SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF TELOS IDENTITY MANAGEMENT SOLUTIONS, LLC (d/b/a XACTA Identity Management Solutions)

EXHIBIT 99.2

THE INTERESTS DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES ACT OF ANY STATE OR JURISDICTION.  NO SALE, OFFER TO SELL, OR OTHER TRANSFER OF THESE INTERESTS MAY BE MADE BY A MEMBER UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR UNLESS IN THE OPINION OF COUNSEL TO TELOS IDENTITY MANAGEMENT SOLUTIONS, LLC THE PROPOSED DISPOSITION FALLS WITHIN A VALID EXEMPTION FROM THE REGISTRATION PROVISIONS OF THOSE ACTS.

SECOND AMENDED AND RESTATED

OF

(d/b/a XACTA Identity Management Solutions)

This SECOND AMENDED AND RESTATED OPERATING AGREEMENT (hereinafter referred to as "this Agreement") is made and entered into as of the 24^th of December 2014, by and among the undersigned.

EXPLANATORY STATEMENT:

NOW, THEREFORE, in consideration of the mutual promises of the parties hereto, each to the others, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1.02.  Principal Office and Registered Agent of Company.  The address of the principal office of the Company is ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.  The Company may have such other or additional offices as the Board of Directors may determine.  The registered agent and registered office of the Company shall be The Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.

Throughout this Agreement, the word or words listed below within quotation marks shall have the meanings which follow them:

"Act" - The Delaware Limited Liability Company Act.

"Additional Member" - A Member admitted to the Company other than as an assignee or transferee of all or a portion of a previously admitted Member's Interest in the Company.

"Affiliate" - A Person who directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with a Member.  The term "control" as used herein (including the terms "controlling," "controlled by," and "under common control with") means the possession, direct or indirect, of the power to: (i) vote 5% or more of the outstanding voting securities of a corporate Member or such Person; or (ii) otherwise direct the management policies of a Member or such Person by contract or otherwise.

"Agreement" - This Second Amended and Restated Operating Agreement, as amended from time to time.

"Appraisal Process" - The Board of Directors shall select a nationally recognized investment banker ranked by Investment Dealers Digest as a top financial advisor for deal sizes less than one hundred million dollars ($100,000,000.00) to prepare an appraisal of the Company.  Any such appraisal must be completed within forty-five (45) days from the date of the triggering event.

"Appraised Value " – The value of the Company established by the Appraisal Process.

"Bankruptcy" - With respect to the Class A Member:

"Board of Directors" - The Board of Directors appointed pursuant to Section 6.02 or any authorized manager, officer, or agent elected by it.

"Borrowing Rate" - The rate of interest that the Class A Member is charged under the Loan Agreement.

"Business" - The creation, development, management, operation, marketing and exploitation of identity management and related technologies.

"Capital Account" - With respect to any Member (i) the amount of money contributed by it to the Company, (ii) the fair market value of property contributed by it to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code) and (iii) allocations to it of Company income and gain (or items thereof), and decreased by (iv) the amount of money distributed to it by the Company, (v) the fair market value of property distributed to it by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (vi) all allocations to it of expenditures of the Company described in Section 705(a)(2)(B) of the Code, and (vii) allocations of Company loss and deduction (or item thereof); subject to such other adjustments required by Treas. Reg. § 1.704-1(b)(4) (or any corresponding successor provisions).  Upon the determination by the Board of Directors, the Capital Accounts of the Members may be restated to their fair market values in connection with the admission of an Additional Member or an additional Capital Contribution by an existing Member.  In all events, such Capital Account shall be maintained in accordance with the Treasury Regulations promulgated under Section 704(b) of the Code.

"Capital Contribution" - The amount of cash and the fair market value of assets, net of any liabilities, contributed to the Company by each Member on the date of contribution of such assets.  Any reference in this Agreement to the Capital Contribution of a then Member shall include a Capital Contribution previously made by any prior Member with respect to the Interest of such then Member.

"Capital Transaction" - A sale, exchange or other disposition of all or substantially all of the Company's assets.

"Capital Transaction Proceeds" - All cash receipts from a Capital Transaction (other than a Liquidating Capital Transaction) plus any amounts released from reserves in connection with a Capital Transaction less (i) all cash expenditures associated with a Capital Transaction and (ii) such amounts reserved for future operating expenses, as the Board of Directors may determine.

"Cash Flow" - For any fiscal year, all cash receipts of the Company (other than receipts with respect to Capital Contributions, Capital Transactions and Liquidating Capital Transactions) plus amounts released from reserves, less (i) all cash expenditures (other than expenditures with respect to Capital Transactions and Liquidating Capital Transactions) including fees paid to Members under Section 8.03, and (ii) such reasonable reserves, as the Board of Directors may determine, to meet anticipated expenses or liabilities of the Company, including but not limited to, operating expenses, debt service and reserves for capital expenditures, as the Board of Directors shall determine from time to time.

"Change in Control of the Class A Member" – An occasion upon which (i) any one Person, or more than one Person acting as a group (as such term is used under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a member of the Class A Member's Board of Directors or fiduciary holding securities under an employee benefit plan of the Class A Member or a corporation controlled by the Class A Member, acquires (either directly and/or through becoming the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)), directly or indirectly, securities of the Class A Member representing 50% or more of the combined voting power of the Class A Member's outstanding voting securities (or has acquired securities representing 50% or more of the combined voting power of the Class A Member's outstanding voting securities during the 12-month period ending on the date of the most recent acquisition of the Class A Member's securities by such person); (ii) any one Person, or more than one Person acting as a "group" (as such term is used under Section 13(d)(3) of the Exchange Act), 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 Class A Member's assets; or (iii) the Class A Member enters into a letter of intent or an agreement that contemplates the occurrence of a Change in Control of the Class A Member as described in subsections (i) or (ii) above.

"Class A Member" - The Person designated as a Class A Member on Exhibit A, and any substitute Members who are an assignee or transferee of a Class A Member.

"Class B Member" - The Person designated as a Class B Member on Exhibit A and any substitute Members who are an assignee or transferee of a Class B Member.

"Code" - The Internal Revenue Code of 1986, as amended, and any successor statute thereto.

"Company" - This limited liability company.

"Corporate Administrative Services Agreement" – The Corporate Administrative Services Agreement, dated April 21, 2007, by and among the Company and the Class A Member, as further amended by Amendment No. 1 dated April 21, 2008, Amendment No. 2 dated January 1, 2010, Amendment No. 3 dated January 1, 2011, Amendment No. 4 dated January 1, 2012, Amendment No. 5 dated January 1, 2013 and Amendment No. 6 dated January 1, 2014, and as amended or supplemented from time to time.

 "Immediate Family" - The spouse, child, stepchild, grandchild, sibling, parent, niece, nephew or personal representative of a Person or a trust for the benefit of any of the foregoing.  Notwithstanding the foregoing, a spouse of a Person who is legally separated from the Person shall not be included in the definition of Immediate Family.

"Interest" - The ownership interest of a Member in the Company.

"Liquidating Capital Transaction" - A Capital Transaction made in contemplation of and pursuant to a plan or intent to liquidate and dissolve the Company as soon as practicable thereafter.

"Liquidating Capital Transaction Proceeds" - All cash receipts from a Liquidating Capital Transaction plus any amounts released from reserves as a result of such Liquidating Capital Transaction less all cash expenditures associated with such Liquidating Capital Transaction.

"Loan Agreement" – The Class A Member's revolving line of credit with ▇▇▇▇▇ Fargo, as extended or amended from time to time, or any subsequent line of credit that replaces such line of credit.

"Members" - Any and all Persons designated as Members on Exhibit A, or any Person who becomes a Member as provided herein, in such Person's capacity as a Member of the Company. Such term shall include and refer to two or more Members if more than one Member shall at any time exist hereunder.  A Member may be designated to be in more than one class of Members.  If no class is specified, a reference to Members shall include Members of all classes.

"Percentage Interest" - The Percentage Interest opposite a Member's name on Exhibit A, as modified pursuant to this Agreement.  In the event of a change in a Member's Percentage Interest in the Company, the Board of Directors shall amend Exhibit A to reflect such change.

"Persons" - Individuals, partnerships, limited liability companies, corporations, unincorporated associations, trusts, estates, governmental authorities and other entities.

"Purchase Agreement" – Membership Interest Purchase Agreement, dated December [_], 2014, by and among the Class A Member and the Class B Member.

"Securities Act" - The Securities Act of 1933, as amended.

"State" - The State of Delaware.

"State Acts" - The securities laws of the State or any other jurisdiction.

"Transfer" - When used as a noun, the voluntary or involuntary sale, assignment, substitution, transfer or other disposition (whether by gift, operation of law or otherwise), with or without consideration, of an Interest, and when used as a verb shall mean to cause or make any such sale, assignment, transfer or other disposition.

"▇▇▇▇▇ Fargo" – ▇▇▇▇▇ Fargo Capital Finance, LLC.

The purposes for which the Company has been formed are (a) to exploit, develop, license, commercialize, and otherwise deal with identity management and related technologies; (b) to conduct any other lawful business as may be approved by the Members of the Company in the manner provided in this Agreement; and (c) to do all things necessary, convenient or incidental to the foregoing.  The Company may enter into such contracts, agreements, ventures or arrangements with such other Persons as may be deemed necessary by the Board of Directors to accomplish any of its purposes.  The Company shall have the power to do all things which the Board of Directors believes to be necessary and appropriate in furtherance of the Company's purposes.

Section 4.01.  Capital Contributions; Guarantees; Loans.

ALLOCATION OF PROFITS AND LOSSES;

Section 5.02.  Determination of Profits and Losses.  The net profits or net losses of the Company shall be determined in accordance with the accounting methods followed for federal income tax purposes and otherwise in accordance with sound accounting principles and procedures applied in a consistent manner.  An accounting shall be made for each fiscal year by the Company as soon as possible after the close of each such fiscal year, to determine the Members' respective shares of net profits or net losses of the Company, which shall be credited or debited, as the case may be, to the Members' respective Capital Accounts.  For tax purposes, all items of income, gain, loss, deduction or credit shall be allocated to and among the Members in the same proportion in which they share profits and losses.

Section 6.01.  Powers of the Board of Directors.  In addition to the powers now or hereafter granted an authorized person of a limited liability company under applicable law or which are granted the Board of Directors under any provisions of this Agreement, the Board of Directors shall have full, exclusive and complete discretion, power and authority, subject in all cases to the provisions of this Agreement and the requirements of applicable law, to manage, control, administer and operate the business and affairs of the Company for the purposes herein stated, to make all decisions affecting such business and affairs, to adopt such accounting rules and procedures as it deems appropriate in the conduct of the business and affairs of the Company and to do all things which it deems necessary or desirable in the conduct of the business and affairs of the Company, including without limitation, (subject to the limitations provided in this Article VI and elsewhere in this Agreement) for Company purposes, the power:

If any member of the Board of Directors shall die, resign or be removed, the Member who appointed him or her shall appoint a successor to fill the resulting vacancy.  A member of the Board of Directors may only be removed with or without cause by the Member who appointed him or her.

 

Section 7.01.  Voluntary Transfer.

Section 9.01.  Events of Dissolution.  The Company shall be dissolved upon the happening of any of the following:

Section 9.02.  Winding Up.  Upon dissolution under Section 9.01, no further business shall be conducted by the Company except for the taking of such action as shall be necessary for the winding up of the affairs of the Company and the distribution of its assets to the Members pursuant to the provisions hereof, and thereupon the Board of Directors, or in the event a quorum of the Board of Directors does not remain, such Person or Persons as the majority of Members shall designate (hereinafter, in either event, referred to as the "Liquidator") shall act as liquidating trustee and immediately proceed to wind up and terminate the business and affairs of the Company.  Upon the dissolution of the Company, the Members shall provide for the dutiful discharge of any ongoing obligations and/or liabilities of the Company.

Section 9.03.  Sale of Company Assets.  Upon dissolution, the Liquidator shall sell such of the Company assets as is feasible, necessary or appropriate.  In lieu of the sale of any or all of the Company property, the Liquidator may convey and assign all or any part of the Company property to the Members in undivided interests as tenants in common or such other form of similar ownership as shall be applicable to the jurisdiction where the property is located.  A full accounting shall be made of the accounts of the Company and each Member thereof and of the Company's assets, liabilities and income, from the date of the last accounting to the date of such dissolution.  The profits and losses of the Company shall be determined to the date of dissolution and transferred, as provided in Article V, to the respective Capital Accounts of the Members.  In accounting for distributions of Company property, such property shall be valued at the fair market value at the date of dissolution as determined by an appraisal secured by the Liquidator, except that no value shall be placed upon the firm name or goodwill of the Company.  Any difference between the valuation of the Company property and its book value shall be considered as though it represented profit or loss, and shall be allocated to the Capital Accounts of the Members as provided in Section 4.02.  Any gain or loss on disposition of Company property shall be credited or charged to the Capital Accounts of the Members in the same manner as the difference between the valuation of Company property and its book value.

Section 9.04.  Distribution of Assets.  The Liquidator shall apply the remaining Company assets, in the following order of priority:

Section 9.05.  Return of Capital Contributions.  The Members shall look solely to the assets of the Company for the return of their Capital Contributions, and if the Company property remaining after the payment or discharge of the debts, obligations and liabilities of the Company is insufficient to return the Capital Contributions, they shall have no recourse therefor against the members of the Board of Directors or the Liquidator.

Section 10.01.  Fiscal Year.  The fiscal year end of the Company shall be December 31st.

Section 10.02.  Tax Elections.  In the case of a distribution of property made in the manner provided in Section 734 of the Code, or in the case of a Transfer of any Interest permitted by this Agreement made in the manner provided in Section 743 of the Code, at the request of the Transferring Member, an authorized officer of the Company shall file an election under Section 754 of the Code in accordance with the procedures set forth in the applicable Treasury Regulations.

Section 11.01.  Reports.  As soon as practicable after the end of each fiscal year, the Board of Directors shall deliver to each Member a report of the financial condition of the Company including balance sheet, statement of revenues and expenses, the Member's Capital Accounts, and all information relating to the Company necessary for the preparation by each Member of its federal income tax return.

Section 11.02.  Company List.  The Board of Directors shall maintain a list of the names and addresses of all Members at the principal office of the Company.  Such list shall be made available for the review of any Member or its representative at reasonable times, and upon request either in person or by mail, the Board of Directors shall furnish a copy of such list to any Member or its representative for the cost of reproduction and mailing.

Section 11.03.  Access.  Any Member and/or its authorized representative shall be permitted access to all records of the Company after adequate notice, at any reasonable time.

The term "Customer" as used in this Section 12.02 shall mean any Person that has licensed intellectual property from the Company, or has been solicited by or on behalf of the Company to license the Company's intellectual property or has used services provided by Company personnel, within the two (2) year period immediately preceding the date on which such Member (or the Class B Member, if applicable) ceases to be a Member.

The Members acknowledge that certain lines of business that the Class A Member is currently engaged in are similar to the Business of the Company and the Members confirm that engaging in such businesses by the Class A Member shall not be considered a violation of this Section 12.02.

Section 13.02.  Transactions with Affiliates.  The fact that a Member, a member of his family or an Affiliate is directly or indirectly interested in or connected with any Person employed by the Company or from whom the Company may buy merchandise, materials, services or other property shall not prohibit the Company from employing, or from dealing with, such Person; provided that, the Board of Directors approves such employment or dealings.

ARTICLE XIV


INDEMNIFICATION

Section 14.01.  Liability of Board of Directors and Members.  The members of the Board of Directors and the Members (including their owners, directors, officers, employees and agents) shall not be liable to the Company or to the Members (including their owners, directors, officers, employees and agents) for any act or omission, done in good faith in such capacity, and within what was believed to be the scope of Company business, unless such member of the Board of Directors or Member (including their owners, directors, officers, employees and agents) shall have been culpable of gross negligence or willful or wanton misconduct.

Section 14.02.  Indemnification.  The Company shall indemnify and hold harmless the members of the Board of Directors and the Members (including their owners, directors, officers, employees and agents) against any and all claims, actions, demands, costs, expenses (including attorneys' fees), damages and losses as a result of any allegation, claim or legal proceeding relating to any act or omission concerning the activities of the Company, unless the person or party against whom any such allegation or claim is made or legal proceeding directed was culpable of gross negligence or willful or wanton misconduct.  The indemnification of the member of the Board of Directors or Member (including their owners, directors, officers, employees and agents) shall be limited to and recoverable only out of the assets of the Company.  Notwithstanding the foregoing, the Company shall not be required to indemnify a Member with respect to any claim, action, demand allegation or legal proceeding brought against another Member or a member of the Board of Directors.

Section 15.01.  Execution of Documents by Members.  Each Member hereby agrees to execute all other documents conforming hereto and to do all such filing, recording, publishing and other acts as may be deemed by the Board of Directors appropriate to comply with the requirements of law for the formation and operation of a limited liability company and any amendment or cancellation thereof in all jurisdic­tions where the Company shall conduct business.

Section 15.02.  Filing of Documents by Board of Directors.  The Board of Directors shall promptly cause to be executed, acknowledged, filed with the proper offices and published in each jurisdiction in which the Company conducts business such notices, certificates, statements or other instruments as may be necessary or appropriate to comply with the requirements for the formation and operation of a limited liability company under the laws of the State and all other jurisdictions in which the Company may conduct business.

This Agreement shall not be amended except by the unanimous consent of the Members.  Without limiting the generality of the foregoing, each party to this Agreement understands that the Board of Directors shall be entitled to amend Exhibit A to reflect any changes in the Percentage Interests of the Members in accordance with the terms of this Agreement.  In the event this Agreement is amended as hereinbefore provided, each Member agrees to promptly execute or cause to be executed one or more amendments to this Agreement (including any amendments restating this Agreement in its entirety) and such certificates to reflect the adoption by the Company of any such amendment of this Agreement as may be required by the laws of the jurisdictions in which the Company does business at such time.

Section 18.01.  Notices.  All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made if hand delivered or mailed from within the United States by first class mail, postage prepaid, and addressed to a Member at its address set forth on Exhibit A.  Time periods shall commence on the date of hand delivery or mailing of a notice or any other communication.  Any notice which is required to be given within a stated period of time shall be considered timely if postmarked before midnight of the last day of such period.  Any Member may change its address by giving notice in writing stating its new address to the Board of Directors.  Commencing on the tenth day after the giving of such notice, such newly designated address shall be such Member's address for the purposes of all notices or other communications required or permitted to be given pursuant to this Agreement.

Section 18.03.  Genders and Headings.  The use of any gender herein shall be deemed to be or include the other gender and the use of the singular herein shall be deemed to be or include the plural (and vice-versa), wherever appropriate.  The headings herein are inserted only as a matter of convenience and reference and in no way define, limit or describe the scope of this Agreement, or the intent of the provisions thereof.

Section 18.04.  Binding Effect.  This Agreement shall be binding-upon, and inure to the benefit of, the parties hereto and their respective heirs, executors, administrators, personal and legal representatives, successors and permitted assigns, except as otherwise expressly provided herein.

Section 18.05.  Counterparts; Signature Pages.  This Agreement may be executed in any number of counterparts and/or separate signature pages and by facsimile, each of which shall be considered an original and all of which taken together shall constitute one and the same instrument.

Section 18.06.  Interest Held For Investment.  Each Member does hereby represent and warrant by the execution of this Agreement that (A) its Interest was obtained for investment purposes only and not for resale or distribution, (B) it is qualified by its personal experience to analyze the merits and risks of a contribution to the Company, and (C) it has not relied on the advice of the members of the Board of Directors or the Company's counsel in making its decision to contribute to the Company and become a Member herein.

Section 18.07.  Securities Laws Restrictions.  The Interests described in this Agreement have not been registered under the Securities Act or under the State Acts.  Consequently, these Interests may not be sold, transferred, assigned, pledged, hypothecated or otherwise disposed of, except in accordance with the provisions of the Securities Act, the State Acts and this Agreement.

Section 18.08.  Application of Subchapter K.  No election shall be made by the Company, the Board of Directors or any Member for the Company to be excluded from the application of the provisions of Subchapter K of the Code, or from any similar provisions of State and foreign tax laws which relate to the taxation of partnerships, unless the Board of Directors decide that the Company should be taxed as other than a partnership in accordance with the "check-the-box" rules under Treasury Regulation Section 301.7701-3.

Section 18.09.  Waiver of Partition.  Each Member (and its representatives, successors and assigns) hereby irrevocably waives any and all right to maintain any actions for partition or to compel any sale with respect to any assets or properties of the Company.

Section 18.10.  Severability.  If any of this Agreement is held illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect any other provision hereof which shall remain in full force and effect.

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IN WITNESS WHEREOF, the Members have executed this Agreement under seal as of the day and year first above written.

 

 

 

WITNESS:		CLASS A MEMBER:
		TELOS CORPORATION
		By:	/s/ ▇▇▇▇ ▇. ▇▇▇▇	(SEAL)
			▇▇▇▇ ▇. ▇▇▇▇, President and CEO
		CLASS B MEMBER:
		HOYA ID FUND A, LLC
		By:	/s/ ▇▇▇▇ ▇▇▇▇	(SEAL)
		Name:	▇▇▇▇ ▇▇▇▇
		Title:	CEO

 

 

 

 

 

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The undersigned owners of the Class B Member hereby join in the execution of this Agreement for purposes of agreeing to the provisions of Article XII.

 

 

 

				(SEAL)
				(SEAL)
				(SEAL)
				(SEAL)
				(SEAL)
				(SEAL)
				(SEAL)
				(SEAL)

 

 

 

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