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Microcap & Penny Stocks : Telos (TLSRP) preferred
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From: mikehunt29/24/2007 10:14:51 PM
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Exhibit 99.27

Letter dated September 21, 2007 to Mr. Tom O'Grady, a Partner at the law firm of McGuireWoods LLP

237 Park Avenue Suite 900 New York, NY 10017

Mr. Tom O'Grady Partner McGuireWoods LLP 1750 Tysons Boulevard
Suite 1800
McLean, VA 22102-4215

VIA FEDEX

September 21, 2007

Dear Mr. O'Grady:

As you may be aware, I am an independent director on the Board of Telos Corporation. I understand that you and your firm have acted as corporate counsel to Telos.

I am writing to you to seek a referral of an independent securities/corporate counsel to review the adequacy of disclosure, under U.S securities laws, in Telos' Form 10-Q for the period ended June 30, 2007, filed with the Securities and Exchange Commission (the "10-Q")(1).

As you may be aware, the 10-Q disclosure concerning Telos' sale of Telos Identity Management Solutions, LLC ("TIMS LLC") to parties, including the brother of Telos' CEO John Wood, states:

"On April 11, 2007, Telos Identity Management Solutions, LLC ("TIMS LLC") was formed as a limited liability company under the Delaware Limited Liability Company Act. The Company
[Telos] contributed substantially all of the assets of its Identity Management business line and assigned its rights to perform under its U.S Government contract with the Defense Manpower Data Center ("DMDC") to TIMS LLC. The net book value of assets contributed by the Company totaled $17,000. The Company owned 99.999% of the membership interests of TIMS LLC and certain private equity investors ("Investors") owned 0.001% of the membership interests of TIMS LLC. On April 20, 2007, the Company sold an additional 39.999% of the membership interests to the Investors in exchange for $6 million in cash consideration. Legal and investment banking expenses directly associated with the transaction amounted to approximately $190,000. As a participant of certain private


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(1) Filed without compliance to Rule 10-01(d) of Regulation S-X, since this 10-Q was not reviewed by an independent public accountant as required by the SEC. This action was done without the approval of the Board of Directors.


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equity investors, the brother of John B. Wood, the Company's Chairman and Chief Executive Officer, indirectly holds a 2% effective ownership interest in TIMS LLC."

Omitted from this 10-Q disclosure is a provision contained in the transaction document which states:

"Upon the occurrence of any of the following events: (i) the involuntary termination of John B. Wood as CEO and Chairman of the Class A Member [Telos]; (ii) the Bankruptcy of the Class A Member; or (iii) the transfer or issuance of more than fifty-one percent (51%) of the stock of the Class A Member to a third party (each of which shall be referred to as a "Class B Option Event"), then the Class B Member shall have an option to purchase, and the Class A Member shall be obligated to sell (unless it elects to purchase the Interest of the Class B Member under Section 7.03 .C), a portion of the Class A Member's Percentage Interest representing twenty percent (20%) of the Percentage Interests in the Company (the "Option Interest") in accordance with this Section 7.03. The Class A Member must notify the Class B Member of the occurrence of a Class B Option Event within five (5) days of such occurrence (the "Event Notice"). Notwithstanding the foregoing, the Class B Member's option under this Section 7.03 shall not be exercisable if there is, at the time of the Class B Option Event, a letter of intent to sell the Company, a binding contract to sell all of the assets of, or Interests in, the Company, or a standstill for due diligence with respect to a sale of the Company. If any of the preceding circumstances exist, the time for exercising the Class B Member's option under this Section 7.03 shall toll until such time as such circumstance no longer exists and such date shall be considered the date of the Class B Option Event."

(Amended and Restated Operating Agreement of TIMS LLC, Section 7.03)

Clearly, the 10-Q does not identify the TIMS LLC transaction as a related party transaction (in view of the involvement of Mr. Wood's brother), and the 10-Q fails to disclose that Telos is obligated to sell to parties, including Mr. Wood's brother(2), material additional interests in TIMS LLC upon Mr. Wood's involuntary termination from Telos.

I question whether the omission of the TIMS LLC transaction as a related party transaction is compounded by the fact that nearly one year prior to this transaction, in 2006, a majority of Telos' independent directors found that Mr. Wood should be terminated for cause(3). Clearly, the determination of Telos' independent directors of Mr. Wood's termination for cause was a condition precedent to the execution of the TIMS LLC transaction, which transaction provides for the additional sale of material interests to Mr. Wood's brother upon such a termination event.


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(2) The TIMS document contains other ambiguous statements regarding the involvement of other family members of Mr. Wood in this related party transaction.
(3) Revised Report of the Special Litigation Committee of Telos Corporation, July 20, 2007.

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As an independent director on the Board of Telos Corporation, I have a responsibility to ensure that Telos complies with U.S. securities laws, including disclosure of related party transactions. In this instance, I require independent legal advice in order to fulfill my duties and responsibilities.

As you are aware, McGuireWoods is acting as counsel of record in an adverse capacity against Director Hamot and I in litigation captioned Hamot and Siegel
v. Telos in the Circuit Court of Baltimore City, Case No. 24-C-07-005603. In view of McGuireWoods' likely ethical conflict of interest in providing me with legal advice while simultaneously and concurrently litigating against me, please provide a recommendation of alternate independent and competent counsel to provide legal advice to me on the important issues raised in this letter. I would appreciate a response by September 25, 2007. Thank you.

Sincerely,

/s/ ANDREW R. SIEGEL

Andrew R. Siegel
Director, Telos Corporation




Cc: Members of the Board of Directors, Telos Corporation Alex Castelli, CPA, The Reznick Group
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