<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6
(e)(2))
Telos Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Telos Corporation Independent Preferred Stockholders Committee
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:___________________________________________________________
(2) Aggregate number of securities to which transaction
applies:___________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):_______________________________________________________
(4) Proposed maximum aggregate value of transaction:___________________
(5) Total fee paid:____________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:_________________________________________
(2) Form, schedule or registration statement no.:___________________
(3) Filing party:___________________________________________________
(4) Date filed:_____________________________________________________
<PAGE>
VALUE PARTNERS, LTD.
2200 Ross Avenue
Suite 4660 West
Dallas, Texas 75201
(214) 999-1900
June , 1998
Dear Fellow Preferred Stockholder:
Value Partners, Ltd., ("Value Partners") is the beneficial owner of
714,317, or 19.87%, of the issued and outstanding shares of the 12% Cumulative
Exchangeable Redeemable Preferred Stock, $.01 par value per share (the
"Preferred Stock") of Telos Corporation (the "Company"). Value Partners is
soliciting your support to elect two Class D directors to the Board of Directors
of the Company that are independent of, and have not been selected by,
management of the Company.
The Company has not declared or paid dividends on the Preferred Stock
since 1991. The Company's Articles of Amendment and Restatement of its Articles
of Incorporation ("Articles") provide that if dividends are in arrears and
unpaid for three full semi-annual periods, then the number of directors
constituting the Company's Board of Directors shall, without further action, be
increased by two directors (designated as "Class D" directors) and the holders
of the Preferred Stock (the "Preferred Stockholders") shall have the exclusive
right to elect such directors. Notwithstanding the requirements of the Articles,
the Company has failed to call, or permit the Preferred Stockholders to call, a
special meeting to elect the two Class D directors. Value Partners, through the
registered holder of its shares, Cede & Co. ("Cede"), made demand upon the
Company to hold such meeting, was sued by the Company in a declaratory judgment
proceeding and counter-claimed to enforce the rights of the Preferred
Stockholders to obtain a Special Meeting of the Preferred Stockholders (the
"Special Meeting") to elect the Class D directors. On April 22, 1998, the U.S.
District Court for the Eastern District of Virginia (the "Court"), decided that
the Company was required to hold the Special Meeting for the election of the
Class D directors and prohibited the Company from interfering with the meeting
or the election.
As a result of the Court's decision, the Special Meeting of the
Preferred Stockholders to elect the two Class D directors will be held at the
law offices of McGuire, Woods, Battle & Boothe, LLP, at the Army Navy Building,
1627 I ("Eye") Street, N.W., Washington, D.C. 20006, on Friday, July 31, 1998,
at 10:00 a.m.
Value Partners has taken a stand for the Preferred Stockholders by
obtaining a decision protecting the rights of all Preferred Stockholders. Value
Partners is soliciting your vote in order to elect two nominees, Mr. Julio E.
Heurtematte, Jr. and Mr. Malcolm M.B.
<PAGE>
Letter to Preferred Stockholders
Page 2
Sterrett (the "Nominees"), as the two Class D directors on the Company's Board
of Directors. In December 1996, Value Partners became concerned that the Company
was failing to live up to its obligations to the Preferred Stockholders, as set
forth in the Articles. Value Partners believes that the placement of these two
Nominees on the Board of Directors will provide to the holders of the Preferred
Stock an ability to participate in the actions of the Board and the executive
officers of the Company ("Management") and to, at least, have a voice in the
affairs and governance of the Company.
If elected, the Nominees would seek to --
- ensure that the Company takes all appropriate steps to enable it
to comply with its contractual obligations to the holders of the
Preferred Stock;
- provide quality leadership and consistent focus;
- conduct a thorough review of the Company's strategic objectives
and current operations; and
- ensure that Management is actively working to promote the best
interests of the Company's shareholders, both Common and
Preferred.
These Nominees will provide something that Telos Corporation has needed
for a long time -- independent, outside directors who are not involved in the
management of the Company and who will work to hold Management more accountable
to the preferred owners of the Company, its Preferred Stockholders.
We need your help to implement necessary representation of the Preferred
Stockholders on Telos Corporation's Board in order to enhance its corporate
governance. If you agree with us that the Preferred Stockholders have the right
to ensure that there is independent oversight of the Company's Board now, then
we urge you to vote FOR the Nominees on the enclosed WHITE proxy card.
It is very important that you be represented at the Special Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign and date your WHITE proxy card
today and return it in the envelope provided, even if you plan to attend the
Special Meeting.
Please vote the Value Partners WHITE proxy card today. In the event that
you receive proxy cards sent to you by Mr. Litsinger, Mr. Calhoun or Dr.
Greenblatt (each a "Challenger"), please do not sign or return them. Value
Partners believes that its Nominees
<PAGE>
Letter to Preferred Stockholders
Page 3
have the unique ability to best represent the Preferred Stockholders, as set
forth in detail in the attached Proxy Statement. If you voted a Challenger's
proxy card, you have every right to change your vote simply by signing, dating
and mailing the enclosed WHITE proxy card. This will automatically cancel your
earlier vote since only the latest dated proxy card will count at the Special
Meeting.
We need your support to enable us to provide effective leadership and
oversight on behalf of all the Company's Preferred Stockholders.
Sincerely,
VALUE PARTNERS, LTD.
By: Ewing & Partners,
General Partner
------------------------------------
By: Timothy G. Ewing
General Partner of Ewing & Partners
<PAGE>
1998 SPECIAL MEETING OF HOLDERS
OF THE
12% CUMULATIVE EXCHANGEABLE
REDEEMABLE PREFERRED STOCK
OF
TELOS CORPORATION
19886 Ashburn Road
Ashburn, Virginia 20147
To Be Held on July 31, 1998
-----------------------------
PROXY STATEMENT
of
VALUE PARTNERS, LTD.
-----------------------------
INTRODUCTION
This Proxy Statement and the accompanying WHITE proxy card are being
furnished in connection with the solicitation of proxies by Value Partners,
Ltd., a Texas limited partnership ("Value Partners"), to be used at the 1998
Special Meeting of holders of the 12% Cumulative Exchangeable Redeemable
Preferred Stock (the "Preferred Stock") of Telos Corporation, a Maryland
corporation ("Telos" or the "Company"), to be held at the Army Navy Building,
1627 I ("Eye") Street, N.W., Washington, D.C. 20006 in the law offices of
McGuire, Woods, Battle & Boothe, LLP, on Friday, July 31, 1998 at 10:00 a.m. and
at any adjournments or postponements thereof (the "Special Meeting"). This Proxy
Statement and the accompanying WHITE proxy card are first being mailed to
holders of the Preferred Stock on or about ___________________, 1998.
Value Partners owns 19.87% of Telos' outstanding Preferred Stock and is
the single largest holder of the Company's Preferred Stock. This Special Meeting
is occurring as a result of the Orders of the U.S. District Court for the
Eastern District of Virginia (the "Court"), which were issued as a result of
Value Partners' efforts. For a description of the Court's Orders dated April 22,
1998 and May 4, 1998 and its Memorandum Opinion dated April 22, 1998, see "Why
You Should Vote for Value Partners' Nominees," below.
Value Partners is a Texas limited partnership, of which Ewing &
Partners is the general partner. Timothy G. Ewing is a general partner and the
Managing Partner of Ewing & Partners. The business of Value Partners primarily
consists of long-term investment in capital stocks, warrants, bonds, notes,
debentures and other securities, although Value Partners will engage in the
trading of securities as market conditions warrant. Value Partners has been a
holder of the Company's Preferred Stock since June 30, 1994.
<PAGE>
Proxy Statement
Page 2
Value Partners is soliciting your proxy in support of the election of
Mr. Julio E. Heurtematte, Jr. and Mr. Malcolm M.B. Sterrett (the "Nominees") as
the Class D directors of Telos. The Class D directors are the two directors who
may be elected to the Telos Board of Directors exclusively by the holders of the
Preferred Stock at any time the Company has failed, for any reason, to pay
dividends on the Preferred Stock for three consecutive semi-annual periods. No
dividends have been paid on the Preferred Stock since 1991. Value Partners
believes that two outside Class D directors are needed on the Telos Board to
provide an independent voice on the current Board of Directors and a review of
the actions taken by the executive officers of the Company ("Management").
On November 24, 1997, April 2, 1997 and April 27 and 28, 1998, Value
Partners, a member of the Committee, filed with the Securities and Exchange
Commission (the "Commission") amendments to its Schedule 13D setting forth its
intent to seek Class D representation on the Board of Directors at the Special
Meeting to be held on July 31, 1998 pursuant to the Court's orders.
Management of Telos has, for years, blocked all initiatives by the
Preferred Stockholders to elect their two independent Class D directors. Value
Partners believes that the Board of Directors of Telos needs independent
directors, who are persons other than current Management, in order to provide
effective leadership on behalf of the Company's Preferred Stockholders.
WHY YOU SHOULD VOTE FOR VALUE PARTNERS' NOMINEES
The Company's Articles of Amendment and Restatement of the Articles of
Incorporation (the "Articles") require that if the Company has failed, for any
reason, to pay annual dividends of $1.20 per share on the Preferred Stock for
three consecutive semi-annual periods, then the number of directors constituting
the Board of Directors shall increase by two directors, without further action,
and the holders of the Preferred Stock shall have the exclusive right, voting
separately as a class, to elect the directors of the Company to fill such newly
created "Class D" directorships.
As stated in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, and in the Company's Quarterly Report on Form 10-Q for
the three months ended March 31, 1998, the Company has not declared or paid
dividends on the Preferred Stock since 1991. Accordingly, the plain language of
the Articles gives the Preferred Stockholders the right to elect two Class D
directors.
<PAGE>
Proxy Statement
Page 3
Other holders of the Preferred Stock have sought to have the Company
recognize this basic right of representation. However, the Company has
consistently failed to comply with these requests for Board representation and
has used Company funds to fight such requests, even when legal action has been
taken by stockholders against the Company to enforce these rights granted to the
stockholders by the Company's Articles. Although the Preferred Stockholders have
a clear right to elect two Class D directors, Management has used nonsensical
and convoluted legal arguments to prevent the election of the Class D directors.
Rather than assist the holders of the Preferred Stock in obtaining their proper
representation on the Board, Management has consistently denied the Preferred
Stockholders their right to Board representation.
Management's attitude and actions have failed to recognize that the
holders of the Preferred Stock are preferential owners of the equity of the
Company who have certain contractual rights under the Company's Articles,
including representation on the Board of Directors if dividends are not paid for
the requisite period.
In December, 1996, Value Partners, the beneficial owner of 19.87% of
the Preferred Stock, came to the conclusion that Management's actions were
contrary to the Articles and applicable law and that representation for the
Preferred Stockholders was necessary and appropriate.
In that regard, on December 23, 1996, Value Partners mailed a
registered letter (the "December 23 Letter") to the Company which: (i) requested
that the Company call a special meeting of the holders of the Preferred Stock to
be held on January 31, 1997 to elect the two Class D directors; (ii) if the
special meeting was not called as requested by January 23, 1997, Value Partners,
as a beneficial holder of more than 10% of the Preferred Stock, called for a
special meeting of the holders of the Preferred Stock to be held on Friday,
February 28, 1997 at 2:00 p.m. at the offices of Value Partners' special counsel
located in Washington, D.C., and requested, among other things, that the Company
provide to holders of record of the Preferred Stock 30 days written notice of
the special meeting; and (iii) nominated two persons, Mr. Julio E. Heurtematte,
Jr. and Mr. Malcolm M.B. Sterrett, to run as candidates for the Class D director
positions. By its December 23 Letter, Value Partners also requested that the
Company provide it with access to the stock books of the Company relating to the
holders of the Preferred Stock, so Value Partners could communicate with other
Preferred Stockholders.
On January 7, 1997, the General Counsel of the Company, a Mr. William
Brownley ("Mr. Brownley"), contacted Value Partner's special counsel regarding
the December 23 Letter. Mr. Brownley claimed that the January 31 date did not
provide for sufficient time
<PAGE>
Proxy Statement
Page 4
to hold a special meeting as required under the Company's bylaws and, in any
event, that Value Partners had no right to call a special meeting.
By letter dated January 10, 1997, Mr. Brownley stated that: (i) the
Company would not call a special meeting of the holders of the Preferred Stock;
(ii) Value Partners did not make a proper request for a list of holders of the
Preferred Stock; and (iii) the Company would not provide Value Partners with a
list of such holders. After an additional written request by Value Partners'
special counsel on January 17, 1997, the Company continued to refuse to provide
a stockholder list to Value Partners.
Notwithstanding the fact that the Company had recognized Value Partners
as a major stockholder by virtue of its prior Schedule 13D filings, had engaged
in discussions with Value Partners' general partner regarding the Company's
Board of Directors, had treated Value Partners as if it were the record holder
of the shares beneficially owned by Value Partners and never questioned Value
Partners' ownership or ability to exercise its rights as a holder of the
Preferred Stock, on January 23, 1997, Mr. Brownley transmitted to Value
Partners' special counsel a letter stating that the Company "finds that Value
Partners does not appear to be a shareholder of Telos Corporation's public
preferred stock. Therefore, Telos does not have the obligation nor, indeed, the
right, to respond to any of Value Partners' demands, requests or deadlines."
On February 3, 1997, Value Partners' special counsel, on behalf of
Value Partners, delivered by registered mail to the Company two letters. The
first letter was a demand by Cede which is the official "record" holder of the
shares of Preferred Stock beneficially owned by Value Partners. (To avoid
confusion, unless otherwise indicated, Cede, as the record holder for Value
Partners shall be referred to herein as "Value Partners".) That first letter
confirmed and renewed Value Partners' prior demands in its December 23 Letter.
Value Partners demanded that: (i) the Company call and hold a special meeting of
the holders of the Preferred Stock on March 31, 1997, or, if not called by the
Company, in accordance with the terms of the Articles, Value Partners designated
itself to call such a meeting and called the special meeting to be held on
April 4, 1997 at 2:00 p.m. at the offices of Value Partners' special counsel;
(ii) Value Partners' nominees be put on the ballot for election as Class D
directors; and (iii) the Company provide to Value Partners a stockholder list
pursuant to the Maryland General Corporation Law and the Company's Articles.
The second letter, from Value Partners, made a demand upon the Company,
pursuant to Rule 14a-7 promulgated under Securities Exchange Act of 1934, for
a list of the holders of the Preferred Stock.
The Company did not respond to the requests by Cede or Value Partners.
<PAGE>
Proxy Statement
Page 5
However, on February 26, 1997, the Company filed suit against Cede in
the Circuit Court for Loudoun County, Virginia, seeking a declaratory judgment
as to: (i) whether the Company was required to enlarge its Board of Directors by
two directorships; (ii) whether the holders of the Preferred Stock were entitled
to elect two Class D directors; and (iii) whether the Company was obligated to
call a special meeting, or alternatively, whether Cede was entitled to call such
a meeting.
On March 28, 1997, Cede removed the action commenced by the Company to
the United States District Court for the Eastern District of Virginia,
Alexandria Division. That same day, Cede filed its Answer and Counterclaims (the
"Counterclaim") in that litigation. The Counterclaim of Cede demanded, among
other things, that the Court: (i) direct the Company to provide Cede with a
stockholder list; (ii) declare that (A) the Company's Board of Directors has
been increased by two Class D directors, and (B) the holders of the Preferred
Stock have the exclusive right under the Company's Articles to elect two Class D
directors to fill such directorships either (X) at a special meeting (and Cede
is entitled to call that meeting), or (Y) at the Company's annual meeting, if
the special meeting would be held during the period within 90 days immediately
preceding the date fixed for the Company's annual meeting of stockholders; and
(iii) enjoin the Company from interfering with the election of the two Class D
directors by the holders of the Preferred Stock either at a special meeting or
at the Company's annual meeting. Value Partners agreed to indemnify Cede for the
costs of this litigation. Value Partners' litigation counsel represented Cede in
this action.
On April 22, 1998, the Court granted Cede's motion for summary judgment
and ordered the parties to meet and confer regarding an appropriate form of
final order by May 1, 1998 (i) enjoining the Company from interfering with the
right of Value Partners (through Cede) to elect two Class D directors to the
Company's Board of Directors and (ii) compelling the Company to comply with
Maryland law and to provide to Value Partners (through Cede) a list of the
Company's Preferred Stockholders.
In its Memorandum Opinion, the Court determined that there was no
dispute that: (i) the holders of the Preferred Stock were entitled to receive
cumulative semi-annual 12% dividends on the Preferred Stock, and (ii) if the
dividends "payable" on the Preferred Stock are unpaid for three consecutive
semi-annual periods, then the holders of the Preferred Stock have the right to
elect two Class D directors to the Company's Board of Directors. The issue
presented in the case was that the Company claimed that the Preferred
Stockholders had no right to elect the two Class D directors because the
dividends were not "payable" because they were not "legally available for
payment" due to various impediments, such as the restrictive covenants in the
Company's loan agreements.
<PAGE>
Proxy Statement
Page 6
The Court determined that the intrinsic evidence, including the (i)
plain meaning of the Articles, (ii) the terms and structure of other charter
provisions, and (iii) the purpose of the provisions in the Articles, all point
conclusively to the conclusion that "payable" means due or owed and that the
right to elect the Class D directors was intended by the drafters of the
Articles to be triggered by the non-payment of the dividends for three
consecutive semi-annual periods "for whatever reason."
In its analysis, the Court found the Company's legal arguments to be
"nonsense" and that "injunctive relief is warranted to compel Telos to meet its
statutory obligations to [Value Partners] to provide a verified stockholder
list."
The judge's opinion further found that an injunction preventing Telos
from interfering with the election was appropriate since Value Partners (through
Cede) had: "convincingly demonstrated that (i) it has succeeded on the merits of
its claim, (ii) there is no adequate remedy at law, (iii) the balance of the
equities favors [Value Partners], and (iv) the public interest is served by the
issuance of the injunction."
On May 4, 1998, the Court entered an Order which set forth the terms
and conditions of the Special Meeting and which stated that: (i) Telos
represented to the Court that it would follow and abide by the Court's Order of
April 22, 1998; (ii) the dividends payable on the Preferred Stock have been in
arrears and unpaid for more than three consecutive full semi-annual periods and
the Preferred Stockholders are entitled to elect two Class D directors to the
Telos Board; (iii) Cede was entitled to a stockholders list on or before May 8,
1998 (which list has been so delivered); (iv) Cede was awarded final judgment on
its Counterclaim; (v) Telos shall take all necessary actions to hold a special
meeting of its Preferred Stockholders on or before July 31, 1998 to allow the
Preferred Stockholders to elect two Class D directors in accordance with the
Telos Articles and Bylaws; and (vi) Telos must send the requisite notice of the
Special Meeting to the Preferred Stockholders on or before May 11, 1998.
THE COMMITMENT OF THE NOMINEES
The Nominees are committed to providing independent, outside
representation on the Telos Board on behalf of the Preferred Stockholders and to
the commencement of the payment of the accrued dividends on the Preferred Stock,
as soon as possible.
If elected, the Nominees would seek to --
- provide quality leadership and consistent focus;
<PAGE>
Proxy Statement
Page 7
- conduct a thorough review of the Company's strategic objectives
and current operations;
- ensure that the Company take all appropriate steps to enable it to
comply with its contractual obligations to the holders of the
Preferred Stock; and
- ensure that Management is actively working to promote the best
interests of the Company's shareholders, both Common and Preferred.
Value Partners believes that the Company is at a crossroads. It needs,
but currently lacks, the type of leadership and guidance that can only be
provided by completely independent members of the Board of Directors.
A vote for the Nominees is a vote for directors who are independent of
Management and who are committed to providing the proper leadership and
oversight which the Company needs.
If, like us, you believe that the Board of Directors of Telos needs to
have directors who are independent of Management in order to represent the
interests of the Preferred Stockholders, Value Partners urges you to mark, sign,
date and return the enclosed WHITE proxy card to vote FOR the election of each
of the Nominees as soon as possible!
ELECTION OF DIRECTORS
General
The Company's Restated Bylaws provide that the number of directors
shall be not less than three (3) nor more than fifteen (15). There are currently
four (4) members of the Board of Directors.
The Company's Articles provide that if dividends on the Preferred Stock
are in arrears and unpaid for three full semi-annual periods, then the number of
directors constituting the Company's Board of Directors, without further action,
shall be increased by two (Class D) directors and the holders of the Preferred
Stock shall have the exclusive right to elect such directors. The Company is
subject to a Court order prohibiting it from interfering with the election of
the Class D directors. The Class D directors shall serve until the next Annual
Meeting of stockholders of the Company and until their successors are elected
and qualified. The Class D director positions will terminate and no Class D
<PAGE>
Proxy Statement
Page 8
directors will be permitted to be elected to the Board of Directors and the
number of directors constituting the Board of Directors shall be reduced,
without further action, by two at such time as all dividends accumulated on the
Preferred Stock shall have been paid in full, subject to reverting in the event
of each and every subsequent failure of the Company to pay dividends for three
consecutive full semi-annual periods.
Compensation of Directors
During the fiscal year ended December 31, 1997, employee directors were
paid a fee of $2,000 for each Board meeting attended. Outside directors Mr.
Norman P. Byers and Dr. Stephen D. Bryen were paid an annual fee of $25,000, and
further compensated at a rate of $750 for each meeting in excess of four
meetings a year. Chairman of the Board, Dr. Fred Charles Ikle, is paid $25,000
quarterly for his service on the Board. In addition, Mr. Byers receives $5,000
per annum for his service as Proxy Chairman. The compensation paid to the
outside directors is paid pursuant to a proxy agreement between the Company, the
Defense Security Service and certain of the Company shareholders. During the
fiscal year ended December 31, 1997, no directors of the Company were awarded
options.
The Nominees
Value Partners orally requested, through its special counsel in
Washington, D.C., that the Nominees serve as the Class D directors. Value
Partners is not compensating the Nominees for such service or for agreeing to
become nominees.
Neither Mr. Heurtematte nor Mr. Sterrett is related by blood, marriage or
adoption to any member of the Board of Directors or to any of the executive
officers named in the Company's Form 10-K for the year ended December 31, 1997.
Value Partners recommends that Preferred Stockholders of Telos elect
the Nominees as the Class D Directors of Telos at the Special Meeting. If both
Nominees are elected, the Nominees would constitute one-third of the entire
Board of Directors of Telos. The Nominees and their business qualifications are
listed below.
Julio E. Heurtematte, Jr. Mr. Heurtematte, 62, has been a private
consultant since 1989, specializing in international projects, trade and
investments. From 1963 to 1989, Mr. Heurtematte held various positions of
increasing responsibility at the Inter-American Development Bank (the "IAD
Bank"), most recently as the Deputy Manager for Project Analysis where he headed
a sub-department of approximately 80 professionals (including engineers,
economists and financial analysts) responsible for the evaluation of up to 50
projects per annum resulting in annual loans from the IAD Bank of between $1.2
billion
<PAGE>
Proxy Statement
Page 9
and $2.6 billion. From 1979 to 1989, Mr. Heurtematte was also a member of IAD
Bank's Pension Fund Investment Committee. In addition, Mr. Heurtematte: (i) has
not, during the past ten years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) and has not been a part,
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to federal or state securities laws, or finding any
violation with respect to such laws; (ii) beneficially owns no shares of
Preferred Stock or any other class of capital stock of the Company, directly or
indirectly; (iii) owns no shares of Preferred Stock or any other class of
capital stock of the Company, of record but not beneficially; (iv) has not
purchased or sold any shares of Preferred Stock or any other class of capital
stock of the Company, within the past two years; (v) has borrowed no funds for
the purpose of acquiring or holding the Preferred Stock or any other class of
capital stock of the Company; (vi) is not and was not, within the past year, a
party to any contract, arrangement or understanding with any person with respect
to any securities of the Company, including, but not limited to joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies. Mr. Heurtematte is the nominee of Value Partners but has
no affiliation with Value Partners; (vii) is not presently aware of any
Exchangeable Preferred Stock owned by any of his "associates" (as such term is
defined by Rule 12b-2). Mr. Heurtematte's sole "associate" is his spouse, Marie
Jeanne Heurtematte; and (viii) beneficially owns no securities of any parent or
subsidiary of the Company, directly or indirectly; (ix) is not indebted to the
Company; and (x) has not engaged in any transactions with the Company. Neither
Mr. Heurtematte, nor to the best of his knowledge, any associate of Mr.
Heurtematte, nor any member of the immediate family of the foregoing, have
engaged in any transaction, or series of similar transactions, since the
beginning of the Company's last fiscal year, or any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party in an amount involved which exceeds
$60,000. Other than as serving as a Class D director, if elected, neither Mr.
Heurtematte nor any of his associates have any arrangement or understanding with
any person (A) with respect to any future employment by the Company or its
affiliates; or (B) with respect to any future transactions to which the Company
or any of its affiliates will or may be a party. Mr. Heurtematte is a U.S.
citizen. His address is 5028 Lowell Street, Washington, D.C. 20016.
Malcolm M.B. Sterrett. Mr. Sterrett, 55, is a private investor. From 1989
to 1993, he was a partner at the law firm of Pepper Hamilton & Scheetz,
Washington, D.C. From 1988 to 1989, he served as General Counsel to the U.S.
Department of Health and Human Services and from 1982 to 1988 he was a
Commissioner on the U.S. Interstate Commerce Commission. Prior thereto, he was
Vice President and General Counsel to the United
<PAGE>
Proxy Statement
Page 10
States Railway Association and served as Staff Director and Counsel to the U.S.
Senate Committee on Commerce, Science and Transportation. Mr. Sterrett (i) has
not, during the past ten years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) and has not been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to federal or state securities laws, or finding any
violation with respect to such laws; (ii) beneficially owns no shares of
Preferred Stock or any other class of capital stock of the Company, directly or
indirectly; (iii) owns no shares of Preferred Stock or any other class of
capital stock of the Company, of record but not beneficially; (iv) has not
purchased or sold any shares of Preferred Stock or any other class of capital
stock of the Company, within the past two years; (v) has borrowed no funds for
the purpose of acquiring or holding the Preferred Stock or any other class of
capital stock of the Company; (vi) is not and was not, within the past year, a
party to any contract, arrangement or understanding with any person with respect
to any securities of the Company, including, but not limited to joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies. Mr. Sterrett is the nominee of Value Partners but has no
affiliation with Value Partners; (vii) is not presently aware of any Preferred
Stock owned by any of his "associates" (as such term is defined by Rule 12b-2).
Mr. Sterrett's sole "associate" is his spouse, Joan D. Sterrett; (viii)
beneficially owns no securities of any parent or subsidiary of the Company,
directly or indirectly; (ix) is not indebted to the Company; and (x) has not
engaged in any transactions with the Company. Neither Mr. Sterrett, nor to the
best of his knowledge, any associate of Mr. Sterrett, nor any member of the
immediate family of the foregoing, have engaged in any transaction, or series of
similar transactions, since the beginning of the Company's last fiscal year, or
any currently proposed transaction, or series of similar transaction, to which
the Company or any of its subsidiaries was or is to be a party in an amount
involved which exceeds $60,000. Other than as serving as a Class D director, if
elected, neither Mr. Sterrett nor any of his associates have any arrangement or
understanding with any person (A) with respect to any future employment by the
Company or its affiliates; of (B) with respect to any future transactions to
which the Company or any of its affiliates will or may be a party. Mr. Sterrett
is a U.S. citizen. His address is 4516 Wetherill Road, Bethesda, Maryland 20816.
Each Nominee, if elected, would hold office until the 1999 Annual
Meeting of Stockholders and until a successor has been elected and qualified or
until his earlier death, resignation or removal. Each Nominee has consented in
writing to serve as a Class D director if elected. Although Value Partners has
no reason to believe that either of the Nominees will be unable to serve as a
director, if any one or more of the Nominees is not
<PAGE>
Proxy Statement
Page 11
available for election, the persons named on the WHITE proxy card will vote for
the election of such other nominees as may be proposed by Value Partners.
INFORMATION REGARDING VALUE PARTNERS
Value Partners is the beneficial owner of 714,317 shares of the
Preferred Stock, which, at May 15, 1998, represented 19.87% of the issued and
outstanding shares of the Preferred Stock as reported by the Company in its Form
10-Q for the quarter ended March 31, 1998. Ewing & Partners, a Texas general
partnership, is the general partner of Value Partners. Timothy G. Ewing is the
general partner and the Managing Partner of Ewing & Partners. In addition, Ewing
Asset Management, L.L.C., a Texas limited liability company, holds a 1% general
partnership interest in Ewing & Partners. Mr. Ewing is the Manager and 100%
owner of EAM. As such, Mr. Ewing has the authority to cause such entities to
acquire, hold, trade and vote the Preferred Stock. None of such entities were
formed solely to acquire, hold or sell the Preferred Stock. Each of such
entities holds securities issued by one or more companies other than the
Company. The limited partners in Value Partners are sophisticated, "accredited"
investors and are passive investors who do not, directly or indirectly,
participate in the management of these entities. Value Partners is a private
investment fund. The voting power over the Preferred Stock is not subject to any
contingencies beyond the standard provisions for entities of this nature (i.e.,
limited partnerships) which govern the replacement of a general partner. None of
the limited partners are "participants" in this solicitation. The principal
place of business for Ewing & Partners, EAM and Mr. Ewing is the same as for
Value Partners; it is 2200 Ross Avenue, Suite 4660, Dallas, Texas 75201.
The following table sets forth information with respect to purchases of
the Preferred Stock of the Company by Value Partners in the two years preceding
the date of this Proxy Statement.
<PAGE>
Proxy Statement
Page 12
<TABLE>
<CAPTION>
Date of Price Paid No. of
Purchase or Obtained Shares
- ------------------ ------------------ -------------------
<S> <C> <C>
06-30-94 $56,100.00 12,000
07-20-94 154,074.38 35,217
07-21-94 107,500.00 25,000
08-01-94 107,500.00 25,000
08-03-94 158,400.00 36,000
08-12-94 53,250.00 12,000
09-20-94 36,560.00 8,000
09-21-94 22,750.00 5,000
09-28-94 36,465.00 8,500
01-01-95 21,420.00 7,000
03-01-95 111,100.00 55,000
06-08-95 185,745.00 95,000
09-14-95 472,020.00 100,000
09-14-95 35,645.00 7,600
09-22-95 45,645.00 10,000
10-09-95 462,520.00 100,000
10-13-95 57,770.00 12,000
10-24-95 435,545.00 85,000
10-25-95 71,270.00 15,000
11-09-95 93,770.00 20,000
05-02-96 205,395.00 31,000
05-03-96 65,645.00 10,000
- ------------------ ------------------ -------------------
- ------------------ ------------------ -------------------
TOTAL: $2,996,189.38 714,317
</TABLE>
<PAGE>
Proxy Statement
Page 13
None of the holdings of Value Partners set forth herein are held of
record but not beneficially, nor are any of such securities owned beneficially
by associates of Value Partners, except as set forth herein. Value Partners is
not presently aware of any Preferred Stock owned by any of its "associates" (as
that term is defined by Rule 12b-2 under the Securities Exchange Act of 1934, as
amended), except that Value Partners has always attributed beneficial ownership
to Ewing & Partners, and to the general partners thereof, Mr. Ewing and EAM. The
holder of record of the shares beneficially owned by Value Partners is Cede. As
of the date of this Proxy Statement, Value Partners has not purchased the
Preferred Stock with funds that were borrowed or otherwise obtained for the
purpose of acquiring such shares of the Preferred Stock. As of the date hereof,
Value Partners has not sold any shares of the Preferred Stock in the two years
preceding the date of this Proxy Statement. Value Partners holds no securities
of any parent or subsidiary of the Company, directly or indirectly or other
class of securities of the Company.
In addition, Value Partners is not, or was not, during the past year, a
party to any contracts, arrangements or understandings with any person with
respect to the Preferred Stock. The Nominees agreed to run for the Class D
director positions at the request of Value Partners. Value Partners does not
beneficially own, directly or indirectly, any securities of any of the Company's
subsidiaries. Other than as set forth herein, neither Value Partners nor any of
its associates has any arrangement or understanding with any person: (i) with
respect to any future employment by the Company or its affiliates; or (ii) with
respect to any future transaction to which the Company or any of its affiliates
will or may be a party. Value Partners has not engaged in any transaction or
series of similar transactions since the beginning of the Company's last fiscal
year, or any currently proposed transaction, or series of similar transactions,
to which the Company or any of its subsidiaries was or is to be a party. Value
Partners has not, during the past 10 years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), and has not
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws, or finding
any violations with respect to such laws. Value Partners is not and was not,
within the past year, a party to any contract, arrangement or understanding with
any person with respect to any securities of the Company (except its limited
partnership agreement and its request of the Nominees to run as candidates for
the Class D director positions), including but not limited to joint ventures,
loan or option arrangements, puts or calls, guaranties against loss or
guaranties of profit, division of profits or losses, or the giving or
withholding of proxies. Except as reported in the Company's Form 10-K for the
year ended December 31, 1997 and except for (i) the case Telos Corporation v.
Cede & Co., U.S. District Court for the Eastern District of Virginia, Alexandria
Division, Case No. 97-439-A, filed February 26, 1997, for declaratory judgment
<PAGE>
Proxy Statement
Page 14
and permanent injunction and (ii) the case, Boland v. Telos Corporation,
Case No. 96 184034/CL 214236, Maryland Circuit Court of Baltimore City, neither
Mr. Heurtematte, Mr. Sterrett nor Value Partners is aware of any other material
legal proceedings to which the Company or any of its subsidiaries is a party.
BENEFICIAL OWNERSHIP OF OTHER HOLDERS
OF THE COMMON AND PREFERRED STOCK
The following table sets forth, based on the publicly available
information known to the Committee as of March 1, 1998, certain information as
to each person or entity who or which was known to the Committee to be the
beneficial owner of more than 5% of the issued and outstanding Common and
Preferred Stock. (This information is based on the information provided in the
Company's Form 10-K for the year ended December 31, 1997.)
<PAGE>
Proxy Statement
Page 15
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership of
Title of Class of Beneficial Owner as of March 1, 1998 Class
- ---------------------------------- -------------------------------- --------------------------- ---------
<S> <C> <C> <C>
Class A Common Stock John R.C. Porter, Chairman of the 23,030,718 shares(1) 75.99%
Board
15 Bernes St.
London SW1W 9EA
England
Class A Common Stock Telos Shared Savings Plan 3,658,536 shares 15.85%
19886 Ashburn Road
Ashburn, VA 20147
Class A Common Stock Union de Banques 3,150,468 shares(2) 12.92%
Suisses (Luxembourg) S.A.
299 Part Ave. 37th Fl.
New York, NY 10171
Class B Common Stock F&C Nominees Limited 3,143,358 shares 77.85%
11 Devonshire Square
London EC 2M 4YR
England
Class B Common Stock Bank of Scotland (London) 815,700 shares 20.20%
Nominees Limited
11 Devonshire Square
London EC 2M 4YR
England
Class A Common Stock John B. Wood, President 1,296,650 shares(3) 5.62%
All Officers and Directors 2,458,403 shares(4) 10.65%
of the Company
As A Group (8 persons)
12% Cumulative Exchangeable Value Partners, Ltd. 714,317 shares(5) 19.87%
Redeemable Preferred Stock 2200 Ross Avenue, Ste. 4660
Dallas, TX 75201
12% Cumulative Exchangeable Wynnefield Partners/Small 215,000 shares 5.98%
Redeemable Preferred Stock Value Cap
One Penn Plaza, Site 4720
New York, NY 10119
</TABLE>
- ----------------
(1) Mr. Porter's holding include 7,228,916 shares of Class A Common Stock
purchasable upon exercise of a warrant.
(2) Union de Banques Suisses (Luxembourg) S.A. holdings include 1,312,695
shares of Class A Common Stock purchasable upon exercise of a warrant.
(3) Mr. Wood holds options to acquire 1,288,000 shares of the Company's Class A
Common Stock in addition to his current common stock holdings. These shares
are purchasable upon exercise of warrant and are exercisable within 60 days
of March 1, 1998.
(4) Under the Company's stock option plans and certain stock option agreements,
all officers and directors as a group hold options to acquire 2,071,218
shares of Class A Common Stock exercisable within 60 days after March 1,
1998.
(5) See "Information Regarding Value Partners."
<PAGE>
Proxy Statement
Page 16
VOTING
Preferred Stockholders are urged to mark, sign and date the enclosed
WHITE proxy card and return it today in the enclosed postage-paid envelope in
time to be voted at the Special Meeting.
The record date for determining stockholders entitled to notice of and
to vote at the Special Meeting is June 26, 1998 (the "Voting Record Date").
Stockholders of record at the close of business on the Voting Record Date will
be entitled to one vote at the Special Meeting for each share of Telos Preferred
Stock held on the Voting Record Date and for as many individuals as there are
directors to be elected. As of May 15, 1998, based on the Company's Form 10-Q
for the quarter ended March 31, 1998, there were 3,595,586 shares of Preferred
Stock issued and outstanding.
Only holders of record of the Preferred Stock as of the close of
business on the Voting Record Date will be entitled to vote. If you were a
Preferred Stockholder of record on the Voting Record Date, you may vote your
shares at the Special Meeting even if you have since sold your shares.
Accordingly, please vote the shares held by you on the Voting Record Date, or
grant a proxy to vote such shares, on the WHITE proxy card, even if you sold
your shares after the Voting Record Date.
If any of your shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the Voting Record Date, only it can vote
such shares and only upon receipt of your specific instructions. Accordingly,
please contact the person responsible for your account and instruct that person
to execute on your behalf the WHITE proxy card.
The WHITE proxy solicited hereby, if properly signed and returned to
Value Partners and not revoked prior to its use, will be voted in accordance
with the instructions contained therein. If no contrary instructions are given,
each proxy received will be voted FOR the Nominees for director described herein
and, upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) submitting a duly executed proxy bearing a later
date; or (ii) appearing at the Special Meeting and giving the Secretary notice
of his or her intention to vote in person. Proxies solicited hereby may be
exercised only at the Special Meeting and any adjournment thereof and will not
be used for any other meeting.
Each share of Preferred Stock is entitled to one vote at the Special
Meeting on all matters properly presented at the meeting and may be voted for as
many individuals as there are directors to be elected. Directors are elected by
a plurality of the votes cast with
<PAGE>
Proxy Statement
Page 17
a quorum present. A quorum consists of stockholders representing, either in
person or by proxy, a majority of the outstanding Preferred Stock entitled to
vote at the meeting. Abstentions are considered in determining the presence of a
quorum but will not affect the plurality vote required for the election of
directors.
If the election of the Class D directors is contested, under rules
applicable to broker-dealers, the proposal for the election of the Nominees
would be considered a "non- discretionary" item upon which broker-dealers may
not vote on behalf of their clients unless such clients have furnished voting
instructions. As a result, there may be broker non-votes at the Special Meeting.
However, broker non-votes will have no effect on the election of directors by a
plurality vote. If there is no contest, the proposal for the election of the
Nominees would be considered a "discretionary" item upon which broker-dealers
may vote on behalf of their clients where the clients have not submitted voting
instructions. In that case, there would be no broker non-votes at the Special
Meeting.
VALUE PARTNERS STRONGLY RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
proxies named on the WHITE proxy card to vote the proxy with respect to the
election of any person as a director if a Nominee is unable to serve or for good
cause will not serve, matters incident to the conduct of the meeting, and upon
such other matters as may properly come before the Special Meeting. Value
Partners is not aware of any business that may properly come before the Special
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
Value Partners or the Nominees may solicit proxies by mail,
advertisement, telephone, facsimile, telegraph and personal solicitation. Value
Partners or its regular employees or the Nominees may solicit proxies personally
or by telephone without additional compensation. Value Partners or the Nominees
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
solicitation materials to the beneficial owners of the Common Stock.
Value Partners has retained D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, a professional proxy solicitation firm, to assist in the
solicitation of proxies and
<PAGE>
Proxy Statement
Page 18
for related services. Value Partners will pay D.F. King & Co., Inc. a fee
of $4,000 plus $3.00 per telephone call and has agreed to reimburse it for its
reasonable out-of-pocket expenses. Value Partners has agreed to indemnify D.F.
King & Co., Inc. and its controlling persons, officers, directors, employees and
agents from and against any and all losses, claims, damages, liabilities and
expenses relating to its engagement, including liabilities and expenses under
the federal securities laws, but excluding matters relating to the indemnified
person's negligence, bad faith or willful misconduct. Approximately 30 persons
will be used by D.F. King & Co., Inc. in its solicitation efforts.
Value Partners will initially bear the cost of soliciting proxies in
connection with the Special Meeting. The cost of such solicitation, which
includes the fees of Value Partners' attorneys, solicitors, advertising,
printing and mailing and other costs incidental to the solicitation, including
litigation fees and expenses, cannot be stated with precision at this time.
However, Value Partners estimates that the total expenditures relating to this
proxy solicitation will be approximately $165,000, of which approximately
$142,000 has been incurred as of March 31, 1998, which fees and expenses began
to accrue on or about May, 1996. Of the total estimate, approximately $100,000
relates to fees and expenses incurred in connection with litigation necessitated
by the refusal of the Management to abide by the clear requirements of the
Company's Articles and hold a special meeting to elect the Class D directors. If
the Nominees are elected to the Board of Directors, Value Partners presently
intends to seek reimbursement from the Company for the costs incurred by the
Committee, but does not presently intend to submit the question of such
reimbursement to a vote of the stockholders.
Value Partners assumes no responsibility for the accuracy or
completeness of any information contained herein which is based on, or
incorporated by reference to, the Company's Form 10-K for the year ended
December 31, 1997 or the Form 10-Q for the quarter ended March 31, 1998, or its
other public filings.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE
ENCLOSED WHITE PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
- ------------------------------------------------------------------------------
IMPORTANT
Your vote is important. Regardless of the number of shares of Telos
Preferred Stock you own, please vote as recommended by Value Partners, Ltd. by
taking this simple step:
1. PLEASE SIGN, DATE and PROMPTLY MAIL the enclosed WHITE proxy card in
the postage-paid envelope provided.
2. PLEASE DO NOT RETURN ANY PROXY CARDS THAT MAY BE SENT TO YOU
BY MR. CALHOUN, MR. LITSINGER OR DR. GREENBLATT (THE
"CHALLENGERS").
IF YOU VOTED A CHALLENGER'S PROXY CARD BEFORE RECEIVING A VALUE
PARTNERS WHITE PROXY CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE SIMPLY BY
SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD. THIS WILL CANCEL YOUR
EARLIER VOTE SINCE ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE SPECIAL
MEETING.
If you own shares in the name of a brokerage firm, only your broker can
vote your shares on your behalf and only after receiving your specific
instructions. Please call your broker and instruct him/her to execute a WHITE
card on your behalf. You should also promptly sign, date and mail your WHITE
card when you receive it from your broker.
Please do so for each separate account you maintain.
You should return your WHITE proxy card at once to ensure that your
vote is counted. This will not prevent you from voting in person at the meeting
should you attend.
If you have any questions or need assistance in voting your shares,
please call D.F. King & Co., Inc., which is assisting us, toll-free at
1-800-859-8509.
- ------------------------------------------------------------------------------
<PAGE>
VALUE PARTNERS, LTD.
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF VALUE PARTNERS, LTD. ("VALUE
PARTNERS") FOR USE AT THE SPECIAL MEETING OF THE HOLDERS OF THE TELOS
CORPORATION (THE "COMPANY") PREFERRED STOCK (AS DEFINED BELOW) TO BE HELD ON
JULY 31, 1998 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned, being a holder ("Preferred Stockholder") of the 12%
Cumulative Exchangeable Redeemable Preferred Stock, $.01 par value per share
(the "Preferred Stock"), of the Company as of June 26, 1998, hereby authorizes
Timothy G. Ewing or Timothy B. Matz or any successors thereto as proxies, with
full powers of substitution, to represent the undersigned at the Special Meeting
of Preferred Stockholders of the Company to be held at the Army Navy Building,
1627 I ("Eye") Street, N.W., Washington, D.C. 20006, at the law offices of
McGuire, Woods, Battle & Boothe, LLP, on Friday, July 31, 1998 at 10:00 a.m.,
Eastern Time, and at any adjournment or postponement of said meeting, and
thereat to act with respect to all votes that the undersigned would be entitled
to cast, if then personally present, as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as marked for all nominees listed
to the contrary below) below
Nominees for a one-year term: Julio E. Heurtematte, Jr.; Malcolm M.B. Sterrett
(INSTRUCTION: To withhold authority to vote for one of the nominees,
cross-out the name of the nominee set forth above.)
In their discretion, the proxies are authorized to vote with respect to
the election of any person as a director if a nominee is unable to serve or will
not serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the meeting.
(To be signed and dated on the reverse side)
Value Partners recommends that you vote FOR the nominees of Value
Partners. Shares of Preferred Stock of the Company will be voted as specified.
If no specification is made, shares will be voted for the election of Value
Partners' nominees to the Board of Directors and otherwise at the discretion of
the proxies. This proxy may not be voted for
<PAGE>
any person who is not a Value Partners nominee. This proxy may be revoked
at any time before it is voted at the Special Meeting.
[Reverse Side]
The undersigned hereby acknowledges receipt of the Proxy Statement from
Value Partners for the Special Meeting.
Dated:__________________, 1998
-----------------------------------
-----------------------------------
Signature(s)
Please sign this exactly as your name(s) appear(s) on this proxy.
When signing in a representative capacity, please give title.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
