SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 19)*
TELOS CORPORATION
----------------------------------------------------------------------
(Name of Issuer)
12% Cumulative Exchangeable Redeemable Preferred Stock, $.01 par value
----------------------------------------------------------------------
(Title of Class of Securities)
8796B200
----------------------------------------------------------
(CUSIP Number)
Andrew R. Siegel
Costa Brava Partnership III, LP
237 Park Avenue, Suite 900
New York, New York 10017
(212) 692-6395
----------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 5, 2007
----------------------------------------------------------------------
(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 19
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
SHARES 506,811
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 0
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
506,811
---------------------------------------------------
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 19
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
SHARES 0
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 506,811
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
---------------------------------------------------
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 19
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
SHARES 0
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 506,811
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
---------------------------------------------------
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 19
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
SHARES 0
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 506,811
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
---------------------------------------------------
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 19
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
SHARES 14,476
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 506,811
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
14,476
---------------------------------------------------
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 19
AMENDMENT NO. 19 to SCHEDULE 13D
This amendment ("Amendment No. 19") 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, and further amended by Amendment
No. 5 filed on September 26, 2005, and further amended by Amendment No. 6 filed
on October 18, 2005, and further amended by Amendment No. 7 filed on November
14, 2005, and further amended by Amendment No. 8 filed on December 29, 2005, and
further amended by Amendment No. 9 filed on January 13, 2006, and further
amended by Amendment No. 10 filed on February 9, 2006, and further amended by
Amendment No. 11 filed on June 2, 2006, and further amended by Amendment No. 12
filed on February 8, 2007, and further amended by Amendment No. 13 filed on
February 16, 2007, and further amended by Amendment No. 14 filed on March 7,
2007, and further amended by Amendment No. 15 filed on July 20, 2007, and
further amended by Amendment No. 16 filed on July 26, 2007, and further amended
by Amendment No. 17 filed on August 3, 2007, and further amended by Amendment
No. 18 filed on September 5, 2007 (collectively, the "Schedule"), by Costa Brava
Partnership III, LP ("Costa Brava"), Roark, Rearden & Hamot, LLC ("Roark"), Seth
W. Hamot ("Mr. Hamot"), White Bay Capital Management, LLC ("White Bay"), and
Andrew R. Siegel ("Mr. 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. 19 speaks only as of its date. Costa Brava,
Roark, Mr. Hamot, White Bay and Mr. Siegel are collectively referred to herein
as the "Costa Brava 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:
Messrs. Hamot and Siegel previously filed a Motion for Temporary
Restraining Order asking the Circuit Court for Baltimore City in the
State of Maryland to direct the Issuer to permit Messrs. Hamot and
Siegel to examine and make copies of certain books and records of the
Issuer, a copy of which is attached to an earlier version of this
Schedule 13D as Exhibit 99.22 (the "August 2007 Motion for Temporary
Restraining Order"). On September 5, 2007, Director Hamot sent an email
to certain members of the Board of Directors of the Issuer, a copy of
which is attached as Exhibit 99.25 (the "9/5/07-A Email"), having
attached to it a Preliminary Injunction issued on August 28, 2007 (the
"August 2007 Preliminary Injunction") from which the August 2007 Motion
for Temporary Restraining Order was converted. The August 2007
Preliminary Injunction ordered that the Issuer respond to all
reasonable requests by Messrs. Hamot and Siegel for information
pertinent and necessary to perform their duties as members of the Board
of Directors of the Issuer. The Court did not alter the status of a
related stipulation and protective order, as discussed in the August
2007 Preliminary Injunction.
In connection with his service as a Class D Director of the Issuer, Mr.
Hamot delivered a letter to Director Bailey of the Issuer concerning
the independence of Director Bailey, Chairman of the Issuer's
independent Audit Committee and formerly the CEO of Viisage Technology
Inc., a copy of which is attached to an earlier version of this
Schedule 13D as Exhibit 99.24.
On September 5, 2007, Director Harris responded via email to Director
Hamot's specific concerns about Director Bailey's independence and his
role on the Audit Committee (the "9/5/07-B Email").
Page 8 of 19
On September 7, 2007, in further commenting on the independence of
Director Bailey, Director Hamot replied to the 9/5/07-B Email, copying
certain members of the Board of Directors of the Issuer and containing
certain attachments, a copy of which (without the attachments thereto)
is attached as Exhibit 99.26 (the "9/7/07 Email"). Director Hamot's
reply also addressed the recent filing of the Issuer's non-compliant
Form 10-Q for the quarter ended June 30, 2007 in violation of
Regulation S-X.
As of the date of this Amendment No. 19, except as set forth above, and
in the 9/5/07-A Email and the 9/7/07 Email, including any attachments
thereto, and as otherwise set forth in the Schedule, none of the Costa
Brava Reporting Persons has any present plans or intentions which would
result in or relate to any of the transactions described in
subparagraphs (a) through (j) of Item 4 of the instructions to Schedule
13D.
Page 9 of 19
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*
Exhibit 99.4 Complaint filed in the Circuit Court for Baltimore City in
the State of Maryland on October 17, 2005*
Exhibit 99.5 Goodman Letter dated November 11, 2005*
Exhibit 99.6 Form of Warner Stevens Audit Committee Demand Letter dated
December 27, 2005*
Exhibit 99.7 Form of Warner Stevens Board Demand Letter dated December
27, 2005*
Exhibit 99.8 Form of Warner Stevens CEO/CFO Demand Letter dated December
27, 2005*
Exhibit 99.9 Owsley Letter dated December 27, 2005*
Exhibit 99.10 Motion for Judgment filed in the Circuit Court of the
County of Fairfax in the State of Virginia on December 28, 2005*
Exhibit 99.11 Motion for Preliminary Injunction filed in the Circuit
Court for Baltimore City in the State of Maryland on May 26,
2006*
Exhibit 99.12 Memorandum of Points and Authorities in Support of Motion
for Preliminary Injunction filed in the Circuit Court for
Baltimore City in the State of Maryland on May 26, 2006 (without
the exhibits thereto)*
Exhibit 99.13 Letter dated February 7, 2007 to the Corporate Secretary of
the Issuer*
Exhibit 99.14 Motion for Preliminary Injunction filed in the Circuit
Court for Baltimore City in the State of Maryland on February 15,
2007*
Exhibit 99.15 Memorandum of Points and Authorities in Support of Motion
for Preliminary Injunction filed in the Circuit Court for
Baltimore City in the State of Maryland on February 15, 2007
(without the exhibits thereto)*
Exhibit 99.16 Second Amended Complaint filed in the Circuit Court for
Baltimore City in the State of Maryland on February 27, 2007*
Exhibit 99.17 Nominating Letter dated March 1, 2007*
Exhibit 99.18 Letter dated July 18, 2007 to the Corporate Secretary of
the Issuer*
Exhibit 99.19 Letter dated July 26, 2007 to the Chief Financial Officer
of the Issuer*
Exhibit 99.20 Letter dated July 26, 2007 to the V.P., Corporate Counsel &
Secretary of the Issuer*
Exhibit 99.21 Complaint filed in the Circuit Court for Baltimore City in
the State of Maryland on August 2, 2007 (without the exhibits
thereto)*
Exhibit 99.22 Motion for Temporary Restraining Order filed in the Circuit
Court for Baltimore City in the State of Maryland on August 2,
2007*
Exhibit 99.23 Memorandum of Points and Authorities in Support of Motion
for Temporary Restraining Order filed in the Circuit Court for
Baltimore City in the State of Maryland on August 2, 2007*
Exhibit 99.24 Independence Letter dated August 18, 2007 to Director
Bailey of the Issuer*
Exhibit 99.25 Email dated September 5, 2007 from Director Hamot to
certain members of the Board of Directors of the Issuer
Exhibit 99.26 Email dated September 7, 2007 from Director Hamot to
Director Harris, copying certain members of the Board of
Directors of the Issuer
* Filed with an earlier version of this Schedule 13D.
Page 10 of 19
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 19 to the Schedule
13D is true, complete and correct.
Dated: September 13, 2007
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 19
EXHIBIT INDEX
-------------
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*
Exhibit 99.4 Complaint filed in the Circuit Court for Baltimore City in
the State of Maryland on October 17, 2005*
Exhibit 99.5 Goodman Letter dated November 11, 2005*
Exhibit 99.6 Form of Warner Stevens Audit Committee Demand Letter dated
December 27, 2005*
Exhibit 99.7 Form of Warner Stevens Board Demand Letter dated December
27, 2005*
Exhibit 99.8 Form of Warner Stevens CEO/CFO Demand Letter dated December
27, 2005*
Exhibit 99.9 Owsley Letter dated December 27, 2005*
Exhibit 99.10 Motion for Judgment filed in the Circuit Court of the
County of Fairfax in the State of Virginia on December 28, 2005*
Exhibit 99.11 Motion for Preliminary Injunction filed in the Circuit
Court for Baltimore City in the State of Maryland on May 26,
2006*
Exhibit 99.12 Memorandum of Points and Authorities in Support of Motion
for Preliminary Injunction filed in the Circuit Court for
Baltimore City in the State of Maryland on May 26, 2006 (without
the exhibits thereto)*
Exhibit 99.13 Letter dated February 7, 2007 to the Corporate Secretary of
the Issuer*
Exhibit 99.14 Motion for Preliminary Injunction filed in the Circuit
Court for Baltimore City in the State of Maryland on February 15,
2007*
Exhibit 99.15 Memorandum of Points and Authorities in Support of Motion
for Preliminary Injunction filed in the Circuit Court for
Baltimore City in the State of Maryland on February 15, 2007
(without the exhibits thereto)*
Exhibit 99.16 Second Amended Complaint filed in the Circuit Court for
Baltimore City in the State of Maryland on February 27, 2007*
Exhibit 99.17 Nominating Letter dated March 1, 2007*
Exhibit 99.18 Letter dated July 18, 2007 to the Corporate Secretary of
the Issuer*
Exhibit 99.19 Letter dated July 26, 2007 to the Chief Financial Officer
of the Issuer*
Exhibit 99.20 Letter dated July 26, 2007 to the V.P., Corporate Counsel &
Secretary of the Issuer*
Exhibit 99.21 Complaint filed in the Circuit Court for Baltimore City in
the State of Maryland on August 2, 2007 (without the exhibits
thereto)*
Exhibit 99.22 Motion for Temporary Restraining Order filed in the Circuit
Court for Baltimore City in the State of Maryland on August 2,
2007*
Exhibit 99.23 Memorandum of Points and Authorities in Support of Motion
for Temporary Restraining Order filed in the Circuit Court for
Baltimore City in the State of Maryland on August 2, 2007*
Exhibit 99.24 Independence Letter dated August 18, 2007 to Director
Bailey of the Issuer*
Exhibit 99.25 Email dated September 5, 2007 from Director Hamot to
certain members of the Board of Directors of the Issuer
Exhibit 99.26 Email dated September 7, 2007 from Director Hamot to
Director Harris, copying certain members of the Board of
Directors of the Issuer
* Filed with an earlier version of this Schedule 13D*
Page 12 of 19
EXHIBIT 1 - JOINT FILING STATEMENT
Pursuant to Rule 13d-1(k)(1), we, the undersigned, hereby express our
agreement that the Amendment No. 19 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 13, 2007
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 13 of 19
Exhibit 99.25
Email dated September 5, 2007 from Director Hamot to certain
members of the Board of Directors of the Issuer
Attached you will find a court order issued on August 28th. You'll note that my
request for a Temporary Restraining Order has been granted and converted to a
Preliminary Injunction preventing the Corporation's continued refusal to remit
to me the documents necessary for me to perform my duties as a director.
As of this morning, Telos has not provided any of the requested minutes of the
Audit Committee meetings for the periods since Director Bailey became Chair
thirteen months ago. Additionally, Telos has provided no further details of
Director Bailey's "independence" as specified in NASD Rule 4200 (a) (15). You
will recall that I requested such during the August 9th 2007 telephonic Board of
Directors meeting. As you are aware, having received no further evidence of
Director Bailey's independence, on August 18, 2007 I sent an email specifying my
exact concerns with Director Bailey's past employment and his position on the
Audit Committee.
Hence, now several months have past since my request for Audit Committee minutes
and significantly important ones have still not been provided. Similarly, almost
a month has past since I questioned Bailey's independence, and not a single
effort has been made to detail how this determination was made. At this juncture
I must insist that the Board hire independent counsel to review Director
Bailey's independence and discuss such with the NASD if necessary. If he is
found to lack such, I would expect that Telos would have to notify the SEC that
the 10Q's of 2006's third and forth quarter, 2007's first and second quarter,
and the 10K of 2006, were not reviewed and approved by an independent audit
committee as mandated for public companies in the Sarbanes-Oxley Act.
Attachment to 9/5/07-A Email
----------------------------
- --------------------------------------------
SETH W. HAMOT and ANDREW R. IN THE
SIEGEL
CIRCUIT COURT
Plaintiffs
FOR
v.
BALTIMORE CITY
TELOS CORPORATION
Part 20
Defendant
Case No.: 24-C-07-005603
- --------------------------------------------
PRELIMINARY INJUNCTION
----------------------
On August 2, 2007 plaintiffs Seth W. Hamot and Andrew R. Siegel, Class
D Directors of defendant Telos Corporation, filed a motion for temporary
restraining order with this Court asking it to direct Telos to permit Messrs.
Hamot and Siegel to examine and make copies of certain documents in connection
Page 14 of 19
with their duties as directors and in preparation for a telephonic board meeting
scheduled for August 9, 2007.
The Court, having conducted a hearing in open court with respect to
this motion and having heard the arguments of counsel on August 27, 2007, will
convert the present motion to a request for preliminary injunction in order to
avoid the durational limitations contained in Md. Rule 15 504(c) with respect to
temporary restraining orders and grant plaintiffs' motion for a preliminary
injunction, the Court being satisfied that the four factors set forth in
Eastside Vend Distributers., Inc. v. Pepsi Bottling Group, Inc., 396 Md. 219,
240 (2006) (citing Dept. of Transportation v. Armacost, 299 Md. 392, 404 (1984))
weigh in favor of its issuance.
It is, therefore, this 28th day of August, 2007, by the Circuit Court
for Baltimore City, Part 20, ORDERED as follows:
1. Telos shall promptly respond to all reasonable requests by
plaintiffs for information pertinent and necessary to perform
their duties as members of the Board of Directors of defendant
corporation.
2. Telos shall provide plaintiffs with all information given to
other members of its Board of Directors at the same time that
said information is provided to the other directors.
3. Telos shall be permitted to withhold from plaintiffs
information protected by the work product doctrine or
attorney/client privilege in connection with the ongoing
litigation in Costa Brava Partnership III, L.P., et al. v.
Telos Corporation, et al. (Civil Case No. 24-C-05-009296)
pending before the Circuit Court for Baltimore City, Part 20.
4. Plaintiffs Hamot and Siegel are shareholder plaintiffs in the
above captioned litigation. On July 7, 2006, these plaintiffs,
by their counsel, Harry Levy, Esquire and Lewis T. Stevens,
Page 15 of 19
Esquire, executed a Stipulation and Protective Order pursuant
to which Telos is entitled to designate documents produced in
discovery or submitted to the Court as "confidential" or
"highly confidential," given a good faith belief that the
material satisfies those definitions as set forth in the
Stipulation and Protective Order. "Highly confidential"
material is defined as confidential material that is so
sensitive that any disclosure beyond disclosure to those
individuals specified in paragraph III (D) below (chiefly,
counsel of record, other counsel for the parties, the Court
and consultants, experts and outside litigation support
personnel) deliberately or inadvertently, would cause
significant competitive or other injury. Since being elected
to the Board of Directors of Telos Corporation on June 18,
2007, plaintiffs have sought documents from Telos which were,
or may be designated, as "highly confidential," claiming that
they are no longer bound by the limitations imposed by the
Stipulation and Protective Order due to their status as board
members and fiduciaries of the defendant corporation. Telos'
resistance to such claims resulted in the present lawsuit.
When counsel for plaintiffs was asked at oral argument to
express his clients' objections to abiding by the limitations
imposed by the Stipulation and Protective Order, he indicated
to the Court that it was based upon their understanding of
their status under Delaware corporate law, citing Henshaw v.
American Cement Corp., 252 A.2d 125 (Del. Ch. 1969). To be
certain, Henshaw stands for the proposition that, as a matter
of common law, a director of a Delaware corporation has the
right to inspect corporate books and records and that right is
correlative to his duty to protect and preserve the
corporation. Id. at 128. The premise is clearly that directors
Page 16 of 19
are fiduciaries with duties to the corporation and its
shareholders and are subject to claims for any violation of
those duties. According to plaintiffs here, that is the end of
the story. Interestingly, however, Mr. Henshaw sought to
engage agents and attorneys to assist him in his inspection of
corporate books and records. These same individuals were
embroiled in pending litigation against the corporation and
the Chancery Court had to determine whether Henshaw's director
status gave him the unlimited right to retain agents and
attorneys of his own choosing. The court said no, recognizing
the corporation's legitimate interest in protecting its
position in the lawsuit. It characterized the effort as "back
door discovery unbound by work product, privilege, or any
other limitation upon discovery." Id. at 130.
While the issue here is not identical to that addressed in
Henshaw, the principle is the same. During the pendency of the
shareholder litigation against Telos, this Court is not
inclined to permit Messrs. Hamot and Siegel to avoid their
commitments under the Stipulation and Protective Order through
the guise of their newly acquired director status. Upon
resolution of the shareholder litigation, the Court's
determination of this issue may be quite different. But that
is a matter for another day. Accordingly, the Court will
consider plaintiffs in this action bound by the terms of the
Stipulation and Protective order entered in the shareholder
litigation.
5. Plaintiffs shall be excused from the requirement of filing a
bond in connection with this preliminary injunction.
Page 17 of 19
6. This preliminary injunction shall remain in effect pending the
resolution of the present litigation or until further order of
this Court.
ALBERT J. MATRICCIANI, JR.
JUDGE
/s/ ALBERT J. MATRICCIANI, JR.
-----------------------------------------
ALBERT J. MATRICCIANI, JR.
Judge
cc: Leslie D. Hershfield, Esquire
Ava E. Lias-Booker, Esquire
Page 18 of 19
Exhibit 99.26
Email dated September 7, 2007 from Director Hamot to Director Harris, copying
certain members of the Board of Directors of the Issuer
Sir,
I concur with your desire to do an assessment of Director Bailey's
"independence" pursuant to Rule 4200(a) (15) of the NASD.
I have proposed this "assessment" be done by independent counsel well versed in
these matters. The usual route for investigations at public companies is to have
the Audit Committee supervise such with the assistance of qualified outside
counsel, as the "audit" function relates not only to financial statements but to
issues of corporate control also. In this instance, such a procedure would not
be possible, as the topic of our concerns is itself the independence of the
Audit Committee Chairman.
I have been a part of such an investigation recently. You will find the
following language in the first quarter 10Q of Bradley Pharmaceuticals Inc., of
which I am Interim Chairman and serve on the Audit Committee:
In response to a resignation letter sent to members of the Board of
Directors on April 13, 2007, from an employee of the Company, the Audit
Committee, with the assistance of its outside counsel, conducted an internal
review of the matters set forth in the letter. The Audit Committee's review was
completed on May 8, 2007, and the results of that review were reported to the
full Board of Directors, the SEC and the Company's independent accountants. No
matters from the review affected the financial statements or books and records
of the Company.
Furthermore, here is a link allowing one to download the Sarbanes-Oxley Act of
2002. http://www.law.uc.edu/CCL/SOact/toc.html. As you'll see, it is a
complicated statute. The retention and use of a renowned national law firm, well
staffed with former senior officials of the SEC who are experienced in
compliance with the Act, would ensure that the assessment that we seek is not
merely adequate, but thorough and unequivocal. Such a skill set is missing from
Telos, obviously.
Furthermore, as you are already aware from my email to Director Bailey on the
morning of August 20, 2007, Telos is already out of compliance with SEC
Regulation S-X, "Form and Content of Financial Statements." As I stated at that
time, below is section 10-01 (d) of this regulation:
"(d) Interim review by independent public accountant. Prior to filing, interim
financial statements included in quarterly reports on Form 10-Q must be reviewed
by an independent public accountant using professional standards and procedures
for conducting such reviews, as established by generally accepted auditing
standards, as may be modified or supplemented by the Commission. If, in any
filing, the company states that interim financial statements have been reviewed
by an independent public accountant, a report of the accountant on the review
must be filed with the interim financial statements."
The filing of the Telos 10Q in the afternoon of August 20, 2007 is an
intentional violation of federal securities Regulation S-X because Telos does
not have "an independent public accountant" at the moment. I have never seen
such an intentional violation of U.S. securities laws in my investing career,
and I read several hundred financial filings each year. Well-advised firms
facing the same issues as Telos - the lack of a public auditor - instead issue
press releases detailing their financial results with many disclaimers, and
follow up with 8K filings of such with the SEC. If you would like more clarity
about this matter please give me a call and I will take you through several
examples.
Instead, at Telos management and Director Bailey are attempting to confuse (a)
the investing public, (b) the SEC, and (c) our firm's creditors into believing
that we are a current filer with the SEC. Simply stated, Telos is not a current
filer. Moreover, by allowing this type of scam to happen when the Board knows it
Page 19 of 19
is illegitimate, the Board is encouraging such behavior as opposed to curtailing
it, and we, as directors of a public company, are likely breaching our duty and
loyalty to Telos Corporation.
For your further reference, I have included our company's Audit Committee
charter. Among the many responsibilities of the Audit Committee, I would like to
draw your attention to the fact that the Board has delegated that the Audit
Committee shall "review the effectiveness of the system for monitoring
compliance with laws and regulations...." Clearly, the intentional violation of
federal securities laws (Regulation S-X) by Telos grossly contravenes this
charter.
Since the public disclosure record is clear that Mr. Bailey's company received
very substantial payments from Telos, I must insist at this point that the Board
hire independent counsel to address Mr. Bailey's independence. If you or any
other director copied on this email concur or disagree, please state so
expeditiously. I have included these public disclosures again for your
reference.