UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
(Amendment No.
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TELOS CORPORATION
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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TELOS CORPORATION
19886 Ashburn Road
Ashburn, Virginia 20147-2358
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 12, 2010
14, 2011NOTICE 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 2011 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 (formerly known as BDO Seidman, LLP) to serve as the Company’s independent registered public accounting firm; and |
| 3. | OTHER BUSINESS. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
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
TELOS CORPORATION
19886 Ashburn Road
Ashburn, Virginia 20147-2358
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 2010
14, 2011This 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.
Voting Procedures
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 Secretary
Telos Corporation
19886 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.
Election of Directors
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 | | 4748 | | 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. As ofSince January 2008, Mr. Wood serveshas served as Enterworks, Inc.’s Non-Executive Chairman. Prior to joining the Company, Mr. Wood worked on Wall Street for Dean Witter Reynolds, UBS Securities, and his own boutique investment bank. Mr. Wood graduated from Georgetown University where he earned a Bachelor of Science in Business Administration in finance and computer science. Mr. Wood also serves on several advisory boards and one foundation board.
Mr. Wood was asked to remain Chairmanis the brother of Mr. Emmett J. Wood, the Vice President, Marketing, of the Company. |
| | | | As the Chief Executive Officer of the Company, becauseMr. Wood provides the Board with not only the knowledge of histhe daily workings of the Company, but also with the essential experience and expertise that can be provided only by a person who is intimately involved in running the Company. Mr. Wood’s broad knowledge and experience with the Company, its shareholders,stockholders, partners, and vendors.
vendors resulting from his long tenure with the Company is invaluable to the Board. |
| | | | | | |
| 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.
Ewing & Partners
Timothy G. Ewing
4514 Cole Avenue, Suite 808740
Dallas, TX 75205 | | 501,317356,798 shares (F)(I) | | 15.7%11.2% |
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 (G)(J) | | 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 (H)(K) | | 5.1% |
 | | | | | | |
Title of Class | | Name and Address of
Beneficial Owner | | Amount and
Nature of
Beneficial
Ownership as of
September 30, 2010 | | Percent of Class |
12% Cumulative
Exchangeable
Redeemable
Preferred Stock | | Victor Morgenstern
Faye Morgenstern
Judd Morgenstern
JenniferMorningstar Trust – Faye Morgenstern Irrevocable Trust
Robyn Morgenstern Irrevocable Trust
Judd Morgenstern Irrevocable TrustTrustee
106 Vine Avenue
Highland Park, IL 60035 | | 182,000 shares (I)(L) | | 5.7% |
12% Cumulative
Exchangeable
Redeemable
Preferred Stock | | Costa Brava Partnership III, LP
Roark, Rearden & Hamot, LLC
Seth W. Hamot
White Bay Capital Management, LLC222 Berkeley Street, 17th Floor
Andrew R. Siegel
237 Park Avenue, Suite 800
New York, NY 10017Boston, MA 02116 | | 521,287405,172 shares (J)(M) | | 16.4%12.7% |
12% Cumulative
Exchangeable
Redeemable
Preferred Stock | | Brown Advisory Holdings IncorporatedNSB Advisors LLC
901 South Bond Street, Suite 400200 Westage Center Drive, #228
Baltimore, MD 21231Fishkill, NY 12524 | | 592,223623,927 shares (K)(N) | | 18.6%19.6% |
| (A) | Messrs. Wood, MarinoIncludes 15,328,480 shares held directly by Toxford Corporation and Williams473,322 shares held directly hold 8,392; 2,052by Mr. Porter. Mr. Porter is the sole stockholder of Toxford Corporation. |
| (B) | Includes 40,981, 7,363, 6,669, 27,630, 32,099, and 70,9761,895 shares of our Class A Common Stock, respectively. In addition, the Class A Common Stock holdingsheld for the benefit of Messrs. Wood, Flaherty, Williams, Malloy, Marino and Williams, and Ms. Nakazawa, include 40,981; 7,363; 32,099; 6,223; 26,991respectively, by the Telos Corporation Shared Savings Plan. Also includes 550,691, 18,750, 168,750, 190,518, and 1,170161,062 restricted shares of ourthe Class A Common Stock respectively, held for their beneficial interest by the Telos Corporation Savings Plan.Additionally, in June 2008, as a result of awards under the 2008 Omnibus Long-Term Incentive Plan, Messrs. Wood, Flaherty, Williams, Malloy, Marinoand Williams, and Ms. Nakazawa, hold 3,762,465; 865,000; 1,075,000; 500,000; 900,000 and 700,250 shares of our restricted Class A Common Stock, respectively, that are included in their respective stock holdings. |
| (B) | These holdings are comprised of restricted Class A Common Stock granted in September 2008 under the 2008 Omnibus Long-Term Incentive Plan. |
| (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 ourthe Class A Common Stock, which are exercisable within 60 days of September 30, 2010.2011. |
| (D)(E) | These holdings are comprisedIncludes 40,000 restricted shares of restrictedthe Class A Common Stock granted in December 2009 under the 2008 Omnibus Long-Term Incentive Plan. |
| (E)(F) | The common stock holdings of our executive officers and directors as a group include 100,220Includes 195,913 shares of our Class A Common Stock held directly; 182,758 shares of ourthe Class A Common Stock held for their beneficial interestthe benefit of the executive officers by the Telos Corporation Shared Savings Plan, and 9,906,0651,616,333 restricted shares of restrictedthe Class A Common Stock issued under the 2008 Omnibus Long-Term Incentive Plan. |
| (F)(G) | 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. Ewing filed a joint Schedule 13D/A (Amendment No. 11) on June 6, 2005, indicating thatEwing. E&P, as the general partner of VP, has the sole power to vote ormay direct the vote and the sole power to dispose and to direct the disposition of the shares of Public Preferred Stock held by VP. Mr. Ewing and EAM, as the partners of E&P, and Timothy G. Ewing may be deemed to have the shared power to vote or direct the vote and the shared power to dispose and to direct the disposition of 501,317 shares.the shares of Public Preferred Stock held by VP. |
| (G)(J) | 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. 3)10) on April 1, 2005March 8, 2007 indicating that WCM is the sole general partner of WPSCV and WPSCVI and has the sole power to direct the voting and disposition of the shares beneficially owned by WPSCV and WPSCVI. Messrs. Obus and Landes are the co-managing members of WCM, and each shares with the other the power to direct the voting and disposition of the shares that WCM may be deemed to beneficially own. WCI is the sole investment manager of WSCVOF and has the sole power to direct the voting and disposition of the shares that WSCVOF beneficially owns. Messrs. Obus and Landes are executive officers of WCI and each shares |
| | 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 vote or direct the vote and the sole power to dispose or direct the disposition of 85,400 shares. WPSCVI has the sole voting and dispositive power with respect to vote or direct the vote and the sole power to dispose or direct the disposition of 142,800 shares. CP has the sole voting and dispositive power with respect to vote or direct the vote and the sole power to dispose or direct the disposition of 13,500 shares. Mr. Obus has the sole voting and dispositive power with respect to vote or direct the vote and the sole power to dispose or direct the disposition of 13,500 shares, and shared voting and dispositive power with respect to vote or direct the vote and the shared power to dispose or direct the disposition of 360,000 shares. Mr. Landes has shared voting and dispositive power with respect to vote or direct the vote and the shared power to dispose or direct the disposition of 360,000 shares. WCM has the sole voting and dispositive power with respect to vote or direct the vote and the sole power to dispose or direct the disposition of 274,600 shares. WCI has the sole voting and dispositive power with respect to vote or direct the vote and the sole power to dispose or direct the disposition of 85,400 shares. |
| (H)(K) | 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 the shared voting and dispositive power with respect to vote or to direct the vote and the shared power to dispose or to direct the disposition of 110,146 shares;shares, MG has the sole voting and dispositive power with respect to vote or to direct the vote and the sole power to dispose or to direct the disposition of 45,143 shares, and Mr. Cohen has the sole voting and dispositive power with respect to vote or to direct the vote and the sole power to dispose or to direct the disposition of 7,433 shares. |
| (I)(L) | 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 or direct the vote and sole power to dispose or direct the disposition of 50,000 shares, and shared power to dispose or direct the disposition of 132,000 shares; FM has the sole power to vote or direct the vote of 17,000 shares and shared power to dispose or direct the disposition of 92,000 shares; JM has the sole power to vote or direct the vote of 40,000 shares and shared power to dispose or direct the disposition of 115,000 shares; Jennifer Trust has the sole voting and dispositive power with respect to vote or direct the vote of 25,000 shares and shared power to dispose or direct the disposition of 25,000 shares; Robyn Trust has the sole voting and dispositive power with respect to vote or direct the vote of 25,000 shares and shared power to dispose or direct the disposition of 25,000 shares; and Judd Trust has the sole voting and dispositive power with respect to vote or direct the vote of 25,000 shares and shared power to dispose or direct the disposition of 25,000 shares. |
| (J)(M) | According to the Schedule 13D/A (Amendment No. 27) filed on October 29, 2010, by Costa Brava Partnership III LP (“CBP”)L.P., Roark, Rearden & Hamot, LLC, (“RRH”), White Bay Capital Management, LLC (“WBCM”), Mr.and Seth W. Hamot, the three filers have sole voting and Mr. Andrew R. Siegel filed a joint Schedule 13D/A (Amendment No. 26) on February 20, 2008 indicating that CBP hasdispositive power with respect to the sole power to vote or to direct the vote and to dispose or direct the disposition of 506,811 shares; each of RRH, WBCM and Mr. Hamot has the shared power to vote or to direct the vote and dispose or direct the disposition of 506,811 shares; Mr. Siegel has the sole power to vote or direct the vote and to dispose or direct the disposition of 14,476 shares, and the shared power to vote and dispose or direct the vote or disposition of 506,811405,172 shares. |
| (K)(N) | According to itsthe Schedule 13G/A (Amendment No. 3)13G filed on September 21, 2010, Brown Advisory Holdings Incorporated (“BAHI”) indicated that BAHI has shared power to dispose or direct the disposition of 592,223 shares and that such shares are ownedApril 1, 2011, by the clients of NSB Advisors LLC, who have the rightfiler has sole voting and dispositive power with respect to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities.623,927 shares. |
Section 16(a) Beneficial Ownership Reporting Compliance
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 Executive Officers
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.
Corporate Governance
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.
Independence of Directors
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.
Role in Risk Oversight
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.
Meetings of the Board of Directors and Committees of 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.
Audit Committee
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.
Management Development and Compensation Committee (“Compensation Committee”)
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.
Nominating and Corporate Governance Committee (“Nominating Committee”)
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 of Directors Nomination Process
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.
Stockholder Communications with Board of Directors
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.
Compensation of Executive Officers and 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.
Certain Relationships and Related Party Transactions
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.
Legal Proceedings With 10% Beneficial Owner of the Company’s Stock
Costa Brava Partnership III, L.P.
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.
Hamot et al. v. Telos Corporation
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.
Andrew Siegel v. Telos Corporation, et al.
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
Report of the U.S District Court for the Eastern District of Virginia, Alexandria Division. On August 19, 2010, Mr. Siegel filed a Notice of Voluntary Dismissal of his Complaint.REPORT OF THE AUDIT COMMITTEEAudit Committee
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.
Independent Registered Public Accounting Firm
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.
Compensation of Executive Officers and Directors
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.
Advisory Vote on Executive Compensation
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.
Frequency of the Vote on Executive Compensation
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.
Stockholder Proposals for the 20112012 Annual Meeting
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.
Other Matters
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.
Incorporation by Reference
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
TELOS CORPORATION
POLICY WITH RESPECT TO RELATED PERSON TRANSACTIONS
I. Purpose
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.
II. Definitions
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:
Any director or executive officer of the Company;
Any immediate family member of a director or executive officer of the Company;
Any nominee for director and the immediate family members of such nominee;
A 5% beneficial owner of the Company’s voting securities or any immediate family member of such owner; and
Any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
“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.
III. Review/Report
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:
Distributing (as soon as reasonably practicable following the completion of each fiscal year) a formal questionnaire to all executive officers and directors requiring these persons to evaluate and disclose whether or not during the preceding fiscal year they were involved in, or aware of, any Related Person Transaction;
Posting this policy on the Company website and including it in the Company’s 2009 proxy statement;
Periodically distributing this policy to the Company’s executive officers and directors; and
Periodically making internal inquiries regarding Company relationships with known entities that qualify as Related Persons.
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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