Maryland Court Dismisses with Prejudice All Claims by Activist Hedge Fund Costa Brava Against Telos Corporation

Business Wire, April 15, 2008

ASHBURN, Va. -- Telos Corporation (OTC:TLSRP.PK) today announced that The Circuit Court for Baltimore City has dismissed with prejudice all claims against the company by activist hedge fund Costa Brava Partnership III, L.P. of Boston and Wynnfield Partners Small Cap Value L.P. of New York City.

In his order granting dismissal of the remaining counts in the hedge fund's third amended complaint (TAC), Judge Albert J. Matricciani, Jr., wrote, "The present litigation has been lengthy and certainly costly to the parties. As a result of the Court's ruling on the present motion, it will come to an end, at least in this forum. ... [T]he Court has found that the plaintiffs have failed to state causes of action in the TAC . . . ."

"After nearly three long years, this case is over," said John B. Wood, CEO of Telos. "The activist hedge fund, Costa Brava, has failed in its efforts to extract dividend payments out of turn at the expense of our other shareholders. We've had finding after finding against this hedge fund, and we're gratified that the judge has ruled for Telos and all our shareholders, and has thrown out these claims."

Judge Albert J. Matricciani, Jr., also wrote, "...[I]n the judgment of the Court neither the ERPS registration statement nor the company charter and Articles of Amendment and Restatement can be read to give rise to a contractual obligation with Telos to pay plaintiffs accrued PIK dividends at the time of the first scheduled redemption date or anytime thereafter."

The judge wrote later in his memorandum and opinion, "The ERPS instrument does not, as a matter of law, establish for plaintiffs an interest in Telos' corporate assets or earnings as security for a debt."

Since 2005, the court has ruled repeatedly against Costa Brava, previously denying motions calling for the company to be placed in receivership, that the company be enjoined from selling any assets, and that the exchangeable redeemable preferred shares (ERPS) be classified as debt rather than equity. At one point, the Court issued a preliminary injunction against Costa Brava when it inappropriately communicated with Telos' bank.

The activist hedge fund, which holds approximately 16 percent of Telos ERPS, sued Telos in 2005 in an attempt to force payment of dividends out of turn. Costa Brava filed several derivative claims alleging wrongdoing by Telos officers and directors. The same court dismissed those derivative claims in January 2008.

"We are having a banner year financially and have recently signed significant contracts with the Army, the Air Force and other major federal government customers," said Wood. "We look forward to continuing to build on the successes that our employees have achieved."

About Telos Corporation

Telos Corporation has provided innovative IT solutions and services to the federal government for more than 30 years, focusing since 1989 on secure enterprise solutions. Telos Secure Networks and Xacta security solutions ensure that the government's most security-conscious organizations comply with demanding federal and DoD information security mandates. Offerings include enterprise IT security management solutions, enterprise security consulting services, secure networks, secure enterprise messaging, and secure identity management solutions. Telos and Xacta solutions are represented to the federal government on Telos' GSA schedule. For more information, visit www.telos.com.