Series D Senior Subordinated Unsecured Note
Due October 1, 2000
Series D Senior Subordinated Unsecured Note
Due October 1, 2000
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS IT IS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER
SAID ACT AND LAWS. THIS NOTE IS SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO
SENIOR INDEBTEDNESS DUE TO NATIONSBANK, N.A. AND/OR CERTAIN OTHER BANKS OR
FINANCIAL INSTITUTIONS.
Ashburn, Virginia November 20, 1998
SERIES D SENIOR SUBORDINATED UNSECURED NOTE DUE OCTOBER 1, 2000
FOR VALUE RECEIVED, Telos Corporation, a Maryland corporation, with offices
at 19886 Ashburn Road, Ashburn, Virginia 20147 (hereinafter referred to as "the
Borrower" or the "Company"), promises to pay to the order of Foreign & Colonial
Enterprise Trust Limited Partnership, (hereinafter referred to as "F&C
Enterprise Trust LP" or "Lender"), at c/o Berkeley Square House, Berkeley
Square, London W1X 5PA, England, or at such other offices or at such other place
or places as the holder hereof may from time to time designate in writing, the
principal sum of Three Hundred Sixty Thousand Dollars ($360,000) on October 1,
2000 together with interest on the principal amount hereof from time to time
outstanding at the rate hereinafter provided until paid in full.
This is one of a series of the Company's Notes known as its Series D Senior
Subordinated Unsecured Notes Due October 1, 2000 (collectively referred to
herein as the "Series D Notes", all of like tenor, except as to the identifying
number and principal amount thereof. The Series D Notes have been issued in the
aggregate principal amount of $1,800,000.
I. GENERAL TERMS
1.1 Interest only shall be payable at the rate of fourteen percent (14%)
per annum, on the principal balance of this Note from time to time outstanding
from and after the date hereof, and shall be due and payable quarterly, until
the principal has been paid in full, on the first day of April, July, October,
and January in each year. Interest shall accrue from the date hereof, but the
first interest payment shall not be due until April 1, 1999. Such payment shall
include all interest accrued from the date hereof until the date of such
interest payment.
1.2 If not sooner paid, the outstanding and unpaid principal balance shall
be paid on October 1, 2000, together with accrued and unpaid interest on this
Note. In addition, interest shall be payable at the rate provided in Section 1.1
hereof on any Payment Premium from the date such premium is due until paid in
full.
1.3 Principal, premium, if any, and interest on this Note are payable in
lawful money of the United States. The principal of this Note may be prepaid at
any time after ten (10) days' written notice to the Lender, in whole or in part,
and shall be accompanied by payment in cash of all accrued and unpaid interest
on the amount so prepaid, together with, to the extent not prohibited by
applicable law, a Payment Premium.
1.4 In the event of a Public Offering of the common stock of the Company,
or in the event of a Refinancing, the principal then outstanding shall become
immediately due and payable, together with, accrued and unpaid interest thereon,
and, to the extent not prohibited by applicable law, a Payment Premium in an
amount equal to the lesser of (i) the Net Proceeds of such Public Offering or
Refinancing, or (ii) the amount determined in accordance with 1.6(iv). The Net
Proceeds shall be applied toward the payment of the outstanding and unpaid
principal balance of the Notes, accrued and unpaid interest thereon and, to the
extent not prohibited by applicable law, such Payment Premium.
1.5 In the event of a Merger or Dissolution, the principal then outstanding
shall become immediately due and payable, together with accrued and unpaid
interest thereon and, to the extent not prohibited by applicable law, a Payment
Premium in the amount determined in accordance with 1.6(iv).
1.6 Definitions.
(i) "Public Offering" shall mean the distribution and sale of the Company's
common stock (some of the proceeds of which sale are available to the Company)
pursuant to a registration statement (other than a registration statement on
Form S-4 or Form S-8) which has been filed with the U.S. Securities and Exchange
Commission and become effective.
(ii) "Refinancing" shall mean a sale of securities of the Company which
results in Net Proceeds to the Company in excess of $10,000,000, other than (a)
obligations for borrowed money due and payable within one year which are not
extended, renewed or refinanced beyond such due date; or (b) other obligations
for money borrowed money from NationsBank and/or its successors, substitutes and
participants and their respective assigns and any refinancing thereof.
(iii) "Net Proceeds" shall mean the proceeds to the Company after expenses
of sale and distribution, including discounts, commissions and brokerage and
legal fees.
(iv) "Payment Premium" shall, except as otherwise provided in 1.4, mean an
amount equal to 13.5% per annum, compounded semiannually from and after the date
hereof until paid, on the principal amount of this Note outstanding from time to
time until the time of payment.
(v) "Merger" shall mean a merger, consolidation or other combination to
which the Company or any subsidiary is a party, in which the Company is not the
surviving corporation or which results in the acquisition of "beneficial
ownership" of securities of the Company representing 50% or more of the total
number of votes that may be cast for the election of directors by any "person"
or "group" (as such terms are defined in Rule 13(d) promulgated under the
Securities Exchange Act of 1934, as amended), or a sale by the Company of all or
substantially all of its assets.
(vi) "Dissolution" shall mean the adoption by the Board of Directors and/or
the shareholders of the Company of a resolution to dissolve the Company and
liquidate its assets, the filing by the Company of articles of dissolution or a
similar application for dissolution with the appropriate officer of the state of
incorporation of the Company, the entry of an order or other action by such
state dissolving the Company, or the adoption by the Board of Directors or the
shareholders of the Company of a plan of liquidation or a resolution approving a
liquidating distribution of the Company's assets, whichever shall first occur.
1.7 At any time after the issuance of this Note, the holders of a majority
in outstanding principal amount of the Series D Notes, the Series C Notes and
the Series B Senior Secured Notes issued by the Company may request, in writing,
that the Company effect a Public Offering, at the Company's cost and expense.
Upon receipt of any such request, the Company shall, as expeditiously as
possible, use its best efforts to effect a Public Offering, with the objective
of realizing Net Proceeds sufficient to pay the then-outstanding principal
balance of the Series D Notes, the Series C Notes and the Series B Senior
Secured Notes together with accrued, unpaid interest thereon, and, to the extent
not prohibited by applicable law, a Payment Premium in an amount determined in
accordance with 1.4.
1.8 If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday, or legal holiday under the laws of the Commonwealth of
Virginia, or any other day on which banking institutions in the Commonwealth of
Virginia are obligated or authorized by law or executive order to close, such
payment shall be made on the next succeeding business day in Virginia and any
such extended time of the payment of principal shall not be included in
computing compound interest in connection with such payment.
1.9 Upon receipt by the Borrower of evidence reasonably satisfactory to it
of the mutilation, destruction, loss or theft of this Note, the Borrower will
make and deliver to the owner a new note of like tenor in lieu of this Note so
mutilated, destroyed, lost or stolen.
1.10 Payments made on account hereof shall be applied first to accrued and
unpaid interest, then to principal, and then to the Payment Premium, if any.
1.11 All payments made by the Company on account of the Series D Notes or
any of them shall be made pro rata, in proportion to the outstanding principal
balance of each of the Series D Notes outstanding at the time of any such
payment.
II. DEFAULT
2.1 It is expressly agreed by Borrower that the following shall be deemed
to be Events of Default under this Note: (a) the failure to pay, when due, any
amount of principal, or not more than five days after due date of any amount of
premium, if any, or interest on this Note or the Series B or Series C Notes, or
(b) in the event the Borrower files any petition, or any petition is filed
against it and not dismissed within sixty (60) days, under any bankruptcy or
insolvency law or for the appointment of a receiver for substantially all its
assets or in the event the Borrower makes a general assignment for the benefit
of creditors, (c) or any failure by the Borrower to perform or observe any of
the other covenants, agreements or provisions to be performed or observed by it
under this Note or the Series B or Series C Notes, and such default shall not be
rectified or cured within 10 days after written notice thereof by the Lender to
the Company, and (d) an event of default as specified in the Amended and
Restated Credit Agreement, as amended from time to time, among the Company,
Telos Corporation (a California corporation) and NationsBank, N.A. (the "Credit
Agreement") shall have occurred and be continuing, if (and only if) such event
results in acceleration of the maturity of the indebtedness under such Credit
Agreement and such acceleration continues in effect.
2.2 If an Event of Default occurs, the Lender, at his option, may
accelerate this Note and may by written notice to Borrower declare the entire
unpaid principal amount of this Note and all interest accrued and unpaid thereon
to be immediately due and payable whereupon the unpaid principal amount and all
such accrued interest shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind. The failure of the
Lender to give such notice shall, in no event, be deemed a waiver of any of the
Lender rights hereunder as long as the Event of Default continues.
2.3 Upon default in the payment of the principal of this Note or any other
sum payable hereunder when due upon demand, at maturity or by reason of
acceleration of maturity, or upon the occurrence of any other Event of Default
hereunder Borrower agrees to pay all reasonable costs of collection incurred by
the holder of the Note, including reasonable attorneys' fees, whether suit is
brought or not, and all other costs and expenses reasonably connected with
collection of the indebtedness evidenced hereby.
III. SUBORDINATION
3.1 Payment of the principal, or interest and Payment Premium on this Note
are subordinate and subject in right of payment to the prior indefeasible
payment in full in cash or cash equivalents of all Senior Indebtedness, and each
holder of this Note by such holder's acceptance hereof, acknowledges and
confirms such subordination. "Senior Indebtedness" means all present and future
obligations, liabilities and indebtedness of the Company of every type and
nature, currently or hereafter due, incurred or created, arising under or in
connection with the Credit Agreement or any refinancing loan documents,
including, without limitation (i) all Obligations (as defined in the Credit
Agreement) and any refinancing thereof, (ii) all interest provided for in the
Credit Agreement, or any refinancing loan documents (including, without
limitation, interest arising prior to and after the commencement of any
bankruptcy or similar proceeding in which the Company is the debtor, whether or
not such interest is an allowed claim in such proceeding) at the rates specified
in the Credit Agreement or any refinancing loan documents; and (iii) all fees,
charges, expenses, indemnities and other amounts payable under or incidental to
the Credit Agreement (excluding any such amounts payable in respect of warrants
or other equity-related obligations or earning participations that may be issued
by the Company). Notwithstanding the foregoing, Senior Indebtedness held
(whether as a result of subrogation or otherwise) by the Company, any of the
subsidiaries or any other affiliate of the Company (whether as a result of
subrogation or otherwise) (Telos, the subsidiaries and any other affiliates of
the Company being collectively referred to herein as "Affiliated Parties") or by
any person who has acquired Senior Indebtedness, directly or indirectly, which
has been held by any of the Affiliated Parties, shall not constitute "Senior
Indebtedness" under this Agreement (other than under this sentence) until such
time as all Senior Indebtedness held by Persons other than Affiliated Parties
has been indefeasibly paid in full in cash or cash equivalents, and no
Affiliated Party or Person acquiring Senior Indebtedness from an Affiliated
Party shall acquire any rights hereunder by virtue of holding such Senior
Indebtedness.
This Note shall be construed and enforced in accordance with, and governed
by the laws of, the Commonwealth of Virginia without giving effect to conflict
of laws principles.
The parties hereto, including the undersigned Borrower and all guarantors
and endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, and assent to extensions of time of payment, or
forbearance or other indulgence without notice.
TELOS CORPORATION
By: /s/ William L. P. Brownley
Name: William L. P. Brownley
Title: Vice President & General Counsel