<PAGE>
[LOGO]
April 12, 1996
Dear Stockholder:
This letter accompanies the Proxy Statement for our Annual Meeting on
Thursday, May 16, 1996, at the offices of the Company at 3033 Science Park Road,
San Diego, California 92121, at 9:00 a.m. We hope that it will be possible for
you to attend in person.
At the meeting, the stockholders will be asked to elect seven directors,
approve the 1995 Employee Stock Purchase Plan and the 1996 Directors' Stock
Option and Equity Participation Plan and to ratify the Board's selection of
auditors. In addition, we will present a report on the operations and activities
of the Company. Following the meeting, management will be pleased to answer your
questions about the Company.
The Notice of Meeting and Proxy Statement accompanying this letter describe
the matters upon which stockholders will vote at the upcoming meeting, and we
urge you to read these materials carefully. We also urge you to sign and return
your proxy cards so we can be sure of a quorum to vote on these proposals for
stockholder action.
Sincerely,
[SIG]
J. S. Webb
Chairman of the Board
[SIG]
Gene W. Ray
President and Chief
Executive Officer
3033 SCIENCE PARK ROAD - SAN DIEGO, CALIFORNIA 92121 - (619) 552-9500
<PAGE>
THE TITAN CORPORATION
3033 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(619) 552-9500
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1996
To the Stockholders of The Titan Corporation:
The Annual Meeting of Stockholders of The Titan Corporation will be held at
the offices of the Company at 3033 Science Park Road, San Diego, California
92121, on Thursday, May 16, 1996, at 9:00 a.m., for the following purposes:
1. To elect a Board of seven directors;
2. To consider and act upon a proposal to adopt the 1995 Employee Stock
Purchase Plan;
3. To consider and act upon a proposal to adopt the 1996 Directors'
Stock Option and Equity Participation Plan;
4. To consider and act upon a proposal to ratify the selection of
Arthur Andersen LLP as the Company's auditors for the fiscal year
ending December 31, 1996; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 21, 1996, will be
entitled to vote at the meeting.
By order of the Board of Directors,
[SIG]
David A. Hahn
SECRETARY
San Diego, California
April 12, 1996
TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, YOU ARE REQUESTED
TO SIGN THE ATTACHED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID,
ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE MEETING YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE
SENT IN YOUR PROXY.
<PAGE>
THE TITAN CORPORATION
3033 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
April 12, 1996
------------------------
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of The Titan
Corporation ("Titan" or the "Company") for use at the Annual Meeting of
Stockholders to be held at the offices of the Company at 3033 Science Park Road,
San Diego, California 92121, on May 16, 1996 at 9:00 a.m. and at any
adjournments thereof. The shares represented by the proxy will be voted at the
meeting if the proxy is properly executed and returned. Any stockholder giving a
proxy has the right to revoke it by giving written notice to the Secretary of
the Company at any time prior to the voting or by executing and delivering a
later dated proxy. A stockholder of record at the close of business on March 21,
1996, if present at the meeting, may vote in person whether or not he has
previously given a proxy. This Proxy Statement and its enclosures are being
mailed to the Company's stockholders on or about April 12, 1996.
The cost of the solicitation will be paid by the Company. In addition to
solicitation of proxies by use of the mails, directors, officers or employees of
the Company may solicit proxies personally, or by other appropriate means. The
Company will request banks, brokerage houses and other custodians, nominees or
fiduciaries holding stock in their names for others to send proxy materials to
and to obtain proxies from their principals, and the Company will reimburse them
for their reasonable expenses in doing so. The Company has retained the services
of William F. Doring & Co. to assist in the solicitation of proxies at an
estimated cost of $5,000 plus certain out-of-pocket expenses.
VOTING
The securities of the Company entitled to vote at the meeting consist, as of
March 21, 1996, of 694,872 shares of $1.00 Cumulative Convertible Preferred
Stock (the "Preferred Stock") and 14,046,238 shares of common stock, par value
$.01 per share (the "Common Stock"). Only stockholders of record on the books of
the Company at the close of business on that date will be entitled to vote at
the meeting. Each holder of Preferred Stock is entitled to one-third ( 1/3) vote
for each of said shares. Holders of Preferred and Common Stock will vote as a
single class, and not separately.
Under the Company's bylaws and Delaware law, shares represented by proxies
that reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. All other proposals to come before
the Annual Meeting require the approval of a majority of the shares of stock
having voting power present and entitled to vote thereon. Abstentions as to a
particular proposal will have the same effect as votes against such proposal.
Shares that reflect broker non-votes, however, will be treated as shares not
present and, therefore, not entitled to vote on such proposal for purposes of
determining approval of such proposal. Accordingly, such shares will not be
counted as votes for or against such proposal and will not affect the outcome of
the vote on such proposal.
At the Company's Annual Meeting in 1995, approximately 92.3% of the
outstanding voting power was represented and participated in the election of
directors.
<PAGE>
OWNERSHIP OF TITAN'S SECURITIES
The following table sets forth certain information as to the number of
shares beneficially owned as of March 21, 1996 (a) by each person who is known
to the Company to own beneficially 5% or more of the outstanding shares of any
class of its voting stock, (b) by each present Titan director, each nominee to
become a director and each of the Named Executive Officers (as defined on page
9), and (c) by all Titan officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
IDENTITY OF OWNER BENEFICIAL OF
OR GROUP (1) TITLE OF CLASS OWNERSHIP CLASS
- --------------------------------------------------------------------------- -------------- --------------- ---------
<S> <C> <C> <C>
Charles R. Allen........................................................... Common Stock 17,250(2) *
Joseph F. Caligiuri........................................................ Common Stock 17,250(2) *
Daniel J. Fink............................................................. Common Stock 13,600(2) *
Robert E. La Blanc......................................................... Common Stock 1,000 *
Thomas G. Pownall.......................................................... Common Stock 13,750 *
Gene W. Ray................................................................ Common Stock 357,339(2) 2.54%
J. S. Webb................................................................. Common Stock 88,854(2) *
Ronald B. Gorda............................................................ Common Stock 36,348(2) *
Cornelius L. Hensel........................................................ Common Stock 9,104(2) *
Frederick L. Judge......................................................... Common Stock 25,485(2) *
Stephen P. Meyer........................................................... Common Stock 44,930(2)(5) *
BKP Capital Management, Inc................................................ Common Stock 1,080,000(3) 7.69%
Feibusch & Co., Inc........................................................ Common Stock 705,100(4) 5.02%
All Directors and Officers as a Group
(15 Persons).............................................................. Common Stock 689,712(2) 4.91%
</TABLE>
- ---------
* Less than 1%.
(1) The address of each owner, other than BKP Capital Management, Inc. and
Feibusch & Co., Inc., is c/o The Titan Corporation, 3033 Science Park Road,
San Diego, California 92121. The address of BKP Capital Management, Inc. is
One Sansome Street, Suite 3900, San Francisco, California 94104. The address
of Feibusch & Co., Inc. is 80 E. Sir Francis Drake Boulevard, Suite 3D,
Larkspur, California 94939.
(2) Including (A) 6,250; 6,250; 6,250; 97,500; 25,000; 32,500; 8,750; 25,000;
and 254,250 shares subject to outstanding options held by Messrs. Allen,
Caligiuri, Fink, Ray, Webb, Gorda, Hensel, Judge, and all directors and
officers as a group, respectively, which are currently exercisable or may
become exercisable within 60 days after March 21, 1996 and (B) 75,145;
27,228; 3,848; 254; 485; 14,180; and 142,829 shares held by the trustees of
the Company's 401(k) Retirement Plan and Employee Stock Ownership Plan for
the accounts of Messrs. Ray, Webb, Gorda, Hensel, Judge, Meyer, and all
directors and officers as a group, respectively.
(3) All shares are beneficially owned by BKP Capital Management ("BKP"), Bob K.
Pryt, its President and sole shareholder and BKP Partners, L.P. ("BKPP").
BKP, BKPP and Mr. Pryt have shared voting and dispositive power with respect
to all 1,080,000 shares. All information concerning BKP, Mr. Pryt and BKPP
is based upon information provided to the Company by BKP.
(4) All shares are beneficially owned by Feibusch & Co., Inc. and Robert J.
Feibusch, its president and sole shareholder. Feibusch & Co., Inc. and Mr.
Feibusch have shared voting and dispositive power with respect to all
705,100 shares. All information concerning Feibusch & Co., Inc. and Mr.
Feibusch is based upon information provided to the Company by Feibusch &
Co., Inc.
(5) Mr. Meyer resigned in February 1996.
Except as otherwise indicated in the above notes, shares shown as
beneficially owned are those as to which the named person possesses sole voting
and investment power. However, under California law, personal property owned by
a married person may be community property which either spouse may manage and
control, and Titan has no information as to whether any shares shown in this
table are subject to California community property law.
2
<PAGE>
ELECTION OF DIRECTORS
Seven directors are to be elected at the meeting, each to serve for a term
of one year and until his successor shall be elected. The proxies solicited
hereby are intended to be voted for the nominees whose names are listed below.
All of the nominees are presently directors and all were elected by the
stockholders, except Mr. La Blanc who was elected by the existing directors to
fill a vacancy in February 1996. The Company has no reason to believe that the
nominees for election will not be available to serve their prescribed terms.
However, the persons named in the proxy will have discretionary authority to
vote for others if any nominee is unable or unwilling to serve.
INFORMATION CONCERNING NOMINEES
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME AGE PRINCIPAL OCCUPATION DIRECTOR OTHER CORPORATE DIRECTORSHIPS
- -------------------------- ----------- --------------------------------- ----------- -------------------------------------
<S> <C> <C> <C> <C>
J. S. Webb 76 Chairman of the Board of 1984 Amdahl Corporation; EIP Microwave;
Directors of Titan Plantronics, Inc.
Charles R. Allen 70 Advisor, New Court Partners, a 1989 --
venture capital unit of
Rothschild, Inc.
Joseph F. Caligiuri 68 Retired Executive Vice President 1984 Alton Group, Inc.; Avnet, Inc.;
of Litton Industries, Inc., Scriptel Holding, Inc.
diversified manufacturing
Daniel J. Fink 69 President of D. J. Fink 1985 Orbital Sciences Corporation
Associates, Inc., management
consulting
Robert E. La Blanc 62 President of Robert E. La Blanc 1996 Tribune Co.; Storage Technology
Associates, Inc., financial and Corporation; Prudential Global Fund,
technical consulting Inc.; Prudential Pacific Growth Fund,
Inc.; Prudential Global Limited
Maturity Fund, Inc.
Thomas G. Pownall 74 Retired Chairman and Chief 1992 Sundstrand Corporation
Executive Officer of Martin
Marietta Corporation
Dr. Gene W. Ray 57 President and Chief Executive 1985 Wave Systems Corp.
Officer of Titan
</TABLE>
Mr. Webb served as Vice Chairman of the Board of TRW, Inc., a diversified
manufacturing company, from June 1978 until December 1981 and President of
TRW-Fujitsu Company, a joint venture formed to market Fujitsu's computer
projects in the United States, from May 1980 until his retirement in December
1981.
Mr. Allen was employed by TRW, Inc., a diversified manufacturing company,
from 1955 to 1986, where he held a number of executive management positions,
including director from 1972 to 1986 and Executive Vice President and Chief
Financial Officer from 1977 to 1986.
Mr. Caligiuri was employed by Litton Industries, Inc., a diversified
manufacturing and services company, from 1969 to 1993, where he held a number of
executive management positions, including Executive Vice President from
September 1981 to April 1993.
3
<PAGE>
Mr. Fink was employed by General Electric Co. from 1967 to 1982, where he
held a number of executive management positions, including Senior Vice President
of Corporate Planning and Development, after which he founded and has been the
President of D. J. Fink Associates, Inc., a management consulting firm.
Mr. La Blanc was a General Partner with Salomon Brothers, an investment
banking firm, from 1969 to 1979. From 1979 to 1981 he was Vice Chairman of
Continental Telecom, Inc., after which he founded and has been the President of
Robert E. La Blanc Associates, Inc., a financial and technical consulting firm.
Mr. Pownall was employed by Martin Marietta Corporation, a diversified
manufacturing and services company, from 1963 to 1992 where he held a number of
executive management positions, including director from September 1971 to April
1992, Chief Executive Officer from April 1982 to April 1988, and Chairman of the
Board of Directors from January 1983 to April 1988.
Dr. Ray was a co-founder of Titan Systems, Inc., the parent of which merged
into the Company in 1985. He served as a Director, Chief Executive Officer and
President of Titan Systems from its inception in 1981 until the merger. He has
been President and Chief Executive Officer of the Company since the merger.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS AND DIRECTORS' FEES
The Company's Board of Directors has an audit committee, a nominating
committee and a compensation, stock option and pension committee. The members of
the audit committee are Mr. Allen, Chairman, and Messrs. Caligiuri, Fink and
Pownall. This committee, which monitors the Company's basic accounting policies,
reviews audit and management reports and makes recommendations regarding the
appointment of the independent auditors, held three meetings during fiscal 1995.
The members of the nominating committee are Mr. Caligiuri, Chairman, and Messrs.
Allen, Fink and Pownall. This committee, which seeks out, evaluates and
recommends to the Board of Directors qualified nominees for election as
directors of the Company, did not formally meet during fiscal 1995. The members
of the compensation, stock option and pension committee are Mr. Pownall,
Chairman, and Messrs. Allen, Caligiuri and Fink. This committee, which deals
with the hiring and election of corporate officers, salary and incentive
compensation policies for officers and executives, and the granting of stock
options and stock appreciation rights to employees, held four meetings during
fiscal 1995.
During fiscal 1995, the Board of Directors held eight meetings and took
action by unanimous written consent on three occasions. With the exception of
Mr. Allen, each of the incumbent directors attended more than 75% of the
meetings of the Board and its committees on which he served during 1995. Mr.
Allen attended more than 50% of all meetings.
Directors who are not officers receive directors' fees at an annual rate of
$16,000, paid quarterly, and $1,000 per meeting day. In addition, under the
existing Directors' Stock Option Plans, options to purchase 15,000 shares of the
Common Stock of the Company are granted to each such director upon election to
the Board. Such directors also receive periodic additional grants of options to
purchase 5,000 shares of Common Stock under the Directors' Stock Option Plans.
RELATIONSHIPS WITH DIRECTORS' BUSINESSES
The Company has entered into a Consulting Agreement with Robert E. La Blanc
Associates, Inc., a financial and technical consulting firm of which Mr. La
Blanc is President, to identify and analyze certain business opportunities in
the communications area. Robert E. La Blanc Associates, Inc. will be paid a fee
of $10,000 to $25,000, depending on the amount of work required, plus
reimbursement of out-of-pocket expenses.
4
<PAGE>
TITAN MANAGEMENT
The executive officers of Titan and their respective positions with Titan
and ages are set forth in the following table. Biographical information on each
of the executive officers who is not a director is set forth following the
table. There are no family relationships between any director or executive
officer and other director or executive officer of Titan. Executive officers
serve at the discretion of the Board of Directors.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
YEAR IN WHICH
NAME POSITION AGE HE/SHE BECAME OFFICER
- ------------------------------- --------------------------------------------------- ----------- ---------------------
<S> <C> <C> <C>
J. S. Webb Chairman of the Board of Directors 76 1984
Gene W. Ray President and Chief Executive Officer 57 1985
Louis L. Fowler Vice President and Assistant Secretary 57 1989
Ronald B. Gorda Senior Vice President 40 1994
David A. Hahn Senior Vice President, General Counsel and 35 1995
Secretary
Roger Hay Senior Vice President and Chief Financial 46 1994
Officer
Cornelius L. Hensel Senior Vice President 59 1995
Frederick L. Judge Senior Vice President 62 1994
</TABLE>
The term of office of each executive officer is until his or her respective
successor is elected and has been qualified, or until his or her death,
resignation or removal. Officers are elected by the Board of Directors annually
at its first meeting following the Annual Meeting of Stockholders.
Mr. Fowler has been Vice President since September 1989. From March 1987 to
September 1989 he served as Vice President of Titan Systems, Inc. Prior thereto,
Mr. Fowler was Director of Contracts of Titan Systems, Inc. from March 1985 to
March 1987.
Mr. Gorda has been Senior Vice President since February 1995 and President
of the Linkabit division of the Company since June 1993. From May 1994 to
February 1995 he was a Vice President at Titan. From August 1991 to June 1993 he
served as Senior Vice President of the SATCOM Systems business unit of the
Linkabit division. Prior thereto, he was Senior Program Manager of the SATCOM
Command and Control division of Rockwell International from April 1986 to July
1991.
Mr. Hahn has been Senior Vice President, General Counsel and Secretary of
the Company since May 1995. Prior thereto, he was a partner with the law firm of
Latham & Watkins, San Diego, California from January 1993 to May 1995. From
August 1985 to January 1993, he was an associate with Latham & Watkins.
Mr. Hay has been Senior Vice President and Chief Financial Officer since
March 1994. From October 1989 to September 1993 he was Executive Vice
President--Finance and Chief Financial Officer of International Rectifier
Corporation.
Mr. Hensel joined the Company in January 1995 and has been Senior Vice
President since February 1995. From January 1994 to December 1994 Mr. Hensel was
Senior Vice President and General Manager of the C(3)I Systems Division of CSC
Professional Systems Group. From June 1988 to December 1993 he was Senior Vice
President and General Manager of the C(3)I Systems Division of Atlantic Research
Corporation.
Mr. Judge has been Senior Vice President since February 1994. From January
1991 to January 1994, Mr. Judge was Senior Vice President and Chief Operating
Officer of Hughes Communications, Inc., a unit of GM Hughes Electronics Corp.
From January 1988 to January 1991, he served as Senior Vice President of Hughes
Communications, Inc.
5
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company's Compensation, Stock Option and Pension Committee has the duty
to administer the Company's cash and equity based executive compensation
programs and to evaluate the overall performance of the executive officers.
COMPENSATION PHILOSOPHY
The Company believes that there should be a direct relationship between
executive compensation and value delivered to the stockholders. The Company
implements this philosophy with a set of supporting principles:
- Compensation must be fair.
The Company strives to evaluate the relative contribution of its executive
officers and to compensate them fairly in relationship to their individual
contributions, to each other, and to their relative value in comparable
companies.
- Compensation must be competitive.
The Company is committed to providing base salary programs that enable it
to attract and retain the best available people. It maintains these
programs by monitoring the competitive pay practices of other companies in
similar businesses.
- Compensation must be related to Company goals.
Executive officers are rewarded based on overall Company performance and
on individual performance. Company performance is evaluated by measuring
the achievement of Company goals and business plans. Individual
performance is measured by reviewing progress against specific personal
objectives. Individual performance goals are established for each
executive officer based upon his or her ability to effect overall company
objectives. Such individual performance goals typically include business
unit profitability, asset management, cost control, contract performance
objectives and success in diversifying into commercial and international
businesses as appropriate.
- Compensation must motivate.
The compensation program is designed to provide a direct link between
performance and compensation. Realistic individual and Company performance
targets provide the motivation to strive to meet or exceed performance
goals.
COMPENSATION MEASUREMENT
The Company has a formalized process to assist in the evaluation of
performance and in the determination of compensation amounts for each of the
executive officers. It is as follows:
1. Early in the year, the Board of Directors approves the overall
Company goals including earnings per share ("EPS") and return on equity
("ROE"). Individual performance goals are established for the executive
officers by the President and CEO, and approved by the Committee. The
President and CEO's goals are established by the Committee. The Company
measurement goals of EPS and ROE represent approximately two thirds of the
incentive opportunity for the President and CEO and other executive officers
on the Corporate staff. The remaining one-third is tied to individual
performance measures. In the case of executive officers with business unit
responsibility, approximately half of the incentive compensation measurement
is based upon individual business unit profitability and return on revenues,
with the remainder equally split between overall Company goals and
individual performance measures.
2. Each executive officer is given feedback periodically during the year
against these objectives.
3. Upon review and recommendation of the Compensation, Stock Option and
Pension Committee, and approval by the Board of Directors, each executive
officer is rewarded according to the overall performance of the Company and
according to the achievement of individual objectives.
6
<PAGE>
TOTAL COMPENSATION
The Company has a program of cash compensation and equity based
compensation. These programs apply equally to the President and Chief Executive
Officer and all other executive officers.
CASH COMPENSATION
BASE SALARY COMPENSATION
Base salary is set to allow the Company to attract and retain the people
necessary for the successful operation and growth of the Company. Base salary is
reviewed annually and is examined to determine compatibility with the pay
practices of companies in similar businesses. Variable pay opportunity is
established in keeping with the competitive environment. In March 1995, Dr.
Ray's base salary was increased in recognition of his performance in 1994 as
were the salaries of three of the other four highest paid executive officers in
1994. Dr. Ray's base salary for 1996 was not increased nor was the base salary
of two of the other four highest paid officers in 1995.
INCENTIVE COMPENSATION
The Committee believes that a substantial portion of the total compensation
should be related to the overall performance of the Company as well as the
individual contribution of each executive officer. As a result, much of the
total compensation is "at risk."
Under the Company's Incentive Plan, bonuses are paid to the President and
CEO and each executive officer based on individual performance and the
performance of the Company, with maximum incentive compensation ranging from 30%
to 60% of base salary compensation. The maximum incentive compensation range is
established based upon the individual's goals as well as to be consistent with
maximum incentive compensation of similar businesses. A supplemental bonus is
available to reward growth above Plan in Company EPS or unit profitability.
The Incentive Compensation set forth in the accompanying table for the
President and Chief Executive Officer and the other four highest paid executive
officers was dependent on the achievement of the Company and individual
performance goals for the periods shown. The variation in incentive compensation
from year to year and from individual to individual reflects the executive
officer's relative achievement of his/ her performance objectives, as well as
whether the Company goals were achieved. In February 1996, Dr. Ray and two of
the other four highest paid executive officers received no bonus as a result of
the Company's performance in 1995.
EQUITY BASED COMPENSATION
STOCK OPTION PROGRAMS
The Company's Stock Option Program's purpose is to provide additional
incentives to the executive officers to encourage their commitment to the
maximization of shareholder value over the long-term.
Options are granted consistent with the responsibility and accountability of
the recipient and the compensation philosophy previously expressed. Stock option
grants afford a desirable long-term compensation method because they closely
ally the interests of management with shareholder value.
The option programs utilize a four year vesting period to encourage
executive officers to continue in the employ of the Company. These options are
at current market value and are available to all executive officers. During
1995, the President and CEO, along with three of the other four highest paid
executive officers, were awarded stock options as shown in the accompanying
table.
7
<PAGE>
The Compensation Committee has evaluated the total compensation of the five
highest paid executive officers in 1995 and has approved their compensation as
reasonable and consistent with the Company's compensation philosophy.
It is the Company's policy to qualify all compensation paid to its top
executives for deductibility under the Internal Revenue Code and regulations in
order to maximize the Company's income tax deductions.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries.
COMPENSATION COMMITTEE
Thomas G. Pownall, Chairman
Charles R. Allen
Joseph F. Caligiuri
Daniel J. Fink
February 22, 1996
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1995,
1994 and 1993, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the most highly compensated executive officers of the Company in 1995 (the
"Named Executive Officers") in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION
AWARDS
-------------------- ------------- ALL OTHER
SALARY($) BONUS($) OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR (A) (B) SARS (#) ($) (C)
- ----------------------------------------------------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gene W. Ray.......................................... 1995 328,462 -- 50,000 43,886
President and Chief 1994 290,500 169,800 50,000 41,798
Executive Officer 1993 287,038 -- 95,000 39,221
Ronald B. Gorda...................................... 1995 173,563 176,000 25,000 25,638
Senior Vice President 1994 156,758 117,246 50,000 14,912
1993 131,910 30,000 30,000 9,382
Cornelius L. Hensel.................................. 1995 175,219 85,200 55,000 21,918
Senior Vice President
Frederick L. Judge................................... 1995 232,271 -- -- 32,773
Senior Vice President 1994 198,186 150,875 50,000 20,625
Stephen P. Meyer..................................... 1995 177,018 -- 25,000 29,874
Senior Vice President 1994 174,401 78,200 -- 28,271
(resigned in February 1996) 1993 161,773 -- 55,000 27,508
</TABLE>
- ---------
(A) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(B) Amounts shown include bonus cash compensation earned by executive officers
for each fiscal year whether received in the fiscal year in which it was
earned or in the subsequent fiscal year.
(C) Amounts shown consist of (i) the Company's matching contribution to its
401(k) Retirement Plan; (ii) the Company's matching contribution to its
Supplemental Retirement Plan for Key Executives; (iii) the Company's
contribution to its Employee Stock Ownership Plan and (iv) interest earned
in the Company's Supplemental Retirement Plan for Key Executives which
exceeded 120% of the applicable federal long-term rate with compounding (as
prescribed under Section 1274(d) of the Internal Revenue Code). Amounts
shown for fiscal year 1995 for each Named Executive Officer consist of the
following elements of compensation: Dr. Ray: (i) $7,500; (ii) $28,300; (iii)
$3,776; and (iv) $4,310; Mr. Gorda: (i) $7,500; (ii) $16,300; (iii) $1,482;
and (iv) $356; Mr. Hensel: (i) $4,183; (ii) $17,500; (iii) none; and (iv)
$235; Mr. Judge: (i) $7,500; (ii) $24,375; (iii) none; and (iv) $898; Mr.
Meyer: (i) $7,500; (ii) $17,000; (iii) $2,976; and (iv) $2,398.
9
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made during fiscal 1995 under the Company's long-term incentive program
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL OPTIONS STOCK PRICE
GRANTED TO APPRECIATION FOR
EMPLOYEES IN EXERCISE OPTION TERM (F)
OPTIONS FISCAL PRICE EXPIRATION --------------------
NAME GRANTED (B) YEAR (C) ($/SH)(D) DATE (E) 5% ($) 10% ($)
- ------------------------------------- ----------- ------------------ ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Ray.......................... 50,000 12.69% 9.50 8/16/05 298,724 757,027
Ronald B. Gorda...................... 25,000 6.35% 9.50 8/16/05 149,362 378,513
Cornelius L. Hensel.................. 35,000 8.88% 5.75 2/27/05 126,565 320,740
20,000 5.08% 9.50 8/16/05 116,489 302,811
Frederick L. Judge................... -- -- -- -- -- --
Stephen P. Meyer..................... 25,000 6.35% 9.50 8/16/05 149,362 378,513
</TABLE>
- ---------
(A) No SARs were granted to any of the Named Executive Officers during the last
fiscal year.
(B) Options granted in 1995 are exercisable starting 12 months after grant date,
with 25% of the options becoming exercisable at that time and with an
additional 25% of the options becoming exercisable on each successive
anniversary date, with full vesting occurring on the fourth anniversary
date.
(C) In 1995 employees of the Company received stock options covering a total of
394,000 shares.
(D) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(E) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment. All
options were "incentive" stock options under the Internal Revenue Code.
(F) Present value was calculated using an assumed annual compounded growth over
the term of the option of 5% and 10%, respectively. Use of this model should
not be viewed in any way as a forecast of the future performance of the
Company's stock, which will be determined by future events and unknown
factors.
10
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FY-END OPTION VALUE (A)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)(C)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($)(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Ray......................... 20,000 122,500 91,250 138,750 328,281 284,219
Ronald B. Gorda..................... -- -- 30,000 77,500 96,250 145,937
Cornelius L. Hensel................. -- -- -- 55,000 -- 48,125
Frederick L. Judge.................. -- -- 12,500 37,500 46,875 140,625
Stephen P. Meyer.................... 20,000 117,500 45,000 55,000 171,250 114,375
</TABLE>
- ---------
(A) No SARs were owned or exercised by any of the Named Executive Officers
during the last fiscal year.
(B) Market value of underlying securities on date of exercise, minus the
exercise or base price.
(C) Market value of underlying securities at year-end, minus the exercise or
base price.
AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into agreements with the Named Executive Officers
and certain other executive officers to reinforce and encourage continued
dedication without distraction arising from the possibility of a change in
control of the Company. The terms of the agreements provide that, in the event
of a Change in Control (as defined), and the termination of the executive's
employment at any time during the 2-year period thereafter by the Company other
than for cause or by the executive for good reason, the executive will be paid a
lump sum amount equal to two times his or her base salary plus maximum annual
bonus. Additionally, the executive will receive a prorated bonus for the year of
termination and continuation of medical and dental benefits covering the
executive and his or her dependents for 2 years following the termination. The
payments are limited to ensure deductibility for tax purposes under Section 280G
of the Internal Revenue Code.
Under the agreements, Change in Control is deemed to have occurred in the
event of (i) the acquisition by any person, together with its affiliates, of
beneficial ownership of capital stock of the Company possessing 25% or more of
the combined voting power of the Company's outstanding capital stock, (ii)
within any two year period, the majority of the members of the Board were to be
comprised of individuals other than those who were members at the beginning of
such period, unless the new members elected during such period were approved by
two-thirds of the members of the Board still in office who were members of the
Board at the beginning of such two-year period, (iii) all or substantially all
of the Company's assets are sold as an entirety to any person or related group
of persons, or (iv) the Company is merged with or into another corporation or
another corporation is merged into the Company with the effect that immediately
after such transaction the stockholders of the Company immediately prior to such
transaction hold less than a majority interest of the total voting power
entitled to vote in the election of directors, managers or trustees of the
entity surviving such transaction.
11
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG THE TITAN CORPORATION,
NEW YORK STOCK EXCHANGE MARKET INDEX AND INDUSTRY GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TITAN CORPORATION MG INDUSTRY GROUP NYSE MARKET INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 192.86 124.59 129.41
1992 214.29 165.07 135.50
1993 175.16 237.84 153.85
1994 372.21 263.98 150.86
1995 415.99 363.82 195.61
</TABLE>
- ---------
(1) The above graph compares the performance of The Titan Corporation with that
of the New York Stock Exchange Market Index and the MG Industry Group 171 --
Electronics Equipment Manufacturers Index, which is a published industry
group index.
(2) The comparison of total return on investment (change in year-end stock price
plus reinvested dividends) for each of the periods assumed that $100 was
invested on December 31, 1990 in each of The Titan Corporation, the New York
Stock Exchange Market Index and the MG Industry Group 171 -- Electronics
Equipment Manufacturers Index with investment weighted on the basis of
market capitalization. Titan's stock price was $7.125 per share on December
31, 1995.
12
<PAGE>
APPROVAL OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Company's 1995 Employee Stock Purchase Plan (the "Plan") was adopted by
the Board of Directors on August 17, 1995 and is being submitted to the
stockholders of the Company at this Annual Meeting. A total of 500,000 shares of
Common Stock, par value $.01 per share (the "Stock"), are reserved for issuance
under the Plan and no shares have been issued under the Plan. The first offering
period under the Plan commenced on January 1, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PLAN FOR THE FOLLOWING
REASONS:
It will encourage Titan's employees to acquire an ownership interest in the
Company, which will act as an additional incentive for the employees to promote
the success of the business of Titan and its subsidiaries.
The Plan, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). See "Federal Income Tax
Information" below. The Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
REQUIRED VOTE
The affirmative vote of a majority of the voting power of the shares of the
Company's Common Stock and Preferred Stock present at the Annual Meeting and
entitled to vote thereon is required to approve and adopt the Plan, with the
Common Stock and Preferred Stock voting together and not as separate classes.
PURPOSE
The purpose of the Plan is to encourage ownership of Stock by employees of
Titan and its subsidiaries, and to provide an additional incentive for the
employees to promote the success of the business of Titan and its subsidiaries.
ADMINISTRATION
The Plan is administered by the Company's board of directors (the "Board").
The Board may delegate all or any portion of its authority with respect to the
Plan to the Compensation, Stock Option and Pension Committee, consisting of
members of the Board. The Board may from time-to-time adopt rules and
regulations for carrying out the Plan. Any interpretation or construction of any
provision of the Plan by the Board shall be final and conclusive on all persons.
The Board receives no compensation for performing its duties as
administrator of the Plan. All costs of administering the Plan will be paid by
the Company.
ELIGIBILITY
Any person who is employed by the Company (or any of its subsidiaries
designated by the Board of Directors) for at least 20 hours per week and more
than five months per year is eligible to participate in the Plan, provided that
such employee is employed on the commencement date of an offering period.
Notwithstanding the foregoing, elected officers of the Company are not eligible
to participate in the Plan.
OFFERING DATES
The Plan is implemented by consecutive six month subscription periods (each
a "Subscription Period") with a new Subscription Period commencing on or about
January 1 and July 1 of each year. All accrued payroll deductions of each
participant will be applied to the purchase of shares in accordance with the
terms of the Plan at the end of each Subscription Period. The first six month
Subscription Period began on January 1, 1996. The Board has the power to alter
the duration of the Subscription Periods without stockholder approval.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Plan by delivering to the
Company a subscription agreement authorizing payroll deductions at least ten
days prior to the first day of the applicable Subscription Period, unless a
later time has been set by the Board of Directors for all eligible employees
with respect
13
<PAGE>
to a given Subscription Period. An employee who becomes eligible to participate
in the Plan after the commencement of a Subscription Period may not participate
in the Plan until the next following Subscription Period.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Plan is the
lower of 85% of the Market Value (as defined below) of a share of Common Stock
on the date of commencement of the applicable Subscription Period or 85% of the
Market Value of a share of Common Stock on the last day of the applicable
Subscription Period. Market Value means, as of a particular date, (i) if the
Common Stock is listed on an exchange, the closing price of the Common Stock on
such date on such exchange, (ii) if the Common Stock is quoted through the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
National Market System or any successor thereto, the closing price of the Common
Stock on such date and (iii) if the Common Stock is quoted through NASDAQ (but
not on the National Market System) or otherwise publicly traded, the average of
the closing bid and asked prices of the Common Stock on such date. In the event
that the Common Stock is not traded on the date as of which Market Value is to
be determined, Market Value shall be determined as of the next preceding trading
day.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the Subscription Period. The deductions must be between 1% and 10% of a
participant's regular earnings, which is defined in the Plan to include the
total salary, bonus and overtime paid to a participant during the Subscription
Period, but excluding fringe benefits and any other form of remuneration.
Payroll deductions commence on the first payday following the commencement of
the Subscription Period and continue until the end of the Subscription Period
unless sooner terminated or changed by the employee as provided in the Plan. A
participant may discontinue his or her participation in the Plan or may increase
or decrease the rate of payroll deductions as provided in the Plan. A change
that increases the rate is effective at the beginning of the next Subscription
Period; a change that decreases the rate is effective with the next payroll
period.
All payroll deductions are credited to the participant's account under the
Plan and are deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
PURCHASE OF STOCK
At the beginning of each Subscription Period, by executing a subscription
agreement to participate in the Plan, each participant is in effect granted a
right to purchase shares of Common Stock on the last day of the Subscription
Period. The maximum number of shares which a participant may purchase on the
last day of the Subscription Period is determined by dividing such participant's
payroll deductions accumulated during the Subscription Period by the lower of
(i) 85% of the Market Value of a share of the Company's Common Stock at the
commencement of the Subscription Period, or (ii) 85% of the Market Value of a
share of the Company's Common Stock on the last day of such Subscription Period;
provided that in no event may a participant be permitted to purchase, during any
one Subscription Period, more than a number of shares determined by dividing
$12,500 by the Market Value of a share of the Company's Common Stock on the date
of commencement of such Subscription Period, nor may any participant acquire
shares of Common Stock to the extent such acquisition would cause the
participant to own shares of stock (including shares which would be owned if all
outstanding options to purchase stock owned by such person were exercised) in
excess of five percent (5%) of the total combined voting power of all classes of
stock of Titan or any Related Corporation (as defined in Sections 424(e) and
424(c) of the Code). See "Payment of Purchase Price; Payroll Deductions" for
limitations on payroll deductions. If, on the last day of a Subscription Period,
the number of shares of Stock subscribed for exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable. Unless an employee
withdraws from participation in the Plan (see "Withdrawal") or the employee's
participation is otherwise discontinued (see "Termination of Employment"), the
employee's entire account balance will automatically be used to purchase the
maximum number of shares, at the applicable price, on the last day of the
Subscription Period.
14
<PAGE>
Shares of Stock purchased under the Plan shall be delivered to a broker
designated by the Board to hold shares for the benefit of the participants. As
determined by the Board from time to time, such shares shall be delivered as
physical certificates or by means of a book entry system. Although the
participant may direct the broker to sell such shares at any time (subject to
the six month holding period described below under Nonassignability and
applicable securities laws), the shares otherwise must be held in an account
with the broker designated by the Board until 24 months after the first day of
the Subscription Period during which the shares were purchased. Following such
24-month period, a participant may transfer his or her shares to another broker
or to any other person (including the participant) but all costs incident to
such transfer shall be paid by the participant.
WITHDRAWAL
A participant's interest in a given Subscription Period may be terminated in
whole, but not in part, at any time during the Subscription Period. Such
withdrawal shall be made by signing and delivering to the Company a notice of
withdrawal from the Plan. Upon such notice of withdrawal, no further payroll
deductions for the purchase of shares will be made, and the payroll deductions
credited to the participant's account will be returned to the participant. An
employee who withdraws from the Plan during a Subscription Period may not
re-enroll under the Plan until the next following Subscription Period.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, terminates his or her participation in the Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to such participant or, in the case of death, to the
person or persons entitled thereto as specified by the employee in the
subscription agreement (or, in the absence of such specification, to the
executor or administrator of the estate of the participant, or if no such
executor or administrator exists, to such other relative, dependent or person as
is permitted by the terms of the Plan). Failure to remain in the continuous
employ of the Company for at least 20 hours per week during the Subscription
Period will be deemed to be a withdrawal from the Plan.
CAPITAL CHANGES
In the event that the shares of Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Titan or of another corporation (whether by reason of merger, consolidation,
recapitalization, stock split, combination of shares, or otherwise), or if the
number of shares of Common Stock shall be increased through a stock split or the
payment of a stock dividend, then there shall be substituted for or added to
each share of Common Stock theretofore reserved for sale under the Plan, the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be so changed, or for which each such
share shall be exchanged, or to which each such share shall be entitled, as the
case may be , or the number or kind of securities which may be sold under the
Plan and the purchase price per share shall be appropriately adjusted consistent
with such change in such manner as the Board may deem equitable to prevent
dilution or enlargement of rights granted to, or available for, employees
eligible to participate. Similarly, if the number of shares of Common Stock
shall be decreased through a reverse stock split or otherwise, the number of
securities and purchase price per share shall be proportionally adjusted.
NONASSIGNABILITY
No rights, interest or accumulated payroll deductions of an employee under
the Plan may be pledged, assigned or transferred for any reason, and any such
attempt shall be void.
Shares purchased under the Plan may not be assigned, transferred, pledged or
otherwise disposed of until after completion of six full calendar months
following the end of the Subscription Period during which the shares of Stock
were acquired. The foregoing restriction will lapse with respect to any
participant in the event of the death of such participant.
15
<PAGE>
REPORTS
Individual accounts will be maintained for each participant in the Plan.
Each participant shall receive as promptly as practicable after the end of each
Subscription Period a report of his or her account setting forth the total
amount of payroll deductions accumulated, the per share purchase price, the
number of shares purchased and the remaining balance to be carried forward, if
any.
AMENDMENT AND TERMINATION OF THE PLAN
The Board shall have the right to amend, modify or terminate the Plan at any
time without notice, provided that without the approval of the Company's
stockholders no such amendment shall increase the total number of shares of
Stock subject to the Plan, change the formula by which the price at which the
shares of Stock shall be sold is determined, or change the class of employees
eligible to participate in the Plan. Without limiting the generality of the
foregoing but subject to the foregoing proviso, the Board may amend the Plan
from time to time to increase or decrease the length of any future Subscription
Periods (e.g. to an annual period), but not in excess of the maximum period
allowable for the Plan to meet the requirements of Section 423 of the Code, and
to make all required conforming changes to the Plan. In the event that, after
the initial Subscription Period, there occurs a dissolution or liquidation of
the Company, the plan shall terminate, and each participant shall have the
amount in his or her plan account refunded in cash, without interest.
FEDERAL INCOME TAX INFORMATION
The Plan is intended to qualify as an "Employee Stock Purchase Plan" under
the provisions of Section 423 of the Code. Under the present provisions of the
Code, no taxable income is recognized by a participant either at the time of
enrollment into the Plan or at the time shares are purchased. Depending upon the
length of time the acquired shares are held by the participant, the federal tax
consequences will vary. If the shares are held for a period of 24 months or more
from the first day of the Subscription Period during which such shares are
purchased, and sold at a price in excess of the purchase price, the gain on the
sale of the shares will be taxed as ordinary income equal to the lesser of (i)
15% of the market value of the shares as of the first day of the Subscription
Period or (ii) the excess of the fair market value of the shares at the time of
disposition of the shares over the price paid. Any additional gain will be
treated as long-term capital gain. If the 24 month holding period is satisfied,
the Company will not be entitled to any deduction for federal income tax
purposes with respect thereto. If the sale produces a loss, no ordinary income
will be realized and the loss will be a long-term capital loss.
If the shares are held for less than 24 months from the first day of the
Subscription Period during which such shares were acquired, any gain on the sale
of the shares will be treated as ordinary income to the extent of the difference
between the purchase price and the fair market value on the date of purchase
(the last day of the Subscription Period) and the Company will be entitled to a
corresponding deduction for federal income tax purposes. Any additional gain
will be treated as a long-term or short-term capital gain, depending upon
whether the shares have been held for more than one year from the last day of
the Subscription Period during which such shares were acquired.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Plan, does not purport to be complete, and does not discuss the income tax
laws of any state or foreign country in which a participant may reside.
APPROVAL OF THE 1996 DIRECTORS'
STOCK OPTION AND EQUITY PARTICIPATION PLAN
In order to increase the Company's ability to attract and retain outside
directors of the highest caliber and experience, the Company's Board of
Directors adopted the 1996 Directors' Stock Option and Equity Participation Plan
(the "Directors' Plan") on February 22, 1996 and is submitting it to the
stockholders for their approval at this Annual Meeting. The affirmative vote of
a majority of the voting power of the shares present at the Annual Meeting and
entitled to vote thereon will be required for the approval of the Directors'
Plan, with the Preferred and Common Stock voting together and not as separate
classes.
16
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PLAN FOR THE FOLLOWING
REASONS:
It will increase the Company's ability to attract and retain outside
directors of the highest caliber and experience.
Under the Directors' Plan, options to purchase an aggregate of 15,000 shares
of the Company's Common Stock, par value $.01 per share ("Common Stock") are
granted to each director of the Company who is not an employee of the Company or
any of its subsidiaries. An option to purchase 5,000 shares of Common Stock is
granted on the later of the date the director takes office as a director of the
Company or the date the Directors' Plan was adopted by the Board; an option for
an additional 5,000 shares is granted one year after the initial grant; and an
option for an additional 5,000 shares is granted two years after the initial
grant.
In addition, each director who is not an employee of the Company or its
subsidiaries may elect to forego cash payment of all or any portion of his or
her Director Fees (the fees subject to such election are hereinafter referred to
as "Elected Fees") and receive shares of Common Stock having a Fair Market Value
equal to the amount of Elected Fees. Such election to receive Common Stock in
lieu of Elected Fees shall be made at least six months prior to the scheduled
payment, and such election is irrevocable. If a director elects to receive
shares of Common Stock, the number of shares issuable shall equal the amount of
the Elected Fees divided by the Fair Market Value per share of Common Stock as
of the issue date. No grant of Common Stock pursuant to an election by a
director to receive Common Stock in lieu of Elected Fees shall be made prior to
approval of this Plan by the Company's stockholders.
The maximum number of shares of stock for which options granted hereunder
may be exercised or which may be issued under stock grants in lieu of Director
Fees shall be 125,000 shares of the Company's Common Stock, subject to
adjustment in certain circumstances, including stock dividends, stock splits,
reverse stock splits, reorganizations, reclassifications or recapitalizations of
Common Stock.
The purchase price which must be paid for stock on exercise of an option
granted under the Directors' Plan is equal to the fair market value of the stock
on the date the option is granted. Under the Directors' Plan, Joseph F.
Caligiuri, Charles R. Allen, Daniel J. Fink and Thomas G. Pownall each were
granted an option for 5,000 shares, subject to stockholder approval of the
Directors' Plan, at $7.50 per share. Mr. La Blanc, who joined the Board on the
date of approval of this Plan, received options under previous directors' plans.
Under the terms of the Directors' Plan, these directors will be granted two
additional options for 5,000 shares each on the first and second anniversaries
of the date of initial grant. Payment for stock upon exercise of an option must
be in cash.
Each option granted under the Directors' Plan shall become exercisable in
installments as follows: it may in the aggregate be exercised as to 25% of the
total number of shares optioned following the first anniversary of the date of
grant; up to 50% of the total number of shares optioned may be exercised
following the second anniversary of the date of grant; up to 75% of the total
number of shares optioned may be exercised following the third anniversary of
the date of grant; and up to 100% of the total number of shares optioned may be
exercised following the fourth anniversary of the date of grant. Options are
nontransferable except upon death, by will or by operation of the laws of
descent and distribution, and can be exercised during the directors' lifetime
only by him or his guardian or legal representative. Any options granted under
the Directors' Plan may not be exercised prior to approval of the Plan by the
Company's stockholders.
If an optionholder ceases to be a director of the Company, his or her option
will terminate ninety days thereafter and may thereafter no longer be exercised,
except that (i) if a director dies, any portion of an option held by him or her
that was exercisable at the date of death may be exercised within the option
period but not later than one year after the date of death by his or her legal
representatives or by those entitled to receive the option under applicable laws
of testate or intestate succession, and (ii) if a director ceases to be a
director because of disability, any portion of an option that was exercisable at
the date the option holder ceased to be a director may be exercised by the
option holder (or his or her guardian) within the option period but not later
than one year after the date the option holder ceased to be a director.
17
<PAGE>
Notwithstanding any other provisions of the Directors' Plan, upon any Change
in Control (as defined in the Plan) all then outstanding options will become
fully vested and exercisable.
The Directors' Plan will terminate on February 22, 2001, after which no
further options or shares may be granted thereunder.
The Board of Directors may alter, amend, suspend or terminate the Directors'
Plan, provided that no holder of an outstanding option may thereby be deprived
of his rights. Moreover, stockholder approval would be required for any
amendment to the Directors' Plan as to which approval by stockholders is
necessary for continued applicability of Rule 16b-3 under the Securities
Exchange Act of 1934. Notwithstanding the foregoing, the Plan shall not be
amended more than once every six months other than to comport with changes in
the Code, ERISA or the rules thereunder.
APPROVAL OF SELECTION OF AUDITORS
The Board is seeking stockholder ratification of its selection of Arthur
Andersen LLP to serve as the Company's auditors for the fiscal year ending
December 31, 1996. Arthur Andersen LLP is serving as the Company's auditors for
1995 and previously served as the Company's auditors since 1985 and as Titan
Systems' auditors since 1981. It is anticipated that representatives of Arthur
Andersen LLP will attend the Annual Meeting with the opportunity to make any
statement they may desire to make and will be available to respond to
appropriate questions from stockholders. Arthur Andersen LLP will be retained as
the Company's auditors for the fiscal year ending December 31, 1996 if this
proposal is approved by the holders of a majority of the voting power of the
shares represented and voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER BUSINESS
The Company knows of no other matters to be brought before the Annual
Meeting of Stockholders. If other matters should come before the meeting, it is
the intention of each person mentioned in the proxy to vote such proxy in
accordance with his judgment of such matters. Discretionary authority with
respect to such other matters is granted by the execution of the enclosed proxy.
STOCKHOLDERS' PROPOSALS
Proposals by stockholders intended to be presented at the next annual
meeting in 1997 must be in writing and received by the Company by December 13,
1996 to be considered for inclusion in the Company's proxy material under the
rules of the Securities and Exchange Commission.
FINANCIAL STATEMENTS
The Company's 1995 Annual Report, including financial statements for fiscal
year 1995, accompanies this proxy statement. STOCKHOLDERS MAY OBTAIN FREE OF
CHARGE A COPY OF THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BY WRITING TO THE SECRETARY, 3033
SCIENCE PARK ROAD, SAN DIEGO, CALIFORNIA 92121.
18
<PAGE>
APPENDIX A
THE TITAN CORPORATION
1996 DIRECTORS' STOCK OPTION
AND EQUITY PARTICIPATION PLAN
1. PURPOSE OF THE PLAN. Under this 1996 Directors' Stock Option and
Equity Participation Plan (the "Plan") of The Titan Corporation (the "Company"),
(i) options shall be granted to directors who are not Employees of the Company
to purchase shares of the Company's capital stock, and (ii) directors who are
not Employees of the Company may elect to receive shares of the Company's Common
Stock in lieu of cash payment of Director Fees. The Plan is designed to enable
the Company to attract and retain outside directors of the highest caliber and
experience. Certain capitalized terms used in this Plan are defined in Section
12 hereof.
2. STOCK SUBJECT TO PLAN. The maximum number of shares of stock for
which options granted hereunder may be exercised or which may be issued under
stock grants in lieu of Director Fees shall be 125,000 shares of the Company's
Common Stock, par value $.01 per share ("Common Stock"), subject to the
adjustments provided in Section 6. The shares of Common Stock to be issued
under the Plan may be either previously authorized but unissued shares or
treasury shares. Shares of stock subject to the unexercised portions of any
options granted under this Plan which expire or terminate or are canceled may
again be subject to options or stock grants under the Plan.
3. PARTICIPATING DIRECTORS. The directors of the Company who shall
participate in this Plan are those directors who are not, at the time they
receive options or stock grants hereunder, Employees of the Company or any of
its subsidiaries.
1 OF 18
<PAGE>
4. GRANT OF OPTIONS. Each participating director shall be granted
the following options, the date of each of which being a "date of grant":
(a) 5,000 shares of stock (subject to the adjustments provided
in Section 6) on the later to occur (the "date of initial grant") of (i) the
date on which he or she first takes office as a director of the Company, or (ii)
the date on which this Plan was adopted by the Board of Directors of the
Company;
(b) 5,000 shares of stock (subject to adjustments provided in
Section 6) on the date that is one year after the date of initial grant; and
(c) 5,000 shares of stock (subject to the adjustments provided
in Section 6) on the date that is two years after the date of initial grant.
Notwithstanding any other provision of this Plan, no option hereunder
shall be granted unless sufficient shares (subject to said adjustments) are then
available therefor under Sections 2 and 7. In consideration of the granting of
the options, the option holder shall be deemed to have agreed to remain as a
director of the Company for a period of at least one year after each date of
grant. Nothing in this Plan shall, however, confer upon any option holder any
right to continue as a director of the Company or shall interfere with or
restrict in any way the rights of the Company or the Company's shareholders,
which are hereby expressly reserved, to remove any option holder at any time for
any reason whatsoever, with or without cause, to the extent permitted by the
Company's bylaws and applicable law.
5. OPTION PROVISIONS. Each option granted under the Plan shall
contain such terms and provisions as the President of the Company may authorize,
including in any event the following:
(a) The exercise price of each option shall be equal to the
aggregate Fair Market Value of the shares of stock optioned on the date of grant
of such option. Fair Market Value means the closing price of stock of the same
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class on the day in question (or, if such day is not a trading day in the U.S.
securities markets or if no sales of stock of that class were made on such day,
on the nearest preceding trading day on which sales of stock of that class were
made), as reported with respect to the market (or the composite of the markets,
if more than one) in which such stock is then traded; or if no such closing
prices are reported the lowest independent offer quotation reported, for such
day in Level 2 of NASDAQ; or if no such quotations are reported, it means the
value established by what the Board of Directors of the Company in its judgment
then deems to be the most nearly comparable valuation method.
(b) Payment for stock purchased upon any exercise of the option
shall be made in full in cash concurrently with such exercise.
(c) The option shall become exercisable in installments as
follows: It may be exercised as to up to but no more than 25% of the total
number of shares optioned on the first anniversary of the date of grant; up to
but no more than 50% of the total number of shares optioned on the second
anniversary of the date of grant; up to but no more than 75% of the total number
of shares optioned on the third anniversary of the date of grant; and up to 100%
of the total number of shares optioned on the fourth anniversary of the date of
grant; in each case to the nearest whole share.
(d) When the option holder ceases to be a director of the
Company, whether because of death, resignation, removal, expiration of his or
her term of office or any other reason, the option shall terminate ninety (90)
days after the date such option holder ceases to be a director of the company
and may thereafter no longer be exercised; except that (i) upon the option
holder's death his or her legal representative(s) or the person(s) entitled to
do so under the option holder's last will and testament or under applicable
intestate laws shall have the right to exercise the option within one year after
the date of death (but
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not after the expiration date of the option), but only for the number of shares
as to which the option holder was entitled to exercise the option on the date of
his or her death and (ii) upon the option holder's ceasing to be a director by
reason of disability her or she (or his or her guardian) shall have the right to
exercise the option within one year after the date of the option holder ceased
to be a director (but not after the expiration date of the option), but only for
the number of shares as to which the option holder was entitled to exercise the
option on the date of his or her ceasing to be a director.
(e) Notwithstanding any other provision herein, such option may
not be exercised prior to shareholder approval of this Plan at an annual meeting
of shareholders by a majority of the shares represented at such meeting; nor
prior to the admission of the shares of stock issuable on exercise of the option
to listing on notice of issuance on any stock exchange on which shares of the
same class are then listed; nor unless and until, in the opinion of counsel for
the Company, such securities may be issued and delivered without causing the
Company to be in violation of or incur any liability under any federal, state or
other securities law, any requirement of any securities exchange listing
agreement to which the Company may be a party, or any other requirement of law
or of any regulatory body having jurisdiction over the Company.
(f) The option shall not be transferable by the option holder
other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended (the "Code"), or Title I of the Employee Retirement Income
Security Act ("ERISA") or the rules thereunder; may not be pledged or
hypothecated; and shall be exercisable during the option holder's lifetime only
by the option holder or by his or her guardian or legal representative.
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6. ADJUSTMENTS. If the outstanding shares of the Company's Common
Stock are increased or decreased, or are changed into or exchanged for a
different number or kind of shares or securities of the Company, as a result of
one or more reorganizations, recapitalizations, stock splits, reverse stock
splits, stock dividends or the like, appropriate adjustments shall be made in
the number and/or kind of shares or securities as to which options may
thereafter be granted under this Plan and for which options then outstanding
under this Plan may thereafter be exercised. Any such adjustment in outstanding
options shall be made without change in the aggregate purchase price applicable
to the unexercised portion of such options, but with a corresponding adjustment
in the purchase price for each share or other unit of any security covered by
the option. No fractional shares of stock shall be issuable under any option
granted under this Plan or as a result of any such adjustment.
7. CORPORATE REORGANIZATIONS. Upon the dissolution or liquidation
of the Company, or upon a reorganization, merger or consolidation of the Company
as a result of which the outstanding shares of the Company's Common Stock are
changed or exchanged for cash or property or securities not of the Company's
issue, or upon a sale of substantially all the property of the Company to
another corporation or person, the Plan shall terminate, and all options thereto
granted hereunder shall terminate, unless provisions shall be made in writing in
connection with such transaction for the continuance of the Plan and/or for the
assumption of options theretofore granted, or the substitution for such options
of options covering the stock of a successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in which event the Plan and options theretofore granted shall
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continue in the manner and under the terms so provided. If the Plan and
unexercised options shall terminate pursuant to the foregoing sentence, all
persons entitled to exercise any unexercised portions of options then
outstanding shall have the right, at such time prior to the consummation of the
transaction causing such termination as the Company shall designate, to exercise
the unexercised portions of their options, including the portions thereof which
would, but for this section entitled "Corporation Reorganizations," not yet be
exercisable.
8. CHANGE IN CONTROL. Notwithstanding any other provisions of this
Plan, upon any Change in Control (as defined herein below) all then outstanding
options will become fully vested and exercisable. The term "Change in Control"
shall mean (a) any "person" (as such term is used in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934) becomes the beneficial owner
(as such term is used in Section 13(d)(1) of the Securities Exchange Act of
1934), directly or indirectly, of securities of the Company representing at
least 25% of the combined voting power of the then outstanding securities of the
Company in a transaction which was not approved by the Company's Board of
Directors prior to its occurrence; or (b) during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such period constituted
the Company's Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
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9. GRANTING OF STOCK. (a) Each participating Director may elect to
forego cash payment of all or any portion of his or her Director Fees (the fees
subject to such election are hereinafter referred to as "Elected Fees") and
receive, subject to provisions of subsection (c) hereof, on the date such
Elected Fees otherwise would be paid, or such other date specified by the Board,
shares of Common Stock. If the participating director elects to receive shares
of Common Stock, the number of shares issuable shall equal the amount of the
Elected Fees divided by the Fair Market Value per share of Common Stock as of
the issue date. No fractional shares of Common Stock shall be issued and the
value of such fractional share shall be paid to each participating director in
cash. An election pursuant to this Section 9 shall be made prior to the
commencement of any period of Board service to which the grant relates, but in
any event at least six months prior to the scheduled payment of the Elected
Fees, and such election shall be irrevocable.
(b) This Plan will be submitted for the approval of the
Company's stockholders within twelve months after the date of the Board's
initial adoption of this Plan. No grant of Common Stock pursuant to Section 9
hereof shall be made prior to approval of this Plan by the Company's
stockholders.
(c) The Company shall be entitled to require payment in cash or
deduction from other compensation payable to each participating director of any
sums required by federal, state or local tax law to be withheld with respect to
the issuance of Common Stock under the Plan.
(d) This Plan and the issuance and delivery of shares of Common
Stock hereunder are subject to compliance with all applicable federal and state
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laws, rules and regulations (including but not limited to state and federal
securities law) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under this Plan
shall be subject to such restrictions, and the person acquiring such securities
shall, if requested by the Company, provide such assurances and representations
to the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent permitted by
applicable law, the Plan shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
10. DURATION, TERMINATION AND AMENDMENT OF THE PLAN. This Plan shall
become effective upon its adoption by the Board of Directors of the Company and
shall expire on February 22, 2001, so that no option may be granted hereunder
after that date although any option outstanding on that date may thereafter be
exercised in accordance with its terms. The Board of Directors of the Company
may alter, amend, suspend or terminate this Plan, provided that no such action
shall deprive an option holder, without his or her consent, of any option
previously granted pursuant to this Plan or of any of the option holder's rights
under such option. Except as herein provided, no such action of the Board,
unless taken with the approval of the stockholders of the Company, may make any
amendment to the Plan as to which approval by stockholders is necessary for
continued applicability of Rule 16b-3 of the Securities and Exchange Commission.
Notwithstanding the foregoing, the Plan shall not be amended more than
once every six months other than to comport with changes in the Code, ERISA or
the rules thereunder.
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11. ADMINISTRATION. (a) It shall be the duty of the Board to conduct
the general administration of this Plan in accordance with its provisions. The
Board shall have the power to interpret this Plan and to adopt such rules for
the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
(b) All expenses and liabilities which members of the Board
incur in connection with the administration of this Plan shall be borne by the
Company. The Board may employ attorneys, consultants, accountants, appraisers,
brokers, or other persons. The Board, the Company and the Company's officers
and Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and binding upon
the Company and all other interested persons. No members of the Board shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan, and all members of the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
12. CERTAIN DEFINITIONS. Wherever the following terms are used in
this Plan they shall have the meaning specified below, unless the context
clearly indicates otherwise.
(a) DIRECTOR FEES. "Director Fees" shall mean the annual
retainer fee and regular meeting fees, including committee fees, if any, paid by
the Company to a participating director.
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(b) EMPLOYEE. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
(c) FAIR MARKET VALUE. "Fair Market Value" is defined in
Section 5(a) hereof.
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APPENDIX B
THE TITAN CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. DEFINITIONS
As used in this 1995 Employee Stock Purchase Plan of The Titan
Corporation, the following terms shall have the meanings respectively assigned
to them below:
(a) "Board" shall mean the Board of Directors of Titan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Compensation, Stock Option and
Pension Committee of the Board.
(d) "Eligible Employee" shall mean a person who is eligible
under the provisions of Section 3 to participate in the
Plan.
(e) "Market Value" means, as of a particular date, (i) if the
Stock is listed on an exchange, the closing price of the
Stock on such date on such exchange, (ii) if the Stock is
quoted through the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market
System or any successor thereto, the closing price of the
Stock on such date and (iii) if the Stock is quoted through
NASDAQ (but not on the National Market System) or otherwise
publicly traded, the average of the closing bid and asked
prices of the Stock on such date. In the event that the
Stock is not traded on the date as of which Market Value is
to be determined, Market Value shall be determined as of the
next preceding trading day.
(f) "Participant" shall mean an Eligible Employee who has
elected to participate in the Plan by filing a subscription
agreement in accordance with the terms of the Plan.
(g) "Employer" shall mean Titan and any Related Corporation
which has been designated in writing by the Committee as
such.
(h) "Plan" shall mean The Titan Corporation 1995 Employee Stock
Purchase Plan.
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(i) "Plan Account" shall mean the account kept by Titan for each
Participant in accordance with the provisions of Section 9.
(j) "Regular Earnings" shall mean the part of the Participant's
compensation used to determine his or her allowable
contribution according to the provisions of Section 8.
(k) "Related Corporation" shall mean any corporation which is or
during the term of the Plan becomes a parent corporation of
Titan, as defined in Section 424(e) of the Code, or a
subsidiary corporation of Titan, as defined in Section
424(f) of the Code.
(l) "Stock" shall mean the Common Stock, $0.01 par value, of
Titan, or such other securities as may be substituted for
such Stock in accordance with Section 14.
(m) "Subscription Date" shall mean the last day of each
Subscription Period.
(n) "Subscription Period" shall mean such periods for
acquisition of Stock as set forth in Section 5.
(o) "Subscription Price" shall mean the price per share as
determined in Section 7, to be paid by the Participants for
Stock acquired under the Plan.
(p) "Titan" shall mean The Titan Corporation, a Delaware
corporation.
SECTION 2. ESTABLISHMENT OF THE PLAN
This Plan shall be known as The Titan Corporation 1995 Employee
Stock Purchase Plan. The purpose of the Plan is to encourage ownership of Stock
by employees of Titan and any Related Corporations, and to provide an additional
incentive for the employees to promote the success of the business of Titan and
any Related Corporations. The Plan is intended to meet the requirements of an
"Employee Stock Purchase Plan" as defined in Section 423 of the Code.
SECTION 3. ELIGIBLE EMPLOYEES
(a) All individuals who, on the last day on which Stock is
traded before a Subscription Period begins, are employees of an Employer shall
be deemed to be eligible to participate in the Plan, except that any employee
(i) who has not as of such date completed ninety (90) days of employment, (ii)
whose customary employment is for less than twenty (20) hours per week or less
than
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five (5) months per year or (iii) who is an officer of Titan (as defined in Rule
16a-1 promulgated under the Securities Exchange Act of 1934) shall not be an
Eligible Employee.
(b) A person who is otherwise an Eligible Employee shall not be
granted any right to purchase Stock under the Plan to the extent (i) it would,
if exercised, cause the person to own shares of Stock (including shares which
would be owned if all outstanding options to purchase Stock owned by such person
were exercised) in excess of five percent (5%) of the total combined voting
power of all classes of stock of Titan or of any Related Corporation, or (ii) it
causes such person to have purchase rights under all employee stock purchase
plans of Titan and any Related Corporation which exceed $25,000 of Market Value
of Stock (determined at the time the right to purchase Stock under this Plan is
granted) for each calendar year in which such right is outstanding. For this
purpose a right to purchase Stock accrues when it first becomes exercisable
during the calendar year. In determining whether the stock ownership of an
Eligible Employee equals or exceeds the five percent (5%) limit set forth above,
the rules of Section 424(d) of the Code (relating to attribution of stock
ownership) shall apply, and Stock which the employee may purchase under
outstanding options shall be treated as Stock owned by the employee.
SECTION 4. ENROLLMENT
Any person who is an Eligible Employee who desires to subscribe
for the purchase of Stock for the following Subscription Period must submit a
subscription agreement to the Committee at least ten days prior to the beginning
of such Subscription Period. Once enrolled, an Eligible Employee will continue
to participate in the Plan for each succeeding Subscription Period until he or
she terminates his or her participation or ceases to be an Eligible Employee.
If a Participant ceases to be an Eligible Employee, his or her participation
shall cease immediately and the amount credited to the Participant's Plan
Account will be refunded in cash. If a Participant desires to change his or her
rate of contribution he or she may do so effective for the next Subscription
Period by filing a new subscription agreement at least ten days prior to the
beginning of such Subscription Period; provided, however, a Participant may
decrease his or her rate of contribution once during any Subscription Period
(but not below one percent (1%) of Regular Earnings as that term is defined in
Section 8) by filing an amended subscription agreement.
SECTION 5. DURATION OF OFFER; SUBSCRIPTION PERIODS
This Plan shall be in effect from January 1, 1996 through and
including December 31, 2005. During the duration of the Plan there will be
twenty (20) Subscription Periods. Each Subscription Period runs from January 1
through June 30, or July 1 through December 31 or such other period which is
designated by the Board as a Subscription Period. Following designation by the
Board of the initial Subscription Period under the Plan, all succeeding semi-
annual
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periods described above shall be deemed Subscription Periods without need of
further Board action unless and until contrary action shall have been taken by
the Board prior to the beginning of what would otherwise be a Subscription
Period.
SECTION 6. SHARES TO BE OFFERED
The total number of shares to be made available under this Plan
is Five Hundred Thousand (500,000) authorized and unissued or treasury shares of
Stock, subject to any adjustments pursuant to Section 14 of the Plan. Subject
to any adjustments pursuant to Section 14 of the Plan, the aggregate number of
shares a Participant may purchase under the Plan during each Subscription Period
shall not exceed the result of $12,500 divided by the Market Value of the shares
on the last trading day before the first day of the Subscription Period, and
then rounded down, if necessary, to the nearest whole number. In the event that
all of the Stock made available under the Plan is subscribed prior to the
expiration of the Plan, the Plan may be terminated in accordance with Section 15
of the Plan. Titan shall, at all times during which subscriptions are
outstanding, reserve and keep available shares of Stock sufficient to satisfy
such subscriptions, and shall pay all fees and expenses incurred by Titan in
connection therewith.
SECTION 7. SUBSCRIPTION PRICE
The "Subscription Price" for each share of Stock shall be eighty-
five percent (85%) of the lesser of (i) the Market Value of such share on the
first day of the Subscription Period or (ii) the Market Value of such share on
the last day of the Subscription Period.
SECTION 8. AMOUNT OF CONTRIBUTION; METHOD OF PAYMENT
Except as otherwise provided herein, the Subscription Price will
be payable by the Participant by means of payroll deduction. The minimum
deduction shall be no less than one percent (1%) of the Participant's Regular
Earnings, and the maximum deduction shall be no more than ten percent (10%) of
such Participant's Regular Earnings. "Regular Earnings" means the total salary,
bonus and overtime paid to a Participant during the Subscription Period, but
excluding fringe benefits and any other form of remuneration. Payroll
deductions will commence with the first pay check issued during the Subscription
Period and will continue with each pay check throughout the entire Subscription
Period except for pay periods for which the Participant receives no compensation
(i.e., uncompensated personal leave, leave of absence, etc.). A Participant may
change his or her rate of contribution during a Subscription Period only as
provided in Section 4 above. Accumulated payroll deductions held by Titan in
Plan Accounts shall not bear interest, nor shall Titan be obligated to segregate
the same from any of its other assets.
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SECTION 9. PURCHASE OF SHARES
(a) Titan will maintain a Plan Account in the name of each
Participant. At the close of each pay period, the amount deducted from the
Participant's Regular Earnings will be credited to the Participant's Plan
Account. On each Subscription Date, the amount then in the Participant's Plan
Account will be divided by the Subscription Price for such Subscription Period
and the Participant's Plan Account will be credited with the number of whole
shares which result. Any amount representing a fractional share and remaining
in the Participant's Plan Account after deducting the amount required to pay for
the number of shares issued will be deemed to be an advance payment of the
Subscription Price for the next Subscription Period but will not otherwise
reduce the amount a Participant may contribute pursuant to Section 8 during the
next Subscription Period. In the event the number of shares of Stock subscribed
for in any Subscription Period exceeds the remaining number of shares available
for sale under the Plan, the available shares shall be allocated among the
Participants in proportion to their Plan Account balances at the end of such
Subscription Period, exclusive of any amounts carried forward pursuant to the
preceding sentence. Any amount remaining in a Participant's Plan Account will
be refunded in cash, without interest.
(b) Shares of Stock purchased on any Subscription Date shall be
delivered to a broker designated by the Committee to hold shares for the benefit
of the Participants. As determined by the Committee from time to time, such
shares shall be delivered as physical certificates or by means of a book entry
system. Although the Participant may direct the broker to sell such shares at
any time (subject to the restrictions of Section 12 of the Plan and applicable
securities laws), the shares otherwise must be held in an account with the
broker designated by the Committee until 24 months after the first day of the
Subscription Period for which the shares were purchased. Following such 24-
month period, a Participant may transfer his or her shares to another broker or
to any other person (including the Participant) but all costs incident to such
transfer shall be paid by the Participant.
SECTION 10. WITHDRAWAL FROM THE PLAN
A Participant may withdraw from the Plan by submitting a written
request to the Company at least three business days prior to the effective date
of withdrawal. At the time of withdrawal the amount credited to the
Participant's Plan Account will be refunded in cash, without interest. A
Participant who withdraws from the Plan during a Subscription Period may not
enroll again in the Plan until the next Subscription Period. A Participant's
withdrawal during one Subscription Period does not prevent the Participant from
re-enrolling during subsequent Subscription Periods.
SECTION 11. TERMINATION OF EMPLOYMENT
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Termination of employment for any reason including death shall be
treated as an automatic withdrawal as set forth in Section 10. A transfer from
one Employer to another Employer shall not be treated as a termination of
employment. For purposes of this Section 11, a Participant shall be deemed to
be employed throughout any leave of absence for military service, illness or
other bona fide purpose which does not exceed the longer of ninety days or the
period during which the Participant's re-employment rights are guaranteed by
statute (including without limitation the Veterans Re-employment Rights Act or
similar statute relating to military service) or by contract. If the
Participant does not return to active employment prior to the termination of
such period, his or her employment shall be deemed to have ended on the ninety-
first day of such leave of absence, or on the first day following expiration of
such longer period guaranteed by statute or by contract as provided above.
SECTION 12. TRANSFERABILITY
(a) Except for transfers by will or under the laws of descent
and distribution, (i) neither the payroll deduction credited to a Participant's
Plan Account nor an Eligible Employee's right to purchase Stock under this Plan
may be sold, assigned, transferred, pledged, or otherwise disposed of or
encumbered, and any such action taken by the Participant or Eligible Employee,
or any claim asserted by another party in respect of such right or interest,
shall be void and (ii) rights to purchase Stock under this Plan may be exercised
only by an Eligible Employee.
(b) Shares of Stock purchased under the Plan may not be
assigned, transferred, pledged or otherwise disposed of until after completion
of six full calendar months following the end of the Subscription Period during
which the shares of Stock were acquired. Thereafter the shares of Stock may be
sold or otherwise transferred without restrictions subject to the restrictions
of Section 9 (b); provided that the foregoing restrictions will lapse with
respect to any Participant in the event of the death of such Participant.
SECTION 13. APPLICATION OF FUNDS
All funds received or held by Titan under the Plan are not held
in trust and may be used for any corporate purpose.
SECTION 14. ADJUSTMENT OF AND CHANGES IN THE STOCK
In the event that the shares of Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Titan or of another corporation (whether by reason of merger, consolidation,
recapitalization, stock split, combination of shares, or otherwise), or if the
number of shares of Stock shall be increased through a stock split or the
payment of a
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stock dividend, then there shall be substituted for or added to each share of
Stock theretofore reserved for sale under the Plan, the number and kind of
shares of stock or other securities into which each outstanding share of Stock
shall be so changed, or for which each such share shall be exchanged, or to
which each such share shall be entitled, as the case may be, or the number or
kind of securities which may be sold under the Plan and the purchase price per
share shall be appropriately adjusted consistent with such change in such manner
as the Board may deem equitable to prevent dilution or enlargement of rights
granted to, or available for, Eligible Employees. Similarly, if the number of
shares of Stock shall be decreased through a reverse stock split or otherwise,
the number of securities and purchase price per share shall be proportionally
adjusted.
SECTION 15. AMENDMENT OR DISCONTINUANCE OF THE PLAN
The Board shall have the right to amend, modify or terminate the
Plan at any time without notice, provided that without the approval of the
Company's stockholders no such amendment shall increase the total number of
shares of Stock subject to the Plan, change the formula by which the price at
which the shares of Stock shall be sold is determined, or change the class of
employees eligible to participate in the Plan. Without limiting the generality
of the foregoing but subject to the foregoing proviso, the Board may amend the
Plan from time to time to increase or decrease the length of any future
Subscription Periods (e.g. to an annual period), but not in excess of the
maximum period allowable for the Plan to meet the requirements of Section 423 of
the Code, and to make all required conforming changes to the Plan. In the event
that, after the initial Subscription Period, there occurs a dissolution or
liquidation of the Company, the plan shall terminate, and each Participant shall
have the amount in his or her Plan Account refunded in cash, without interest.
SECTION 16. ADMINISTRATIVE
The Plan shall be administered by the Board. The Board shall
have authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to make all other determinations necessary
or advisable for the administration of the Plan. Any interpretation or
construction of any provision of the Plan by the Board shall be final and
conclusive on all persons. The Board may delegate all or any portion of its
authority with respect to the Plan to the Committee, and thereafter until such
delegation is revoked by the Board all powers under the Plan delegated to the
Committee shall be exercised by the Committee.
SECTION 17. EMPLOYEE'S RIGHTS
Nothing in this Plan shall prevent Titan or any Related
Corporation from terminating any employee's employment. No employee shall have
any
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rights as a stockholder until full payment has been made for the shares of Stock
for which he or she has subscribed.
SECTION 18. APPROVAL OF BOARD AND STOCKHOLDERS
The Plan was approved by the Board on August 17, 1995. The Plan
is subject to approval by the stockholders of Titan within twelve months of such
Board approval. If stockholder approval is not so obtained, the Plan shall
terminate and each Participant shall have the then existing amount of his or her
Plan Account refunded in cash, without interest, and each Participant shall
surrender and have no further rights or interest in any Stock to be purchased
under the Plan.
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THE TITAN CORPORATION--PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 16, 1996
Mr. J. S. Webb and Dr. Gene W. Ray, or either of them, each with power of
substitution, are hereby appointed proxies at the Annual Meeting of Stockholders
of THE TITAN CORPORATION to be held May 16, 1996, or any adjournment or
adjournments thereof, to represent and to vote all shares of stock of said
corporation (preferred and common) which the undersigned would be entitled to
vote if personally present, upon the matters specified below and upon such other
business as may properly come before the Meeting, and any prior proxy to vote at
such Meeting is hereby revoked. With respect to matters not known to said
corporation's Board of Directors at the time of the solicitation hereof, said
proxies are authorized to vote in their discretion.
1. ELECTION OF DIRECTORS / / FOR / / WITHHOLD AUTHORITY For all
(EXCEPT AS INDICATED TO THE
CONTRARY)
<TABLE>
<S> <C> <C> <C>
J. S. Webb Charles R. Allen Joseph F. Caligiuri Daniel J. Fink
Robert E. La Blanc Thomas G. Pownall Dr. Gene W. Ray
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- --------------------------------------------------------------------------------
2. PROPOSAL TO ADOPT THE 1995 EMPLOYEE STOCK PURCHASE PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO ADOPT THE 1996 DIRECTORS' STOCK OPTION AND EQUITY
PARTICIPATION PLAN
/ / FOR / / AGAINST / / ABSTAIN
4. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996.
/ / FOR / / AGAINST / / ABSTAIN
IMPORTANT--PLEASE SIGN ON OTHER SIDE
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE TITAN
CORPORATION. UNLESS A CONTRARY DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE
ELECTION OF ALL THE NOMINEES SET FORTH ABOVE AS DIRECTORS, FOR THE 1995 EMPLOYEE
STOCK PURCHASE PLAN, FOR THE 1996 DIRECTORS' STOCK OPTION AND EQUITY
PARTICIPATION PLAN AND FOR RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S AUDITORS.
DATE: _________________________________________, 1996
___________________________________
Signature of Stockholder
___________________________________
Signature of Stockholder
Please sign exactly as your name or
names appear hereon, and when
signing as attorney, executor,
administrator, trustee, or
guardian, give your full title as
such. If the signatory is a
corporation, sign the full
corporate name by a duly authorized
officer.
PLEASE SIGN, DATE AND RETURN YOUR
PROXY
PROMPTLY IN THE POST-PAID ENVELOPE
PROVIDED
