Item 1.01. Entry into a Material Definitive Agreement
On October 5, 2020, the Company entered into a Membership Interest Purchase
Agreement ("Purchase Agreement") between the Company and Hoya ID Fund A, LLC
("Hoya") that contemplates the purchase by the Company of all of the Class B
Units of Telos ID ("Telos ID Units") owned by Hoya (the "Telos ID Purchase").
Upon the closing of the Telos ID Purchase, Telos ID will become a wholly owned
subsidiary of the Company. The successful consummation of the initial public
offering of the Company's common stock (the "IPO") is a condition to the closing
of the Telos ID Purchase. If the IPO is not consummated, the Telos ID Purchase
will not occur.
As consideration for the Telos ID Units, the Company will pay a purchase price
to Hoya or its members consisting of (a) the payment to Hoya of $30 million and
(b) the issuance to Hoya or its members of that number of shares of the
Company's common stock equal to twelve percent (12%) of the total number of
shares of common stock that are issued and outstanding following (i) the
issuance of such shares of common stock to Hoya or its members and (ii) the
closing of the IPO. As a condition to the Telos ID Purchase, Hoya or the members
of Hoya will enter into lock-up agreements with the underwriters in the IPO to
restrict the trading of the common stock issued to Hoya or its members for 180
days.
The foregoing summary of the Purchase Agreement does not purport to be complete
and is qualified in its entirety by reference to the full text of the Purchase
Agreement, which is substantially in the form attached hereto as Exhibit 99.1 to
this Current Report on Form 8-K and is incorporated by reference herein.
On October 6, 2020, Telos Corporation (the "Company") entered into a voting and
support agreement (the "Voting Agreement") with certain holders (the "Preferred
Stockholders") of approximately thirty-two percent (32%) of the Company's
outstanding 12% Cumulative Exchangeable Redeemable Preferred Stock (the "Public
Preferred Stock"). Under the Voting Agreement, each of the Preferred
Stockholders agreed, among other things, to consent to certain amendments to the
Company's Amended and Restated Articles of Incorporation (the "Charter") with
respect to the Public Preferred Stock. These amendments provide that, upon a
qualified initial public offering of the Company's common stock, each issued and
outstanding share of Public Preferred Stock would be converted into the right to
receive ninety percent (90%) of the liquidation value of the Public Preferred
Stock as of such date, which shall be paid eighty-five percent (85%) in cash and
fifteen percent (15%) in common stock of the Company (based upon the initial
price to the public of the Company's common stock on the date of the qualified
initial public offering). The proposal to amend the Charter requires the
consent of the holders of a majority of the outstanding shares of Public
Preferred Stock.
The foregoing summary of the Voting Agreement does not purport to be complete
and is qualified in its entirety by reference to the full text of the Voting
Agreement, which is substantially in the form attached hereto as Exhibit 99.2 to
this Current Report on Form 8-K and is incorporated by reference herein.
Item 8.01 Other Events
On October 1, 2020, the Company's Management Development and Compensation
Committee approved an increase to the salary of John B. Wood, the Company's
Chairman and Chief Executive Officer, from $600,000 per year to $700,000 per
year. This increase becomes effective on October 1, 2020.
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Item 9.01. Financial Statements and Exhibits
99.1 Membership Interest Purchase Agreement, dated October 5, 2020, by and
between Hoya ID Fund A, LLC and the Company.
99.2 Voting and Support Agreement, dated October 6, 2020, by and between the
Company and Wynnefield Partners Small Cap Value, L.P., Wynnefield
Partners Small Cap Value L.P. I, Wynnefield Capital, Inc. Profit Sharing
Plan, Wynnefield Small Cap Value Offshore Fund, Ltd., Minerva Advisors
LLC, Minerva Group, LP,. Minerva GP, LP, Minerva GP, Inc., Victor A.
Morgenstern Grantor Retained Annuity Trust 2020 #2, Judd Morgenstern
Revocable Trust, Jennifer Morgenstern Irrevocable Trust, Robyn
Morgenstern Irrevocable Trust, Judd Morgenstern Irrevocable Trust and
Victor A. Morgenstern Grandchildren Trust.
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