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19886 Ashburn Road
Ashburn, Virginia 20147-2358
To Be Held on November 12, 2010
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of Telos Corporation, a Maryland corporation (the “Company”), will be held in the auditorium at the Company’s headquarters located at 19886 Ashburn Road, Ashburn, Virginia, 20147-2358, on Friday,Monday, November 12, 201014, 2011 at 10:12:00 a.m.,p.m. Eastern Standard Time, for the following purposes:
1. ELECTION OF DIRECTORS: To elect nine Class A/B Directors to the Board of Directors to serve until the 2012 Annual Meeting of Stockholders or until their successors are elected and qualified;
2. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: To ratify the selection of BDO USA, LLP to serve as the Company’s independent registered public accounting firm;
3. ADVISORY VOTE ON EXECUTIVE COMPENSATION: To approve, on an advisory basis, the compensation of the Company’s named executive officers;
4. FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION: To recommend, on an advisory basis, the frequency with which the Company should conduct future stockholder advisory votes on named executive officer compensation.
5. OTHER BUSINESS: To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on September 30, 20102011 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.
Holders of record of the Company’s Class A and Class B Common Stock who plan to attend the meeting in person should mark the attendance box on their proxy card and bring the proxy card with them to the meeting. Beneficial owners of the Company’s Class A and Class B Common Stock and 12% Cumulative Exchangeable Redeemable Preferred Stock that is held by a bank, broker or other nominee will be required to provide adequate proof of ownership. In addition, due to the security requirements of the Company’s headquarters, all stockholders will be required to provide personal identification for admission to the Annual Meeting.
By order of the Board of Directors
Therese K. Hathaway
Corporate Secretary
Ashburn, Virginia
October 15, 201020, 2011
19886 Ashburn Road
Ashburn, Virginia 20147-2358
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 2010
This Proxy Statement is furnished by Telos Corporation, a Maryland corporation (“Telos” or the “Company”), to the holders of the Company’s Class A and Class B Common Stock (collectively, the “Common Stock”)and 12% Cumulative Exchangeable Redeemable Preferred Stock (“Public Preferred Stock”) in connection with the Annual Meeting of Stockholders (“Annual Meeting”) of the Company to be held in the auditorium at the Company’s headquarters located at 19886 Ashburn Road, Ashburn, Virginia 20147-2358 on November 12, 2010 at 10:14, 2011, 12:00 a.m.,p.m. Eastern Standard Time, or any adjournment of it, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders (“Annual Meeting Notice”). The Company expects to begin mailing the Annual Meeting Notice, this Proxy Statement, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20092010 (the “2009“2010 Form 10-K”) to all stockholders of record on or about October 15, 2010.20, 2011. On the same date, the proxy card will be mailed to all holders of record of the Company’s Common Stock.The Company’s Board of Directors is soliciting proxies solely for the election of the Class A/B Directors.
The entire cost of soliciting these proxies will be borne by the Company. The Company will request brokers and others to send proxy forms and other proxy material to the beneficial owners of the Common Stock and reimbursement will be provided for any reasonable expenses incurred in so doing. If necessary, the Company may also request its employees to solicit proxies from the stockholders personally or by telephone. The Company may retain a proxy solicitor to assist in the solicitation of proxies, for which the Company would pay usual and customary fees.
This Proxy Statement is being mailed to holders of the Common Stock and the Public Preferred Stock on or about October 15, 201020, 2011 together with a Proxy Card (to holders of Common Stock only), the Annual Meeting Notice and the Company’s 20092010 Form 10-K.
Important notice regarding the availability of proxy materials for the Telos Corporation Annual Meeting of Stockholders to be held on November 12, 2010:14, 2011: The Annual Meeting Notice, this Proxy Statement and the Company’s 20092010 Form 10-K are available at
HTTP://BNYMELLON.MOBULAR.NET/BNYMELLON/TLSRP.
Record Date. The record date for determining the stockholders entitled to vote at the Annual Meeting is September 30, 20102011 (“Record Date”). As of September 30, 2010,2011, there were 33,615,15035,906,460 shares of Class A Common Stock and 4,037,628 shares of Class B Common Stock outstanding and entitled to vote at the Annual Meeting. The purpose of the Annual Meeting is to allow the holders of the Class A and Class B Common Stock to elect nine Class A/B Common Directors and to vote on any other issue properly brought before the meeting.
Votes. Each holder of Common Stock is entitled to one vote per share of Common Stock held onin the election of Class A/B Common Directors, and any other issue to be decided at the Annual Meeting. Cumulative voting is not permitted.
Quorum and Vote Required. A quorum consists of stockholders representing, either in person or by proxy, a majority of the votes entitled to be cast at the Annual Meeting. Banks, brokers, and other nominees do not have the authority to vote your uninstructed shares in the election of directors.directors, the advisory vote on executive compensation, or the advisory vote on the frequency of the vote on executive compensation. If a beneficial owner of the Company’s Common Stock does not instruct its bank, broker, or other nominee how to vote its shares in the election of directors,on these matters, no votes will be cast on that beneficial owner’s behalf. These broker non-votes are counted for purposes of determining whether a quorum is present.
present and will have no effect on the result of the vote.
Directors are elected by a plurality of the votes cast if a quorum is present. The affirmative vote of a majority of votes cast at the Annual Meeting if a quorum is present is required to ratify the appointment of the independent registered public accounting firm. The option of one year, two years or three years that receives the
highest number of votes cast by the holders of the Common Stock will be the frequency for the stockholder advisory vote on the compensation of the Company’s named executive officers that will be considered to be preferred by the holders of the Common Stock.
Voting Methods. Holders of the Company’s Common Stock may vote by (1) signing, dating and mailing the enclosed proxy card in the postage paid envelope provided or (2) attending the Annual Meeting and voting their shares in person. If shares of the Common Stock are held in the name of a bank, broker or other nominee, the beneficial owner of those shares must provide the bank, broker, or other nominee with instructions on how to vote those shares by following the voting instructions provided by the bank, broker, or other nominee. A beneficial holder may not vote any shares held in the name of a bank, broker, or other nominee unless the beneficial holder obtains a “legal proxy” from the bank, broker, or other nominee.
If any nominations for Class D Directors had been received, holders of the Company’s Public Preferred Stock would have been eligible to vote at the Annual Meeting on the election of such Class D Directors and on no other matter before the Annual Meeting; however, since no nominations for Class D Directors were received, holders of Public Preferred Stock are not eligible to vote on any issue before the Annual Meeting.
Meeting Attendance. Registered holders of the Company’s Common Stock who plan to attend the meeting in person should mark the attendance box on their proxy card and bring the proxy card with them to the meeting. Beneficial owners of the Common Stock and the Public Preferred Stock that is held by a bank, broker or other nominee must provide adequate proof of ownership. In addition, due to security requirements at the Company’s headquarters, personal identification will be required for admission to the Annual Meeting.
Revocation of Proxies. A registered holder of the Company’s Common Stock who has provided a proxy may revoke the proxy at any time before the underlying shares are voted at the Annual Meeting by:
(1) | Executing a proxy dated later than the most recent proxy given and mailing it to: Corporate Secretary Telos Corporation 19886 Ashburn Road, Ashburn, VA 20147; |
Corporate SecretaryTelos Corporation19886 Ashburn Road, Ashburn, VA 20147;
(2) | Appearing in person and voting using a ballot at the Annual Meeting; or |
(3) | Filing an instrument of revocation with the Inspector of Elections at the Annual Meeting. |
If shares of the Common Stock are held in the name of a bank, broker, or other nominee, the beneficial owner of those shares must contact the bank, broker, or other nominee in order to change a vote. The Inspector of Elections will record each vote according to the latest instructions received from the respective stockholder.
The Company’s Board of Directors is comprised of eleven members. Nine of the eleven directors are elected by the holders of the Company’s Common Stock and are designated “Class A/B Directors.” At any time that dividends on the Company’s Public Preferred Stock are in arrears and unpaid for three consecutive full semi-annual periods, the holders of the Company’s Public Preferred Stock are entitled to elect two members to the Company’s Board of Directors. Accordingly, on June 18, 2007, the holders of the Company’s Public Preferred Stock elected Seth W. Hamot and Andrew R. Siegel to the Company’s Board of Directors. All of the Class A/B Directors hold office until the next annual meeting of stockholders and until their successors are elected and qualified. The terms of Messrs. Hamot and Siegel, the Class D Directors, will continue until their respective successors are elected and qualified.
Class A/B Director Nominees. The Company’s Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated the following individuals for election as Class A/B Directors by the holders of the Company’s Common Stock: John B. Wood, Bernard C. Bailey, David Borland, William M. Dvoranchik, Lt. Gen. (ret) Bruce R. Harris, Lt. Gen. (ret) Charles S. Mahan, Jr., Maj. Gen. (ret) John W. Maluda, Robert J. Marino, and Vice Admiral (ret) Jerry O. Tuttle.
Biographical Information Concerning Class A/B Director Nominees. Information concerning the nominees for election as Class A/B Directors appears below.
Name | Age | Biographical Information | ||
John B. Wood | President, Chief Executive Officer and Chairman of the Board of the Company. Mr. Wood joined the Company in 1992 as Executive Vice President and Chief Operating Officer (“COO”) and in 1994 was named President and Chief Executive Officer (“CEO”). In March 2000 he was appointed to the newly created position of Executive Chairman of the Board, which he held until he became Chairman of the Board subsequent to a restructuring of the Board of Directors in 2002. In January 2003, Mr. Wood resumed the positions of President and CEO. Mr. Wood has also served as Chairman of Enterworks, Inc., since January 1996; and as CEO of Enterworks, Inc. from January 1996 to November 2005. From January 2005 to December 2007, Mr. Wood served as Enterworks, Inc.’s Executive Chairman. Mr. Wood | |||
As the Chief Executive Officer of the Company, vendors resulting from his long tenure with the Company is invaluable to the Board. |
Name | Age | Biographical Information | ||
Bernard C. Bailey | Chairman and CEO of Paraquis Solutions LLC, a privately held consulting and | |||
Mr. Bailey has significant experience in finance matters and within the Company’s industry. Mr. Bailey also has served on a number of boards of public companies, and the experience gained by serving on those boards will make him a valuable resource for the Board |
David Borland | President of the Borland Group, an information technology consulting company, since January 2004. Mr. Borland was elected to the Board of Directors in March 2004 after retiring as Deputy Chief Information Officer (“CIO”) of the U.S. Army with more than 30 years of experience in the U.S. Government. Mr. Borland’s career Army experience also includes serving as Vice Director of Information Systems for Command, Control, Communications, and Computers; Director of the Information Systems Selection and Acquisition Agency; and numerous other positions. From 1966 through 1970, Mr. Borland served in the U.S. Air Force. Mr. Borland has received numerous awards, including the Meritorious Presidential Rank Award for Senior Executive Service Members (1996 and 2003), the Distinguished Presidential Rank Award (2000), and the United States Army Decoration for Exceptional Civilian Service (1998 and 2003). | |||
Mr. Borland’s industry experience and extensive service with the U.S. Army make him a valuable member of the Board of Directors. | ||||
Name | Age | Biographical Information | ||
William M. Dvoranchik | 65 | Chairman and CEO of Life is Great, LLC, a privately held consulting and services firm, since 2001. Mr. Dvoranchik was elected to the Company’s Board of Directors in October 2006. In 2001, he retired as President of the Federal Government sector of Electronic Data Systems (“EDS”), where he oversaw all aspects of EDS’ relationship with the U.S. Government. His career at EDS spanned over 30 years and he gained experience as a leader in the brokerage, insurance, and banking and thrift industries before focusing on the U.S. Government sector. From 1985 until his retirement in 2001, in addition to the Federal Government sector, Mr. Dvoranchik participated in and led EDS projects in the intelligence community, state and local governments, and international public sectors, in particular in Australia, Great Britain, and Asia. During this time, he led efforts that brought in new revenues in excess of $10 billion for EDS. For over 20 years, Mr. Dvoranchik served as chairman of the board of the EDS Employees Federal Credit Union, with assets of more than $400 million. He presently serves as director of QBase, LLC, a privately held analytic services company. | ||
Mr. Dvoranchik’s senior management experience in the U.S. government sector provides a valuable resource to the Board and the Company. | ||||
Lieutenant General Bruce R. Harris (USA, Ret.) | Retired, United States Army Lieutenant General. | |||
General Harris has extensive experience with the U.S. Army, Board and the Company. |
Name | Age | Biographical Information | ||
Lieutenant General Charles S. Mahan, Jr. (USA, Ret.) | Retired Vice President and General Manager of the Law Enforcement and Security strategic business unit of DynCorp International, a company providing technology and professional services solutions to government and commercial clients worldwide, where he served from January 2007 to July 2008. From July 2006 to December 2006, he served first as President and Chief Operating Officer of Horne Engineering Services, LLC, an engineering services firm, and then as Chief Operating Officer of Horne International, an affiliate of credentialing organization. | |||
General Mahan’s comprehensive experience with the U.S. Army and service with two defense contractors and management. |
Name | Age | Biographical Information | ||
Major General John W. Maluda (USAF, Ret.) | Retired, United States Air Force Major General. Mr. Maluda was elected to the Board in October 2009. He retired from the United States Air Force in September 2009 after more than 34 years of continuous active duty. At the time of his retirement, General Maluda holds a Bachelor of Science in Electrical Engineering from Auburn University, a Masters Degree in Systems Management from the University of Southern California, as well as an Advanced Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization. | |||
General Maluda retired from the U.S. Air Force in 2009 and has broad industry insight which makes him a valuable member of the Board of Directors. | ||||
Robert J. Marino | Executive Vice President, Special Projects for the Company. Mr. Marino joined the Company in 1988 as Senior Vice President of Sales and Marketing. In 1990, his responsibilities were expanded to include Program Management in addition to Sales and Marketing. In January 1994, Mr. Marino was appointed to President of Telos Systems Integration, and in January 1998, he was appointed to Chief Sales and Marketing Officer, a position he held until June 2004 at which time he was appointed Executive Vice President for Special Projects. Prior to joining the Company in February 1988, Mr. Marino held the position of Senior Vice President of Sales and Marketing with Centel Federal Systems and M/A.com Information Systems, both of which are U.S. Government contractors. Mr. Marino was elected to the Board of Directors in June 2004. In addition to his duties with Telos, Mr. Marino serves as director on the board of Aquatic Energy, an algae to bio-diesel company. | |||
Mr. Marino has served the Company for over 20 years and remains a valuable advisor to the Company’s various business lines. |
Name | Age | Biographical Information | ||
Vice Admiral Jerry O. Tuttle (USN, Ret.) | Retired United States Navy Vice Admiral. In addition to his duties with Telos, Admiral Tuttle serves as chairman of the board for the U.S. subsidiary of Systematic Software Engineering, a Danish software development company. | |||
Admiral Tuttle has in-depth U.S. government insight due to his 40 years of service with the U.S. Navy. He serves on the Company’s Proxy Board |
The Board of Directors of Telos recommends that the Class A/B Director nominees named above be elected by the holders of the Company’s Common Stock.
No Class D Director NomineesNominees.. The Company did not receive nominations for Class D Directors. As a result, the terms of Messrs. Hamot and Siegel will continue after the Annual Meeting until their respective successors are elected and qualified.
Name | Age | Biographical Information | ||
Seth W. Hamot | Managing Member, Roark, Rearden & Hamot Capital Management, LLC (“RRHCM”), and owner of Roark, Rearden & Hamot, Inc. (“RRHI”), since 1997, and President of Roark, Rearden & Hamot, LLC (“RRH”) since 2002. Mr. Hamot has been a director of the Company since June 18, 2007. Mr. Hamot was nominated for election by Costa Brava Partnership III L.P. (“Costa Brava”), an investment fund and a holder of the | |||
Mr. Hamot was elected pursuant to the Company’s governing documents by the holders of the | ||||
Andrew R. Siegel | Managing Member, White Bay Capital Management, LLC. Mr. Siegel has been a director of the Company since June 18, 2007. Mr. Siegel was nominated by Costa Brava, a holder of the | |||
Mr. Siegel was elected pursuant to the Company’s governing documents by the holders of the |
If the Company had received nominations for Class D Directors, holders of the Public Preferred Stock would have been eligible to vote at the Annual Meeting on the election of Class D Directors and on no other matter before the Annual Meeting.
The table below sets forth information as of September 30, 20102011 concerning persons known by the Company to be beneficial owners of more than 5% of any class of the Company’s voting securities, as well as concerning each class of equity securities of the Company beneficially owned by all directors and nominees, each
of the officers listed in the Summary Compensation Table included under Item 11, Executive Compensation — Summary Compensation Table, of the Company’s 20092010 Form 10-K, and the directors and executive officers of the Company as a group. Unless otherwise indicated, the individuals shown have sole voting and dispositive power.
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of September 30, | Percent of Class | |||
Class A Common Stock | Toxford Corporation Place de Saint Gervais 1 1211 Geneva Switzerland | |||||
Class A Common Stock | John R.C. Porter Chalet Ty 1936 Verbier Switzerland | |||||
Class A Common Stock | Telos Corporation Shared Savings Plan 19886 Ashburn Road Ashburn, VA 20147 | 3,658,536 shares | ||||
Class B Common Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England | 1,681,960 shares | 41.7% | |||
Class B Common Stock | Graphite Enterprise Trust LP Berkley Square House, 4th Floor London W1J 6BQ England | 420,490 shares | 10.4% | |||
Class B Common Stock | North Atlantic Smaller Companies Investment Trust PLC c/o North Atlantic Value LLP Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB England | 1,186,720 shares | 29.4% | |||
Class B Common Stock | John B. Wood | |||||
Class B Common Stock | Michele Nakazawa | 125,000 shares | 3.1% | |||
Class B Common Stock | Michael P. Flaherty | 100,000 shares | 2.5% | |||
Class B Common Stock | Brendan D. Malloy | 100,000 shares | 2.5% | |||
Class B Common Stock | Edward L. Williams | 100,000 shares | 2.5% | |||
Class B Common Stock | All officers and directors As a group (24 persons) | 619,888 shares | 15.4% | |||
Class A Common Stock | John B. Wood | |||||
Class A Common Stock | Michael P. Flaherty | |||||
Class A Common Stock | Edward L. Williams | |||||
Class A Common Stock | Michele Nakazawa | |||||
Class A Common Stock | Brendan D. Malloy | |||||
Class A Common Stock | Robert J. Marino | |||||
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of September 30, | Percent of Class | |||
Class A Common Stock | Bernard C. Bailey | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | David Borland | 120,000 shares (C)(D) | 0.3% | |||
Class A Common Stock | William M. Dvoranchik | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | Seth W. Hamot | — | — | |||
Class A Common Stock | Bruce R. Harris | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | Charles S. Mahan, Jr. | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | John W. Maluda | 80,000 shares | 0.2% | |||
Class A Common Stock | Andrew R. Siegel | — | — | |||
Class A Common Stock | Jerry O. Tuttle | |||||
Class A Common Stock | All officers and directors As a group | |||||
Series A-1 Redeemable Preferred Stock | North Atlantic Smaller Companies Investment Trust PLC c/o North Atlantic Value LLP Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB England | |||||
Series A-1 Redeemable Preferred Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England | |||||
Series A-1 Redeemable Preferred Stock | Toxford Corporation Place de Saint Gervais 1 1211 Geneva Switzerland | |||||
Series A-1 Redeemable Preferred Stock | John R.C. Porter Chalet Ty Fano, 2Chemin d’Amon 1936 Verbier Switzerland | 983 shares (G) | 82.7% | |||
Series A-2 Redeemable Preferred Stock | North Atlantic Smaller Companies Investment Trust PLC c/o North Atlantic Value LLP Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB England | |||||
Series A-2 Redeemable Preferred Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England | |||||
Series A-2 Redeemable Preferred Stock | Toxford Corporation Place de Saint Gervais 1 1211 Geneva, Switzerland |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of September 30, 2011 | Percent of Class | |||
Series A-2 Redeemable Preferred Stock | John R.C. Porter Chalet Ty Fano, 2 Chemin d’Amon 1936 Verbier Switzerland | 1,376 shares (H) | 82.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | Value Partners, Ltd. 4514 Cole Avenue, Suite Dallas, TX 75205 | |||||
12% Cumulative Exchangeable Redeemable Preferred Stock | Wynnefield Partners Small Cap Value, L.P. Wynnefield Partners Small Cap Value, L.P. I Channel Partnership II, L.P. Wynnefield Small Cap Value Offshore Fund, Ltd. Wynnefield Capital Management, LLC Wynnefield Capital, Inc. Nelson Obus Joshua Landes 450 Seventh Avenue, Suite 509 New York, NY 10123 | 373,500 shares | 11.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | Athena Capital Management, Inc. Minerva Group, LP David P. Cohen 50 Monument Road, Suite 201 Bala Cynwyd, PA 19004 | 162,722 shares | 5.1% |
12% Cumulative Exchangeable Redeemable Preferred Stock | Victor Morgenstern Faye Morgenstern Judd Morgenstern 106 Vine Avenue Highland Park, IL 60035 | 182,000 shares | 5.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | Costa Brava Partnership III, LP Roark, Rearden & Hamot, LLC Seth W. Hamot | |||||
12% Cumulative Exchangeable Redeemable Preferred Stock |
(A) |
(B) | Includes 40,981, 7,363, 6,669, 27,630, 32,099, and |
(C) | Includes 15,000 restricted shares of the Class A Common Stock granted under the 2008 Omnibus Long-Term Incentive Plan. |
(D) | Mr. Borland holds options to acquire 20,000 shares of |
Includes 908 shares held directly by Toxford Corporation and 75 shares held directly by Mr. Porter. |
(H) | Includes 1,271 shares held directly by Toxford Corporation and 105 shares held directly by Mr. Porter. |
(I) | According to the Schedule 13D/A (Amendment No. 13) filed on July 22, 2011, by Value Partners Ltd. (“VP”), Ewing & Partners (“E&P”), Ewing Asset Management LLC (“EAM”), and Timothy G. |
Wynnefield Partners Small Cap Value, L.P., (“WPSCV”), Wynnefield Partners Small Cap Value L.P. I (“WPSCVI”), Channel Partnership II, L.P. (“CP”), Wynnefield Small Cap Value Offshore Fund, Ltd. (“WSCVOF”), Wynnefield Capital Management, LLC (“WCM”), Wynnefield Capital, Inc. (“WCI”), Mr. Nelson Obus and Mr. Joshua H. Landes filed a joint Schedule 13D/A (Amendment No. |
with the other the power to direct the voting and disposition of the shares that WCI may be deemed to beneficially own. Mr. Obus is the general partner of CP and has the sole power to direct the voting and disposition of the shares beneficially owned by CP. WPSCV has the sole power to vote or direct the vote and the sole power to dispose or direct the disposition of 131,800 shares. WSCVOF has the sole voting and dispositive power with respect to |
Athena Capital Management, Inc. (“ACM”), Minerva Group, LP (“MG”), and Mr. David Cohen filed a joint Schedule 13G/A (Amendment No. 4) on February 3, 2010, indicating that ACM has |
Victor Morgenstern (“VM”), Faye Morgenstern (“FM”), Judd Morgenstern (“JM”), Jennifer Morgenstern Irrevocable Trust (“Jennifer Trust”), Robyn Morgenstern Irrevocable Trust (“Robyn Trust”), and Judd Morgenstern Irrevocable Trust (“Judd Trust”), filed a joint Schedule 13D/A (Amendment No. 1) on March 10, 2009, indicating that VM has the sole power to vote |
According to the Schedule 13D/A (Amendment No. 27) filed on October 29, 2010, by Costa Brava Partnership III |
According to |
Information concerning Section 16(a) beneficial ownership reporting compliance for the Company’s directors, executive officers and persons who own more than 10 percent of the Company’s Common Stock is set forth in the subsection entitled “Section 16(a) Beneficial Ownership Reporting Compliance” of Item 10, page 65,62, of the Company’s 20092010 Form 10-K, which information is incorporated by reference into this Proxy Statement. In addition, Mr. Marino did not file a Form 4 until July 11, 2011 reporting the divestiture of Class A Common Stock on May 6, 2011.
Biographical information concerning the Company’s current executive officers is set forth under Item 10, Directors, Executive Officers and Corporate Governance, beginning on page 6360 of the Company’s 20092010 Form 10-K, which is incorporated by reference into this Proxy Statement.
Information concerning director independence, board meeting and annual meeting attendance, and board committee information is set forth under Item 10, Directors, Executive Officers and Corporate Governance, beginning on page 6257 of the Company’s 20092010 Form 10-K, which is incorporated by reference into this Proxy Statement. Information concerning the Company’s Proxy Board is set forth under Item 11, Executive Compensation, beginning on page 6563 of the Company’s 20092010 Form 10-K.
John B. Wood is both the Chairman of the Board of Directors and the Chief Executive Officer of the Company. The Company’s policy as to whether the roles of the Chairman and the Chief Executive Officer should be separate is to adopt the practice that best serves the Company’s needs at any particular time. The Board of Directors believes that combining the Chairman and Chief Executive Officer positions is currently the most effective leadership structure and is in the best interests of the Company’s stockholders because of Mr. Wood’s long tenure with the Company, including as the Chief Executive Officer, and his broad knowledge and experience with the Company’s shareholders,stockholders, partners, and vendors. The Board of Directors may decide to separate or combine the roles of Chairman and Chief Executive Officer, if appropriate, at any time in the future. The Company has no lead independent director.
We operateThe Company operates under a Proxy Agreement, which governs the relationship between the Company and the foreign stockholders that, directly and indirectly, own a majority stake in the Company. Pursuant to such Proxy Agreement, a Proxy Board has been established, which consists of independent Board members Harris, Mahan, and Tuttle.Under the Proxy Agreement, the Proxy Board has the authority to vote 15,801,802 shares of Class A Common Stock at the Annual Meeting.
We haveThe Board of Directors adopted a Code of Ethics applicable to all of our employees, including the Chief Executive Officer, the Chief Financial Officer, and the Controller, which is available on our website atwww.telos.com. In the event that we amendthe Board of Directors amends our Code of Ethics or grantgrants a waiver from ourits restrictions to the Chief Executive Officer, the Chief Financial Officer, or the Controller, we intend tothe Company will provide timely notice of such amendment or waiver on ourits website.
The Company has adopted the director independence standards whichthat are summarized below. The Company’s director independence standards are based upon NASDAQ Listing Rule 5605. Pursuant to NASDAQ Listing Rule 5605(b)(1), a majority of directors of the Board will be independent. Pursuant to NASDAQ Listing Rule 5605(a)(2), a director will not be independent if,
(A) At any time during the past three years he was employed by the Company;
(B) He accepted, or has a family member who accepted, any compensation from the Company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination
of independence other than the following: (i) compensation for board or board committee service; (ii) compensation paid to a family member who is an employee (other than an executive officer) of the Company; or (iii) benefits under a tax-qualified retirement plan, or non-discretionary compensation;
(C) He is a family member of an individual who is, or at any time during the past three years was, employed by the Company as an executive officer;
(D) He is, or has a family member who is, a partner in, or a controlling shareholder or executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the Company’s securities; or (ii) payments under non-discretionary charitable contribution matching programs.programs;
(E) He is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company served on the compensation committee of such other entity.
entity; or
(F) He is, or has a family member who is, a current partner of the Company’s outside auditor, or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years.
Pursuant to the independence standards set forth above, the Board has determined that the following directors and nominees meet the Company’s independence standards and therefore are independent: Bernard C. Bailey, David Borland, William M. Dvoranchik, Bruce R. Harris, Charles S. Mahan, John W. Maluda, and Jerry O. Tuttle. Based on these standards, the Board determined that the following directors are not independent: Robert J. Marino and John B. Wood. Additionally, due to conflicts of interest, both Seth W. Hamot and Andrew R. Siegel were determined not to be independent. In determining the independence of the Company’s directors, the Board of Directors considered transactions between the Company and any entity on whose board of directors one of the Company’s directors serves. In determining the independence of General Maluda, the Board of Directors considered the consulting arrangement between the Corporation and General Maluda that the Board approved on September 30, 2010. Under that agreement, General Maluda is entitled to annual consulting fees in the amount of $120,000 beginning October 1, 2010. The Board of Directors believes that this consulting arrangement will not interfere with General Maluda’s exercise of independent judgment in carrying out his responsibilities as a director.
As part of its general responsibility to manage the Company’s business, the Board of Directors has oversight responsibility with respect to risk management. The Board of Directors has delegated primary responsibility for risk oversight and the monitoring of the Company’s significant areas of risk to the Audit Committee. In accordance with its charter, the Audit Committee discusses with management the Company’s major policies with respect to risk assessment and risk management. The Audit Committee regularly reports the results of these discussions to the Board of Directors.
During the fiscal year ended December 31, 2009,2010, the Board of Directors held sixnine meetings. Each director attended over 75 percent of the aggregate number of meetings of the Board and the committees of the Board on which he served.
The Company encourages all directors to attend annual meetings of stockholders. TenNine directors, namely Messrs. Bailey, Borland, Dvoranchik, Hamot, Harris, Mahan, Maluda, Marino, Siegel, Tuttle, and Wood, attended the Company’s annual meeting of stockholders in 2009.2010.
The Company has standing Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees.
The Audit Committee was established to assist the boardBoard of directorsDirectors in fulfilling its oversight responsibilities for (1) the integrity of the Company’s financial statements, (2) the Company’s compliance with legal and regulatory requirements, (3) the independent registered public accounting firm’s qualifications and independence, and (4) the performance of the Company’s internal audit function and independent registered public accounting firm. As of September 30, 2010, theThe Audit Committee consists of directors Bailey (chairman), Dvoranchik, and Mahan. In 2009,2010, the Audit Committee met eightfive times. The Board of Directors has adopted an Audit Committee charter which is available on the Company’s website atwww.telos.com. The Board has determined that Mr. Bailey is an “audit committee financial expert” as defined by rules adopted by the SEC and is independent.
The Management Development and Compensation Committee (the “Compensation Committee”) was established for the purpose of reviewing, determining and approving all forms of compensation to be provided to the Company’s executive officers and directors, and any stock compensation to be provided to all employees. The Compensation Committee is comprised of directors Borland, Dvoranchik (chairman), and Harris. The Management Development and Compensation Committee met sevensix times during the year 2009.2010. The Board of Directors has adopted a Compensation Committee charter which is available on the Company’s website atwww.telos.com.
The Nominating and Corporate Governance Committee (the “Nominating Committee”) was established to make recommendations regarding Board nominations and to monitor the implementation of corporate governance rules and regulations. The Nominating Committee consists of directors Borland (chairman), Maluda, Marino (ex officio), Tuttle, and Wood. In 2009,2010, the Nominating Committee met twice.did not meet in person and acted by unanimous written consent without a meeting. The Board of Directors has adopted a Nominating Committee charter which is available on the Company’s website atwww.telos.com.
The CEO proposes the compensation level for each of the executives reporting directly to him. The Compensation Committee reviews these recommendations and, following discussions with the CEO, makes final recommendations to the Board of Directors with respect to the compensation levels of those executives. The CEO has no role in the establishment of his compensation.
Neither the Compensation Committee nor management engaged a compensation consultant in 2010 to provide advice or recommendations on the amount or form of executive or director compensation.
Board members are nominated pursuant to the following policy: The Nominating and Corporate Governance Committee identifies potential candidates for first-time nomination as a director by using a variety of sources such as recommendations from the Company’s management, current Board members, stockholders, and contacts in organizations served by the Company. Stockholders may nominate potential candidates by following the procedure set forth in the Company’s Bylaws. This process provides that, in order for nominations or other business to be properly brought before an annual meeting by a stockholder, the stockholder must deliver written notice to the Company’s secretary at the Company’s principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The Nominating Committee will consider any director nominees submitted by stockholders in accordance with these procedures.
The Nominating Committee then conducts an initial review of the potential candidate’s background, including whether he/she meets the minimum qualifications for Board members; whether the individual would be considered independent under NASDAQthe standards adopted by the Company and SEC rules; and whether the individual would meet any additional requirements imposed by law or regulation on members of the Audit and/or Compensation Committees of the Board. Among the requirements potential candidates should meet are the following: U.S. citizenship; eligibility for security clearance at a top secret level; 10 years of corporate or related business
experience, preferably having served on corporate Boards or committees; and familiarity with government contracts, the defense industry, and information technology and security. The evaluation process of a potential candidate’s background will not be treated differently whether or not he/she was nominated by a stockholder, except for nominations received from holders of Public Preferred Stock, which are not subject to the Company’s nomination process.
If the initial candidate review is satisfactory, the Nominating Committee will arrange an introductory meeting with the candidate and the committee’s chairman, or the Company’s CEO, or with other directors to determine the potential candidate’s interest in serving on the Board. If the candidate is interested in serving on the Board and the Nominating Committee recommends further consideration, a comprehensive interview conducted by the Nominating Committee, the CEO, other members of the Board, and in some cases, key Company executives, follows. Upon successful conclusion of the review process, the Nominating Committee will present the candidate’s name to the Board of Directors for nomination as a director and inclusion in the Company’s Proxy Statement.
Stockholders wishing to communicate with the Board of Directors should contact the office of the Corporate Secretary who will forward such communication to the appropriate committee of the Board of Directors.ThereDirectors or to the individual director. There have been no changes in the procedures by which shareholdersstockholders may recommend nominees to the Company’s board of directors.
Information concerning executive officer and director compensation is set forth under Item 11, Executive Compensation, of the Company’s 2009 Form 10-K, beginning on page 65, and is incorporated into this Proxy Statement by reference thereto.
Information concerning certain relationships and related party transactions is set forth under Item 13, Certain Relationships and Related Transactions, and Director Independence, of the Company’s 20092010 Form 10-K, beginning on page 76,75, and is incorporated into this Proxy Statement by reference thereto.
Effective October 24, 2007, the Company adopted a Related Persons Transaction Policy which is attached hereto as Exhibit I.also set forth under Item 13 of the 2010 Form 10-K, referenced above, and incorporated into this Proxy Statement by reference thereto.
Information concerning the Company’s legal proceedings with Costa Brava is set forth in Note 14, Contingencies, Legal Proceedings — Costa Brava Partnership III, L.P. et al. v. Telos Corporation, et al., beginning on page 52,51, of the Company’s 20092010 Form 10-K, which information is incorporated into this Proxy Statement by reference thereto. As previously reported, the Plaintiffs (now Appellants) appealed the decision of the Court dismissing the Plaintiffs’ complaints. The Appellees include the Company and the directors and officers included in the dismissed complaints, including John B. Wood, David Borland, and Robert J. Marino.
AsAlso as previously reported, on April 8, 2009, the Appellants filed a Petition for Writ of Certiorari to Court of Special Appeals with the Court of Appeals of Maryland. On June 12, 2009, the Court of Appeals of Maryland denied the Petition for Writ of Certiorari, stating that “there has been no showing that review by certiorari is desirable and in the public interest.” The oral arguments were held before the Maryland Court of Special Appeals on May 3, 2010. The court has yet to render a decision on the matter.
At this stage of the appeal process, it is impossible to reasonably determine the degree of probability related to Plaintiffs’ (Appellants’) success in any of their assertions. Although there can be no assurance as to the ultimate outcome of this appeal process, the Company and its officers and directors strenuously deny Plaintiffs’ claims, will continue to vigorously defend the matter, and oppose the relief sought.
Information concerning the Company’s legal proceedings with Messrs. Seth W. Hamot and Andrew Siegel is set forth in Note 14, Contingencies, Legal Proceedings — Hamot et al. v. Telos Corporation, beginning on page 54,51, of the Company’s 20092010 Form 10-K, which information is incorporated into this Proxy Statement by reference thereto.
As previously reported, on April 12, 2010, the Class D Directors filed a Motion for the Advancement of Legal Fees and Expenses. A hearing on this matter was held before Judge Michel Pierson on August 17, 2010, and a ruling is still pending.
At this stage of the litigation and appeal process, it is impossible to reasonably determine the degree of probability related to the Class D Directors’ success in any of their assertions. Although there can be no assurance as to the ultimate outcome of these proceedings, the Company and its officers and directors strenuously deny the Class D Directors’ claims, and will vigorously defend the matter, and continue to oppose the relief sought.
As previously reported, on June 30, 2010, Mr. Andrew Siegel filed a Complaint against Telos Corporation, Doe I-XX, and Roe Corporation I-XX in
Information concerning the report of the Audit Committee report is set forth under Item 10, Audit Committee, beginning on page 6257 of the Company’s 20092010 Form 10-K, which is incorporated into this Proxy Statement by reference thereto.
The Audit Committee selected BDO USA, LLP (previously known as BDO Seidman, LLP)(“BDO”) to serve as the Company’s independent registered public accounting firm for the 20092010 fiscal year. BDO has also been selected
to serve as the Company’s independent registered public accounting firm for the 20102011 fiscal year. Information concerning the Company’s relationship with BDO is set forth under Item 14, Principal Accountant Fees and Services, beginning on page 7877 of the Company’s 20092010 Form 10-K, which is incorporated into this Proxy Statement by reference thereto.
The Company does not expect representatives of BDO USA, LLP to attend the Annual Meeting and, as a result, they will not have an opportunity to make a statement or respond to questions.
The Board of Directors of Telos recommends that the selection of BDO USA, LLP as the Company’s independent registered public accounting firm for the 20102011 fiscal year be ratified by the holders of the Common Stock.
Information concerning executive officer and director compensation is set forth under Item 11, Executive Compensation, of the 2010 Form 10-K, beginning on page 63, and is incorporated into this Proxy Statement by reference thereto.
In accordance with recent legislation, the Company is providing the holders of the Common Stock a vote to approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers as disclosed in the Compensation Discussion and Analysis and accompanying Executive Compensation Tables and related narrative disclosure under Item 11, “Executive Compensation,” of the 2010 Form 10-K, beginning on page 63.
The Company’s compensation program is designed to support the achievement of the Company’s business and financial goals. Please read the “Compensation Discussion and Analysis” beginning on page 63 of the Form 10-K for additional details about the Company’s executive compensation program, including information about the fiscal year 2010 compensation of the Company’s named executive officers.
The Board of Directors is asking the holders of the Company’s Common Stock to indicate their support for the compensation of the Company’s named executive officers as described in the 2010 Form 10-K. This proposal, commonly known as a “say-on-pay” proposal, gives the holders of the Common Stock the opportunity to express their views on the compensation of the Company’s named executive officers. This vote is not intended to address any specific item of compensation but rather the overall compensation of the Company’s named executive officers and the related philosophy, policies and practices described in the 2010 Form 10-K. Accordingly, the Board of Directors is asking the holders of the Common Stock to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the holders of the Company’s Class A and Class B Common Stock approve, on an advisory basis, the compensation of the named executive officers as disclosed in the company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2010, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2010 Summary Compensation Table and the other related tables and disclosure.”
The say-on-pay vote is advisory, and therefore not binding on the Company, the Board of Directors, or the Compensation Committee. Our Board of Directors and our Compensation Committee value the opinions of the Company’s stockholders, will consider the results of the vote on this advisory resolution, and will evaluate whether any actions are warranted to address those results.
The Board of Directors of Telos recommends the approval of the resolution set forth above approving the compensation of the Company’s executive officers.
The Board of Directors is also seeking the preference of the holders of the Common Stock, on an advisory (non-binding) basis, with respect to the frequency of future votes on the compensation of the Company’s named executive officers. This advisory “frequency” vote is required at least once every six years beginning with our 2011 Annual Meeting.
This proposal affords the holders of the Common Stock the opportunity to cast an advisory vote on how often the Company should include a say-on-pay vote in its proxy materials for future annual meetings of stockholders (or special meetings of stockholders for which the Company must include executive compensation information in the proxy statement for that meeting). Under this proposal, the holders of the Common Stock may vote to have the say-on-pay vote every year, every two years or every three years, or may choose to abstain from voting. The holders of the Common Stock are not voting to approve or disapprove the Board’s recommendation.
The Board of Directors believes that the say-on-pay vote should be conducted every three years to provide the Compensation Committee the time to respond thoughtfully to the sentiments of the holders of the Common Stock and implement any necessary changes. The Compensation Committee carefully reviews changes to the Company’s executive compensation program to maintain the consistency and credibility of the program, which is important in motivating and retaining the highly talented and results-oriented executives who are critical to the Company’s long-term success and growth. The Board of Directors believes that a triennial vote is an appropriate frequency to allow the Compensation Committee sufficient time to thoughtfully consider their input of the holders of the Common Stock, implement any appropriate changes to the Company’s executive compensation program, and assess the results of these changes.
The option of one year, two years or three years that receives the highest number of votes cast by the holders of the Common Stock will be the frequency for the stockholder advisory vote on the compensation of the Company’s named executive officers that will be considered to be preferred by the holders of the Common Stock. However, because this vote is not binding on the Board of Directors, the Board of Directors may decide, either now or in the future, that it is in the best interests of the Company and its stockholders to hold a stockholder advisory vote on the compensation of the Company’s named executive officers more or less frequently than the preference indicated by this vote, including, for example, due to changes in executive compensation policies, practices and plans or discussions with stockholders.
The Board of Directors of Telos recommends a vote FOR the option “Every Three Years” for the frequency of future advisory votes on executive compensation.
Stockholders who wish to have proposals for the Company’s 20112012 Annual Meeting included in the proxy materials for such meeting must submit these proposals to the Company on or prior to June 17, 2011.22, 2012. All other proposals must be submitted in accordance with the process set forth in the Company’s Bylaws, which provide that, in order for business to be properly brought before an annual meeting by a stockholder, the stockholder must deliver written notice to the Company’s secretary at the Company’s principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the
60th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.
Neither the Board of Directors nor management intends to bring any matter for action at the Annual Meeting of Stockholders other than those matters described above. If any other matter or any proposal should be presented and should properly come before the meeting for action, the persons named in the accompanying proxy will vote upon such matter and upon such proposal in accordance with their best judgment.
We have elected to “incorporate by reference” certain information into this Proxy Statement. By incorporating by reference, we can disclose important information to you by referring you to another document that we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this Proxy Statement, except for information incorporated by reference that is superseded by information contained in this Proxy Statement. This Proxy Statement incorporates by reference information from the following sections of the Company’s 20092010 Form 10-K: Items 3, 10, 11, 13, and 14, as well as Item 8, Consolidated Financial Statements and Supplementary Data — Note 14, Contingencies. A copy of the Company’s 20092010 Form 10-K has been mailed to you along with this Proxy Statement.
Exhibit I
This Related Person Transaction Policy was adopted by the Board of Directors of Telos Corporation (the “Company”) to ensure the timely identification, review, approval and ratification of transactions with related persons and to assist the Company in the timely disclosure of such transactions in the Company’s filings with the SEC, as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules and regulations.
This policy is intended to supersede other policies of the Company such as the Code of Conduct and the Corporate Governance Principles that may be applicable to transactions with related persons.
For purposes of this policy, the following definitions apply:
“Related Person Transaction”means any transaction or series of transactions in which (i) the Company or a subsidiary is a participant, (ii) the aggregate amount involved exceeds $120,000 and (iii) any “Related Person” has a direct or indirect material interest.
“Related Person” means:
“Immediate Family Member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law of a person, and any person (other than a tenant or employee) sharing the household of such person.
Related Person Transactions shall be reviewed by the Board of Directors acting through the Audit Committee at regularly scheduled committee meetings, except that the Chairman of the Audit Committee may call a special committee meeting to review a proposed Related Person Transaction. That transaction is subject to the approval and/or ratification of the full Board of Directors. If the proposed Related Person Transaction involves a director, then that director may participate in the deliberations pursuant to the last paragraph of this policy below, but may not vote with respect to such approval or ratification.
Each individual executive officer and director shall be responsible for reporting any potential Related Person Transaction to the General Counsel and/or the Audit Committee. The Company shall take such steps as it deems reasonable and appropriate to inform such executive officers and directors about this Related Person Transactions policy, which shall include:
Whether the Related Person’s interest in a proposed transaction is material or not will depend on all facts and circumstances, including whether a reasonable investor would consider the person’s interest in the transaction important, together with all other available information, in deciding whether to buy, sell or hold the Company’s securities. In preparing the Company’s SEC filings and in determining whether a transaction is subject to this policy, the Company’s General Counsel is entitled to make the determinations of whether a particular relationship constitutes a material interest by a Related Person. In administering this policy, the Audit Committee shall be entitled (but not required) to rely upon such determinations of materiality by the Company’s General Counsel.
In reviewing a proposed Related Person Transaction, the Committee shall consider all relevant facts and circumstances, including the commercial reasonableness of the terms, the benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the Related Person’s direct or indirect interest, and the actual or apparent conflict of interest of the Related Person. The Audit Committee shall forward to the full Board of Directors its recommendations in regards to any Related Person Transaction involving a director or an executive officer of the Company, for final determination.
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