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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the Annual Meeting) of Telos Corporation, a Maryland corporation (the Company), will be held in the auditorium at the Companys headquarters located at 19886 Ashburn Road, Ashburn, Virginia, 20147-2358, on Monday, November 14, 2011 at 12:00 p.m. Eastern Standard Time, for the following purposes:
1. ELECTION OF DIRECTORS: To elect nine Class A/B Directors to the Board of Directors to serve until the 2012 Annual Meeting of Stockholders or until their successors are elected and qualified;
2. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: To ratify the selection of BDO USA, LLP to serve as the Companys independent registered public accounting firm;
3. ADVISORY VOTE ON EXECUTIVE COMPENSATION: To approve, on an advisory basis, the compensation of the Companys 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, 2011 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 Companys 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 Companys 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 Companys 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 20, 2011
This Proxy Statement is furnished by Telos Corporation, a Maryland corporation (Telos or the Company), to the holders of the Companys 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 Companys headquarters located at 19886 Ashburn Road, Ashburn, Virginia 20147-2358 on November 14, 2011, 12:00 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (the 2010 Form 10-K) to all stockholders of record on or about October 20, 2011. On the same date, the proxy card will be mailed to all holders of record of the Companys Common Stock. The Companys 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 20, 2011 together with a Proxy Card (to holders of Common Stock only), the Annual Meeting Notice and the Companys 2010 Form 10-K.
Important notice regarding the availability of proxy materials for the Telos Corporation Annual Meeting of Stockholders to be held on November 14, 2011: The Annual Meeting Notice, this Proxy Statement and the Companys 2010 Form 10-K are available at HTTP://BNYMELLON.MOBULAR.NET/BNYMELLON/TLSRP.
Record Date. The record date for determining the stockholders entitled to vote at the Annual Meeting is September 30, 2011 (Record Date). As of September 30, 2011, there were 35,906,460 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.
Votes. Each holder of Common Stock is entitled to one vote per share of Common Stock held in 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, 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 Common Stock does not instruct its bank, broker, or other nominee how to vote its shares on these matters, no votes will be cast on that beneficial owners behalf. These broker non-votes are counted for purposes of determining whether a quorum is 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
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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 Companys 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.
If any nominations for Class D Directors had been received, holders of the 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 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 Companys headquarters, personal identification will be required for admission to the Annual Meeting.
Revocation of Proxies. A registered holder of the 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; |
(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.
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The Companys 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 Companys 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 Companys 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 Companys 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 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 | 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. Woods 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. |
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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. Mr. Baileys career spans over two decades of management experience in the high technology and security industries. He served most recently from August 2002 to September 2006 as the President and CEO of Viisage Technology, Inc., a leading provider of advanced technology identity solutions. Under his four years of leadership, Viisages market capitalization grew from $60 million to over $1 billion. During that period, the company executed nine acquisitions, eventually culminating in the formation of L1 Identity Solutions, a NYSE listed company. Prior to Viisage, from January 2001 to August 2002, Mr. Bailey served in various executive roles, including COO at Art Technology Group, a leading provider of e-commerce software. From 1984 to 2001, Mr. Bailey held a variety of finance, sales, marketing, and operations positions at IBM, where he also served in executive roles involved in the growth and development of IBM Global Services systems integration and consulting business lines. Mr. Bailey has been a member of the Companys Board of Directors since October 2006. In addition to his duties with Telos, Mr. Bailey serves as a director on the board of Spectrum Control, Inc. (NASDAQ:SPEC), Analogic Corp. (NASDAQ: ALOG), and Identive Group, Inc. (NASDAQ: INVE). Mr. Bailey holds an Advanced Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization. | ||
Mr. Bailey has significant experience in finance matters and within the Companys industry. Mr. Bailey also has served on a number of boards of public companies, and the experience gained by serving on those boards will make him a valuable resource for the Board and the Company. | ||||
David Borland | 63 | 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. Borlands 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. Borlands industry experience and extensive service with the U.S. Army make him a valuable member of the Board of Directors. |
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Name | Age | Biographical Information | ||
William M. Dvoranchik | 65 | Chairman and CEO of Life is Great, LLC, a privately held consulting and services firm, since 2001. Mr. Dvoranchik was elected to the Companys 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. Dvoranchiks senior management experience in the U.S. government sector provides a valuable resource to the Board and the Company. | ||||
Lieutenant General Bruce R. Harris (USA, Ret.) |
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. |
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Name | Age | Biographical Information | ||
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 SAPs 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 Armys 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 Spectrum Control, Inc. (NASDAQ:SPEC) and ONeil and Associates, a privately owned management company. He also serves on the board of advisors for Goldbelt Wolf, a subsidiary of Goldbelt, a tribal-owned Alaskan Native Claims Settlement Act company, and on the board of trustees for the Fisher House Foundation. General Mahan holds a Professional Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization. | ||
General Mahans comprehensive experience with the U.S. Army and service with two defense contractors make General Mahan a valuable resource for the Board and management. |
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Name | Age | Biographical Information | ||
Major General John W. Maluda (USAF, Ret.) |
58 | Retired, United States Air Force Major General. Mr. Maluda was elected to the Board in October 2009. He retired from the United States Air Force in September 2009 after more than 34 years of continuous active duty. At the time of his retirement, General Maluda was Director of Cyberspace Transformation and Strategy, in the Office of the Secretary of the Air Force, and Chief Information Officer. In that capacity, he shaped doctrine, strategy, and policy for communications and information activities and served as the functional advocate for 30,000 personnel. Prior to that, General Maluda was Vice Commander, 8th Air Force, Barksdale Air Force Base, Louisiana. General Maluda enlisted in the Air Force in 1973 and received his commission in 1978 as a distinguished graduate of the ROTC program at Troy State University, Alabama. His career highlights included serving at three major commands, with unified combatant commands, a defense agency, the White House and the Air Staff. General Maludas staff experience included positions at Headquarters U.S. Air Force, Air Combat Command, U.S. Air Force in Europe, Air Force Special Operations Command, U.S. Space Command and the White House Communications Agency. General Maluda holds a Bachelor of Science in Electrical Engineering from Auburn University, a Masters Degree in Systems Management from the University of Southern California, as well as an Advanced Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization. | ||
General Maluda retired from the U.S. Air Force in 2009 and has broad industry insight which makes him a valuable member of the Board of Directors. | ||||
Robert J. Marino | 74 | 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 Companys various business lines. |
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Name | Age | Biographical Information | ||
Vice Admiral Jerry O. Tuttle (USN, Ret.) |
76 | 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 Navys 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 Internationals 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 Companys Proxy Board and continues to provide valuable guidance regarding the U.S. defense industry. |
The Board of Directors of Telos recommends that the Class A/B Director nominees named above be elected by the holders of the Companys Common Stock.
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No Class D Director Nominees. The Company did not receive nominations for Class D Directors. As a result, the terms of Messrs. Hamot and Siegel will continue after the Annual Meeting until their respective successors are elected and qualified.
Name | Age | Biographical Information | ||
Seth W. Hamot | 49 | 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. and chairman of TechTeam Global, Inc., both NASDAQ companies. | ||
Mr. Hamot was elected pursuant to the Companys 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 | 42 | 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 is currently a director of TechTeam Global Inc., a NASDAQ company, and serves as a member of that companys audit committee. Mr. Siegel was a Senior Vice President of RRHCM from 2005 to December 2008. Prior to joining RRHCM, from July 2003 to February 2004, Mr. Siegel was a member of DebtTraders Ltd. Prior to that, from 2000 to 2002, he worked for Deutsche Bank Securities. In addition, in 2002 he was the founding member of White Bay Capital Management, LLC, of which he remains a member. Mr. Siegel received a Bachelors Degree from American University and a Masters Degree in Business Administration from the University of Maryland. | ||
Mr. Siegel was elected pursuant to the Companys governing documents by the holders of the Public Preferred Stock and his election is not subject to any recommendations for election by the Board. |
If the Company had received nominations for Class D Directors, holders of the Public Preferred Stock would have been eligible to vote at the Annual Meeting on the election of Class D Directors and on no other matter before the Annual Meeting.
The table below sets forth information as of September 30, 2011 concerning persons known by the Company to be beneficial owners of more than 5% of any class of the Companys voting securities, as well as concerning each class of equity securities of the Company beneficially owned by all directors and nominees, each
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of the officers listed in the Summary Compensation Table included under Item 11, Executive Compensation Summary Compensation Table, of the Companys 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 September 30, 2011 |
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, 2Chemin dAmon 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 B Common Stock | Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England |
1,681,960 shares | 41.7% | |||
Class B Common Stock | Graphite Enterprise Trust LP Berkley Square House, 4th Floor London W1J 6BQ England |
420,490 shares | 10.4% | |||
Class B Common Stock | North Atlantic Smaller Companies Investment Trust PLC c/o North Atlantic Value LLP Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB England |
1,186,720 shares | 29.4% | |||
Class B Common Stock | John B. Wood | 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 (24 persons) |
619,888 shares | 15.4% | |||
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 | 916,895 shares (B) | 2.6% | |||
Class A Common Stock | Brendan D. Malloy | 731,669 shares (B) | 2.0% | |||
Class A Common Stock | Robert J. Marino | 589,682 shares (B) | 1.6% |
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Title of Class | Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership as of September 30, 2011 |
Percent of Class | |||
Class A Common Stock | Bernard C. Bailey | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | David Borland | 120,000 shares (C)(D) | 0.3% | |||
Class A Common Stock | William M. Dvoranchik | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | Seth W. Hamot | | | |||
Class A Common Stock | Bruce R. Harris | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | Charles S. Mahan, Jr. | 100,000 shares (C) | 0.3% | |||
Class A Common Stock | John W. Maluda | 80,000 shares (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) |
12,013,977 shares (F) | 33.4% | |||
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 |
69 shares | 5.8% | |||
Series A-1 Redeemable Preferred Stock |
Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England |
109 shares | 9.2% | |||
Series A-1 Redeemable Preferred Stock |
Toxford Corporation Place de Saint Gervais 1 1211 Geneva Switzerland |
983 shares (G) | 82.7% | |||
Series A-1 Redeemable Preferred Stock |
John R.C. Porter Chalet Ty Fano, 2Chemin dAmon 1936 Verbier Switzerland |
983 shares (G) | 82.7% | |||
Series A-2 Redeemable Preferred Stock |
North Atlantic Smaller Companies Investment Trust PLC c/o North Atlantic Value LLP Ground Floor, Ryder Court 14 Ryder Street London SW1Y 6QB England |
97 shares | 5.8% | |||
Series A-2 Redeemable Preferred Stock |
Graphite Enterprise Trust PLC Berkley Square House, 4th Floor London W1J 6BQ England |
153 shares | 9.2% | |||
Series A-2 Redeemable Preferred Stock |
Toxford Corporation Place de Saint Gervais 1 1211 Geneva, Switzerland |
1,376 shares (H) | 82.7% |
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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 dAmon 1936 Verbier Switzerland |
1,376 shares (H) | 82.7% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock |
Value Partners, Ltd. 4514 Cole Avenue, Suite 740 Dallas, TX 75205 |
356,798 shares (I) | 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 (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 (K) | 5.1% | |||
12% Cumulative Exchangeable Redeemable Preferred Stock |
Victor Morgenstern Faye Morgenstern Judd Morgenstern Morningstar Trust Faye Morgenstern Trustee 106 Vine Avenue Highland Park, IL 60035 |
182,000 shares (L) | 5.7% | |||
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, #228 Fishkill, NY 12524 |
623,927 shares (N) | 19.6% |
(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. |
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(B) | Includes 40,981, 7,363, 6,669, 27,630, 32,099, and 1,895 shares of the Class A Common Stock held for the benefit of Messrs. Wood, Flaherty, Malloy, Marino and Williams, and Ms. Nakazawa, respectively, by the Telos Corporation Shared Savings Plan. Also includes 550,691, 18,750, 168,750, 190,518, and 161,062 restricted shares of the Class A Common Stock held by Messrs. Wood, Flaherty, Malloy, and Williams, and Ms. Nakazawa, respectively, 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 the Class A Common Stock, which are exercisable within 60 days of September 30, 2011. |
(E) | Includes 40,000 restricted shares of the Class A Common Stock granted under the 2008 Omnibus Long-Term Incentive Plan. |
(F) | Includes 195,913 shares of the Class A Common Stock held for the benefit of the executive officers by the Telos Corporation Shared Savings Plan, and 1,616,333 restricted shares of the Class A Common Stock issued under the 2008 Omnibus Long-Term Incentive Plan. |
(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. E&P, as the general partner of VP, may direct the vote and disposition of the shares of Public Preferred Stock held by VP. Mr. Ewing and EAM, as the partners of E&P, may be deemed to have the power to direct the vote and disposition of the shares of Public Preferred Stock held by VP. |
(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) | 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 shared voting and dispositive power with respect to 110,146 shares, MG has the sole voting and dispositive power with respect to 45,143 shares, and Mr. Cohen has sole voting and dispositive power with respect to 7,433 shares. |
(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. |
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(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 13G filed on April 1, 2011, by NSB Advisors LLC, the filer has sole voting and dispositive power with respect to the 623,927 shares. |
Information concerning Section 16(a) beneficial ownership reporting compliance for the Companys directors, executive officers and persons who own more than 10 percent of the Companys Common Stock is set forth in the subsection entitled Section 16(a) Beneficial Ownership Reporting Compliance of Item 10, page 62, of the Companys 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 Companys current executive officers is set forth under Item 10, Directors, Executive Officers and Corporate Governance, beginning on page 60 of the Companys 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 Companys 2010 Form 10-K, which is incorporated by reference into this Proxy Statement. Information concerning the Companys Proxy Board is set forth under Item 11, Executive Compensation, beginning on page 63 of the Companys 2010 Form 10-K.
John B. Wood is both the Chairman of the Board of Directors and the Chief Executive Officer of the Company. The Companys 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 Companys 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 Companys stockholders because of Mr. Woods long tenure with the Company, including as the Chief Executive Officer, and his broad knowledge and experience with the Companys 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 at www.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 Companys 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
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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 recipients consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the Companys 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 Companys outside auditor, or was a partner or employee of the Companys outside auditor who worked on the Companys 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 Companys 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 Companys directors, the Board of Directors considered transactions between the Company and any entity on whose board of directors one of the Companys 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 Maludas exercise of independent judgment in carrying out his responsibilities as a director.
As part of its general responsibility to manage the Companys 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 Companys significant areas of risk to the Audit Committee. In accordance with its charter, the Audit Committee discusses with management the Companys major policies with respect to risk assessment and risk management. The Audit Committee regularly reports the results of these discussions to the Board of Directors.
During the fiscal year ended December 31, 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 Board 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, attended the Companys annual meeting of stockholders in 2010.
The Company has standing Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees.
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The Audit Committee was established to assist the Board of Directors in fulfilling its oversight responsibilities for (1) the integrity of the Companys financial statements, (2) the Companys compliance with legal and regulatory requirements, (3) the independent registered public accounting firms qualifications and independence, and (4) the performance of the Companys 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 available on the Companys website at www.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 Companys 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 Companys website at www.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 Companys website at www.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 Companys 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 Companys 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 Companys secretary at the Companys principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding years 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 candidates 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
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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 candidates 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 Companys nomination process.
If the initial candidate review is satisfactory, the Nominating Committee will arrange an introductory meeting with the candidate and the committees chairman, the Companys CEO, or other directors to determine the potential candidates 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 candidates name to the Board of Directors for nomination as a director and inclusion in the Companys 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 Companys 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 Companys 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 Companys 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.
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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 Companys independent registered public accounting firm for the 2010 fiscal year. BDO has also been selected to serve as the Companys independent registered public accounting firm for the 2011 fiscal year. Information concerning the Companys 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 Companys 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 Companys 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 Companys compensation program is designed to support the achievement of the Companys 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 Companys executive compensation program, including information about the fiscal year 2010 compensation of the Companys named executive officers.
The Board of Directors is asking the holders of the Companys Common Stock to indicate their support for the compensation of the Companys 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 Companys named executive officers. This vote is not intended to address any specific item of compensation but rather the overall compensation of the Companys 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 Companys Class A and Class B Common Stock approve, on an advisory basis, the compensation of the named executive officers as disclosed in the companys Annual Report
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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 Companys 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 Companys 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 Companys 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 Boards 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys named executive officers more or less frequently than the preference indicated by this vote, including, for example, due to changes in executive compensation policies, practices and plans or discussions with stockholders.
The Board of Directors of Telos recommends a vote FOR the option Every Three Years for the frequency of future advisory votes on executive compensation.
Stockholders who wish to have proposals for the Companys 2012 Annual Meeting included in the proxy materials for such meeting must submit these proposals to the Company on or prior to June 22, 2012. All other proposals must be submitted in accordance with the process set forth in the Companys 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 Companys secretary at the Companys principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding years 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
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60th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.
Neither the Board of Directors nor management intends to bring any matter for action at the Annual Meeting of Stockholders other than those matters described above. If any other matter or any proposal should be presented and should properly come before the meeting for action, the persons named in the accompanying proxy will vote upon such matter and upon such proposal in accordance with their best judgment.
We have elected to incorporate by reference certain information into this Proxy Statement. By incorporating by reference, we can disclose important information to you by referring you to another document that we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this Proxy Statement, except for information incorporated by reference that is superseded by information contained in this Proxy Statement. This Proxy Statement incorporates by reference information from the following sections of the Companys 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 Companys 2010 Form 10-K has been mailed to you along with this Proxy Statement.
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