<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:
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<PAGE>
[LOGO]
March 31, 1998
Dear Stockholder:
This letter accompanies the Proxy Statement for our Annual Meeting on
Thursday, May 14, 1998, 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 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 14, 1998
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 14, 1998, 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 ratify the selection of Arthur
Andersen LLP as the Company's auditors for the fiscal year ending
December 31, 1998; and
3. 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 19, 1998, will be
entitled to vote at the meeting.
By order of the Board of Directors,
[LOGO]
Ira Frazer
SECRETARY
San Diego, California
March 31, 1998
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
March 31, 1998
------------------------
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 14, 1998 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 19,
1998, 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 March 31, 1998.
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 19, 1998, 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
22,391,945 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. 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 1997, approximately 81.9% 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 19, 1998 (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 31,217(2) *
Joseph F. Caligiuri........................................................ Common Stock 27,250(2) *
Daniel J. Fink............................................................. Common Stock 28,600(2) *
Robert E. La Blanc......................................................... Common Stock 16,750(2) *
Thomas G. Pownall.......................................................... Common Stock 29,457(2) *
Gene W. Ray................................................................ Common Stock 521,779(2) 2.33%
J. S. Webb................................................................. Common Stock 112,089(2) *
Louis L. Fowler............................................................ Common Stock 29,933(2) *
Ronald B. Gorda............................................................ Common Stock 112,232(2) *
Cornelius L. Hensel........................................................ Common Stock 53,516(2) *
Frederick L. Judge......................................................... Common Stock 66,679(2) *
Norman J. Wechsler......................................................... Common Stock 1,607,092 7.18%
All Directors and Officers as a Group (16 Persons)......................... Common Stock 1,434,514(2) 6.41%
</TABLE>
- ------------------------
* Less than 1%
(1) The address of each owner, other than Norman J. Wechsler, is c/o The Titan
Corporation, 3033 Science Park Road, San Diego, California 92121. The
address of Norman J. Wechsler is 39 Broadway, New York, New York 10006.
(2) Including (A) 16,250; 11,250; 16,250; 8,750; 10,000; 230,000; 40,000;
13,500; 95,000; 51,250, 50,000; and 695,875 shares subject to outstanding
options held by Messrs. Allen, Caligiuri, Fink, La Blanc, Pownall, Ray,
Webb, Fowler, Gorda, Hensel, Judge and all directors and officers as a
group, respectively, which are currently exercisable or may become
exercisable within 60 days after March 19, 1998; (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) 83,857; 25,192; 16,320;
14,732; 2,166; 2,394; and 157,975 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, Fowler, Gorda, Hensel, Judge and all
directors and officers as a group, respectively.
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 78 Chairman of the Board of 1984 EIP Microwave; Plantronics, Inc.;
Directors of Titan Micro Focus Group, PLC
Charles R. Allen 72 Advisor, New Court Partners, a 1989 --
venture capital unit of
Rothschild, Inc.
Joseph F. Caligiuri 70 Retired Executive Vice President 1984 Avnet, Inc.; PerImmune Holdings, Inc.
of Litton Industries, Inc.,
diversified manufacturing
Daniel J. Fink 71 President of D. J. Fink 1985 Orbital Sciences Corporation
Associates, Inc., management
consulting
Robert E. La Blanc 64 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; Salient
Three Communications, Inc.
Thomas G. Pownall 76 Retired Chairman and Chief 1992 Burke Industries, Inc.
Executive Officer of Martin
Marietta Corporation
Dr. Gene W. Ray 59 President and Chief Executive 1985 --
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 1988 where he held a number of
executive management positions, including director from September 1971 to April
1992, Chief Executive Officer from April 1982 to December 1987, 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, La
Blanc 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 1997. The members of the nominating committee are Mr. Caligiuri,
Chairman, and Messrs. Allen, Fink, La Blanc 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
1997. 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 five
meetings during fiscal 1997.
During fiscal 1997, the Board of Directors held nine meetings and took
action by unanimous written consent on five occasions. Each of the incumbent
directors attended more than 75% of the meetings of the Board. With the
exception of Mr. La Blanc, each of the incumbent directors attended 100% of the
meetings of the committees on which he served during 1997. Mr. La Blanc was
absent from one committee meeting.
Directors who are not officers receive directors' fees at an annual rate of
$24,000, paid quarterly, and $1,000 per meeting for each meeting attended in
excess of six meetings per calendar year. 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 78 1984
Gene W. Ray President and Chief Executive Officer 59 1985
J. Thomas Allen Vice President 50 1996
Eric DeMarco Senior Vice President and Chief Financial 34 1997
Officer
Louis L. Fowler Vice President and Assistant Secretary 59 1989
Ira Frazer Senior Vice President, General Counsel and 43 1998
Secretary
Ronald B. Gorda Senior Vice President 42 1994
Frederick L. Judge Senior Vice President 64 1994
Deanna H. Petersen Corporate Controller 30 1996
Dianne D. Scott Vice President 48 1995
John L. Slack Senior Vice President 59 1998
</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. Allen has been Vice President of the Company and General Manager of
Titan Scan since February 1996. From January 1994 to February 1996 he was
Director of Systems Applications for Titan. From 1991 to January 1994, Mr. Allen
provided consulting services to the Company. Prior thereto, Mr. Allen was a Vice
President and General Manager in Litton's Industrial Automation Group from 1976
to 1991.
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. 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. Frazer has been Senior Vice President, General Counsel and Secretary of
Titan since February 1998. From August 1995 through January 1998 he served as
General Counsel for California Steel Industries, Inc., a joint venture
Japanese/Brazilian steel company. From June 1994 to August 1995 he had a private
legal and consulting practice. From 1989 until June 1994 he was General Counsel
and Chief Administrative Officer of Daihatsu America, Inc., an automotive
distributor.
Mr. Gorda has been Senior Vice President since February 1995 and Chief
Operating Officer of Linkabit Wireless, Inc., since September 1997. He served as
President of the Linkabit division of the Company from June 1993 to September
1997. From May 1994 to February 1995 he was a Vice President at Titan. From
5
<PAGE>
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. Judge has been Senior Vice President since February 1994 and President
of Linkabit Wireless, Inc., since November 1993. 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 Corporate 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.
Ms. Scott has been Vice President since June 1995. From July 1992 to April
1995 she was an independent consultant. From April 1987 to June 1992 she was a
principal with the Scott Group, Inc.
Mr. Slack has been Senior Vice President of the Company and President of
Titan Technologies and Information Systems Corporation since March 1998. Mr.
Slack was President and Chief Executive Officer of DBA Systems, Inc., from
August 1989 to February 1998 and Chairman of the Board of Directors from
February 1990 to February 1998. He was Deputy Assistant Secretary of Defense for
Intelligence between 1975 and 1977. From 1977 until he formed his own consulting
business in 1979, Mr. Slack was Vice President of Martin Marietta Aerospace
Corporation. Since 1979, he has acted as consultant to such clients as the
Congress of the United States (Appropriations Committee), the Department of
Defense, and the U.S. Air Force Deputy Chief of Staff on defense-related
technology matters. From October 1985 through August 1989, Mr. Slack was
President and a director of ARDAK Corporation, a company which builds
inexpensive space systems and supports major aerospace companies in strategic
planning. Mr. Slack is currently a director of ARDAK Corporation.
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 1997 was not increased nor was the base salary of two of the other four
highest paid officers in 1997. In March 1998, Dr. Ray's base salary was
increased in recognition of his performance during the prior fiscal year, as
were the base salaries of three of the other four highest paid executive
officers in 1997.
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 1998, Dr. Ray and each of the other four
highest paid executive officers received a bonus as a result of the Company's
performance in 1997.
EQUITY BASED COMPENSATION
STOCK OPTION PROGRAMS
The Company's Stock Option Program's purpose is to provide additional
incentives to the executive officers to encourage their commitment to the
maximization of shareholder value over the long term.
Options are granted consistent with the responsibility and accountability of
the recipient and the compensation philosophy previously expressed. Stock option
grants afford a desirable long-term compensation method because they closely
ally the interests of management with shareholder value.
The option programs utilize a four-year vesting period to encourage
executive officers to continue in the employ of the Company. These options are
granted at current market value and are available to all executive officers.
During 1997, 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.
8
<PAGE>
The Compensation Committee has evaluated the total compensation of the five
highest paid executive officers in 1997 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 19, 1998
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, 1997,
1996 and 1995, 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 1997 (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.......................................... 1997 337,500 210,000 150,000 107,572
President and Chief 1996 337,500 0 150,000 44,311
Executive Officer 1995 328,462 0 50,000 43,886
Louis L. Fowler...................................... 1997 146,000 102,000 25,000 36,284
Vice President 1996 144,519 46,000 25,000 19,364
1995 138,039 0 5,000 17,322
Ronald B. Gorda...................................... 1997 196,490 92,000 60,000 38,845
Senior Vice President 1996 183,111 12,951 60,000 25,748
1995 173,563 176,000 25,000 25,638
Cornelius L. Hensel.................................. 1997 197,138 (D) 60,000 34,187
Senior Vice President 1996 189,013 19,667 60,000 25,428
(Resigned in January 1998) 1995 175,219 85,200 55,000 21,918
Frederick L. Judge................................... 1997 204,326 90,000 0 19,181
Senior Vice President 1996 234,001 0 0 31,857
1995 232,271 0 0 32,773
</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 1997 for each Named Executive Officer consist of the
following elements of compensation: Dr. Ray: (i) $7,500; (ii) $33,000; (iii)
$1,612; and (iv) $65,460; Mr. Fowler: (i) $7,300; (ii) $14,000; (iii) $618;
and (iv) $14,366; Mr. Gorda: (i) $7,500; (ii) $18,502; (iii) $152; and (iv)
$12,691; Mr. Hensel: (i) $7,500; (ii) $18,402; (iii) $0; and (iv) $8,285;
Mr. Judge: (i) $7,500; (ii) $0; (iii) $0; and (iv) $11,681.
(D) Mr. Hensel's bonus for 1997 had not been determined as of the date of this
Proxy Statement.
10
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made during fiscal 1997 under the Company's long-term incentive program
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL OPTIONS STOCK PRICE
GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OPTION TERM (F)
GRANTED FISCAL PRICE EXPIRATION ---------------------
NAME (B) YEAR (C) ($/SH)(D) DATE (E) 5% ($) 10% ($)
- ---------------------------------- --------- ------------------ ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Ray....................... 150,000 25.91% 5.625 7/16/07 530,630 1,344,720
Louis L. Fowler................... 25,000 4.32% 5.625 7/16/07 88,438 224,120
Ronald B. Gorda................... 60,000 10.36% 5.625 7/16/07 212,252 537,888
Cornelius L. Hensel............... 60,000 10.36% 5.625 7/16/07 212,252 537,888
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 1997 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 1997, employees of the Company received stock options covering a total of
579,000 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......................... -- -- 230,000 300,000 636,040 520,450
Louis L. Fowler..................... -- -- 13,500 47,500 27,881 85,023
Ronald B. Gorda..................... -- -- 95,000 130,000 233,948 223,653
Cornelius L. Hensel................. -- -- 42,500 132,500 60,798 216,468
Frederick L. Judge.................. -- -- 37,500 12,500 128,925 42,975
</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>
1992 $100.00 $100.00 $100.00
1993 81.74 144.08 113.54
1994 173.70 159.92 111.33
1995 194.13 220.41 144.36
1996 91.96 302.01 173.90
1997 170.29 324.09 228.78
</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, 1992 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 $6.25 per share on December
31, 1997.
13
<PAGE>
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, 1998. Arthur Andersen LLP is serving as the Company's auditors for
1997 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, 1998 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.
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 December 31, 1997, 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 1999 must be in writing and received by the Company by December 1,
1998 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 1997 Annual Report, including financial statements for fiscal
year 1997, 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.
14
<PAGE>
PROXY THE TITAN CORPORATION--PROXY PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 14, 1998
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 14, 1998, 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, 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
</TABLE>
For, except vote withheld from the following nominee(s):
- --------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE SELECTION / / / / / /
OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998.
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.
