<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
TITAN CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
April 11, 1997
Dear Stockholder:
This letter accompanies the Proxy Statement for our Annual Meeting on
Thursday, May 15, 1997, 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, to
vote on an amendment to the Company's Restated Certificate of Incorporation
increasing the number of authorized shares of Common Stock from 30,000,000 to
45,000,000, to approve the Stock Option Plan of 1997 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 15, 1997
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 15, 1997, 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 amend the Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 45,000,000;
3. To consider and act upon a proposal to adopt the Stock Option Plan
of 1997;
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, 1997; and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on March 17, 1997, will be
entitled to vote at the meeting.
By order of the Board of Directors,
[SIG]
Philip J. Englund
SECRETARY
San Diego, California
April 11, 1997
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 11, 1997
------------------------
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 15, 1997 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 17,
1997, 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 11, 1997.
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 17, 1997, of 694,872 shares of $1.00 Cumulative Convertible Preferred
Stock (the "$1.00 Preferred Stock"), 500,000 shares of Series B Cumulative
Convertible Redeemable Preferred Stock (the "Series B Preferred Stock") and
16,035,157 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 $1.00 Preferred Stock is entitled to one-third ( 1/3) vote for
each of said shares; holders of Common Stock and Series B Preferred Stock are
entitled to one vote per share. Holders of $1.00 Preferred Stock, Series B
Preferred Stock and Common Stock will vote as a single class, and will not vote
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 that 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. The proposal regarding the increase
in the Company's authorized shares of Common Stock requires the approval of a
majority of the voting power of the outstanding shares of the Company.
Abstentions and broker non-votes will have the same effect as votes against such
proposal. 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 other 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 other proposal for purposes of determining approval of
such other proposal. Accordingly, such shares will not be counted as votes for
or against such other proposal and will not affect the outcome of the vote on
such other proposal.
At the Company's Annual Meeting in 1996, approximately 87.2% 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 17, 1997 (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
10), 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 23,392(2) *
Joseph F. Caligiuri........................................................ Common Stock 22,250(2) *
Daniel J. Fink............................................................. Common Stock 19,600(2) *
Robert E. La Blanc......................................................... Common Stock 6,750(2) *
Thomas G. Pownall.......................................................... Common Stock 23,087(2) *
Gene W. Ray................................................................ Common Stock 429,850(2) 2.68%
J. S. Webb................................................................. Common Stock 92,703(2) *
Louis L. Fowler............................................................ Common Stock 22,181(2) *
Ronald B. Gorda............................................................ Common Stock 60,870(2) *
Cornelius L. Hensel........................................................ Common Stock 23,668(2) *
Frederick L. Judge......................................................... Common Stock 53,064(2) *
Jack D. Witt............................................................... Common Stock 1,368,917(3) 8.54%
All Directors and Officers as a Group (14 Persons)......................... Common Stock 781,544(2) 4.87%
</TABLE>
- ------------------------
* Less than 1%
(1) The address of each owner, other than Jack D. Witt, is c/o The Titan
Corporation, 3033 Science Park Road, San Diego, California 92121. The
address of Jack D. Witt is 120 South Newport Drive, Napa, California 94559.
(2) Including (A) 11,250; 11,250; 11,250; 3,750; 7,500; 143,750; 32,500; 53,750;
22,500; 37,500, 4,750; and 340,000 shares subject to outstanding options
held by Messrs. Allen, Caligiuri, Fink, La Blanc, Pownall, Ray, Webb, Gorda,
Hensel, Judge, Fowler and all directors and officers as a group,
respectively, which are currently exercisable or may become exercisable
within 60 days after March 17, 1997; (B) 21,428 and 14,285 shares that may
be obtained upon conversion of convertible debentures held by Messrs. Ray
and Judge, respectively; and (C) 78,178; 23,306; 4,620; 1,068; 1,279;
14,318; and 125,448 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, Fowler and all directors and
officers as a group, respectively.
(3) All shares are beneficially owned by Jack D. Witt, an individual. Mr. Witt
has sole voting and dispositive power with respect to all 1,368,917 shares,
which includes 333,333 shares that may be acquired upon conversion of
500,000 shares of Series B Preferred Stock. Information regarding Mr. Witt's
ownership was obtained from his most recent Schedule 13D, adjusted for
shares returned to the Company as a post-closing acquisition adjustment.
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 that 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. 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 77 Chairman of the Board of 1984 Amdahl Corporation; EIP Microwave;
Directors of Titan Plantronics, Inc.
Charles R. Allen 71 Advisor, New Court Partners, a 1989 --
venture capital unit of
Rothschild, Inc.
Joseph F. Caligiuri 69 Retired Executive Vice President 1984 Avnet, Inc.
of Litton Industries, Inc.,
diversified manufacturing
Daniel J. Fink 70 President of D. J. Fink 1985 Orbital Sciences Corporation
Associates, Inc., management
consulting
Robert E. La Blanc 63 President of Robert E. La Blanc 1996 Tribune Co.; Storage Technology
Associates, Inc., financial and Corporation; A family of 12
technical consulting Prudential Mutual Funds
Thomas G. Pownall 75 Retired Chairman and Chief 1992 --
Executive Officer of Martin
Marietta Corporation
Dr. Gene W. Ray 58 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 two meetings during fiscal 1996.
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 1996. The members
of the compensation, stock option and pension committee are Mr. Pownall,
Chairman, and Messrs. Allen, Caligiuri, Fink and LaBlanc. 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 three meetings during
fiscal 1996.
During fiscal 1996, the Board of Directors held eight meetings and took
action by unanimous written consent on four occasions. Each of the incumbent
directors attended more than 75% of the meetings of the Board. With the
exception of Messrs. Pownall and Caligiuri, each of the incumbent directors
attended 100% of the meetings of the committees on which he served during 1996.
Messrs. Pownall and Caligiuri were each absent from one committee meeting.
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.
Under the Company's 1996 Directors' Stock Option and Equity Participation Plan,
each non-employee director can elect to receive his directors' fees in Common
Stock.
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
executive officer 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 77 1984
Gene W. Ray President and Chief Executive Officer 58 1985
Eric DeMarco Senior Vice President and Chief Financial 33 1997
Officer
Philip J. Englund Senior Vice President, General Counsel and 53 1996
Secretary
Louis L. Fowler Vice President and Assistant Secretary 58 1989
Ronald B. Gorda Senior Vice President 41 1994
Cornelius L. Hensel Senior Vice President 60 1995
Frederick L. Judge Senior Vice President 63 1994
Deanna H. Petersen Controller 29 1996
</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. DeMarco has been Senior Vice President and Chief Financial Officer of
the Company since January 1997. From June 1986 to January 1997 he was a Senior
Manager with Arthur Andersen LLP.
Mr. Englund has been Senior Vice President, General Counsel and Secretary of
the Company since November 1996. Prior thereto he had a private legal practice
acting as Corporate Counsel to small companies from April 1995 to November 1996.
From November 1986 to April 1995 he was Vice President, Legal of Optical
Radiation Corporation.
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. 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.
5
<PAGE>
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.
Ms. Petersen has been controller since December 1996. From September 1993 to
December 1996, Ms. Petersen was Corporate Manager of Operations Analysis at
Titan. From January 1990 to September 1993 she was a Senior Auditor at Arthur
Andersen LLP.
6
<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 formal 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.
7
<PAGE>
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.
TOTAL COMPENSATION
The Company has a program of cash compensation and equity-based
compensation. These programs apply equally to the President and CEO 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. Dr. Ray's base salary
for 1996 was not increased nor was the base salary of one of the other four
highest paid officers in 1996. Dr. Ray's base salary for 1997 was not increased
and the base salary for 1997 of one of the other four highest paid officers in
1996 was reduced by 15%.
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 80% 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 CEO 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 1997, Dr. Ray and one of the other four highest
paid executive officers received no bonus as a result of the Company's
performance in 1996.
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.
8
<PAGE>
The option programs utilize a four-year vesting period to encourage
executive officers to continue in the employ of the Company. These options are
granted at current market value and are available to all executive officers.
During 1996, 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.
The Compensation Committee has evaluated the total compensation of the five
highest paid executive officers in 1996 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
Robert E. LaBlanc
February 27, 1997
9
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1996,
1995 and 1994, 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 1996 (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.......................................... 1996 337,500 0 150,000 44,311
President and Chief 1995 328,462 0 50,000 43,886
Executive Officer 1994 290,500 169,800 50,000 41,798
Louis L. Fowler...................................... 1996 144,519 46,000 25,000 19,364
Vice President 1995 138,039 0 5,000 17,322
1994 133,230 24,320 5,000 16,973
Ronald B. Gorda...................................... 1996 183,111 12,951 60,000 25,748
Senior Vice President 1995 173,563 176,000 25,000 25,638
1994 156,758 117,246 50,000 14,912
Cornelius L. Hensel.................................. 1996 189,013 19,667 60,000 25,428
Senior Vice President 1995 175,219 85,200 55,000 21,918
Frederick L. Judge................................... 1996 234,001 0 0 31,857
Senior Vice President 1995 232,271 0 0 32,773
1994 198,186 150,875 50,000 20,625
</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 that
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 1996 for each Named Executive Officer consist of the
following elements of compensation: Dr. Ray: (i) $7,500; (ii) $33,000; (iii)
$544; and (iv) $3,267; Mr. Fowler: (i) $7,500; (ii) $10,890; (iii) $310; and
(iv) $664; Mr. Gorda: (i) $7,500; (ii) $17,601; (iii) $150; and (iv) $497;
Mr. Hensel: (i) $7,500; (ii) $17,501; (iii) $0; and (iv) $427; Mr. Judge:
(i) $7,500; (ii) $23,400; (iii) $0; and (iv) $957.
10
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made during fiscal 1996 under the Company's long-term incentive program
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL OPTIONS STOCK PRICE
GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OPTION TERM (F)
GRANTED FISCAL PRICE EXPIRATION --------------------
NAME (B) YEAR (C) ($/SH)(D) DATE (E) 5% ($) 10% ($)
- ------------------------------------ --------- ------------------ ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Ray......................... 150,000 22.12% 4.00 8/20/06 377,337 956,245
Louis L. Fowler..................... 25,000 3.69% 4.00 8/20/06 62,889 159,374
Ronald B. Gorda..................... 60,000 8.85% 4.00 8/20/06 150,935 382,498
Cornelius L. Hensel................. 60,000 8.85% 4.00 8/20/06 150,935 382,498
Frederick L. Judge.................. -- -- -- -- -- --
</TABLE>
- ------------------------
(A) No SARs were granted to any of the Named Executive Officers during the last
fiscal year.
(B) Options granted in 1996 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 1996, employees of the Company received stock options covering a total of
678,000 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.
(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.
11
<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......................... -- -- 143,750 236,250 7,969 781
Louis L. Fowler..................... -- -- 4,750 31,250 0 0
Ronald B. Gorda..................... 2,500 1,875 53,750 111,250 938 313
Cornelius L. Hensel................. -- -- 13,750 101,250 0 0
Frederick L. Judge.................. -- -- 25,000 25,000 0 0
</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 its senior executives (each
hereinafter referred to as the "Executive") to reinforce and encourage their
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 two-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 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 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.
12
<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>
1991 100 100 100
1992 111.11 132.49 104.70
1993 90.82 190.89 118.88
1994 193.00 211.88 116.57
1995 215.70 292.02 151.15
1996 102.17 400.13 182.08
</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, 1991 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 $3.375 per share on December
31, 1996.
13
<PAGE>
PROPOSAL REGARDING INCREASE IN
AUTHORIZED SHARES OF COMMON STOCK
INTRODUCTION
The Board of Directors has approved and recommends to the stockholders the
adoption of an amendment to the Company's Restated Certificate of Incorporation
(the "Amendment") that would increase the number of its authorized shares of
Common Stock, par value $.01, from 30 million shares to 45 million shares.
Although the Board of Directors of Titan has no present intentions to issue
the additional shares of Common Stock to be authorized, it desires to have such
stock available for future financings, acquisitions and compensation programs.
Of the 30 million shares of Common Stock presently authorized, approximately
17,133,680 shares were outstanding (including 1,106,114 shares held in treasury)
and 12,800,181 shares were reserved for issuance upon the exercise of
outstanding options, warrants and convertible securities as of December 31,
1996. Thus, approximately 66,139 shares of authorized Common Stock have not yet
been issued or reserved for issuance. The Board believes that the Company's best
interests would be served if it had a greater number of such shares available
for its future needs.
Unless otherwise required by applicable law or the rules of any exchange on
which the Company's Common Stock is listed, or unless otherwise decided by the
Board, the Company will issue the additional shares of Common Stock authorized
by this proposal as directed by the Board without further action by the
stockholders.
The additional Common Stock to be authorized by adoption of the Amendment
would have identical rights to the currently outstanding Common Stock. As with
all other shares of the Company's Common Stock, the additional shares to be
authorized pursuant to the Amendment would not give stockholders owning such
shares any pre-emptive right to purchase additional shares of Common Stock that
may be issued in the future. Adoption of the proposed Amendment would not affect
the rights of the holders of currently outstanding Common Stock; however, any
future issuance of such shares may be dilutive to stockholders of the Company.
If the Amendment increasing the number of authorized shares is not passed,
the Company will only be able to issue Common Stock in connection with its
future financings, acquisitions and compensation programs within the limits
imposed by its current maximum of 30 million authorized shares of Common Stock.
In some future transactions in which the Board would prefer to use Common Stock,
such as acquisitions, the Company may instead use some combination of cash or
preferred stock. However, even if the number of authorized shares is increased
to 45 million, the Board will retain the flexibility to use cash, preferred
stock or some combination of the two if such an approach is advantageous. In
other circumstances, the Board may decide to call a special stockholder's
meeting to propose an increase in the number of authorized shares of Common
Stock to enable the Company to issue such stock in connection with a particular
transaction.
DESCRIPTION OF THE AMENDMENT
The opening paragraph of Article Fourth of the Company's Restated
Certificate of Incorporation, which paragraph now reads as follows:
Fourth: The Corporation is authorized to issue two classes of stock,
which shall be designated Preferred Stock and Common Stock, respectively.
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue shall be 32,500,000, consisting of
2,500,000 shares of Preferred Stock of the par value of $1.00 per share, and
30,000,000 shares of Common Stock of the par value of $.01 per share.
14
<PAGE>
shall be amended so that from and after adoption of the Amendment, said
paragraph shall read as follows:
Fourth: The Corporation is authorized to issue two classes of stock,
which shall be designated Preferred Stock and Common Stock, respectively.
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue shall be 47,500,000, consisting of
2,500,000 shares of Preferred Stock of the par value of $1.00 per share, and
45,000,000 shares of Common Stock of the par value of $.01 per share.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED CAPITALIZATION OF THE COMPANY.
This proposal will be adopted if it is approved by the holders of a majority
of the voting power of the outstanding shares of the Company. Unless indicated
to the contrary, the enclosed Proxy, if returned, will be voted for adoption of
this proposal.
APPROVAL OF THE STOCK OPTION PLAN OF 1997
Since 1969, the Company has utilized employee stock options to provide
additional incentives to selected key employees of the Company and its
subsidiaries. All of the Company's currently outstanding stock options have
exercise prices equal to the market price of the underlying stock on the date
the options were granted, are nontransferable during the optionholder's lifetime
and terminate upon termination of the optionholder's employment.
Because the number of shares then remaining available for options to be
granted was insufficient to allow the Company to continue to make substantial
use of options as a form of deferred compensation in order to retain and attract
high caliber executives, the Company's Board of Directors adopted the Stock
Option Plan of 1997 (the "Plan") and is submitting it to the stockholders for
their approval at the 1997 Annual Meeting. The affirmative vote of a majority of
the outstanding voting shares represented and voting at the Annual Meeting will
be required for the approval of this Plan, with the $1.00 Preferred Stock,
Series B Preferred Stock and Common Stock voting together and not as separate
classes.
The full text of the Plan is set forth as Appendix A to this proxy
statement. The following summary of the Plan is qualified by this reference to
that text.
Under the Plan, options to purchase an aggregate of 1,000,000 shares of the
Common Stock of the Company may be granted to those present and future salaried
employees (including officers) of the Company and its subsidiaries selected by a
committee of the Board of Directors (the "Committee"). The number of shares is
subject to adjustment in certain circumstances, including stock dividends, stock
splits, reverse stock splits, reorganizations, reclassifications or
recapitalizations of Common Stock.
The purchase price that must be paid for stock on exercise of an option
granted under the Plan will be fixed by the Committee when the stock option is
granted, but such price may not be less than 90% of the fair market value of the
stock on the date the option is granted and must be at least 100% of such fair
market value for any option intended to be an "incentive stock option" under
federal tax law. The closing price of the Company's Common Stock reported on the
New York Stock Exchange composite tape for March 17, 1997 was $3.75. Payment for
stock upon exercise of an option must be in cash, except that the option may
permit payment for optioned shares wholly or partially with shares of the
Company's Common Stock, in lieu of cash, valuing such shares on the basis of
market value on the day preceding the exercise of the option. An optionholder
permitted to pay for optioned shares with the Company's Common Stock would be
able to exercise his employee stock option in successive transactions, starting
with a relatively small number of shares and, by a series of exercises using
shares acquired from one exercise to pay the exercise price in the next,
exercise an option for a large number of shares with no additional cash and no
more investment than the original share or shares delivered.
15
<PAGE>
An option granted under the Plan must be exercised during such term as will
be fixed by the Committee, but not later than ten years after the date upon
which the option was granted. Qualified options are nontransferable except upon
death, by will or by operation of the laws of descent and distribution, and can
be exercised during the employee's lifetime only by him or his guardian or legal
representative. Non-qualified options are transferable by the optionee only upon
such terms and conditions as set forth in the option agreement for such options,
as the Board or the Committee shall determine in its discretion.
Under the Plan, no employee may be granted options for more than 200,000
shares in any calendar year. To the extent that the aggregate fair market value
of stock with respect to which incentive options are exercisable for the first
time by an optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company, any subsidiary and any parent
corporation) exceeds $100,000, such options shall be taxed as non-qualified
options. The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted; fair market value
of stock shall be determined as of the time the option with respect to such
stock is granted. The officers named above under "Executive Compensation" are
among those eligible to participate in the Plan.
Under the Plan, the Committee may, but need not, grant stock appreciation
rights in connection with any or all of the options that may be granted. A stock
appreciation right permits the optionholder to elect to receive any appreciation
in the value of the optioned stock directly from the Company, either in stock or
in cash or in a combination of the two, in lieu of exercising the option. Under
the Plan, an optionholder who has received a stock appreciation right may
exercise that right instead of the option, in whole or in part, at any time that
the option would have been exercisable by its terms. Upon exercise of a stock
appreciation right, the corresponding portion of the related option must be
surrendered and cannot thereafter be exercised, and conversely, upon exercise of
an option to which a stock appreciation right is attached, the right may no
longer be exercised to the extent that the corresponding option has been
exercised. The amount payable on exercise of a stock appreciation right is
measured by the difference, on the date of exercise, of the market value of the
optioned stock over its option exercise price.
Upon the dissolution or liquidation of the Company, or upon certain
reorganizations including a sale of substantially all the property of the
Company, the Plan shall terminate, and all options theretofore granted
thereunder shall terminate, unless special provisions are made in connection
with such transaction in which event the Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If the Plan and
unexercised options 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 that would
otherwise not yet be exercisable.
Notwithstanding any other provisions of the Plan, upon any Change in Control
(as defined in the Plan) all then outstanding options and stock appreciation
rights will become fully vested and exercisable and all restrictions against
sale or transfer or hypothecation of restricted shares shall lapse and expire.
Under present federal tax law, an employee is not taxed upon the receipt of
an option under the Plan and the Company is not entitled to any deduction upon
grant of the option. When an employee exercises an option granted under the Plan
that qualifies as an "incentive stock option" and makes no disposition of the
acquired shares within two years after the option is granted to him or one year
after the transfer of such shares to him, no taxable income will be realized by
him upon exercise of the option (although the "spread" on the option is among
the items of tax preference required to be considered in the calculation of the
alternative minimum tax under the federal tax law), and any gain or loss which
he realizes on a subsequent disposition of shares will be treated as long-term
capital gain or loss. Under those circumstances, the Company will not be
entitled to any deduction for federal income tax purposes with respect to
issuance of shares upon exercise of the option. When an option that is not an
"incentive stock option" is exercised, the employee will realize ordinary
taxable income in an amount equal to the excess of the fair market value of
16
<PAGE>
the shares purchased on the date of exercise over their purchase price, and the
Company will be entitled to a deduction in the same amount. Similarly, when
stock acquired upon exercise of an "incentive stock option" is disposed of
within the two-year or one-year holding periods described above, so much of any
gain as does not exceed the excess of the fair market value of the shares on the
date of exercise over their purchase price will be deductible by the Company as
well as being taxable at ordinary income rates to the employee.
Under present federal tax law, if a stock appreciation right is exercised,
the optionholder will realize ordinary taxable income in an amount equal to the
cash or value of the stock received.
Under current accounting principles as applied by the Company, although
neither the grant nor the exercise of an employee stock option at an exercise
price equal to market value at the date of grant affects reported income, if the
optioned stock is also subject to a stock appreciation right and appreciates in
value, the stock appreciation right will result in some charges against income
to reflect the compensation expense thereof as measured by the appreciation in
the underlying stock.
The Plan will terminate February 22, 2007, after which date no further
options may be granted thereunder.
The Board of Directors may alter, amend, suspend or terminate the 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 Plan that would increase the total number of shares reserved for purposes of
the Plan (except under the adjustment provisions mentioned above), reduce the
minimum option price, extend the termination date of the Plan, or alter the
class of employees eligible to participate in the Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL TO APPROVE THE STOCK OPTION PLAN OF 1997.
This proposal will be adopted if it is approved by the holders of a majority
of the voting power of the shares represented and voting at the Annual Meeting.
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, 1997. Arthur Andersen LLP is serving as the Company's auditors for
1996 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, 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, 1997 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.
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
and the New York Stock Exchange initial reports of ownership and reports of
changes in ownership of that Common Stock.
To the Company's knowledge, based solely upon a review of copies of reports
provided by those individuals to the Company and written representations of
those individuals that no other reports were required with respect to the year
ended Decrember 31, 1996, the Company believes that all of the foregoing filing
requirements applicable to its directors, executive officers, and greater than
ten percent beneficial owners have been met.
STOCKHOLDERS' PROPOSALS
Proposals by stockholders intended to be presented at the next annual
meeting in 1998 must be in writing and received by the Company by December 12,
1997 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 1996 Annual Report, including financial statements for fiscal
year 1996, 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
STOCK OPTION PLAN OF 1997
1. PURPOSE OF THE PLAN. Under this Stock Option Plan (the "Plan") of The
Titan Corporation (the "Company") options may be granted to eligible employees
to purchase shares of the Company's capital stock. The Plan is designed to
enable the Company and its subsidiaries to attract, retain and motivate their
employees by providing for or increasing the proprietary interests of such
employees in the Company. The Plan provides for options that qualify as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as well as options that do not so
qualify.
2. STOCK SUBJECT TO PLAN. The maximum number of shares of stock for which
options granted hereunder may be exercised shall be 1,000,000 shares of the
Common Stock, $.01 par value, of the Company, subject to the adjustments
provided for in Sections 7 and 12. The maximum number of shares for which
options may be granted to any one eligible employee under this Plan during any
one calendar year is 200,000 shares. Shares of stock subject to the unexercised
portions of any options granted under this Plan that expire or terminate or are
cancelled may again be subject to options under the Plan. However, if stock
appreciation rights are granted with respect to any options under this Plan, the
total number of shares of stock for which further options may be granted under
this Plan shall be irrevocably reduced not only when there is an exercise of an
option granted under this Plan, but also when such option is surrendered upon an
exercise of a stock appreciation right granted under this Plan, in either case
by the number of shares covered by the portion of such option which is exercised
or surrendered.
3. ELIGIBLE EMPLOYEES. The employees eligible to be considered for the
grant of options hereunder are any persons regularly employed by the Company or
a subsidiary of the Company on a salaried basis.
4. INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the aggregate
fair market value of stock with respect to which Incentive Options (within the
meaning of Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by an optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company, any
subsidiary and any parent corporation) exceeds $100,000, such options shall be
taxed as non-qualified options. The rule set forth in the preceding sentence
shall be applied by taking options into account in the order in which they were
granted. For purposes of this Section 4, the fair market value of stock shall be
determined as of the time the option with respect to such stock is granted.
5. MINIMUM EXERCISE PRICE. The exercise price for each option granted
hereunder shall be not less than 90% of the fair market value of the stock at
the date of the grant of the option.
6. NONTRANSFERABILITY. Any Incentive Option granted under this Plan shall
by its terms be nontransferable by the optionee other than by will or the laws
of descent and distribution and is exercisable during the optionee's lifetime
only by him or by his guardian or legal representative. A non-qualified option
shall be transferable by the optionee only upon such terms and conditions as set
forth in the option agreement for such option, as the Board or the Committee
shall determine in its discretion.
7. ADJUSTMENTS. If the outstanding shares of stock of the class then
subject to this Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities, 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 for 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 changing the aggregate exercise price applicable to the
unexercised portions of such options.
A-1
<PAGE>
8. MAXIMUM OPTION TERM. No option granted under this Plan may be exercised
in whole or in part more than ten years after its date of grant.
9. PLAN DURATION. The effective date of this Plan shall be February 27,
1997. Options may not be granted under this Plan more than ten years after the
date of the adoption of this Plan, or of stockholder approval thereof, whichever
is earlier.
10. PAYMENT. Payment for stock purchased under any exercise of an option
granted under this Plan shall be made in full in cash concurrently with such
exercise, except that, if and to the extent the instrument evidencing the option
so provides and if the Company is not then prohibited from purchasing or
acquiring shares of such stock, such payment may be made in whole or in part
with shares of the same class of stock as that then subject to the option,
delivered in lieu of cash concurrently with such exercise, the shares so
delivered to be valued on the basis of the fair market value of the stock
(determined in a manner specified in the instrument evidencing the option) on
the day preceding the date of exercise.
11. ADMINISTRATION. The Plan shall be administered by the Company's Board
of Directors (the "Board") or a committee (the "Committee") meeting the
requirements of SEC Rule 16b-3 with respect to grants to executive officers.
The interpretation and construction by the Board or the Committee of any
term or provision of the Plan or of any option granted under it shall be final.
The Board or the Committee may from time to time adopt rules and regulations for
carrying out this Plan and subject to the provisions of this Plan, may prescribe
the form or forms of the instruments evidencing any option granted under this
Plan.
Subject to the provisions of this Plan, the Board or the Committee shall
have full and final authority in its discretion to select the employees to be
granted options, to grant such options and to determine the number of shares to
be subject thereto, the exercise prices, the terms of exercise, expiration dates
and other pertinent provisions thereof.
12. 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 securities of the class then subject to options
hereunder are changed into 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 theretofore granted hereunder shall terminate, unless provision 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 with options covering the stock of a successor employer
corporation, or a parent or a 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 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 "Corporate
Reorganizations," not yet be exercisable.
13. CHANGE IN CONTROL. Notwithstanding any other provisions of this Plan,
upon any Change in Control (as defined hereinbelow) all then outstanding options
and Stock Appreciation Rights (as defined hereinbelow) will become fully vested
and exercisable and all restrictions against sale or transfer or hypothecation
of restricted shares shall lapse and expire. 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 that was not approved by the Board prior to its occurrence; or (b)
during any period of twenty-four (24) consecutive months, individuals who at the
A-2
<PAGE>
beginning of such period constituted the Board 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.
14. STOCK APPRECIATION RIGHTS. If the instrument evidencing the option so
provides, an option granted under this Plan (herein sometimes referred to as the
"corresponding option") may include the right (a "Stock Appreciation Right") to
receive an amount equal to some or all of the excess of the fair market value
(determined in a manner specified in the instrument evidencing the corresponding
option) of the shares subject to unexercised portions of the corresponding
option over the aggregate exercise price for such shares under the corresponding
option as of the date the Stock Appreciation Right is exercised. The amount
payable upon exercise of a Stock Appreciation Right may be paid in cash or in
shares of the class then subject to the corresponding option (valued on the
basis of their fair market value, determined as specified with respect to the
measurement of the amount payable as aforesaid), or in a combination of cash and
such shares so valued. No Stock Appreciation Right may be exercised in whole or
in part (a) other than in connection with the contemporaneous surrender without
exercise of such corresponding option, or the portion thereof that corresponds
to the portion of the Stock Appreciation Right being exercised, or (b) except to
the extent that the corresponding option or such portion thereof is exercisable
on the date of exercise of the Stock Appreciation Right by the person exercising
the Stock Appreciation Right, or (c) unless the class of stock then subject to
the corresponding option is then "publicly traded." For this purpose, a class of
stock is "publicly traded" if it is listed or admitted to unlisted trading
privileges on a national securities exchange or if bid and offer quotations
therefor are reported on the automated quotation system ("NASDAQ") operated by
the National Association of Securities Dealers, Inc., or on any then operative
successor to the NASDAQ system.
15. RESTRICTED STOCK. If the instrument evidencing the option so provides,
shares of stock issued on exercise of an option granted under this Plan may upon
issuance be subject to the following restrictions (and, as used herein,
"restricted stock" means shares issued on exercise of options granted under this
Plan that are still subject to restrictions imposed under this Section 15 that
have not yet expired or terminated):
(a) shares of restricted stock may not be sold or otherwise transferred
or hypothecated;
(b) if the employment of the holder of shares of restricted stock with
the Company or a subsidiary is terminated for any reason other than his
death, normal or early retirement in accordance with his employer's
established retirement policies or practices, or total disability, the
Company (or any subsidiary designated by it) shall have the option for sixty
(60) days after such termination of employment to purchase for cash all or
any part of his restricted stock at the lesser of (i) the price paid
therefor by the holder, or (ii) the fair market value of the restricted
stock on the date of such termination of employment (determined in a manner
specified in the instrument evidencing the option); and
(c) as to the shares of stock affected thereby, any additional
restrictions that may be imposed on particular shares of restricted stock as
specified in the instrument evidencing the option.
The restrictions imposed under this Section 15 shall apply as well to all
shares or other securities issued in respect of restricted stock in connection
with any stock split, reverse stock split, stock dividend, recapitalization,
reclassification, spin-off, split-off, merger, consolidation or reorganization,
but such restrictions shall expire or terminate at such time or times as shall
be specified therefor in the instrument evidencing the option that provides for
the restrictions.
16. AMENDMENT AND TERMINATION. The Board may alter, amend, suspend or
terminate this Plan, provided that no such action shall deprive an optionee,
without his consent, of any option granted to the optionee pursuant to this Plan
or of any of his 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:
(a) increase the maximum number of shares for which options granted
under this Plan may be exercised;
A-3
<PAGE>
(b) reduce the minimum permissible exercise price;
(c) extend the ten-year duration of this Plan set forth herein; or
(d) alter the class of employees eligible to receive options under the
Plan.
A-4
<PAGE>
PROXY THE TITAN CORPORATION--PROXY PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 1997
Mr. J. S. Webb and Dr. Gene W. Ray, or either if them, each with power
of substitution, are hereby appointed proxies at the Annual Meeting of
Stockholders of THE TITAN CORPORATION to be held May 15, 1997, 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 on the
reverse side and upon such other matters 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.
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 INCREASING
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 30,000,000 TO
45,000,000, FOR THE STOCK OPTION PLAN OF 1997 AND FOR RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS.
NEW ADDRESS:
-------------------------
-------------------------------------
Check here for / /
address change -------------------------------------
-------------------------------------
(Continued and to be signed and dated
on reverse side)
<PAGE>
/x/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ITEMS LISTED BELOW. UNLESS OTHERWISE SPECIFIED THIS PROXY WILL BE CAST
FOR ITEMS 1, 2, 3, AND 4.
<S> <C> <C> <C>
1. Election of FOR WITHHELD NOMINEES: J.S. Webb, Robert E. La Blanc,
Directors / / / / Charles R. Allen, Thomas G. Pownall,
Joseph F. Caligiuri, Dr. Gene W. Ray
Daniel J. Fink
For except vote withheld from the following nominee(s):
- --------------------------
<C> <C> <C> <C>
FOR AGAINST ABSTAIN
2. PROPOSAL REGARDING INCREASE IN / / / / / /
AUTHORIZED SHARES OF COMMON STOCK
3. PROPOSAL TO ADOPT THE STOCK OPTION / / / / / /
PLAN OF 1997
4. RATIFICATION OF THE SELECTION / / / / / /
OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997.
</TABLE>
Signature(s) DATE
-------------------------------------- ----------------
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
