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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Form S-3
Registration Statement
Under
THE SECURITIES ACT OF 1933
________________
THE TITAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 8711 95-2588754
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
THE TITAN CORPORATION
3033 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121-1199
TELEPHONE: (619) 552-9500
(Address, including ZIP code, and telephone number, including
area code, of registrant's principal executive offices)
________________
IRA FRAZER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE TITAN CORPORATION
3033 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121-1199
TELEPHONE: (619) 552-9500
(Name, address, including ZIP code, and telephone number, including
area code, of agent for service)
________________
COPIES TO:
M. WAINWRIGHT FISHBURN, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
(619) 550-6000
________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
________________
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CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------
Common Stock
.01 par value..... 1,607,092 $6.156 $9,893,258.35 $2,918.51
- -------------------------------------------------------------------------------
(1) Estimated in accordance with Rule 457(c) solely for the purpose of
computing the amount of the registration fee based on the average of the high
and low prices of the Registrant's Common Stock as reported on the New York
Stock Exchange on June 18, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
1,607,092 SHARES
THE TITAN CORPORATION
COMMON STOCK
________________
This Prospectus relates to 1,607,092 shares (the "Shares") of Common
Stock, .01 par value per share (the "Common Stock"), of The Titan Corporation
("Titan" or the "Company"). The Shares may be offered by a certain
stockholder of the Company (the "Selling Stockholder") from time to time in
transactions on the New York Stock Exchange ("NYSE"), in privately negotiated
transactions or a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholder may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholder or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Stockholder" and "Plan of Distribution."
THE SELLING STOCKHOLDER HAS INDICATED THAT AS OF THE DATE OF THIS
PROSPECTUS, THE SELLING STOCKHOLDER HAS NO PRESENT INTENTION TO SELL ANY
SHARES. THIS PROSPECTUS HAS BEEN PREPARED BY THE COMPANY AND FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH ARRANGEMENTS MADE AT
THE TIME THE SHARES WERE ORIGINALLY ISSUED BY THE COMPANY TO THE SELLING
STOCKHOLDER.
None of the proceeds from the sale of the Shares by the Selling
Stockholder will be received by the Company. The Company has agreed to bear
certain expenses in connection with the registration and sale of the Shares
being offered by the Selling Stockholder. See "Plan of Distribution."
The Common Stock and $1.00 Cumulative Convertible Preferred Stock, $1.00
par value ("Titan Public Preferred"), of the Company are traded on the NYSE
under the Symbols "TTN" and "TTNP," respectively. On June 18, 1998, the last
sale price for the Common Stock and Titan Public Preferred as reported by the
NYSE were $6.19 per share and $13.94 per share, respectively.
________________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June ____, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the Commission's following Regional Offices: Chicago Regional Office,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission also maintains a site
on the World Wide Web that contains reports, proxy and information statements
and other information regarding the Company. The address for such site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
with respect to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules thereto,
which may be inspected without charge at, and copies thereof may be obtained
at prescribed rates from, the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1997, the Company's Proxy Statement for the 1998 Annual Meeting
of Stockholders filed pursuant to Rule 14a-6 of the Exchange Act, the
Company's Current Report on Form 8-K dated February 26, 1998, the Company's
Current Report on Form 8-K/A dated February 26, 1998, and the description of
the common stock contained in the Company's Registration Statement on Form
8-A filed with the Commission by Electronic Memories and Magnetics
Corporation, dated June 16, 1969; as amended by the Form 8 filed with the
Commission on January 22, 1986, and the Form 8-B/A filed with the Commission
on July 31, 1995, each as filed by the Company with the Commission, are
hereby incorporated by reference in this registration statement except as
superseded or modified herein. All documents filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
any document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge
to each person, including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all
of the documents that have been or may be incorporated by reference herein
(other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Such requests should be
directed to the Company's Senior Vice President, General Counsel and
Secretary at the Company's principal executive offices at 3033 Science Park
Road, San Diego, California 92121, (619) 552-9500.
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THE COMPANY
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN, THIS PROSPECTUS (AND THE INFORMATION INCORPORATED HEREIN BY
REFERENCE) CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED HERE OR INCORPORATED BY REFERENCE. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN THE FOLLOWING SECTION, AS WELL AS THOSE DISCUSSED ELSEWHERE IN
THIS PROSPECTUS AND ANY OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
Titan provides state-of-the-art information technology and electronic
systems and services to commercial and government customers. Titan groups
its businesses into four core business segments - Communications Systems,
Software Systems, Information Technologies, and Medical Sterilization and
Food Pasteurization - and a fifth business segment, Emerging Technologies and
Businesses. The Communications Systems segment, through Titan's wholly owned
subsidiary Linkabit Wireless, Inc. ("Linkabit Wireless"), develops and
produces advanced satellite ground terminals, satellite voice/data modems,
networking systems and other products used to provide bandwidth-efficient
communications. The Software Systems segment is a systems integrator that
provides a broad range of information technology services and solutions. The
Information Technologies segment provides information systems solutions to
defense-related government customers with large data management, information
manipulation, information fusion, knowledge-based systems and communications
requirements, and develops and manufacturers digital imaging products,
electro-optical systems and threat simulation/training systems primarily used
by the defense and intelligence communities. The Information Technologies
segment recently grew significantly as a result of Titan's acquisition of DBA
Systems, Inc. ("DBA") in February 1998 and Validity Corporation ("Validity")
in March 1998, which acquisitions are described below. In addition, the
Company currently has a registration statement on file with the Commission
for a proposed acquisition of Horizons Technology, Inc., a Delaware
corporation ("Horizons"). See "-Recent and Pending Acquisitions". The
Medical Sterilization and Food Pasteurization segment utilizes its linear
accelerator technology to provide sterilization systems and services for
medical device manufacturers. The Emerging Technologies and Businesses
segment consists of new technologies and early-stage businesses, including
minority-owned businesses, utilizing technologies originally developed by
Titan.
The Company was incorporated in Delaware in 1969. The Company's
executive offices are located at 3033 Science Park Road, San Diego,
California 92121, and its telephone number is (619) 552-9500.
RECENT AND PENDING ACQUISITIONS
In February 1998, the Company acquired DBA in a stock for stock
transaction accounted for as a pooling-of-interests. In connection with the
acquisition, the shareholders of DBA received approximately 6.1 million
shares of the Common Stock of the Company (and Titan assumed all outstanding
DBA options which were converted into options to acquire approximately
440,000 additional shares of Titan Common Stock), representing approximately
28% of the total issued and outstanding Titan Common Stock and 27% of the
total voting power of Titan capital stock. DBA is principally engaged in the
defense mapping, charting and geodesy and electronics business and has
re-entered the medical imaging and commercial imaging markets. DBA provides
specialized products and services in two major areas of concentration:
imaging systems and electro-optical systems.
In February, 1998, the Company, Sunrise Acquisition Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company created in
order to engage in a merger transaction ("Merger Sub"), and Horizons entered
into an Agreement and Plan of Merger and Reorganization (the "Horizons Merger
Agreement"). The Horizons Merger Agreement provides for the merger of Merger
Sub with and into Horizons (the "Horizons Merger"), upon satisfaction of
certain closing conditions including, without limitation, the approval of
Horizons' stockholders at a Special Meeting of Stockholders (the "Horizons
Special Meeting"). Horizons is predominantly involved in providing software
computer systems integration and technical consulting services, primarily for
the United States defense establishment. The Horizons Merger is contemplated
as a stock-for-stock transaction accounted for as a pooling of interests.
Pursuant to the Horizons Merger Agreement and based upon the capitalization
of Horizons as of the close of business on March 6, 1998, and the closing
price per share of Titan Common Stock on March 6, 1998 ($6.375), the
stockholders of
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Horizons would, upon consummation of the Horizons Merger, receive an
aggregate of approximately 3,035,760 shares of Common Stock of the Company,
and option and warrant holders of Horizons would receive rights to acquire an
aggregate of approximately 41,477 additional shares of Common Stock of the
Company. Based upon the number of shares of Titan capital stock outstanding
on March 6, 1998, and after giving effect to the exercise of options and
warrants held by Horizons stockholders, the former holders of Horizons
capital stock would have approximately 11.7% of the voting power of Titan's
total issued and outstanding shares on a fully diluted basis. The Company
expects that the Horizons Merger will be consummated promptly following the
Horizons Special Meeting, but there can be no assurance that the Horizons
Merger will occur. If it does occur, there can be no assurance that the
Horizons Merger will benefit the Company in the long term. The Horizons
Merger and a business description and other relevant information with respect
to Horizons are described in the Company's Registration Statement on Form S-4
(No. 333-47633) filed with the Commission on April 17, 1998 (as amended).
On March 31, 1998, Titan Technologies and Information Systems
Corporation, a Delaware corporation ("Titan Sub") and a wholly-owned
subsidiary of Titan, acquired all of the outstanding Common Stock, par value
$1.00, ("Validity Shares") of Validity, pursuant to a Stock Purchase
Agreement dated March 24, 1998, among Titan Sub, Validity and the
stockholders of Validity. Titan Sub purchased all of the Validity Shares for
an aggregate of $12,000,000 cash paid at closing, an aggregate of $3,000,000
in promissory notes ("Notes") and the assumption of Validity's transaction
expenses. The Notes bear interest at the prime rate of Imperial Bank, mature
and become fully payable on March 31, 1999, and are secured by 466,000
treasury shares of Common Stock of Titan. Validity principally acts as a
consultant in the testing, design and analysis of business electronics
systems equipment purchased by the United States government from outside
vendors.
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RISK FACTORS
AN INVESTMENT IN THE SHARES BEING OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND IN
ANY OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
ABILITY TO IMPLEMENT SPIN-OUT STRATEGY. In an effort to leverage its
core technologies to build and expand its commercial businesses, the Company
has adopted a strategy of dividing its businesses into focused subsidiaries
and, when possible, funding the continued operations and potential expansion
of each subsidiary by selling a minority equity interest to public investors.
The Company refers to these transactions as a "spin-out" of its
subsidiaries. There are numerous risks inherent in this strategy. Moreover,
the Company has not demonstrated an ability to spin-out its subsidiaries, nor
has the Company demonstrated an ability to successfully manage a public
subsidiary. There can be no assurance that the Company can complete a
spin-out of any subsidiary or that any future spin-out will result in the
public market attributing any incremental value to the Company's Common Stock.
There are many factors that could limit the Company's ability to
successfully complete spin-outs in the future. The inability of the Company
to attract and retain the entrepreneurial management and technical personnel
necessary to successfully develop commercial applications for the Company's
technology would have a material adverse effect on the Company's ability to
manage and grow its commercial businesses from start-up ventures to initial
public offerings. Additionally, in recent years, the stock market in general,
and the shares of technology companies in particular, have experienced
extreme price fluctuations. Broad market fluctuations may adversely affect or
make impossible the Company's ability to complete an initial public offering
of a minority interest of any of its present or future subsidiaries. If the
Company fails in a planned spin-out, such failure could make potential
investors less receptive of future spin-outs by the Company. Furthermore,
there can be no assurance that the Company can develop or acquire the
additional technologies, or can successfully overcome the numerous other
challenges inherent in the operations of a start-up venture, necessary to
complete a spin-out of any of its subsidiaries. See "-- Ability to
Commercialize New Technologies."
If the Company is unable to implement its spin-out strategy, the Company
will need to complete additional equity or debt financing to fund the
continued operations and expansion of its subsidiaries and potential
acquisitions of new technologies. There can be no assurance that any such
financing will be available on acceptable terms or at all, or that such
financing will be adequate to meet the Company's capital requirements. Any
additional equity or convertible debt financing could result in substantial
dilution to the Company's stockholders. If adequate funds are not available,
the Company's ability to operate and expand the businesses of its
subsidiaries and to acquire additional technologies will be materially
adversely affected. The Company may also have difficulty attracting and
retaining key management and technical personnel because of an inability to
offer competitive equity opportunities for these individuals. Any failure by
the Company to spin-out its subsidiaries could have a material adverse effect
on the Company's business, financial condition, results of operations and
market price.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY; PENDING ACQUISITION OF
HORIZONS. In February 1998, the Company acquired DBA in a stock for stock
transaction, and in March 1998 the Company acquired Validity by way of a
stock purchase. In February 1998, the Company entered into the Horizons
Merger Agreement, which provides for the Horizons Merger upon satisfaction of
certain closing conditions, including, without limitation, the effective
registration with the Commission of the Titan Common Stock to be issued in
the Horizons Merger, and the approval of the Horizons Merger by the
stockholders of Horizons at the Horizons Special Meeting. There can be no
assurance that the Company will complete the registration process with
respect to such shares, that the Horizons Merger will be approved at the
Horizons Special Meeting, that the other closing conditions will be satisfied
or that the Horizons Merger will occur at all.
As part of the Company's strategy, the Company intends to continue to
acquire complementary businesses or technologies that could expand its
existing core businesses or constitute new business. Titan's acquisition
strategy entails the potential risks inherent in assessing the value,
strengths, weaknesses, corporate culture, contingent or other liabilities and
potential profitability of acquisition candidates. Titan's acquisition of
DBA and Validity, and its
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proposed acquisition of Horizons, are examples of Titan's acquisition
strategy. There can be no assurance that acquisition opportunities will
continue to be available, that Titan will correctly assess all of these
aspects of potential acquisition candidates, that Titan will have access to
the capital required to finance potential acquisitions or that Titan will
continue to acquire businesses or technologies. In particular, among Titan's
current businesses there can be no assurance that Titan correctly assessed
the business of DBA or Validity, or that the acquisition by Titan of DBA will
prove beneficial to Titan and its stockholders.
Titan's acquisition strategy also involves the potential risks inherent
in integrating the operations of acquired businesses and technologies. The
integration of these acquired businesses may require substantial management
resources and divert management attention from the day-to-day business of the
remainder of the Company. Although the Company intends to seek to reduce the
expenses of the combined business operations through consolidation of
facilities and other expense reductions, there can be no assurance that the
Company will be able to reduce expenses. There can be no assurance that the
Company will be successful in integrating the operations of any business or
technology the Company may acquire or that any acquired business will
ultimately prove to be profitable.
DEPENDENCE ON GOVERNMENT CONTRACTS. A substantial portion of the
Company's revenues are dependent upon continued funding of U.S. and allied
government agencies as well as continued funding of the programs targeted by
the Company's businesses. For the years ended December 31, 1997, 1996 and
1995, U.S. government business represented approximately 72%, 76% and 62% of
the Company's revenues, respectively. U.S. defense budgets and the budgets
of other government agencies have been declining in real terms since the
mid-1980's, and may continue to do so in the future. Any significant
reductions in the funding of U.S government agencies or in the funding areas
targeted by the Company's businesses could materially and adversely affect
the Company's business, results of operations and financial condition.
The Company's direct contracts with the U.S. government and its
subcontracts with prime contractors that have direct contracts with the U.S.
government are subject to termination for the convenience of the government,
and termination, reduction or modification in the event of any change in the
government's requirements or budgetary constraints. When the Company
subcontracts with prime contractors, such subcontracts are also subject to
the ability of the prime contractor to perform its obligations under its
prime contract. The Company often has little or no control over the
resources allocated by the prime contractor to the prime contract, and any
failure by the prime contractor to perform its obligations under the prime
contract could result in the Company's loss of its subcontract. In addition,
the Company's contract-related costs and fees, including allocated indirect
costs, are subject to audits and adjustments by negotiation between the
Company and the U.S. government. As part of the audit process, the
government audit agency verifies that all charges made by a contractor
against a contract are legitimate and appropriate. Audits may result in
recalculation of contract revenues and non-reimbursement of some contract
costs and fees. Any audits of the Company's contract-related costs and fees
could result in material adjustments to the Company's revenues. In addition,
U.S. government contracts are conditioned upon the continuing availability of
Congressional appropriations. Congress usually appropriates funds on a
fiscal year basis even though contract performance may take several years.
Consequently, at the outset of a major program, the contract is usually
incrementally funded and additional funds are normally committed to the
contract by the procuring agency as appropriations are made by Congress for
future fiscal years. Any failure of such agencies to continue to fund such
contracts could have a material adverse effect on the Company's business,
results of operations and financial condition.
FLUCTUATIONS IN RESULTS OF OPERATIONS. The Company has experienced and
expects to continue to experience significant fluctuations in quarterly and
annual revenues, gross margins and operating results. Factors that have
contributed or may contribute to these fluctuations include, among others:
(i) varying demand for the Company's products due to revisions in budgets or
schedules for customer projects or changes in demand for customers' products
which incorporate or utilize the Company's products, (ii) announcements by
the Company or its competitors of the development of new products or
technologies, or the pricing or availability thereof, that cause customers to
defer or cancel purchases of the Company's products, (iii) the timing and
amount of revenues resulting from the complex and lengthy procurement process
of the Company's customers or sales cycles for the Company's products, (iv)
the delay, rescheduling or cancellation of purchase orders from significant
customers of any of the
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Company's core businesses, (v) the failure by the Company to operate within
budgeted contract costs for purchase orders and/or production contracts
received and accepted substantially in advance of delivery, (vi) fluctuations
in average selling prices for the Company's products due to a number of
factors, including product mix, competition, customer demand for products and
unit volumes, (vii) inability to reduce fixed expenses in a timely manner
should revenues not meet the Company's expectations, (viii) expenses relating
to acquisitions, (ix) usage of different distribution and sales channels, (x)
warranty and customer support expenses, (xi) stage of completion of projects
subject to milestone payments and (xii) general economic and political
conditions. All of the above factors are difficult for the Company to
forecast or control, and any of these or other factors could materially
adversely affect the Company's business, financial condition and results of
operations from period to period. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance.
RAPID INDUSTRY CHANGE; TECHNOLOGICAL OBSOLESCENCE. The industries in
which the Company competes are characterized by rapid and continuous
technological change. Future technological changes in these industries or the
availability of new products could render the Company's products
noncompetitive or obsolete. The Company's success will depend in part upon
the success of new product introductions by the Company, which will be
dependent upon several factors, including timely completion and introduction
of new product designs, achievement of competitive product costs,
establishment of close working relationships with major customers and market
acceptance of new products. There can be no assurance that the Company will
be successful in developing and introducing new products that meet changing
customer needs or respond to technological changes or evolving industry
standards in a timely manner, or at all, or that products or technologies
developed by others will not render the Company's products noncompetitive or
obsolete. The Company may experience delays from time to time in completing
the development and introduction of new products. There can be no assurance
that defects will not be found in the Company's products after commencement
of deliveries, which could result in the loss of or delay in market
acceptance. Any failure by the Company to respond to changing market
conditions, technological developments, evolving industry standards or
changing customer requirements, or the development of competing technologies
or products that render the Company's products noncompetitive or obsolete,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
ABILITY TO COMMERCIALIZE NEW TECHNOLOGIES. Since 1991, the Company has
sought to leverage the technologies developed as part of its defense business
into new business opportunities. Accordingly, many of the Company's existing
businesses, such as medical product sterilization and food pasteurization,
and new businesses the Company is continuing to develop are at an early
stage. As such, the Company is subject to all the risks inherent in the
operation of a start-up venture, including the need to secure the funding
required to operate and expand these businesses, to develop and maintain
marketing, sales and support capabilities, to secure appropriate third-party
manufacturing arrangements, to respond to the rapid technological advances
inherent in the markets for these new technologies and, ultimately, to design
and manufacture products or provide services acceptable to buyers in its
target markets. Certain of the Company's new products, including products for
which the Company has contracts for delivery, are still in the testing stage.
There can be no assurance that such tests will be completed satisfactorily
or that the Company will be able to satisfy all of the requirements for
delivery of and payment for these products. In addition, many of the
opportunities in the communications and sterilization businesses involve
projects with lengthy sales cycles. The Company's efforts to address these
risks have required, and will continue to require, significant expenditures
and dedicated management time and other resources. There can be no assurance
that the Company will be successful in addressing these risks or in
commercializing these new technologies.
MARKET ACCEPTANCE OF NEW TECHNOLOGIES. Some of the Company's businesses
are attempting to commercialize new products or are attempting to develop new
markets for existing products, such as food pasteurization with the Company's
E-Beam sterilization process. Because these markets are relatively new, it
is difficult to predict whether these markets will develop or, if they
develop, the rate at which these markets will grow, if at all. If the
markets for the Company's new products or new markets for the Company's
existing products fail to develop, or develop more slowly than anticipated,
this may cast doubt on the Company's ability to implement its overall
business strategy and materially adversely affect the Company's business,
financial condition and results of operations.
7
<PAGE>
RISKS OF INTERNATIONAL OPERATIONS. The Company, through its
Communication Systems segment, conducts substantial business in foreign
countries, particularly in the Pacific Rim. No other segment of Titan's
business engages in a significant amount of business in the Pacific Rim.
Titan generally denominates its foreign contracts in U.S. dollars. As a
result, the recent decline in the value of certain foreign currencies
relative to the U.S. dollar may result in consumers in those countries having
less buying power in general and could make certain of the Company's
communication products less affordable and thus reduce the demand for such
products. This risk is particularly sensitive, given the recent currency
devaluations in Indonesia, Malaysia, Taiwan and the Philippines, countries in
which the Company currently sells or intends to sell its communications
products. Furthermore, a precipitous decline in such foreign currency values
could result in certain of the Company's customers and local subcontractors
and partners refusing to perform their obligations under contracts with the
Company, the cancellation of projects from which the Company expects to
receive significant revenues, defaulting on accounts receivable, and the loss
of any investments by the Company to build infrastructure or develop business
in these countries. Accordingly, there can be no assurance that a decline in
the value of any one foreign currency relative to the U.S. dollar will not
have a material adverse effect on the Company's business, financial condition
and results of operations. Additional risks inherent in the Company's
international business activities include various and changing regulatory
requirements, costs and risks of relying upon local subcontractors, increased
sales and marketing and research and development expenses, export
restrictions and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, longer payment cycles, seasonal reduction in
business activities, potentially adverse tax laws, complex foreign laws and
treaties and the potential for difficulty in accounts receivable collection.
Any of these factors could have a material adverse effect on the Company's
business, financial condition and results of operations. Certain of the
Company's customer purchase agreements are governed by foreign laws, which
may differ significantly from U.S. laws. Therefore, the Company may be
limited in its ability to enforce its rights under such agreements and to
collect amounts owing to the Company should any customer refuse to pay such
amounts. In addition, the Company is subject to the Foreign Corrupt
Practices Act (the "FCPA") which may place the Company at a competitive
disadvantage to foreign companies, which are not subject to the FCPA. There
can be no assurance that any of these factors will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION. The industries and markets in which the Company operates
are highly competitive, and the Company expects that competition will
increase in these markets. The Company's ability to compete in its markets
depends to a large extent on its ability to provide technologically advanced
products and services with shorter lead times and at lower prices than its
competitors. All of the Company's core businesses compete with numerous
other companies, including large domestic and international companies. Many
of these companies have far greater financial, engineering, technological,
marketing, sales and distribution and customer service resources than the
Company. In addition, many of these competitors have more experience in
certain of the Company's targeted markets. As a result, these competitors
may be able to develop and expand their product lines more quickly, adapt
more swiftly to new or emerging technologies and changes in customer
requirements, take advantage of acquisition and other opportunities more
readily, and devote greater resources to the marketing and sale of their
products and services than the Company. In addition, current and potential
competitors in the Company's targeted markets have established or may
establish cooperative relationships among themselves or with third parties to
improve the performance, quality or functionality or to reduce the price of
their products and services. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced profit margins and loss of market share, any of which
would have a material adverse effect on the Company's business, results of
operations and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, financial condition and results of
operations.
RELIANCE ON STRATEGIC RELATIONSHIPS. The Company is and will continue
to be dependent on certain strategic partners for the development and
expansion of its core businesses. For instance, Titan's subsidiary Linkabit
Wireless has a strategic arrangement with its customer PT. Pasifik Satelit
Nusantra ("PSN"). Pursuant to this relationship, Linkabit Wireless and PSN
market certain Linkabit Wireless products in countries already covered by
PSN's satellites, which efforts are geared toward increasing use of both
companies' products. Similarly, Linkabit
8
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Wireless is part of a consortium led by Alcetel Telespace, pursuant to which
the companies pursue symbiotic successes in new markets.
There can be no assurance that the Company will be able to maintain its
existing strategic relationships that may be important to the Company's
business, that its strategic partners will continue to assist the Company by
developing and expanding their businesses or that such strategic partners in
the future will not actually compete with or enter into alliances with
companies that compete with the Company. The Company's failure to maintain
its existing alliances or to form additional alliances with partners in other
markets, or the preemption or disruption of such alliances by the actions of
the Company's competitors or otherwise, could adversely affect the Company's
ability to penetrate and compete successfully in emerging and other markets.
CUSTOMER CONCENTRATION WITHIN BUSINESS SEGMENTS. Certain of the
Company's business segments rely on a small number of customers for a large
portion of their revenues. For example, the U.S. Navy, with respect to the
Company's Mini-DAMA product, and the Federal Aviation Administration (the
"FAA") represent significant customers of the Company's Linkabit Wireless and
Titan Software subsidiaries, respectively. Although no single customer
accounted for more than 10% of the Company's consolidated revenues in 1997,
any one such customer's product or services scheduled for delivery can
represent a significant portion of the potential revenues in a quarter for a
particular subsidiary. As a result, the operating results for certain
business segments for particular periods have in the past been and may in the
future be materially adversely affected by a delay, rescheduling or
cancellation of even one purchase order. The reduction, delay or cancellation
of any order from a significant customer could have a material adverse effect
on the business, financial condition and results of operations of a
particular subsidiary or the Company.
GOVERNMENT REGULATIONS. Several of the Company's products and the
systems with which they operate are subject to various government
regulations. Regulatory changes could significantly impact the Company's
operations by restricting development efforts by the Company's strategic
partners or customers, making current products obsolete or increasing the
opportunity for additional competition. For example, certain countries in
which the Company's Linkabit Wireless subsidiary intends to operate have
telecommunications laws and regulations that do not currently contemplate
technical advances in communications technology such as multi-function
transmissions via satellite. There can be no assurance that regulatory bodies
will not impose new regulations that could have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, in certain circumstances the Company's strategic partners or
customers must obtain various local approvals, licenses and permits prior to
the installation or use of the Company's products. The regulatory schemes in
each country are different and there may be instances of noncompliance by the
Company's strategic partners or customers. Changes in, or the failure by the
Company or its strategic partners or customers to comply with, applicable
domestic and international regulations could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company's sterilization facilities are subject to regulation at the
federal, state and local levels. In particular, the Company's sterilization
facilities are subject to the requirements of the FDA when sterilizing
medical devices or drug packaging materials. In addition, if the Company
were to begin pasteurizing meat or poultry products, in addition to being
subject to the FDA, it would become subject to the requirements of the Food
Safety and Inspection Service of the United States Department of Agriculture
(the "USDA"), which would require preapproval of the pasteurization process
for meat and poultry. Any failure by the Company to obtain any required
permits or approvals or to comply with the regulations imposed by such
agencies could limit the Company's ability to operate in these markets.
The sale of the Company's products outside the United States is subject
to compliance with the United States Export Administration Regulations. The
absence of comparable restrictions on competitors in other countries may
adversely affect the Company's ability to compete in certain foreign markets.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY. The
Company's internal manufacturing capacity is limited. Therefore, the Company
utilizes contract manufacturers to produce several of its products or
components thereof. Certain components and services necessary for the
manufacture of certain of the Company's
9
<PAGE>
products are obtained from a sole supplier or a limited group of suppliers in
connection with specific contracts and the Company does not carry significant
inventories or have long-term or exclusive supply contracts with these
suppliers. The Company's reliance on contract manufacturers and on sole
suppliers or a limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required components or
products, and reduced control over the price, delivery, reliability and
quality of finished products. If the Company were to change certain of its
suppliers or qualify additional suppliers for such components or products,
the Company could be required to negotiate acceptable arrangements with the
new suppliers, complete any required technology transfers or perform
additional testing procedures on the components or products manufactured by
such new suppliers, which could prevent or delay product shipments.
Additionally, prices could increase significantly in connection with changes
of suppliers or if the Company is required to manufacture such components or
products internally. Any inability to obtain timely deliveries of components
or products or deliveries of acceptable quality or any other circumstance
that would require the Company to seek alternative sources of supply, could
delay the timely delivery of or raise issues regarding the quality of such
products, which could damage relationships with current or prospective
customers and have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED INTELLECTUAL PROPERTY PROTECTION; DEPENDENCE ON PROPRIETARY
TECHNOLOGY. The Company's ability to compete may depend, in part, on its
ability to obtain and enforce intellectual property protection for its
technology in the United States and internationally. The Company relies
heavily on the technological and creative skills of its personnel, new
product developments, software programs and designs, frequent product
enhancements, reliable product support and proprietary technological
expertise in maintaining its competitive position, but does not have
significant patent protection for all of its products. The Company relies on
a combination of trade secrets, copyrights, patents, trademarks, service
marks and contractual rights to protect its intellectual property. There can
be no assurance that the steps taken by the Company to protect its
intellectual property will be adequate to deter misappropriation of the
Company's technology or to prevent others from independently developing or
acquiring substantially equivalent technologies or otherwise gaining access
to or disclosing the Company's proprietary and confidential technologies or
that the Company can ultimately enforce all of its rights to its proprietary
technologies. Further, the laws of certain foreign countries in which the
Company's products are or may be sold may not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. Any failure of the Company to obtain protection for its proprietary
technologies or inability of the Company to enforce any protection it obtains
for such technologies could have a material adverse effect on the Company's
business, financial condition and results of operations.
Litigation may be necessary to enforce the Company's intellectual
property rights, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement or
misappropriation. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on the
Company's business, financial condition and results of operations. There can
be no assurance that the Company's products do not infringe the intellectual
property rights of others or that one or more parties will not make claims
that the Company's products infringe upon their proprietary rights or the
rights of third parties. Such claims might include infringement, right to
use or ownership claims by third parties or claims for indemnification
resulting from infringement claims. If any claims or actions are asserted
against the Company, the Company may seek to obtain a license under a third
party's intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. In
addition, should the Company decide to litigate such claims, such litigation
could be extremely expensive and time consuming and could materially
adversely affect the Company's business, financial condition and results of
operations, regardless of the outcome of the litigation. There can be no
assurance that the Company's intellectual property rights would withstand the
claims brought by others in such litigation. If the Company's products are
found to infringe upon the rights of third parties, the Company may be
prohibited from making and selling the infringing products, ordered to pay
monetary damages for past infringement and forced to incur substantial costs
to develop alternative products. There can be no assurance that the Company
would be able to develop such alternative products or that if such
alternative products were developed, they would perform as required or be
accepted in the applicable markets.
RISKS OF BUDGET OVERRUNS IN FIXED PRICE CONTRACTS. Much of the
Company's revenues were derived from fixed-price contracts in 1997. The
Company assumes greater financial risk on fixed-price contracts than on
either time-
10
<PAGE>
and-materials or cost-reimbursement contracts. Profitability of fixed-price
contracts is subject to inherent uncertainties due to fluctuations in the
cost of performance. Cost overruns may be incurred as a result of unforeseen
obstacles, including unexpected problems encountered in engineering, design
and/or testing. Since the Company's businesses in certain of its
subsidiaries may at times be concentrated in a limited number of large
contracts, a significant cost overrun on any one contract could have a
material adverse effect on such subsidiary's business, financial condition
and results of operations. Failure to anticipate technical problems,
estimate costs accurately or control costs during performance of a
fixed-price contract may reduce the Company's overall or consolidated profit
or cause a loss. Although management believes that it adequately estimates
costs for fixed-price contracts, no assurance can be given that such
estimates are adequate or that losses on fixed-price contracts will not occur
in the future.
RELIANCE ON KEY PERSONNEL. The Company's success depends in large part
upon its ability to attract and retain highly qualified technical and
management personnel, including engineers and management personnel with
security clearances required for the Company's classified work and computer
programmers proficient in the C++ language. The loss of the services of any
of these individuals or group of individuals could have a material adverse
effect on the Company's business, financial condition and results of
operations. Most of the Company's key personnel are not subject to
employment or noncompetition agreements. Competition for such personnel from
other companies, academic institutions, government entities and other
organizations is intense. In addition, if the Company is unable to
successfully implement its strategy to spin-out its subsidiaries into
publicly-owned companies, or if the Company is otherwise unable to preserve
the entrepreneurial atmosphere it believes is essential to continuing growth
and development, the Company will likely face difficulty in recruiting and
retaining the personnel necessary to successfully commercialize its products
and to further implement its strategy. See "-- Ability to Implement Spin-Out
Strategy." There can be no assurance that the Company will be successful in
hiring or retaining such key personnel.
VOLATILITY OF STOCK PRICE. The Company believes that factors such as
developments related to the Company's business, technological innovations,
new products or product enhancements by the Company or its competitors,
developments in the Company's relationships with its customers, partners,
distributors and suppliers, fluctuations in results of operations,
significant economic, social and political changes in foreign countries where
any of the Company's subsidiaries do business, changes in analysts'
estimates, regulatory developments, and general conditions in the Company's
market or the markets served by the Company's customers or the economy, and
other factors discussed in these Risk Factors, could cause the price of the
Company's Common Stock to fluctuate, perhaps substantially. In addition, in
recent years the stock market in general, and the market price of the stock
of technology companies in particular, have been subject to significant
fluctuations, which have often been unrelated to the operating performance of
affected companies. Such fluctuations could adversely affect the market
price of the Company's Common Stock. Furthermore, since the Company intends
to pursue its strategy of spinning out certain of its subsidiaries, the
market price of the Company's Common Stock may be significantly affected by
trading of the shares of the Company's subsidiaries in the public markets.
There can be no assurance that the market price of the Common Stock will not
experience significant fluctuations in the future, including fluctuations
that are unrelated to the Company's performance.
IMPACT OF THE YEAR 2000 ISSUE. The Year 2000 issue is a problem created
by the fact that most computer software programs have been written using two
digits rather than four to represent a specific year. Any of the Company's
computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on a recent assessment, the Company has determined that it will be
required to modify or replace certain portions of its software so that its
computer systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue can be mitigated, primarily
by utilizing the Company's internal resources to reprogram, replace and test
the software for Year 2000 modifications. However, if such modifications and
conversions are not made, or are not completed on a timely basis, the Year
2000 issue could have a material adverse impact on the operations of the
11
<PAGE>
Company. The Company has not yet fully assessed the nature, extent and timing
of the year 2000 project, therefore, the total cost of the project cannot be
reasonably estimated at this time. The Company, however, is committed to
completion of the project by no later than mid 1999. Estimates with respect
to the costs of the project and the date on which the Company plans to
complete the Year 2000 modifications will be derived utilizing numerous
assumptions of future events, including the continued availability of certain
internal resources. However, there can be no assurance that these estimates
will be achieved and actual results could differ materially from those plans.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
The Company plans to maintain communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issue. There can be no assurance that the systems of other companies will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS; RIGHTS PLAN. Titan
currently has Preferred Stock issued and outstanding, which entitles the
holders thereof to rights not available to holders of Titan Common Stock.
Furthermore, the Board of Directors of Titan may issue additional shares of
Preferred Stock without stockholder approval on such terms as such Board of
Directors may determine. The rights of the holders of Titan Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any Preferred Stock that may be issued in the future. In addition, Titan's
Restated Certificate of Incorporation and Bylaws contain certain provisions
designed to require significant corporate action prior to taking certain
steps toward a merger, tender offer or proxy contest involving Titan.
Further, pursuant to the terms of its preferred share purchase rights plan,
Titan has distributed a dividend of one right for each outstanding share of
Titan Common Stock. These rights will cause substantial dilution to the
ownership of a person or group that attempts to acquire Titan on terms not
approved by the Titan Board and may have the effect of deterring hostile
takeover attempts. All of the foregoing could have the effect of delaying,
deferring or preventing a change in control of Titan and could limit the
price that certain investors might be willing to pay in the future for shares
of Titan Common Stock.
ADDITIONAL SHARES TO BE ISSUED BY THE COMPANY; SHARES ELIGIBLE FOR
FUTURE SALE. If the Horizons Merger is consummated, based upon the
capitalization of Horizons as of the close of business on March 6, 1998, and
the closing price on the NYSE of Titan Common Stock on March 6, 1998
($6.375), an aggregate of approximately 3,035,760 shares of Titan Common
Stock (the "Merger Consideration") will be issued in the Horizons Merger, and
Titan will assume all outstanding Horizons options and substitute all
Horizons warrants which will be converted into options and warrants, as
applicable, to acquire approximately 41,477 additional shares of Titan Common
Stock. In general, the shares will be eligible for sale in the public market
following the Horizons Merger, subject to certain volume and other resale
limitations for affiliates of Horizons and Titan, pursuant to Rules 144
and/or 145 under the Securities Act. An aggregate of approximately 60% of
the shares issued in the Horizons Merger will be beneficially owned by
persons who may be deemed to be affiliates of Horizons and, therefore,
subject to such limitations. The sale of a significant number of the
foregoing shares may cause substantial fluctuations in the market price of
Titan Common Stock and may adversely effect remaining stockholders of Titan;
and the sale of a significant number of the Selling Stockholder's shares
could have the same effects. Upon consummation of the Horizons Merger, Titan
will have outstanding an aggregate of 23,346,839 shares of Titan Common
Stock, assuming no exercise of outstanding options; 694,872 shares of Titan
Public Preferred; and 500,000 shares of Series B Preferred Stock; based upon
the number of shares outstanding as of March 6, 1998. Assuming 3,035,760
shares of Titan Common Stock are issued as a result of the Horizons Merger,
the current Titan stockholders' ownership of Titan will be reduced to 88%.
In addition, promptly following the consummation of the Horizons Merger,
Titan may file a Form S-8 registering a total of approximately 41,477 shares
of Titan Common Stock. Shares registered on such Form S-8 will, subject to
vesting restrictions and to Rule 144 and/or Rule 145 volume limitations
applicable to affiliates, be available for sale in the open market.
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<PAGE>
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder, the
number of shares of Common Stock owned beneficially by such Selling
Stockholder as of June 18, 1998 and the number of which may be offered
pursuant to this Prospectus. This information is based upon information
provided by the Selling Stockholder in a document filed with the Commission.
Because the Selling Stockholder may offer all, some or none of his Common
Stock, no definitive estimate as to the number of shares thereof that will be
held by the Selling Stockholder after such offering can be provided.
THIS PROSPECTUS HAS BEEN PREPARED BY THE COMPANY AND FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH ARRANGEMENTS MADE AT
THE TIME THE SHARES WERE ORIGINALLY ISSUED BY THE COMPANY TO THE SELLING
STOCKHOLDER.
The Company has filed with the Commission a Registration Statement on
Form S-3, of which this Prospectus forms a part, with respect to, among other
things, the resale of the Shares from time to time at prevailing prices in
the over-the-counter market or in privately-negotiated transactions and has
agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration Statement
effective for one year.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING OWNED AFTER OFFERING(3)
----------------------- NUMBER OF SHARES ------------------------
SELLING STOCKHOLDER NUMBER PERCENT(2) BEING OFFERED NUMBER PERCENT
- --------------------------- --------- ---------- ---------------- ------ --------
<S> <C> <C> <C> <C> <C>
Wechsler & Company, Inc.(1) 1,607,092 6.26% 1,607,092 0 --
39 Broadway
New York, NY 10006
</TABLE>
____________
(1) The sole stockholder, subject to community property laws to the extent
applicable, and Chairman of the Board, President and Chief Executive
Officer of Wechsler & Company, Inc. is Norman J. Wechsler.
(2) Applicable percentage of ownership is based on 25,636,039 shares of
Common Stock outstanding on June 18, 1998.
(3) Assumes the sale of all shares offered hereby, should the Selling
Stockholder elect to do so.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholder may sell
Shares from time to time in transactions on the NYSE, privately-negotiated
transactions or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholder may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholder or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commission).
THIS PROSPECTUS HAS BEEN PREPARED BY THE COMPANY AND FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH ARRANGEMENTS MADE AT
THE TIME THE SHARES WERE ORIGINALLY ISSUED BY THE COMPANY TO THE SELLING
STOCKHOLDER.
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The Selling Stockholder and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act of 1933, as amended (the "Securities
Act"), and any commissions received by them and profit on any resale of the
Shares as principal might be deemed to be underwriting discounts and
commissions under the Securities Act.
Any or all of the sales or other transactions involving the Shares
described above, whether effected by the Selling Stockholder, any
broker-dealer or others, may be made pursuant to this Prospectus. In
addition, any Shares that qualify for sale pursuant to Rule 144 under the Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the Shares may not be sold unless the Shares have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously
engage in market making activities with respect to the Company's Common Stock
for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Stockholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales
of shares of Common Stock by the Selling Stockholder.
Notwithstanding the foregoing, broker-dealers who are qualifying
registered market makers on the NYSE may engage in passive market making
transactions in the Common Stock of the Company on the NYSE in accordance
with Rule 10b-6A under the Exchange Act, during the two business day period
before commencement of sales in this offering. The passive market making
transactions must comply with applicable price and volume limits and be
identified as such. In general, a passive market maker may display its bid
at a price not in excess of the highest independent bid for the security. If
all independent bids are lowered below the passive market maker's bid,
however, such bid must then be lowered when certain purchase limits are
exceeded. Net purchases by a passive market maker on each day are generally
limited to a specified percentage of the passive market maker's average daily
trading volume in the Common Stock of the Company during a prior period and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock of the Company at a level
above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
All costs associated with this offering will be paid by the Company,
provided Titan shall not be responsible for any legal fees or expenses
incurred by the Selling Stockholder or any discounts or commissions payable
in connection with the sale of Shares.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward LLP, San Diego, California
("Cooley Godward").
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EXPERTS
The consolidated financial statements of The Titan Corporation as of
December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 and the consolidated financial statements of Horizons
Technology, Inc. as of January 31, 1998, and for each of the three years in
the period ended January 31, 1998, incorporated by reference in this
prospectus and registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of DBA Systems, Inc., as of June
30, 1997 and 1996 and for each of the three years in the period ended June
30, 1997, incorporated by reference in this prospectus and registration
statement have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report which is incorporated herein by reference, and have
been so incorporated by reference in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the
amounts shown are estimates except for the registration fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 2,918.00
Legal fees and expenses.................................... 3,000.00
Accounting fees and expenses............................... 3,000.00
Printing and Engraving..................................... 1,200.00
Miscellaneous.............................................. 82.00
Total................................................ $10,200.00
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person was an officer or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation
or enterprise. The indemnity may include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement of such action, suit
or proceeding, provided that such officer or director acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
corporation's best interest, and, for criminal proceedings, had no reasonable
cause to believe his or her conduct was illegal. A Delaware corporation may
indemnify officers and directors against expenses (including attorney's fees)
in connection with the defense or settlement of an action by or in the right
of the corporation under the same conditions, except that no indemnification
is permitted without judicial approval if the officer or director is adjudged
to be liable to the corporation. Where an officer or director is successful
on the merits or otherwise in the defense of any action referred to above,
the corporation must indemnify him or her against the expenses which such
officer or director actually and reasonably incurred.
The Registrant's Bylaws contain a provision to limit the personal
liability of the directors of the Registrant for violations of their
fiduciary duty, except to the extent such limitation of liability is
prohibited by the Delaware Law. This provision eliminates each director's
liability to the Registrant or its stockholders for monetary damages except
(i) for any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware Law providing for liability of directors for unlawful payment
of dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal benefit. The
Registrant's Bylaws provide that the Registrant shall indemnify directors and
officers to the fullest extent permitted by law. The effect of these
provisions is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
In addition, Registrant has entered into indemnity agreements with its
executive officers and directors whereby Registrant obligates itself to
indemnify such officers and directors from any amounts which the officer or
director becomes obligated to pay because of any claim made against him or
her arising out of any act or omission committed while he or she is acting in
his or her capacity as a director and/or officer of Registrant.
Registrant maintains directors and officers liability insurance coverage
that insures its officers and directors against certain losses that may arise
out of their positions with the Registrant and insures the Registrant for
liabilities it may incur to indemnify its officers and directors.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.1 Letter Agreement dated February 4, 1998 between Titan and
DBA Systems, Inc. ("DBA") regarding certain registration
rights granted in connection with the acquisition of DBA (1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
____________
(1) Filed as Exhibit 10.38 to the Company's Registration Statement on Form S-4
(No. 333-45719) and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described in Item 15 or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that clauses (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
these clauses is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
II-2
<PAGE>
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Company's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of San Diego,
State of California, on June 24, 1998.
THE TITAN CORPORATION
By: /s/ GENE W. RAY
-------------------------------------
Gene W. Ray,
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gene W. Ray, Eric M. DeMarco and Ira
Frazer, and each or any one of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place, and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments, exhibits thereto and other
documents in connection therewith) to this Registration Statement on Form S-3
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- -------- ------
<S> <C> <C>
/s/ J.S. WEBB
- ------------------------------------- June 24, 1998
J. S. Webb Chairman of the Board of Directors
/s/ GENE W. RAY
- ------------------------------------- June 24, 1998
Gene W. Ray President and Chief Executive Officer
(Principal Executive Officer) and Director
/s/ ERIC M. DEMARCO
- ------------------------------------- June 24, 1998
Eric M. DeMarco Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
/s/ CHARLES R. ALLEN
- ------------------------------------ June 24, 1998
Charles R. Allen Director
/s/ JOSEPH F. CALIGIURI
- ------------------------------------- June 24, 1998
Joseph F. Caligiuri Director
/s/ DANIEL J. FINK
- ------------------------------------- June 24, 1998
Daniel J. Fink Director
/s/ ROBERT E. LA BLANC
- ------------------------------------- June 24, 1998
Robert E. La Blanc Director
/s/ THOMAS G. POWNALL
- ------------------------------------- June 24, 1998
Thomas G. Pownall Director
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.1 Letter Agreement dated February 4, 1998 between Titan and
DBA Systems, Inc. ("DBA") regarding certain registration
rights granted in connection with the acquisition of DBA (1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
____________
(1) Filed as Exhibit 10.38 to the Company's Registration Statement on Form S-4
(No. 333-45719) and incorporated herein by reference.
<PAGE>
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
June 25, 1998
The Titan Corporation
3033 Science Park Road
San Diego, CA 92121
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by The Titan Corporation (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") covering the offering of 1,607,092
shares of the Company's Common Stock to be sold by a certain stockholder, as
described in the Registration Statement (the "Shares").
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Restated
Certificate of Incorporation and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are
a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, are validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
/s/ M. Wainright Fishburn
- --------------------------
M. Wainright Fishburn
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports, with respect to the
consolidated financial statements of The Titan Corporation, dated June 10,
1998 and January 19, 1998 included in The Titan Corporation's Form S-4
Registration Statement dated June 10, 1998 and The Titan Corporation's Form
10-K/A for the year ended December 31, 1997, respectively, and to all
references to our Firm included in this Registration Statement
ARTHUR ANDERSEN LLP
San Diego, California
June 23, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report, with respect to the
consolidated financial statements of Horizons Technology, Inc., dated March
9, 1998 included in The Titan Corporation's Form S-4 Registration Statement
dated June 10, 1998 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
San Diego, California
June 23, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of The Titan Corporation on Form S-3 of our report on DBA Systems, Inc. as of
June 30, 1997 and 1996 and for each of the years in the three year period
ended June 30 1997, dated August 20, 1997, appearing in the Registration
Statement on Form S-4 (No. 333-45719) of The Titan Corporation and to the
reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
DELOITTE & TOUCHE LLP
Orlando, Florida
June 24, 1998
