The entire cost of soliciting these proxies will be borne by the Company.  As needed, the Company will request brokers and others to send proxy forms and other proxy material to the beneficial owners of the Common Stock and reimbursement will be provided for any reasonable expenses incurred in so doing. If necessary, the Company may also request its employees to solicit proxies from the stockholders personally or by telephone.  The Company may retain a proxy solicitor to assist in the solicitation of proxies, for which the Company would pay usual and customary fees.

Voting Methods.  Holders of the Common Stock may vote by (1) signing, dating and mailing the enclosed proxy card in the postage paidreturn envelope provided, or (2) attending the Annual Meeting and voting their shares in person. If shares of the Common Stock are held in the name of a bank, broker or other nominee, the beneficial owner of those shares must provide the bank, broker, or other nominee with instructions on how to vote those shares by following the voting instructions provided by the bank, broker, or other nominee.  A beneficial holder may not vote any shares held in the name of a bank, broker, or other nominee unless the beneficial holder obtains a "legal proxy" from the bank, broker, or other nominee.

If the Company had received nominations for Class D Directors, holders of the Public Preferred Stock would have been eligible to vote at the Annual Meeting on the election of Class D Directors and on no other matter before the Annual Meeting.

 

Set forth below is biographical information concerning our executive officers, who are appointed by the Board of Directors and serve until their successors are appointed and qualified.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires the Company's directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of any equity securities of the Company. During 2015, the following person failed to file a Form 4 filingBased on a timely basis in connection withreview of the purchasecopies of stock through the Company's Shared Savings Plan.

John B. Wood is both the Chairman of the Board of Directors and the Chief Executive Officer of the Company.  The Company's policy as to whether the roles of the Chairman and the Chief Executive Officer should be separate is to adopt the practice that best serves the Company's needs at any particular time.  The Board of Directors believes that combining the Chairman and Chief Executive Officer positions is currently the most effective leadership structure and is in the best interests of the Company's stockholders because of Mr. Wood's long tenure with the Company, including as the Chief Executive Officer, and his broad knowledge and experience with the Company's stockholders, partners, and vendors.  The Board of Directors may decide to separate or combine the roles of Chairman and Chief Executive Officer, if appropriate, at any time in the future.  The Company has no lead independent director.

The Company operates under a Proxy Agreement, which governs the relationship between the Company and certain of its foreign stockholders that, directly and indirectly, hold approximately 36% of the outstanding shares of Common Stock. Pursuant to such Proxy Agreement, a Proxy Board has been established, which consists of independent Board members Harris Mahan, and Tuttle. However, since Adm. Tuttle is no longer standing for re-election, his position onMahan. A third member, another qualified Board Member, will be appointed to the Proxy Board will be replaced with another qualified Board memberin 2017 upon approval by the parties to thea new Proxy Agreement.  Under the Proxy Agreement, the Proxy Board has the authority to vote 15,801,802 shares of Class A Common Stock at the Annual Meeting.

The Board of Directors has adopted a Code of Ethics and Business Conduct applicable to our Chief Executive Officer, Chief Financial Officer, and Controller.  The Code of Ethics and Business Conduct is available on our website at www.telos.com.  In the event that the Board of Directors amends our Code of Ethics and Business Conduct or grants a waiver from the Code of Ethics and Business Conduct, the Company will provide timely notice of such amendment or waiver on its website.

The Company has adopted the director independence standards that are summarized below.  The Company's director independence standards are based upon NASDAQ Listing Rule 5605. Pursuant to NASDAQ Listing Rule 5605(b)(1), a majority of directors of the Board will be independent.  Pursuant to NASDAQ Listing Rule 5605(a)(2), a director will not be independent if,

Pursuant to the independence standards set forth above, the Board has determined that the following directors and nominees meet the Company's independence standards and therefore are independent: Bernard C. Bailey, David Borland, Bruce R. Harris, Charles S. Mahan, and Robert J. Marino.  Based on these standards, the Board determined that the following directors are not independent: John W. Maluda and John B. Wood.  Additionally, due to conflicts of interest, both Seth W. Hamot and Andrew R. Siegel were determined not to be independent.

During the fiscal year ended December 31, 2015,2016, the Board of Directors held five meetings.  Each director attended at least 75%, in the aggregate, of all meetings of the Board and the respective committees of the Board on which they served in person or by phone, .phone.

The Company encourages all directors to attend annual meetings of stockholders.  TenFive of the elevennine directors, namely Messrs. Bailey, Borland, Dvoranchik, Hamot, Harris, Mahan, Maluda, Marino, Tuttle, and Wood, attended the Company's annual meeting of stockholders in 2015.2016.

The Company has standing Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees.

The Audit Committee was established to assist the Board of Directors in fulfilling its oversight responsibilities for (1) the integrity of the Company's financial statements, (2) the Company's compliance with legal and regulatory requirements, (3) the independent registered public accounting firm's qualifications and independence, and (4) the performance of the Company's internal audit function and independent registered public accounting firm.  In 2015,2016, the Audit Committee consisted of directors Bailey (chairman), Dvoranchik,Mahan, and Mahan. On March 29, 2016,Marino. Mr. Marino became a member of the Audit Committee.Committee on March 29, 2016.  In 2015,2016, the Audit Committee met fivefour times. The Board of Directors has adopted an Audit Committee charter, which is available on the Company's website at www.telos.com.  The Board has determined that Mr. Bailey is an "audit committee financial expert" as defined by rules adopted by the SEC and is independent.

The Management Development and Compensation Committee (the "Compensation Committee") was established for the purpose of reviewing, determining and approving all forms of compensation to be provided to the Company's executive officers and directors, and any stock compensation to be provided to all employees. In 2015,2016, the Compensation Committee consisted of directors Borland, DvoranchikHarris, and Marino (chairman), and Harris.  The Compensation Committee met two times during the year 2015..  On March 29, 2016, Mr. Marino became the chairman of the Compensation Committee. The Compensation Committee met three times during the year 2016.  The Board of Directors has adopted a Compensation Committee charter, which is available on the Company's website at www.telos.comwww.telos.com.. The Board of Directors has adopted a Management Development and Compensation Committee charter, which is available on the Company's website at www.telos.com.

Neither the Compensation Committee nor management engaged a compensation consultant in 20152016 to provide advice or recommendations on the amount or form of executive or director compensation.

The Nominating and Corporate Governance Committee (the "Nominating Committee") was established to make recommendations regarding Board nominations and to monitor the implementation of corporate governance rules and regulations. The Nominating Committee consists of directors Borland (chairman), Mahan, Marino, Tuttle, and Wood.  In 2015,2016, the Nominating Committee did not meet in person and acted once by unanimous written consent without a meeting.  The Board of Directors has adopted a Nominating Committee charter which is available on the Company's website at www.telos.com.

The Nominating Committee identifies potential candidates for first-time nomination as a director by using a variety of sources such as recommendations from the Company's management, current Board members, stockholders, and contacts in organizations served by the Company. Stockholders may nominate potential candidates by following the procedure set forth in the Company's Bylaws. This process provides that, in order for nominations or other business to be properly brought before an annual meeting by a stockholder, the stockholder must deliver written notice to the Company's secretary at the Company's principal executive offices not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth (90^th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60^th) day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The Nominating Committee will consider any director nominees submitted by stockholders in accordance with these procedures.

The Nominating Committee then conducts an initial review of the potential candidate's background, including whether he/she meets the minimum qualifications for Board members; whether the individual would be considered independent under the standards adopted by the Company and SEC rules; and whether the individual would meet any additional requirements imposed by law or regulation on members of the Audit and/or Compensation Committees of the Board. Among the requirements potential candidates should meet are the following: U.S. citizenship; eligibility for security clearance at a top secret level; ten (10) years of corporate or related business experience, preferably having served on the board of directors of a corporation; and familiarity with government contracts, the defense industry, and information technology and security. The evaluation process of a potential candidate's background will not be treated differently whether or not he/she was nominated by a stockholder, except for nominations received from holders of Public Preferred Stock, which are not subject to the Company's nomination process.

If the initial candidate review is satisfactory, the Nominating Committee will arrange an introductory meeting with the candidate and the committee's chairman, the Company's CEO, or other directors to determine the potential candidate's interest in serving on the Board. If the candidate is interested in serving on the Board and the Nominating Committee recommends further consideration, a comprehensive interview conducted by the Nominating Committee, the CEO, other members of the Board, and in some cases, key Company executives, follows. Upon successful conclusion of the review process, the Nominating Committee will present the candidate's name to the Board of Directors for nomination as a director and inclusion in the Company's Proxy Statement.

Stockholders wishing to communicate with the Board of Directors should send the communication by mail to the office of the Corporate Secretary (19886 Ashburn Road, Ashburn, VA 20147) who will forward such communication to the appropriate committee of the Board of Directors or to the individual director.  There have been no changes in the procedures by which stockholders may recommend nominees to the Company's board of directors.

Our policies and practices with respect to related person transactions were adopted on October 25, 2007, and are available on our website at www.telos.com.  Generally, any transaction between Telos and a related party in which the aggregate amount exceeds $120,000 is reviewed by the Audit Committee and subject to the ratification and approval of the Board of Directors.  For purposes of this policy, a related person is any director or executive officer of Telos, any nominee for director, any holder of 5% or more of the Company's voting securities, any immediate family members of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has 10% or greater beneficial ownership interest.

On March 31, 2015, the Company entered into Subordinated Loan Agreements and Subordinated Promissory Notes ("Notes") with affiliates of Mr. John R. C. Porter (referred to collectively as "Porter""Mr. Porter").  Mr. Porter and Toxford Corporation, of which Mr. Porter is the sole shareholder, own 39.3% of our Class A Common Stock.  Under the terms of the Notes, Mr. Porter loaned the Company $2,500,000 on or about March 31, 2015.  Telos also entered into a Subordination and Intercreditor Agreement with Mr. Porter and Wells Fargo Capital Finance, LLC ("Wells Fargo"), in which the Notes are fully subordinated to the Wells Fargoour senior credit facility and payments under the Notes are permitted only if certain conditions specified by Wells Fargo are met.lender at that time.  According to the terms of the Notes, the outstanding principal sum would bear interest at the fixed rate of twelve percent (12%) per annum which would be payable in arrears in cash on the 20th day of each May, August, November and February, with the first interest payment date on August 20, 2015.  The Notes do not call for amortization payments and are unsecured.  The unpaid principal, together with interest, is due and payable in full on July 1, 2017.  The Notes, in whole or in part, may be repaid at any time without premium or penalty. The outstanding principal sum under the Notes, as of December 31, 2015,2016, was $2,500,000, and the Company accrued $229,000approximately $529,000 of interest toon the Porter Notes in 2015.as of December 31, 2016.

On December 22, 2005, the Company's Board of Directors established a special litigation committee ("Special Litigation Committee"), composed of certain independent directors, to review and evaluate the matters raised in the litigation. On July 20, 2007, the Special Litigation Committee, in its final report, concluded that the available evidence did not support Plaintiffs' derivative claims and that it was not in the best interests of the Company to pursue such claims in the litigation. On August 24, 2007, the Company moved to dismiss Plaintiffs' derivative claims based upon the report and to dismiss all remaining claims for failure to state a claim. Following an evidentiary hearing, the Circuit Court dismissed all derivative claims based upon the recommendation of the Special Litigation Committee on January 7, 2008.

On February 12, 2008, the Plaintiffs filed a Third Amended Complaint that included both new counts and previously dismissed counts. The Company moved to dismiss or strike the Third Amended Complaint and, on April 15, 2008, the Circuit Court issued an order dismissing with prejudice all counts in the Third Amended Complaint that were not previously disposed of by motion or stipulation. On December 2, 2008, the Company filed a motion for voluntary dismissal of its counterclaim against Plaintiffs (for their interference with the Company's relationship with Wells Fargo) without prejudice. The Circuit Court granted that motion, over Plaintiffs' opposition, on January 23, 2009.

Following Plaintiffs' appeal of the dismissal of their derivative claims and shareholder oppression claim, on September 7, 2012, the Court of Special Appeals of Maryland ruled that the Circuit Court applied an incorrect standard of review to evaluate the conclusions of the Special Litigation Committee. The Court of Special Appeals held that the Circuit Court's dismissal of a shareholder oppression claim (asserted against Mr. Porter) raised an issue of first impression under Maryland law and required further briefing in the Circuit Court. The Court of Special Appeals vacated the decision of the Circuit Court that had been appealed, and remanded the case for further consideration and proceedings.

On October 24, 2012, the Company filed a petition for writ of certiorari in the Court of Appeals of Maryland, which was denied on January 22, 2013.

On remand, the Circuit Court held a status and scheduling conference on July 26, 2013, as a result of which the Circuit Court issued a memorandum to counsel setting a briefing schedule to address the motion filed by the Company and other defendants to dismiss or otherwise dispose of the derivative claims as a result of the findings of the Special Litigation Committee in its final report of July 20, 2007.  On November 1, 2013, the Defendants filed a Motion to Dismiss the derivative claims under the standard of review dictated by the opinion of the Court of Special Appeals.  Plaintiffs filed their Opposition to the Motion on December 23, 2013, and Defendants filed their Reply on January 23, 2014.  A hearing on the Motion to Dismiss was held on April 24, 2014 in the Circuit Court.  No decision has been rendered on the Company's Motion to Dismiss or otherwise dispose of the derivative claims, and the matter remains pending.

On September 17, 2013, the Plaintiffs filed a request for an entry of an order for default as to Mr. Porter, which was denied by the Circuit Court on November 8, 2013.  Mr. Porter ultimately filed a motion to dismiss the claim against him on May 13, 2014, raising multiple grounds.  No decision has been rendered on Mr. Porter's motion to dismiss, and the matter remains pending.

As of December 31, 2015,2016, Costa Brava and Wynnefield own 12.7% and 17.3%, respectively, of the outstanding Public Preferred Stock.

No material developments occurred in this litigation in 2015.2016.

At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to Plaintiffs' success in relation to any of their assertions in the litigation. Although there can be no assurance as to the ultimate outcome of the case, the Company and its present and former officers and directors strenuously deny Plaintiffs' allegations and continue to vigorously defend the matter and oppose all relief sought by Plaintiffs.

On April 12, 2010, the Class D Directors filed a motion for the advancement of legal fees and expenses incurred in defense of the Company's counterclaim. On November 3, 2011, the Circuit Court denied the Plaintiffs' motion, as well as the Plaintiffs' motion for partial summary judgment and request for attorneys' fees. On May 21, 2012, the Circuit Court denied Plaintiffs' motion for reconsideration of the same.

Trial on both the Class D Directors' books and records claims and the Company's counterclaims for damages related to the auditor interference commenced on July 5, 2013, and continued on several days in July 2013.  The evidentiary portion of the trial concluded on August 1, 2013, and post-trial briefing concluded on September 16, 2013.  The court decision on these matters is still pending and no material developments occurred in this litigation in 2015.2016.

At this stage of the litigation it is impossible to reasonably determine the degree of probability related to the Class D Directors' success in any of their assertions and claims, or whether such success would entitle them to monetary relief, although the Company notes that Class D Directors did not seek damages as a part of their books and records claim. Although there can be no assurance as to the ultimate outcome of these proceedings, the Company and its officers and directors strenuously deny the Class D Directors' claims, and will vigorously defend the matter, and continue to oppose the relief sought.

The Audit Committee oversees the Company's financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements for the fiscal year ended December 31, 2015,2016, including the quality and acceptability of accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements included in the Company's Annual Report on Form 10-K.

The Audit Committee discussed with the independent registered public accounting firm, who is responsible for expressing an opinion on conformity of those audited financial statements with U.S. generally accepted accounting principles, the firm's judgment as to the quality and acceptability of the Company's accounting principles and such other matters as are required to be discussed with the independent registered public accounting firm under the Public Company Accounting Oversight Board ("PCAOB") Auditing Standards No. 161301 (Communications with Audit Committees).  In addition, the Audit Committee discussed with the independent registered public accounting firm the firm's independence from management and the Company and received the written disclosures and the letter from the independent accountant required by applicable requirements of the PCAOB regarding the independent accountant's communications with the Audit Committee concerning independence.  The Audit Committee also considered whether the provision of non-audit related services by the independent registered public accounting firm was compatible with maintaining the firm's independence and found it to be acceptable.

In reliance on the reviews and discussions referred to above, the Committee  recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 20152016 for filing with the Securities and Exchange Commission.

On March 27, 2014, the Compensation Committee approved and ratified the Telos Corporation Senior Officer Incentive Program (the "Plan").  The purpose of the Plan is to grant cash bonus awards to certain of our key senior officers, which includes our named executive officers, in order to provide eligible officers with an incentive to put forth maximum efforts for both the short-term and long-term success of the Company and to drive achievement of our long-term growth and profitability objectives. The 20152016 awards under the Plan provided eligible participants the opportunity to earn an incentive award based upon the Company achieving a defined amount of enterprise target EBITDA for the year and achievement of subjective management business objectives established by the Compensation Committee (the "MBO Bonus") and an incentive award based upon achievement of our three-year strategic growth plan (the "Strategic Growth Bonus").  The Plan consists of elements for both short-term and long-term goals, as well as short-term and long-term incentives.  The 20152016 awards required that the Company achieve an enterprise target EBITDA performance goal before the payment of any incentive compensation under the MBO Bonus Plan. OnceIf the Company achieves the enterprise target EBITDA performance goal for the applicable year, the Compensation Committee would have evaluated other factorsretains the discretion to determinedecrease, but not to increase, the incentive compensation.amount of any MBO Bonus even if the enterprise target EBITDA performance goal was not exceeded based on an evaluation of subjective management business objectives.  Under the Plan, 60% would have beenbe payable in lump sum in early 2016.2017.  The remaining 40% would have beenbe payable in equal installments (without interest) on the last day of each of the eight calendar quarters of 20162017 and 20172018 unless the employment of such named executive officer is terminated for any reason (other than death or disability) prior to the next scheduled quarterly payment date.  The Plan is administered by the Compensation Committee, and determinations by the Compensation Committee are final, conclusive and binding on all parties.  Any sums payable under the Plan are subject to the Company having sufficient cash and liquidity to pay the bonuses.

For 2015,2016, the Compensation Committee established aan aggregate total bonus pool of $7 million for both the
MBO Bonus and a pre-existing bonus plan for other employees who are not participants in the Plan.  This amount is the same as the budgeted bonus pool of 2014.  The MBO Bonus budgeted amount of $4 million for 2016 did not change from 2014 and was approximately $4 million.2015.  The $3 million bonus pool, payable quarterly, awards division business line management and general and administrative senior managers and their respective employees based on achievement of quarterly targets.  The 20152016 annual bonus targets for Messrs. John Wood, Williams, Wright, Malloy and Ms. Nakazawa were: $1,100,000, $550,000, $425,000, $330,000, and $425,000.$425,000, respectively.  In setting these targets, the Compensation Committee took into account each officer's role and contribution to the Company's performance, internal equity, the amounts of the annual bonuses paid to the officer in prior years, and, in the case of officers other than Mr. John Wood, the recommendations of Mr. John Wood.

The Plan also includes a target Strategic Growth Bonus component for participants.  During 2015,2016, each of the named executive officers were granted the opportunity to receive a Strategic Growth Bonus for the performance period beginning January 1, 2015,2016, and ending December 31, 2017,2018, which replaced the opportunity to receive a Strategic Growth Bonus granted in 20142015 for the performance period beginning January 1, 20142015 through December 31, 2017. The target amount of each award, if earned, is two and one-half times the amount of each participant's 20152016 MBO Bonus target amount, and the participant's entitlement to payment of the target amount will be based upon successful achievement by the Company of a three-year aggregate enterprise EBITDA goal of $60 million during the performance period before taking into account the payment of the Strategic Growth Bonuses.  All Strategic Growth Bonuses are payable within two and one-half months following the end of the three-year performance period.  If a participant's employment with the Company terminates for any reason (other than death or disability) prior to the last day of the three-year performance period, the participant's right to payment of a Strategic Growth Bonus for the performance period will be forfeited in its entirety.  Upon the termination of a participant's employment by reason of death or disability, the participant will forfeit as of the termination of employment a portion of the Strategic Growth Bonus equal to the amount of the Strategic Growth Bonus initially granted to the participant for that performance period multiplied by a fraction, (i) the numerator of which will be the number of full calendar months from the date of the participant's cessation of employment to the end of the performance period, and (ii) the denominator of which will be the number of months representing the entire performance period (provided that the Compensation Committee is authorized to declare that a lesser percentage of the Strategic Growth Bonus will be forfeited).  With respect to the portion of the Strategic Growth Bonus that is not so forfeited, the performance period will continue and the remaining percentage of the Strategic Growth Bonus that is earned or forfeited will be determined based upon the extent to which the applicable performance goals for such performance period have been achieved or exceeded.  In the case of a change in control of the Company, all performance periods will be deemed to have ended as of the end of the most recent quarterly accounting period prior to the date of the change in control, all performance goals necessary to earn the maximum bonus for each performance period will be deemed to have been achieved, and the full maximum bonus will be paid to a participant of his designated beneficiary, if applicable, in a single-sum payment on the date of the change in control.

As disclosed in the Company's proxy statement for the 2015 Annual Meeting of Stockholders, each of the named executive officers achieved the performance goals for each of their respective MBO Bonus awards for the first three quarters of 2014. As a result, each of the named executive officers were paid 60% of the quarterly payments during the first three quarters of 2014. The remaining 40% of those amounts areis payable to each of the named executive officers in equal installments (without interest) on the last day of each of the eight calendar quarters immediately following 2014 unless the employment of such named executive officer is terminated for any reason (other than death or disability) prior to the next scheduled quarterly payment date. The employment of none of the named executed officers was terminated during 2015.2015 or 2016. As a result, Messrs. John Wood, Williams, Wright, and Malloy and Ms. Nakazawa earned the following amounts, respectively, of their 2014 MBO Bonus award in 2015:2016: $165,000, $82,500, $63,750, $49,500, and $63,750. The Compensation Committee also awarded a bonus inCompany paid these amounts, and the amountportion of $100,000these MBO Bonus awards earned in 2015, outside of the Plan to Ms. Nakazawa in recognition of Ms. Nakazawa's exceptional performance in 2015. As of the date of this proxy statement, the Company has not paid any of these awards.2016.

The following table summarizes the compensation earned for the years ended December 31, 2016, 2015 2014 and 20132014 by the chief executive officer, chief financial officer, and the three other most highly-compensated executive officers.