SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 5)*
TELOS CORPORATION
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(Name of Issuer)
12% Cumulative Exchangeable Redeemable Preferred Stock, $.01 par value
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(Title of Class of Securities)
8796B200
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(CUSIP Number)
Andrew R. Siegel
Costa Brava Partnership III, LP
237 Park Avenue, Suite 800
New York, New York 10017
(212) 692-6395
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 20, 2005
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the Notes)
Page 2 of 12
SCHEDULE 13D
CUSIP NO. 8796B200
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Costa Brava Partnership III, LP
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 506,811
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 506,811
WITH --------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
506,811
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 12
SCHEDULE 13D
CUSIP NO. 8796B200
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Roark, Rearden & Hamot, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 506,811
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH --------------------------------------------
10 SHARED DISPOSITIVE POWER
506,811
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
506,811
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 12
SCHEDULE 13D
CUSIP NO. 8796B200
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Seth W. Hamot
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 506,811
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH --------------------------------------------
10 SHARED DISPOSITIVE POWER
506,811
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
506,811
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 12
SCHEDULE 13D
CUSIP NO. 8796B200
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
White Bay Capital Management, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 506,811
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH --------------------------------------------
10 SHARED DISPOSITIVE POWER
506,811
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
506,811
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 6 of 12
SCHEDULE 13D
CUSIP NO. 8796B200
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Andrew R. Siegel
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 14,476
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 506,811
EACH --------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 14,476
WITH --------------------------------------------
10 SHARED DISPOSITIVE POWER
506,811
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
521,287
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 7 of 12
AMENDMENT NO. 5 to SCHEDULE 13D
This amendment ("Amendment No. 5") amends the Schedule 13D previously
filed on March 25, 2005, and amended by Amendment No. 1 filed on May 9, 2005 and
further amended by Amendment No. 2 filed on June 6, 2005, and further amended by
Amendment No. 3 filed on July 13, 2005, and further amended by Amendment No. 4
filed on September 13, 2005 (collectively, the "Schedule"), by Costa Brava
Partnership III, LP ("Costa Brava"), Roark, Rearden & Hamot, LLC ("Roark"), Seth
W. Hamot ("Hamot"), White Bay Capital Management, LLC ("White Bay"), and Andrew
R. Siegel ("Siegel") with the Securities and Exchange Commission with respect to
the 12% Cumulative Exchangeable Redeemable Preferred Stock, $0.01 par value
("Redeemable Preferred Stock") of Telos Corporation, a Maryland corporation (the
"Issuer"). All defined terms refer to terms defined herein or in the Schedule.
This Amendment No. 5 speaks only as of its date. Costa Brava, Roark, Mr. Hamot,
White Bay and Mr. Siegel are collectively referred to herein as the "Reporting
Persons". The Schedule is amended only to the extent set forth below:
ITEM 4 PURPOSE OF TRANSACTION
Item 4. Purpose of Transaction appearing in the Schedule is hereby
amended and supplemented to add the following:
On September 20, 2005, Roark, as General Partner of Costa Brava, sent a
letter to Mr. Joel Flax of Goodman & Company, LLP, the Issuer's
independent auditors ("Goodman"), regarding the Issuer's election of
SFAS 6, "Classification of Short-Term Obligations Expected to be
Refinanced" with respect to the Redeemable Preferred Stock. A copy of
the letter to Mr. Flax is attached hereto as Exhibit 99.3. Roark notes
that the Prospectus referred to in the letter was filed with the SEC
under file number 33-31671.
As of the date of this Amendment No. 5, except as otherwise set forth
in the Schedule, none of the Reporting Persons has any present plan or
intention which may result in, or relate to, any of the actions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 7 MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Joint Filing Agreement
Exhibit 99.1 Letter dated May 3, 2005 to the Committee of
Independent Directors of the Board of Directors of the
Issuer*
Exhibit 99.2 Costa Brava Letter dated June 30, 2005*
Exhibit 99.3 Letter dated September 20, 2005 to Mr. Joel Flax,
Partner in Charge, Goodman & Company, LLP
*Filed with an earlier version of this Schedule 13D.
Page 8 of 12
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 5 to the Schedule
13D is true, complete and correct.
Dated: September 26, 2005 COSTA BRAVA PARTNERSHIP III, LP
By: Roark, Rearden & Hamot, LLC
Its General Partner
By: /s/ SETH W. HAMOT
------------------------------------
Name: Seth W. Hamot
Title: Manager
ROARK, REARDEN & HAMOT, LLC
By: /s/ SETH W. HAMOT
------------------------------------
Name: Seth W. Hamot
Title: Manager
/s/ SETH W. HAMOT
-----------------------------------------
Seth W. Hamot
WHITE BAY CAPITAL MANAGEMENT, LLC
By: /s/ ANDREW R. SIEGEL
------------------------------------
Name: Andrew R. Siegel
Title: Manager
/s/ ANDREW R. SIEGEL
-----------------------------------------
Andrew R. Siegel
Page 9 of 12
EXHIBIT INDEX
-------------
Exhibit 1 Joint Filing Agreement, dated as of September 26, 2005.
Exhibit 99.1 Letter dated May 3, 2005 to the Committee of Independent
Directors of Board of Directors of the Issuer*
Exhibit 99.2 Costa Brava Letter dated June 30, 2005*
Exhibit 99.3 Letter dated September 20, 2005 to Mr. Joel Flax, Partner in
Charge, Goodman & Company, LLP
* Filed with an earlier version of this Schedule 13D.
Page 10 of 12
EXHIBIT 1 - JOINT FILING STATEMENT
Pursuant to Rule 13d-1(k)(1), we, the undersigned, hereby express our
agreement that the Amendment No. 5 to Schedule 13D for Telos Corporation is
filed on behalf of each of us. This agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Dated: September 26, 2005 COSTA BRAVA PARTNERSHIP III, LP
By: Roark, Rearden & Hamot, LLC
Its General Partner
By: /s/ SETH W. HAMOT
------------------------------------
Name: Seth W. Hamot
Title: Manager
ROARK, REARDEN & HAMOT, LLC
By: /s/ SETH W. HAMOT
------------------------------------
Name: Seth W. Hamot
Title: Manager
/s/ SETH W. HAMOT
-----------------------------------------
Seth W. Hamot
WHITE BAY CAPITAL MANAGEMENT, LLC
By: /s/ ANDREW R. SIEGEL
------------------------------------
Name: Andrew R. Siegel
Title: Manager
/s/ ANDREW R. SIEGEL
-----------------------------------------
Andrew R. Siegel
Page 11 of 12
EXHIBIT 99.3
Letter dated September 20, 2005 to
Mr. Joel Flax, Partner in Charge, Goodman & Company, LLP
September 20, 2005
Mr. Joel Flax
Partner in Charge
Goodman & Company, LLP
One Commercial Place
Norfolk, VA 23510-2119
VIA FEDEX
Re: Telos Corporation
Dear Mr. Flax:
As you may be aware, Costa Brava Partnership III, L.P. ("CBIII") is a
significant holder of Telos' 12% Exchangeable Redeemable Preferred Stock (the
"Security").
CBIII has conducted a thorough review of Telos' Form 10-K for the fiscal year
ended 2004 and its Form 10-Q for the quarters ended March 2005 and June 2005.
Your firm acts as Telos' Independent Registered Public Accounting Firm and
rendered an unqualified audit opinion in the 2004 10-K.
CBIII would appreciate your assistance in understanding your firm's audit
opinion on Telos' election of SFAS 6 - Statement of Financial Accounting
Standards No. 6: Classification of Short-Term Obligations Expected to be
Refinanced.
As you know, Telos made this election in the 10-K and in the 10-Q's in regard to
the short-term obligation of Telos to conduct the mandatory redemption of the
Security. Furthermore, Telos stated that its compliance with the requirements of
SFAS 6 is its intent and ability to exchange the Security for 12% Junior
Subordinated Debentures.
As stated in Telos' 1989 Proxy Statement / Prospectus (the "Prospectus"), the
Debentures cited in the 10-K and 10-Q's have the identical mandatory redemption
terms as the Security. A copy of the Prospectus in enclosed for your reference.
As stated on page 81:
"On the first interest payment date after the sixteenth
anniversary [December 1, 2005] of the Effective Date [of the
C3 Inc. merger]...the Company will be required to redeem 20%
of the greatest principal amount of the Exchange Debentures
outstanding......"
It is clear that the first mandatory redemption of the Debentures is, in fact,
December 1, 2005.
Furthermore, the mandatory redemption terms of the Security are set forth on
page 77 of the Prospectus:
Page 12 of 12
"Mandatory annual redemptions ...will commence on [December
1, 2005] and will continue thereafter...following each
subsequent anniversary of the Effective Date at a price of
$10, together with all accrued and unpaid dividends...The
number of shares to be mandatorily redeemed ...shall be equal
to at least 20%....issued and outstanding at any time..."
It is clear to CBIII that the respective mandatory redemption terms of the
Security and the Debentures are identical. Additionally, and most importantly,
there is no provision in the terms of the Security that permits the satisfaction
of the mandatory redemption obligation through an exchange into Exchange
Debentures.
In view of the aforementioned terms of the Security and the Exchange Debentures,
the election of SFAS 6 appears to be abusive.
While the managers of CBIII are knowledgeable in financial accounting matters,
CBIII is very unclear on the legitimacy of Telos' SFAS 6 election and your
firm's unqualified audit opinion thereof.
We would appreciate your assistance in providing clarity on this matter. Thank
you.
Sincerely,
/s/ ANDREW SIEGEL
- -----------------------------
Andrew Siegel
Roark, Rearden & Hamot LLC,
the general partner of Costa Brava Partnership III, L.P.
enc: C3, Inc. 1989 Proxy Statement / Prospectus