
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To the Executive
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Telos Corporation
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Jefferson V. Wright
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19886 Ashburn Road
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19886 Ashburn Road
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Ashburn, VA 20147
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Ashburn, VA 20147
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Attn.: Legal Department
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EXECUTIVE
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TELOS CORPORATION
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/s/ Jefferson V. Wright
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/s/ John B. Wood
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Jefferson V. Wright
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John B. Wood
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EVP, General Counsel
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Chief Executive Officer
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Name of Subsidiary
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State/Country
of Incorporation
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Ubiquity.com, Inc.
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Delaware
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Xacta Corporation
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Delaware
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Teloworks, Inc.
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Delaware
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Telos Identity Management Solutions, LLC (DBA Telos ID)
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Delaware
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Teloworks Philippines, Inc.
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Philippines
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Date:
March 31, 2014
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/s/ John B. Wood
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John B. Wood
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Chief Executive Officer (Principal Executive Officer)
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Date:
March 31, 2014
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/s/ Michele Nakazawa
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Michele Nakazawa
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Chief Financial Officer (Principal Financial and Accounting Officer)
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Date:
March 31, 2014
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/s/ John B. Wood
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John B. Wood
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Chief Executive Officer (Principal Executive Officer)
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Date:
March 31, 2014
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/s/ Michele Nakazawa
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Michele Nakazawa
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Chief Financial Officer (Principal Financial and Accounting Officer)
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