<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:
/ / Preliminary Proxy Statement
/X/ 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)
Value Partners, Ltd.
- --------------------------------------------------------------------------------
(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:
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<PAGE>
VALUE PARTNERS, LTD.
2200 Ross Avenue
Suite 4660 West
Dallas, Texas 75201
(214) 999-1900
July 1, 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 consecutive
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. 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
<PAGE>
Letter to Preferred Stockholders
Page 2
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;
- 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 Value Partners
believes Telos Corporation has needed for a long time --
independent, outside directors who will represent the interests of
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. Goltermann or Dr. Greenblatt (each a "Challenger"), please do
not sign or return them. Value Partners believes that its Nominees
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.
<PAGE>
Letter to Preferred Stockholders
Page 3
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: /s/ Timothy G. Ewing
-------------------------------
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 July 8, 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 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.
As described below under "Why You Should Vote for Value
Partners' Nominees," management of Telos refused to recognize the
right of the Preferred Stockholders to elect their two independent
Class D directors until Value Partners obtained a court order.
Value Partners believes that the Board of Directors of Telos needs
independent directors who will represent the interests 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.
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
<PAGE>
Proxy Statement
Page 3
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 Partners'
special counsel regarding the December 23 Letter. Mr. Brownley
claimed that the January 31 date did not provide for sufficient
time 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
<PAGE>
Proxy Statement
Page 4
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.
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.
<PAGE>
Proxy Statement
Page 5
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.
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."
<PAGE>
Proxy Statement
Page 6
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 --
- conduct a thorough review of the Company's strategic
objectives and current operations;
- ensure that the Company takes 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.
<PAGE>
Proxy Statement
Page 7
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 the minimum number required by law
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 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
<PAGE>
Proxy Statement
Page 8
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 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 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
<PAGE>
Proxy Statement
Page 9
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 of the
Securities Exchange Act of 1934, as amended ("Exchange Act")). Mr.
Heurtematte's sole "associate" is his spouse, Marie Jeanne
Heurtematte; (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 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"
<PAGE>
Proxy Statement
Page 10
(as such term is defined by Rule 12b-2 of the Exchange Act).
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 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. 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 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.
After the two Class D directors are elected, in the event any
vacancy occurs in Class D prior to the expiration of the terms of
such directors, then the remaining director (if any) may appoint a
successor to hold office for the unexpired term of the director
whose place shall be vacant. If both Class D directors cease to
serve as directors before their terms expire, the holders of the
then outstanding Preferred Stock may, at a special meeting of such
holders, elect successors for the unexpired terms of the directors
whose places shall be vacant.
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
<PAGE>
Proxy Statement
Page 11
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.
<PAGE>
Proxy Statement
Page 12
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.
<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 Exchange Act), 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.
<PAGE>
Proxy Statement
Page 14
BENEFICIAL OWNERSHIP OF HOLDERS
OF THE COMMON AND PREFERRED STOCK
The following table sets forth, based on the publicly
available information known to Value Partners as of March 1, 1998,
certain information as to each person or entity who or which was
known to Value Partners 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, as subsequently
updated by the information provided in the Company's Form 10-Q for
the quarter ended March 31, 1998.)
As of May 15, 1998, the Company had outstanding 21,238,980
shares of Class A Common Stock, no par value; 4,037,628 shares of
Class B Common Stock, no par value; and 3,595,586 shares of 12%
Cumulative Exchangeable Redeemable Preferred Stock, par value $.01
per share. Only the holders of the Preferred Stock are entitled to
vote at the Special Meeting.
On or about May 8, 1998, the Company acquired from Union de
Banque Suisse ("UBS") all of its interests in the Company for $5.5
million. The Company also paid UBS $1 million in fees related to
such transaction and for previous services. As a result of such
purchase by the Company, the percentage holdings of the other
holders of the Class A Common Stock increased.
<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, 23,030,718 shares(1) 75.99%
Chairman of the 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 Banque Suisse 3,150,468 shares(2) 12.92%
(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, Ste. 4720
New York, NY 10119
</TABLE>
________________
(1) Mr. Porter's holdings include 7,228,916 shares of Class A
Common Stock purchasable upon exercise of a warrant.
(2) As of March 1, 1998, UBS' holdings included 1,312,695 shares
of Class A Common Stock purchasable upon exercise of a
warrant. As noted above, the Company purchased all of UBS'
interests in the Company on or about May 8, 1998.
(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. 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 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.
<PAGE>
Proxy Statement
Page 17
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 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,
<PAGE>
Proxy Statement
Page 18
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, willful
misconduct or violation of law or regulation. 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 Value Partners, 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. GOLTERMANN, 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. 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 1-800-714-3312.
<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.
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 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.
<PAGE>
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.
