SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)*
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
c/o Costa Brava Partnership III, LP
237 Park Avenue, Suite 800
New York, New York 10017
(212) 692-6395
-----------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
June 30, 2005
-----------------------------------------------------------------------
(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
--------------------------------------------------------------------------------
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. 3 to SCHEDULE 13D
This amendment ("Amendment No. 3") 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 (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. 3 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 incorporate by reference that certain
letter, dated June 30, 2005, which was prepared by counsel to Costa
Brava and delivered on Costa Brava's behalf to the Issuer's Board of
Directors, the Issuer's independent auditors and the Securities and
Exchange Commission (the "Costa Brava Letter"). A copy of the Costa
Brava Letter is filed as Exhibit 99.2 hereto and incorporated herein by
reference.
The Reporting Persons understand that the Stipulated Temporary
Restraining Order of the United States District Court of the Eastern
District of Virginia (the "Court") dated May 12, 2005, which is the
temporary restraining order referred to in the Costa Brava Letter,
states that "the requirements of this [o]rder shall terminate at 12:01
a.m. EDT on June 3, 2005, unless some other time is ordered by the
Court, or agreed upon by the parties and subsequently ordered by the
Court, for the hearing on Plantiff's Motion for Entry of a Preliminary
Injunction." The Reporting Persons do not have, and the Reporting
Persons specifically disclaim any obligation to provide, updated
information with respect to the proceedings described in the Costa
Brava Letter.
As of the date of this Amendment No. 3, except as set forth above and
in the Costa Brava Letter, and 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 99.2 Costa Brava Letter
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. 3 to the Schedule
13D is true, complete and correct.
Dated: July 11, 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 July 11, 2005.
Exhibit 99.2 Costa Brava Letter
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. 3 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: July 11, 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 99.2 - COSTA BRAVA LETTER
[LETTERHEAD OF GIBBONS, DEL DEO, DOLAN, GRIFFINGER & VECCHIONE]
June 30, 2005
VIA CERTIFIED MAIL - R.R.R.
---------------------------
Board of Directors
Telos Corporation
19886 Ashburn Road
Ashburn, Virginia 20147
Re: Secure Info Corporation v. Xacta(1) and Telos Corporation
---------------------------------------------------------
Gentlemen:
This law firm represents Costa Brava Partnership III, L.P., holder of
the 12% Cumulative Exchangeable Redeemable Preferred Stock of Telos Corporation
("Telos"). We understand that SecureInfo Corporation ("SecureInfo") filed a
lawsuit, and received a temporary restraining order, against Xacta, the
principal subsidiary of Telos, Telos and David Wilson, Vice President for
Product Management of Xacta ("Wilson"), alleging claims under certain Federal
and state computer fraud and abuse laws, misappropriation of trade secrets,
copyright infringement, trespass to chattels and wrongful taking of property of
another (detinue).
We further understand that SecureInfo amended its complaint on June 16,
2005 to set forth new causes of action based upon the Racketeer Influenced
Corrupt Organization Act ("RICO"), common law fraud and deceit, conspiracy to
commit fraud, tortiuous interference with contract and combination to injure
reputation, trade or business. John B. Wood (`Wood"), President, Chief Executive
Officer and Chairman of the Board for Xacta and Telos, Richard Tracy ("Tracy"),
Executive Vice President and Chief Security Officer of Xacta and Telos, and
Wilson were named individually in the amended complaint.
As set forth in the amended complaint, the RICO predicate acts include
multiple acts of alleged criminal copyright infringement, mail fraud, wire
fraud, and possession /transmission of property obtained by fraud. The causes of
action, according to the amended complaint, are based heavily upon Wood's,
Tracy's and Wilson's own email correspondence as well as other email from
agents/employees of Xacta and Telos.
In the amended complaint, SecureInfo alleges that Xacta and Telos
conspired with Lon Berman of Berman Associates, Inc. ("Berman") to fraudulently
obtain SecureInfo's Risk Management System ("RMS") software in order to gain
SecureInfo's trade secret, confidential and copyright information. According to
the amended complaint, Xacta and Telos allegedly hired Berman and provided
funding to Berman to purchase a license for RMS under the guise of a fictitious
Berman client engagement after attempts by Telos to obtain RMS through other
means failed. As alleged by SecureInfo in the amended complaint, email
correspondence purportedly shows that Berman's acts were directed by Tracy and
Wilson with the direct knowledge of Wood.
__________________________________
(1) Principal Subsidiary of Telos
Page 12 of 12
Allegations of fraud and RICO violations must be taken seriously by the
Telos Board of Directors (the "Board") especially when such allegations involve
the company's senior ranking officers. Moreover, the allegations of fraud and
RICO violations in the amended complaint must be brought to the attention of the
Audit Committee of the Board (the "Audit Committee") and Telos' independent
auditors.
In connection with Telos' most recent annual report on Form 10-K and
quarterly report on Form 10-Q filed with the Securities and Exchange Commission
("SEC") on April 18, 2005 and May 16, 2005, respectively, Wood, in his capacity
as Telos' CEO, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
certified that he disclosed to the Audit Committee and Telos' independent
auditors, any fraud, whether or not material, that involves management or other
employees who have a significant role in Telos' internal control over financial
reporting. As CEO, Wood clearly has a significant role in the internal control
over financial reporting and, therefore, finds himself in the untenable position
of reporting to the Audit Committee and Telos' independent auditors regarding
the allegations in the amended complaint which relate to his own conduct, as
well as that of Telos' Executive Vice President and Chief Security Officer.
In light of the foregoing and pursuant to Sarbanes Oxley Act (Section
301), it is clear that the Audit Committee must launch an immediate and thorough
internal investigation of the allegedly fraudulent activity of its senior
officers and, most importantly, depending on what the investigation reveals must
consider whether Wood has the ability to continue to serve as CEO and Chairman
and provide the certifications to Telos' annual and quarterly reports required
by the SEC in light of his alleged role in the allegedly fraudulent activity.
The Audit Committee must immediately devote the proper attention and resources
to this matter as quickly as possible.
Very truly yours,
/s/ CHERYL A. GORMAN
-----------------------------------------
Cheryl A. Gorman
cc: Mr. Joel Flax, Goodman & Company, LLP
Branch Chief
Securities and Exchange Commission,
Corporate Finance-Branch 3