Filed by the Registrant |
þFiled by a Party other than the Registrant | ||
Check the appropriate box: | ||
¨ |
Check the appropriate box:
Preliminary Proxy Statement |
¨ | Confidential, |
R | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material |
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
Telos Corporation | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): ONE OF THE BOXES NEEDS TO BE CHECKED | ||||
R | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
2012
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.
1. | ELECTION OF DIRECTORS: To elect nine Class A/B Directors to the Board of Directors to serve until the 2013 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; and |
3. | OTHER BUSINESS: To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
2012
Directors and the ratification of the Company’s independent registered public accounting firm.
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 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.
(1) | Executing a proxy dated later than the most recent proxy given and mailing it to: |
(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. |
The Company’s Board of Directors is comprised of eleven members. Nine of the eleven directors are elected by the holders of the Common Stock and are designated “Class A/B Directors.” At any time that dividends on the Public Preferred Stock are in arrears and unpaid for three consecutive full semi-annual periods, the holders of the 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 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.
Name | Age | Biographical Information | ||
John B. Wood | 48 | 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. Since January 2008, Mr. Wood has 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 is the brother of Mr. Emmett J. Wood, the Vice President, Marketing, of the Company. | ||
As the Chief Executive Officer of the Company, Mr. Wood provides the Board with not only the knowledge of the 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 stockholders, partners, and vendors resulting from his long tenure with the Company is invaluable to the Board. |
Name | Age | Biographical Information | ||
Bernard C. Bailey | 58 | Chairman and CEO of Paraquis Solutions LLC, a privately held consulting and information technology services firm, since 2006. | ||
Dr. Bailey has significant experience in finance matters and within the Company’s industry. | ||||
David Borland | 64 | 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. |
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. |
Name | Age | Biographical Information | ||
Lieutenant General Bruce R. Harris (USA, Ret.) | 77 | Retired, United States Army Lieutenant General. General Harris was elected to the Board in August 2006. He retired from the United States Army in September of 1989 after more than 33 years of continuous active duty. At the time of his retirement, General Harris was the Director of Information Systems for Command, Control, Communications and Computers in the Office of the Secretary of the Army, Washington, D.C. In that capacity he served as the principal advisor to the Secretary and Chief of Staff of the Army on all aspects of policy, planning, resourcing and acquisition of communications, automation, information management and command and control systems in the United States Army. Since his retirement, General Harris has worked with many of America's leading corporations as a consultant on matters relating to the development of strategic and business plans, resource planning and budget formulation. General Harris is also a director of Hunter Defense Technologies, a privately held company focused on the development of comprehensive solutions to provide shelter, heat, power generation and chem/bio protection for a wide variety of military and homeland security applications. | ||
General Harris has extensive experience with the U.S. Army, including the U.S. Defense Security Service, which is very valuable to the Board and the Company. |
Lieutenant General Charles S. Mahan, Jr. (USA, Ret.) | 65 | 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 Horne Engineering Services, LLC. From July 2005 to July 2006, he was Vice President of Homeland Security and Defense for SAP Public Services, Inc. (a U.S. business unit of the German software giant, SAP AG), where he led both SAP’s Homeland Defense practice and its business development efforts supporting federal, state, and local government organizations. Immediately following his November 2003 retirement from the Army, where he attained the rank of Lieutenant General and served as the Army’s Deputy Chief of Staff for Logistics, General Mahan joined The Home Depot, Inc., a home repair materials company, serving as Senior Director of its Government Solutions Group. General Mahan has been a member of the Board of Directors since August 2006. He currently serves as a director on the board of | ||
General Mahan’s comprehensive experience with the U.S. Army and service with two defense contractors make General Mahan a valuable resource for the Board and management. |
Major General John W. Maluda | 58 | Retired, United States Air Force Major General. | ||
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. |
Name | Age | Biographical Information | ||
Robert J. Marino | 75 | 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. |
Vice Admiral Jerry O. Tuttle | 77 | Retired United States Navy Vice Admiral. Admiral Tuttle was elected to the Board of Directors in August 2006. He retired from the United States Navy in 1993 following a 40-year career that included assignments to numerous attack and fighter squadrons as well as leadership of key information technology programs. Admiral Tuttle is widely regarded as an information technology strategist, having created the Navy’s C41 Joint Operations Tactical System. In 1989, he became Director, Space and Electronic Warfare, an assignment he held until retirement. Since February 2002, he has been President and CEO of J.O.T. Enterprises, an information systems and command, control, communications, intelligence, surveillance and reconnaissance consulting company. Previous executive positions were, from June 2000 to February 2002, as President of REL-TEK Systems & Design (now Savantage Financial Services), an employee-owned software development firm; from 1996 to 2000, as President of ManTech International’s largest subsidiary, ManTech Systems Engineering; and, from 1993 to 1996, as Vice President for business development and chief staff officer with Oracle Government. 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 and continues to provide valuable guidance regarding the U.S. defense industry. |
Name | Age | Biographical Information | ||
Seth W. Hamot | 50 | 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 Public Preferred Stock. Since 1997, Mr. Hamot has been the Managing Member of RRHCM and the owner of RRHI, the corporate predecessor of RRHCM. RRHCM is the investment manager to Costa Brava, whose principal business is to make investments in, buy, sell, hold, pledge and assign securities. Mr. Hamot is also the President of RRH, the general partner of Costa Brava. Prior to 1997, Mr. Hamot was one of the partners of the Actionvest entities. Mr. Hamot is presently a director of Orange 21, Inc. | ||
company. Mr. Hamot was elected pursuant to the Company’s governing documents by the holders of the Public Preferred Stock and his election is not subject to any recommendations for election by the Board. | ||||
Andrew R. Siegel | 43 | 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 Public Preferred Stock. | ||
Mr. Siegel was elected pursuant to the Company’s governing documents by the holders of the Public Preferred Stock and his election is not subject to any recommendations for election by the Board. |
Name | Age | Biographical Information |
Michele Nakazawa | 54 | Executive Vice President, Chief Financial Officer. Ms. Nakazawa joined the Company in March 2004 as Vice President and Controller. Ms. Nakazawa was promoted to Senior Vice President and appointed to serve as CFO in January 2005, and promoted to Executive Vice President in 2008. Ms. Nakazawa has over 20 years experience in finance and accounting. Prior to joining the Company, she held various positions, including CFO of Ubizen, Inc., a U.S. subsidiary of a publicly held Belgian company, from 1999 to 2003; Controller and Treasurer of National Security Analysts, Inc. from 1991 to 1997; and financial analyst for Federal Systems Division of IBM, Inc. from 1983 to 1990. Ms. Nakazawa is a Certified Public Accountant and holds a Masters of Science in Accounting from American University and a Bachelor of Arts in Chemistry from Goucher College. |
Edward L. Williams | 51 | Executive Vice President and Chief Operating Officer. Mr. Williams joined the Company in 1993 as a Senior Vice President responsible for finance, pricing, purchasing, and Defense Contract Audit Agency compliance. In 1994, his responsibilities were expanded to include accounting and business development. In 1996, Mr. Williams was appointed to manage the Company’s networking business unit. In 2000, his responsibilities were expanded to include management of the Company’s operations. Mr. Williams was named Executive Vice President and COO in 2003 and Interim CFO in October 2003. He stepped down as Interim CFO of the Company in January 2005. Prior to joining the Company, Mr. Williams was the CFO for Centel Federal Systems and M/A.com Information Systems, both of which are U.S. Government contractors. Mr. Williams has a Bachelor of Science in Finance from the University of Maryland. |
Robert J. Brandewie | 64 | Senior Vice President, Telos Identity Management Solutions, LLC (“Telos ID”). Mr. Brandewie joined the Company in November 2007 as Senior Vice President of Identity and Security Solutions. He is responsible for directing the Company’s efforts in assisting government organizations in effectively meeting increased security challenges with innovative services and software solutions. Prior to joining the Company, Mr. Brandewie was a Public Sector Solutions group vice president for ActivIdentity Corp., a provider of identity assurance solutions for business and government worldwide, from July 2006 to November 2007, and a director of the Defense Manpower Data Center (“DMDC”) from July 2004 to July 2006. Mr. Brandewie had joined DMDC in 1974 and in his 32 years at DMDC was responsible for the management of a dozen major operational programs. He was an architect of Department of Defense’s Common Access Smart Card system and was responsible for the oversight of the largest and most comprehensive automated personnel database in the department. Mr. Brandewie has a Bachelor of Arts in psychology from the University of Connecticut and a Master of Arts in administrative sciences from Yale University. Mr. Brandewie has received numerous awards, including the Presidential Rank Award of Distinguished Executive (2006) and the Secretary of Defense Medals for Meritorious and Exceptional Civilian Service, respectively. |
Brendan D. Malloy | 46 | Senior Vice President, General Manager, Secure Networks, since 2008. Mr. Malloy joined the Company in 1996, serving initially as a senior account executive before being promoted to director of Department of Defense (“DoD”) Sales, and later to Vice President of DoD Sales. In January 2005, he was appointed Senior Vice President of sales. He currently leads the Secure Networking Solutions organization in support of opportunities in DoD, federal agencies, and the intelligence community, as well as channel relationships through the Telos Partner Program. He held previous sales positions with QMS Federal and Printer Plus. Mr. Malloy is a 1988 graduate of Curry College. |
Richard P. Tracy | 51 | Senior Vice President, Chief Security Officer, Chief Technology Officer. Mr. Tracy joined the Company in October 1986 and held a number of management positions within the Company’s New Jersey operation. In February 1996, he was promoted to Vice President of the Telos information security group and in this capacity established a formidable information security consulting practice. In February 2000, Mr. Tracy was promoted to Senior Vice President for operations and helped launch the Xacta business lines, the Company’s segment focusing on information security. Since that time, Mr. Tracy has pioneered the development of innovative and highly scaleable enterprise risk management technologies that have become industry-leading solutions within the federal government and the financial services verticals. He is the principal inventor listed on four patents for Xacta software. Mr. Tracy assumed the role of Chief Security Officer for Telos and Xacta in 2004 and Chief Technology Officer in 2005. He was President of the Company’s subsidiary, Teloworks, Inc., from 2008 to 2010. |
Name | Age | Biographical Information |
Alvin F. Whitehead | 63 | Senior Vice President, General Manager, Secure Communications, since 2008. Mr. Whitehead joined Telos in 1999 as Vice President of New Business Opportunities, focusing on emerging business areas including Information Security, Secure Messaging and Data Integration. In 2000, he became Vice President, Program Management. Prior to Telos, Mr. Whitehead spent 28 years in the Army, retiring as Chief of Staff of the Defense Information Systems Agency (“DISA”). During his four years as Chief of Staff, he was responsible for coordinating the Agency’s 8000-person staff and its $4.0 billion budget. He was instrumental in establishing the DoD’s Computer Emergency Response Team and integrating it into the Global Network Operations Center. Mr. Whitehead has a Bachelor of Arts from Virginia Polytechnic Institute and State University, and a Master of Public Administration from George Washington University. |
Ralph M. Buona | 56 | Vice President, Business Development. Mr. Buona joined the Company in September 1994 and was promoted to Vice President of Business Development in September 1995, cultivating new business in the areas of information operations/assurance, enterprise management, enterprise integration, wireless networking, advanced messaging, and traditional systems integration. During 2007, he oversaw the Company’s Managed Solutions division, and in 2008 he returned to lead the Company’s business development. Prior to joining the Company, he served with Contel Information Systems, Federal Information Technologies, and Cincinnati Bell Information Systems. Mr. Buona began his career as an Air Force officer and concluded with the Air Force Space Command and NORAD where he was responsible for managing software development and IA activities associated with the advanced early warning missile defense systems. He holds a Bachelor of Science degree in Management from the United States Air Force Academy and a Masters of Science in Systems Management from the University of Southern California. |
David S. Easley | 41 | Vice President, Controller. Mr. Easley joined the Company in April 2005 as Director of Finance & Accounting. In October 2005, Mr. Easley was promoted to Controller. Prior to joining the Company, Mr. Easley held various positions, including Controller, for Applied Predictive Technologies, Inc., a software and consulting company, and Senior Accountant with Beers & Cutler PLLC in Washington, D.C. Mr. Easley is a Certified Public Accountant and holds a Bachelor of Science in Accounting from the University of Kentucky. |
Mark Griffin | 52 | President, General Manager, Telos ID. Mr. Griffin joined the Company in 1984 as program manager. He was promoted to Vice President for the Company’s Traditional Business Division in January 2004 and to Vice President, Identity Management, effective January 2007. He was appointed in April 2007 to head the newly formed Telos ID. Mr. Griffin has over 20 years experience in government IT contracting, materials management and systems integration projects in the electronics and communications fields. He has been involved in day-to-day operations of and has had overall management responsibility for many of Telos’ most critical programs for the Army, Navy, Federal Aviation Administration, DMDC, General Services Administration and Immigration and Naturalization Services. Mr. Griffin holds a Bachelor of Science in Engineering from Virginia Polytechnic Institute and State University. |
Francis M. Masters | 67 | Vice President, Secure Communications. Mr. Masters joined the Company in 1999 as an automated message handling systems engineer and program manager and was appointed Vice President, Secure Messaging Solutions, in October 2005. Before joining Telos, Mr. Masters served in the U.S. Air Force for 20 years as an air intelligence officer, targeting officer and signals intelligence officer. He also has extensive experience as a systems architect and project engineer and served as Vice President of Communications Systems at California Microwave Inc., now the California Microwave Systems division of Northrop Grumman, between February 1987 and July 1999. Mr. Masters earned a Bachelor of Arts in government and economics from the University of North Texas in 1966 and attended the Law School at the University of Houston beginning in 1967. Additionally, he is a graduate of the Air Force School of Applied Cryptologic Sciences and the U.S. Air Force’s Squadron Officer School and Air Command and Staff College. He is a member of the Armed Forces Communications and Electronics Association. |
Rinaldi D. Pisani | 43 | Vice President, Information Assurance. Mr. Pisani joined the Company in 2000 as senior U.S. Army account manager and team lead. He was later promoted to Director of U.S. Army and DoD sales, and then to Vice President of Business Development for Information Assurance. Effective January 2010, Mr. Pisani was appointed to Vice President, Information Assurance. He provides oversight and management for information assurance solutions including Xacta IA Manager, Telos’ IT GRC solution, and IA services offerings for customers in the DoD, federal agencies, and the intelligence community. Prior to joining the Company, Mr. Pisani held several positions with Westwood Computer, leaving as their national government sales manager. Mr. Pisani is a graduate of Georgetown University, with a B.S. in Foreign Service, International Economics. He is a member of the Armed Forces Communications and Electronics Association (AFCEA) and the Association of the United States Army (AUSA). |
Name | Age | Biographical Information |
Emmett J. Wood | 41 | Vice President, Marketing. Mr. Wood joined the Company in 1996 and worked in various roles at Telos and Enterworks, Inc. in both a marketing and business development capacity. He worked on the federal sales team, commercial and partner/channel groups and most recently served as director of commercial and channel sales. In January 2010 he was promoted to Vice President, Marketing. He is responsible for brand management, marketing communications, sponsorships and events, media and analyst relations, government relations, employee communications and corporate community relations. Previously, he also worked in the sales and marketing groups at Dow Jones, Inc. and The Wall Street Journal. Mr. Wood is a graduate of Georgetown University, with a B.A. in political science. Mr. Wood is the brother of Mr. John B. Wood, the President, Chief Executive Officer and Chairman of the Board of the Company. |
Bernard C. Bailey, Chairman | |
William M. Dvoranchik | |
Charles S. Mahan, Jr. |
2011 | 2010 | |||||||
BDO USA, LLP: | ||||||||
Audit fees | $ | 481,000 | $ | 467,000 | ||||
Audit-related fees | ---- | ---- | ||||||
Tax fees (1) | $ | 69,000 | $ | 60,000 | ||||
All other fees | ---- | ---- | ||||||
Total | $ | 550,000 | $ | 527,000 |
· | To attract and retain highly talented and results-oriented executives who are critical to our long-term success and growth; |
· | To align the goals of our key employees, including our named executive officers, with the best interests of the Company; |
· | To reward performance; and |
· | To achieve shareholder value. |
· | Compensation should consist of fixed and at-risk compensation, with the at-risk compensation encouraging improved annual and long-term performance. |
· | Compensation should be a mix of annual and long-term compensation, with the long-term compensation encouraging retention and attainment of long-term performance goals. |
· | Compensation should be a mix of cash and equity, with cash rewarding achievement of goals and equity encouraging retention and long-term performance. Additionally, the Compensation Committee continues to believe in equity ownership by the management team to align the interests of management with our long-term corporate performance. |
Name | 2011 Base Salary | 2010 Base Salary | Increase | Percentage Increase | ||||||||||||
John B. Wood | $ | 560,000 | $ | 560,000 | $ | ---- | ---- | |||||||||
Michele Nakazawa | 325,000 | 325,000 | ---- | ---- | ||||||||||||
Michael P. Flaherty | 350,000 | 350,000 | ---- | ---- | ||||||||||||
Edward L. Williams | 360,000 | 360,000 | ---- | ---- | ||||||||||||
Brendan D. Malloy | 240,000 | 221,179 | 18,821 | 8.5 | % |
Executive Officer | Target Amount | Bonus Paid | ||||||
John B. Wood | $ | 650,000 | $ | 700,000 | ||||
Michele Nakazawa | 225,000 | 275,000 | ||||||
Michael P. Flaherty | 150,000 | 25,000 | ||||||
Edward L. Williams | 275,000 | 300,000 |
Name and Principal Position | Year | Salary | Bonus (1) | Restricted Stock Awards (2) | All Other Compensation (4) | Total | ||||||||||||||||
John B. Wood | 2011 | $ | 560,000 | $ | 700,000 | $ | 7,343 | $ | 29,504 | $ | 1,296,847 | |||||||||||
Chairman, President and CEO | 2010 | 559,092 | 675,000 | ---- | 41,686 | 1,275,778 | ||||||||||||||||
2009 | 535,625 | 575,000 | ---- | 55,977 | 1,166,602 | |||||||||||||||||
Michele Nakazawa | 2011 | 325,000 | 275,000 | 2,148 | 11,867 | 614,015 | ||||||||||||||||
Executive V.P. and CFO | 2010 | 323,675 | 240,000 | ---- | 13,607 | 577,282 | ||||||||||||||||
2009 | 293,750 | 230,000 | ---- | 24,533 | 548,283 | |||||||||||||||||
Michael P. Flaherty(3) | 2011 | 350,000 | 25,000 | 250 | 34,487 | 409,737 | ||||||||||||||||
Former Exec. V.P., General | 2010 | 349,617 | 85,000 | ---- | 35,953 | 470,570 | ||||||||||||||||
Counsel and CAO | 2009 | 341,350 | 175,000 | ---- | 43,916 | 560,266 | ||||||||||||||||
Edward L. Williams | 2011 | 360,000 | 300,000 | 2,540 | 29,987 | 692,527 | ||||||||||||||||
Exec. V.P. and COO | 2010 | 359,633 | 300,000 | ---- | 27,966 | 687,599 | ||||||||||||||||
2009 | 351,750 | 300,000 | ---- | 36,878 | 688,628 | |||||||||||||||||
Brendan D. Malloy | 2011 | 225,100 | 175,500 | 2,250 | 8,223 | 411,073 | ||||||||||||||||
Senior V.P. – Secure Networks | 2010 | 221,179 | 150,000 | ---- | 17,599 | 388,778 | ||||||||||||||||
2009 | 221,729 | 200,000 | ---- | 27,893 | 449,622 |
(1) | Amounts reported in this category relate to payments pursuant to the short-term incentive compensation plan described on pages 18-19 of the Proxy Statement. |
(2) | Represents the grant date fair value of the shares issued under the 2008 Plan. See assumptions made in the valuation of these awards for financial statement reporting purposes in accordance with ASC 718 in Note 1 – Summary of Significant Accounting Policies to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. |
(3) | Effective March 31, 2012, Mr. Flaherty resigned as Executive Vice President, General Counsel, and Chief Administrative Officer of Telos. |
(4) | Amounts presented consist of the following: |
Name | Year | Life Insurance and Long- Term Disability Premiums | Savings Plan Company Match | Golf Club Membership | Total All Other Compensation | |||||||||||||
John B. Wood | 2011 | $ | 10,729 | $ | 4,900 | $ | 13,875 | $ | 29,504 | |||||||||
Michele Nakazawa | 2011 | 6,967 | 4,900 | ---- | 11,867 | |||||||||||||
Michael P. Flaherty | 2011 | 16,087 | 4,900 | 13,500 | 34,487 | |||||||||||||
Edward L. Williams | 2011 | 11,587 | 4,900 | 13,500 | 29,987 | |||||||||||||
Brendan D. Malloy | 2011 | 360 | 3,678 | 4,185 | 8,223 |
Name | All other Stock Awards; Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards | ||||||
John B. Wood | 734,255 | $ | 7,343 | |||||
Michele Nakazawa | 214,750 | 2,148 | ||||||
Michael P. Flaherty | 25,000 | 250 | ||||||
Edward L. Williams | 254,024 | 2,540 | ||||||
Brendan D. Malloy | 225,000 | 2,250 |
Name | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | ||||||
John B. Wood | 550,691 | $ | 5,507 | |||||
Michele Nakazawa | 161,062 | 1,611 | ||||||
Michael P. Flaherty | 18,750 | 188 | ||||||
Edward L. Williams | 190,518 | 1,905 | ||||||
�� | ||||||||
Brendan D. Malloy | 168,750 | 1,688 |
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||
John B. Wood | 1,124,180 | $ | 11,242 | |||||
Michele Nakazawa | 228,750 | 2,288 | ||||||
Michael P. Flaherty | 222,500 | 2,225 | ||||||
Edward L. Williams | 332,256 | 3,323 | ||||||
Brendan D. Malloy | 181,250 | 1,813 |
John B. Wood | Salary Continuation for 24 Months | Accrued and Unused Vacation as of December 31, 2011 | Continuation of Medical/ Welfare Benefits for 24 Months | Cash Equivalent of Company Match to 401(k) for 24 Months | Total | Number of Shares of Restricted Stock That Would Vest | ||||||||||||||||||
Termination without cause | $ | 1,120,000 | $ | 64,615 | $ | 59,917 | $ | 9,800 | $ | 1,254,332 | 550,691 | |||||||||||||
Termination due to disability | 1,120,000 | 64,615 | 59,917 | 9,800 | 1,254,332 | 550,691 | ||||||||||||||||||
Termination due to death | 1,120,000 | 64,615 | 59,917 | 9,800 | 1,254,332 | 550,691 | ||||||||||||||||||
Termination for cause | ---- | 64,615 | ----- | ---- | 64,615 | ---- | ||||||||||||||||||
Voluntary termination | ---- | 64,615 | ----- | ---- | 64,615 | ---- |
Michele Nakazawa | Salary Continuation for 18 Months | Accrued and Unused Vacation as of December 31, 2011 | Continuation of Medical/ Welfare Benefits for 18 Months | Cash Equivalent of Company Match to 401(k) for 18 Months | Total | Number of Shares of Restricted Stock That Would Vest | ||||||||||||||||||
Termination without cause | $ | 487,500 | $ | 31,250 | $ | 37,116 | $ | 7,350 | $ | 563,216 | 161,062 | |||||||||||||
Termination due to disability | 487,500 | 31,250 | 37,116 | 7,350 | 563,216 | 161,062 | ||||||||||||||||||
Termination due to death | 487,500 | 31,250 | 37,116 | 7,350 | 563,216 | 161,062 | ||||||||||||||||||
Termination for cause | ---- | 31,250 | ----- | ---- | 31,250 | ---- | ||||||||||||||||||
Voluntary termination | ---- | 31,250 | ----- | ---- | 31,250 | ---- |
Michael P. Flaherty | Salary Continuation for 18 Months | Accrued and Unused Vacation as of December 31, 2011 | Continuation of Medical/ Welfare Benefits for 18 Months | Cash Equivalent of Company Match to 401(k) for 18 Months | Total | Number of Shares of Restricted Stock That Would Vest | ||||||||||||||||||
Termination without cause | $ | 525,000 | $ | 33,654 | $ | 55,367 | $ | 7,350 | $ | 621,371 | 18,750 | |||||||||||||
Termination due to disability | 525,000 | 33,654 | 55,367 | 7,350 | 621,371 | 18,750 | ||||||||||||||||||
Termination due to death | 525,000 | 33,654 | 55,367 | 7,350 | 621,371 | 18,750 | ||||||||||||||||||
Termination for cause | ---- | 33,654 | ----- | ---- | 33,654 | ---- | ||||||||||||||||||
Voluntary termination | ---- | 33,654 | ----- | ---- | 33,654 | ---- |
Edward L. Williams | Salary Continuation for 18 Months | Accrued and Unused Vacation as of December 31, 2011 | Continuation of Medical/ Welfare Benefits for 18 Months | Cash Equivalent of Company Match to 401(k) for 18 Months | Total | Number of Shares of Restricted Stock That Would Vest | ||||||||||||||||||
Termination without cause | $ | 540,000 | $ | 34,615 | $ | 45,131 | $ | 7,350 | $ | 627,096 | 190,518 | |||||||||||||
Termination due to disability | 540,000 | 34,615 | 45,131 | 7,350 | 627,096 | 190,518 | ||||||||||||||||||
Termination due to death | 540,000 | 34,615 | 45,131 | 7,350 | 627,096 | 190,518 | ||||||||||||||||||
Termination for cause | ---- | 34,615 | ----- | ---- | 34,615 | ---- | ||||||||||||||||||
Voluntary termination | ---- | 34,615 | ----- | ---- | 34,615 | ---- |
Brendan D. Malloy | Salary Continuation for 18 Months | Accrued and Unused Vacation as of December 31, 2011 | Continuation of Medical/ Welfare Benefits for 18 Months | Cash Equivalent of Company Match to 401(k) for 18 Months | Total | Number of Shares of Restricted Stock That would Vest | ||||||||||||||||||
Termination without cause | $ | 360,000 | $ | 18,462 | $ | 28,022 | $ | 7,350 | $ | 413,834 | 168,750 | |||||||||||||
Termination due to disability | 360,000 | 18,462 | 28,022 | 7,350 | 413,834 | 168,750 | ||||||||||||||||||
Termination due to death | 360,000 | 18,462 | 28,022 | 7,350 | 413,834 | 168,750 | ||||||||||||||||||
Termination for cause | ---- | 18,462 | ---- | ---- | 18,462 | ---- | ||||||||||||||||||
Voluntary termination | ---- | 18,462 | ---- | ---- | 18,462 | ---- |
Name | Fees Paid | Stock Awards5 | All Other Compensation | Total | ||||||||||||
Bernard Bailey | $ | 75,000 | $ | 200 | $ | 5,000 | 1 | $ | 80,200 | |||||||
David Borland | 60,000 | 200 | ---- | 60,200 | ||||||||||||
William Dvoranchik | 80,000 | 200 | 5,000 | 1 | 85,200 | |||||||||||
Seth W. Hamot | ---- | ---- | ---- | ---- | ||||||||||||
Bruce Harris | 55,000 | 200 | ---- | 55,200 | ||||||||||||
Charles Mahan | 65,000 | 200 | ---- | 65,200 | ||||||||||||
John W. Maluda | 45,000 | ---- | 100,000 | 2 | 145,000 | |||||||||||
Robert J. Marino | 150,000 | 1 | ---- | 19,330 | 4 | 169,330 | ||||||||||
Andrew R. Siegel | ---- | ---- | ---- | ---- | ||||||||||||
Jerry Tuttle | 60,000 | 200 | ---- | 60,200 | ||||||||||||
John B. Wood | ---- | ---- | ---- | ---- | ||||||||||||
$ | 590,000 | $ | 1,200 | $ | 129,330 | $ | 720,530 |
The table below sets forth information as of September 30, 2011 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 2010 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 | Percent of Class | ||||
Class A Common Stock | Toxford Corporation\ Place de Saint Gervais 1 1211 Geneva Switzerland | 15,801,802 shares (A) | 44.0% | |||
Class A Common Stock | John R.C. Porter Chalet Ty Fano, 2 Chemin d’Amon 1936 Verbier Switzerland | 15,801,802 shares (A) | 44.0% | |||
Class A Common Stock | Telos Corporation Shared Savings Plan 19886 Ashburn Road Ashburn, VA 20147 | 3,658,536 shares | 10.2% | |||
Class A Common Stock | John B. Wood | 4,546,093 shares (B) | 12.7% | |||
Class A Common Stock | Michael P. Flaherty | 897,363 shares (B) | 2.5% | |||
Class A Common Stock | Edward L. Williams | 1,432,099 shares (B) | 4.0% | |||
Class A Common Stock | Michele Nakazawa | 2.6% |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of April 13, 2012 | Percent of Class | |||
Class A Common Stock | Brendan D. Malloy | 731,669 shares (B) | 2.0% | |||
Class A Common Stock | Robert J. Marino | 1.6% |
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 (E) | 0.2% | |||
Class A Common Stock | Andrew R. Siegel | |||||
Class A Common Stock | Jerry O. Tuttle | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | All officers and directors as a group (24 persons) | |||||
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 | 29.4% | ||||
Class B Common Stock | John B. Wood | 194,888 shares | 4.8% | |||
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 (6 persons) | 669,888 shares | 16.6% | |||
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 | 54 shares | 5.8% | |||
Series A-1 Redeemable Preferred Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England | 9.2% |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of April 13, 2012 | Percent of Class | |||
Series A-1 Redeemable Preferred Stock | Toxford Corporation Place de Saint Gervais 1 1211 Geneva Switzerland | 82.7% | ||||
Series A-1 Redeemable Preferred Stock | John R.C. Porter Chalet Ty Fano, 1936 Verbier Switzerland | 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 | 5.8% | ||||
Series A-2 Redeemable Preferred Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England | 9.2% | ||||
Series A-2 Redeemable Preferred Stock | Toxford Corporation Place de Saint Gervais 1 1211 Geneva, Switzerland |
82.7% | ||||||
Series A-2 Redeemable Preferred Stock | John R.C. Porter Chalet Ty Fano, 2 Chemin d’Amon 1936 Verbier Switzerland | 1,069 shares (H) | 82.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | Value Partners, Ltd. Ewing & Partners Ewing Asset Management, LLC Timothy G. Ewing 4514 Cole Avenue, Suite 740 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 (J) | 11.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | Minerva Advisors, LLC David P. Cohen 50 Monument Road, Suite 201 Bala Cynwyd, PA 19004 | |||||
12% Cumulative Exchangeable Redeemable Preferred Stock | Victor Morgenstern Faye Morgenstern Judd Morgenstern Morningstar Trust 106 Vine Avenue Highland Park, IL 60035 | 182,000 shares (L) | 5.7% |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of April 13, 2012 | Percent of Class | ||||
12% Cumulative Exchangeable Redeemable Preferred Stock | Costa Brava Partnership III, LP Roark, Rearden & Hamot, LLC Seth W. Hamot 222 Berkeley Street, 17th Floor Boston, MA 02116 | 405,172 shares (M) | 12.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock | NSB Advisors LLC 200 Westage Center Drive, Suite 228 Fishkill, NY 12524 |
(A) | Includes 15,328,480 shares held directly by Toxford Corporation and 473,322 shares held directly by Mr. Porter. Mr. Porter is the sole stockholder of Toxford Corporation. |
(B) | Includes 40,981, 7,363, 6,669, |
(C) | Includes |
(D) | Mr. Borland holds options to acquire 20,000 shares of the Class A Common Stock, which are exercisable within 60 days of |
(E) | Includes |
(F) | Includes |
(G) | Includes |
(H) | Includes |
(I) | According to the Schedule 13D/A (Amendment No. |
(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. 10) on March 8, 2007 indicating that WCM is the 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 85,400 shares. WPSCVI has the sole voting and dispositive power with respect to 142,800 shares. CP has the sole voting and dispositive power with respect to 13,500 shares. Mr. Obus has the sole voting and dispositive power with respect to 13,500 shares, and shared voting and dispositive power with respect to 360,000 shares. Mr. Landes has shared voting and dispositive power with respect to 360,000 shares. WCM has the sole voting and dispositive power with respect to 274,600 shares. WCI has the sole voting and dispositive power with respect to 85,400 shares. |
(K) |
(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 and dispose of 50,000 shares, and shared power to dispose of 132,000 shares; FM has the sole power to vote 17,000 shares and shared power to dispose 92,000 shares; JM has the sole power to vote 40,000 shares and shared power to dispose 115,000 shares; Jennifer Trust has the sole voting and dispositive power with respect to 25,000 shares; Robyn Trust has the sole voting and dispositive power with respect to 25,000 shares; and Judd Trust has the sole voting and dispositive power with respect to 25,000 shares. |
(M) | According to the Schedule 13D/A (Amendment No. 27) filed on October 29, 2010, by Costa Brava Partnership III L.P., Roark, Rearden & Hamot, LLC, and Seth W. Hamot, the three filers have sole voting and dispositive power with respect to the 405,172 shares. |
(N) | According to the Schedule |
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 62, of the Company’s 2010 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 60 of the Company’s 2010 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 57 of the Company’s 2010 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
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 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.
The 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.
The 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 the Board of Directors amends our Code of Ethics or grants a waiver from its restrictions to the Chief Executive Officer, the Chief Financial Officer, or the Controller, the Company will provide timely notice of such amendment or waiver on its website.
The Company has adopted the director independence standards that 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
The following table provides information as 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;
(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; 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 responsibilityDecember 31, 2011, with respect to risk management. The Boardshares of Directors has delegated primary responsibility for risk oversight and the monitoringCommon Stock that may be issued under certain equity compensation plans.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under plans (excluding securities listed in the first column) | |||||||||
Equity compensation plans approved by security holders: | ||||||||||||
1. 1996 Stock Option Plan | 20,000 | $ | 0.62 | None | ||||||||
2. 2008 Plan | None | N/A | 264,741 | |||||||||
Equity compensation plans not approved by security holders | None | N/A | None |
During the fiscal year ended December 31, 2010, the Board of Directors held nine meetings. Each director attended over 75 percent of the aggregate number of meetings of the Board and the committees of the BoardVote on which he served.
The Company encourages all directors to attend annual meetings of stockholders. Nine directors, namely Messrs. Borland, Dvoranchik, Harris, Mahan, Maluda, Marino, Siegel, Tuttle, and Wood, attendedExecutive Compensation
The Company has standing Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees.
The Audit Committee was established to assistheld on November 14, 2011, the Boardfrequency of Directors in fulfilling its oversight responsibilities for (1) the integritythree years 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. The Audit Committee consists of directors Bailey (chairman), Dvoranchik, and Mahan. In 2010, the Audit Committee met five times. The Board of Directors has adopted an Audit Committee charter which is availablevote 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 Compensation Committee met six times during the year 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 2010, the Nominating Committee 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.
The Nominating 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 the 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, the Company’s CEO, or 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 or to the individual director. There have been no changes in the procedures by which stockholders may recommend nominees to the Company’s board of directors.
Information concerning certain relationships and related party transactions is set forth under Item 13, Certain Relationships and Related Transactions, and Director Independence, of the 2010 Form 10-K, beginning on page 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 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 51, of the 2010 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.
Also 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 51, of the 2010 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.
Information concerning the report of the Audit Committee report is set forth under Item 10, Audit Committee, beginning on page 57 of the 2010 Form 10-K, which is incorporated into this Proxy Statement by reference thereto.
The Audit Committee selected BDO USA, LLP (“BDO”) to serve as the Company’s independent registered public accounting firm for the 2010 fiscal year. BDO has also been selected to serve as the Company’s independent registered public accounting firm for the 2011 fiscal year. Information concerning the Company’s relationship with BDO is set forth under Item 14, Principal Accountant Fees and Services, beginning on page 77 of the 2010 Form 10-K, which is incorporated into this Proxy Statement by reference thereto.
The Company does not expect representatives of BDO 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 2011 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 aboutreceived the fiscal year 2010 compensationhighest number 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, thatvotes cast by the holders of the Company’s Class A and Class B Common Stock approve, on an advisory basis,present in person or represented by proxy at the compensationannual meeting. In light 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-paysuch 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 warranteddecided 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 includeconduct 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.years. 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-paynext vote shouldwill thus 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 importantscheduled 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.
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 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.
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 2010 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 2010 Form 10-K has been mailed to you along with this Proxy Statement.
20