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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K/A

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2000

-OR-

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from  to

Commission File No. 1-6035

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THE TITAN CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 95-2588754                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

3033 Science Park Road
San Diego, California 92121-1199(Address of principal executive offices, zip code)

Registrant's
telephone number, including area code: (858) 552-9500

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Name of exchange on which registered$1.00 Cumulative Convertible Preferred Stock, $1.00 par value

New York Stock ExchangeCommon Stock, $.01 par valuePreferred Stock Purchase Rights


Securities registered pursuant to Section 12(g) of the Act: None

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /x/  No / /

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

Aggregate
market value of the voting stock held by non-affiliates of the registrant as of March 23, 2001: $954,653,217.

Number
of shares of Common Stock outstanding as of March 23, 2001 was: 54,109,143.

Documents Incorporated By Reference:

Proxy Statement for the 2001 Annual Meeting of Stockholders on May 16, 2001. (The Company has filed a definitive proxy statement with the Commission
within 120 days after the close of the fiscal year pursuant to Regulation 14A). With the exception of those portions which are incorporated by reference in this Form 10-K Annual Report, the Proxy
Statement for the 2001 Annual Meeting of Stockholders is not deemed to be filed as part of this Report, Parts II and III.

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EXPLANATORY NOTE

Even though the paper format of the filer's 10-K sent to shareholders was complete, this 10-K/A is being filed to reflect that the original electronic
formatted 10-K, which was timely filed on April 2, 2001, inadvertently omitted pages 2-13. The electronic omission resulted solely because of electronic transmission errors beyond the control of the
filer.

PART I

Item 1. Business

Overview

We are a diversified technology company whose business is to create, build and launch technology-based businesses. We were founded in 1981 as a government
information technology company. Today, Titan Systems, our government business, is a key provider of information technology and communications solutions, services and products in the growing federal
information technology market. Titan Systems also serves as our engine, providing us with government-funded research and development activities that generate technology and intellectual property that
often form the foundation for our commercial technology applications and new businesses as well as cash flow to fund those businesses. We have developed and continue to develop new businesses, like
our SureBeam and Titan Wireless businesses, from the broad portfolio of technologies, intellectual property and expertise that we have created and continue to create as part of our work under
government contracts and our self-funded research and development program. In addition, our existing commercial businesses sometimes generate technologies that can be developed into other
new businesses. We have worked under government contracts totaling in excess of $2 billion in revenues since 1981. Our government contracts generally permit us to retain intellectual property
rights in commercial applications of technologies developed under those contracts. We have also supplemented our internally developed portfolio with technologies, intellectual property and expertise
that we have obtained through strategic acquisitions of other government information technology companies. Our strategy is to leverage our intellectual property portfolio
by creating commercial technology applications or individual businesses that can be monetized through either an initial public offering of a subsidiary, a complete spin-off to our
stockholders, an outright sale of a business, or a technology license or sale. An example of our monetization strategy is our recently completed initial public offering of our SureBeam subsidiary,
which is quoted on the NASDAQ National Market under the symbol "SURE."

Operating Segments

We have organized our business into four core segments that reflect the specific markets and industries in which we operate and our Emerging Technologies and
Businesses segment:

|Segment        |  | Segment Description                                                                                                                                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Titan Systems  |  | Information technology and communications solutions, services and products for defense, intelligence, and other U.S. and allied government agencies                                                                                                                                                          
|SureBeam       |  | Electronic food irradiation systems and services                                                                                                                                                                                                                                                             
|Titan Wireless |  | Satellite-based and wireless-based communication services and systems which provide cost-effective voice, facsimile, data, Internet and network communications services in developing countries                                                                                                              
|Cayenta        |  | Total services provider of information technology services and software applications for its customers' business and governmental functions, including retailing, finance, accounting, customer billing and collection, contract management, supply chain
management and equipment monitoring and maintenance
|               |  |                                                                                                                                                                                                                                                                                                              

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|Emerging Technologies and Businesses |  | Development of commercial applications and businesses for technologies created by Titan. We currently have several new businesses in development, including businesses in which we have applied for patent protection for the underlying
technology.
|------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
believe that each of our four core businessesTitan Systems Corporation, SureBeam Corporation, Titan Wireless, Inc. and Cayenta, Inc.is well
positioned in its respective market for long-term growth. Our consolidated revenues were approximately $1.0 billion for the year ended December 31, 2000.

Our Approach to Creating and Building New Businesses

Our approach to creating and building new technology-based businesses involves the following four phases:

Phase I: Technology and Market Evaluation

As part of our strategy of leveraging our intellectual property portfolio, we continually evaluate the likelihood of successfully transitioning potential
commercial applications of technologies developed under our government contracts into technology-based businesses. This evaluation typically involves assessing potential market size, market demand,
competitive strengths and whether the potential technological advantages and strength of intellectual property protection provide a competitive advantage. We seek commercial applications that address
large, rapidly growing, potentially global markets where we believe our products and services can differentiate themselves from competing products and services. To facilitate our assessments, we often
call upon our relationships with technology-focused venture capital firms and third-party market consultants. We also seek intellectual property protections for our technology and applications of
technologies that we have developed or acquired.

Phase II: Technology Transfers and Creation of New Corporate Subsidiaries

Once we have made an assessment that a potential commercial application can be successfully transitioned into a technology-based business, we determine whether
we should finance the development of that business on our own or in conjunction with partners or whether we should sell or license the technology to a third party. This determination again involves
assessments of the business's market and competitive position, as well as time-to-market considerations and considerations relating to the capital requirements and risk/reward
profile of the business.

Should
we choose to finance the development and growth of a new technology-based business, we typically take a number of actions to create that business that we believe differentiate
our approach from that of other government information technology companies that have attempted to execute a
commercialization strategy. In our Emerging Technologies and Businesses segment, we form a corporate subsidiary to operate the business. We also create an employee stock option plan for the
subsidiary, and use option grants under that plan to help recruit a management team with relevant market expertise and management skills in the business's industry.

We
believe that forming separate subsidiaries in our Emerging Technologies and Businesses segment to operate our new technology-based businesses also provides them with certain
advantages compared with technology-based businesses backed by venture capitalists. Each of our new businesses benefits from the various resources that we, as an established, publicly-traded company,
have in-house and can make available to it. Unlike many other newly-formed technology-based businesses that must look outside their organization for many resources, we support our new
businesses with financial, accounting, marketing, administrative and legal expertise. We may also loan funds to our new businesses, a financing alternative

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that is generally not readily available to early-stage technology-based businesses. We will fund strategic opportunities, including acquisitions, that our new businesses wish to pursue if we consider
the opportunities sufficiently attractive. We also believe that our ability to provide debt financing provides us with an advantage in competing for outside management talent because stock option
grants to our management may be less subject to future dilution to the extent that we choose to fund growth with intercompany debt. By emphasizing long-term business potential rather than
short-term liquidation strategy, we believe we can better recruit outside management talent.

Phase III: Growing Core Businesses

The subsidiaries that we believe are most capable of operating successfully as stand-alone companies become core businesses of The Titan Corporation. For each
core business, our focus is to enable the business to fully exploit its respective market opportunity while balancing our investment objectives against our overall profitability objectives. Once a
subsidiary has become a core subsidiary and one of our operating segments, we typically commit greater financial and management resources and increase our capital expenditures and investments in
building the subsidiary's sales, marketing and other infrastructure. Today, we have four core businesses: Titan Systems, SureBeam, Titan Wireless, and Cayenta.

Phase IV: Pursue Monetization for Core Subsidiaries

We intend to pursue a monetization strategy for our core subsidiaries that includes initial public offerings and complete spin-offs to our
stockholders. Our preferred monetization strategy for our core
subsidiaries is to pursue, whenever market and other conditions permit, an initial public offering. We prefer this approach because we believe that by accessing capital markets our core subsidiaries
will be better able to execute their strategies and achieve greater value for our stockholders. To the extent possible, we create capital structures for and intend to structure any initial public
offerings of our core subsidiaries in order to preserve the ability to later distribute the stock we retain in these subsidiaries to our stockholders on a tax-free basis. We create these
capital structures because we believe that a tax-free spin-off of subsidiary shares would ultimately be a tax efficient way to deliver value to our stockholders. An example of our monetization
strategy is our recently completed initial public offering of our SureBeam subsidiary, which is quoted on the NASDAQ National Market under the symbol "SURE".

Titan Systems

Overview.Titan Systems provides comprehensive information systems solutions and services to U.S. and allied government
defense and intelligence agencies and to civil government agencies with sophisticated data management, information processing, information fusion, and knowledge-based systems and communications
requirements. Titan Systems also develops and manufactures digital imaging products, electro-optical systems, threat simulation/training systems, intelligence electronic hardware and defense
communications systems. Titan Systems also installs, tests and maintains government information systems. For the year ended December 31, 2000, Titan Systems had revenues of approximately
$796.2 million.

Industry Overview.The U.S. government is among the largest buyers of information technology systems and services in
the world. According to INPUT, a market research firm, the U.S. government's information technology budget for its fiscal year 2001 is expected to be approximately $38.5 billion. In outlining
the priorities of the Bush Administration, Secretary of Defense Donald Rumsfeld has stated that one of his five key objectives is to modernize the U.S.'s Command, Control, Communications, Computer,
Intelligence, Surveillance and Reconnaissance, or C4ISR, capabilities. The U.S. government's focus on information technology reflects the critical role that this capability plays both in national
security and in improving government efficiency. The U.S. military is placing greater emphasis on increasing productivity while using fewer resources by employing systems that act as force multipliers
and increase operating capabilities under differing conditions. To further this strategy, military agencies are relying on communications products and systems that provide secure, reliable and
efficient transmission of voice and data in

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demanding environments. Additionally, the U.S. government is increasingly using open systems that incorporate commercial off-the-shelf products to increase the adaptability and
operability of its information technology systems, creating greater contracting opportunities for systems and software integration
work. The U.S. government is also increasingly using the Internet to improve its efficiency, providing contracting opportunities for Internet-based integration work.

Competitive Strengths.Titan Systems attributes its growth and performance to several factors:



Strategy.Titan Systems' objective is to be the premier provider of information technology and communications solutions
and services to U.S. defense, intelligence and civilian government agencies and to allied governments. To achieve this objective, Titan Systems intends to pursue the following strategies:



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Solutions, Services and Products.Titan Systems' information systems solutions and services include systems analysis
and design, object-oriented software development services and systems integration. Titan Systems' initial work in this area generally involves a joint analysis of the customer's enterprise structure
and processes and information system needs. Once this analysis is completed, Titan Systems provides process re-engineering and designs the technology solution to meet the customer's needs.
This process typically involves software development by Titan Systems, coupled with integration of commercial off-the-shelf software and hardware as available. Titan Systems
also provides a variety of professional and technical support services, including electronics and mechanical design and fabrication, computer-aided drafting and manufacturing services, technical
documentation and prototyping. In addition, Titan Systems offers several different defense communications products. As a result of the complex nature of Titan Systems' customer solutions, its
engagements often are long-term and involve follow-on contracts. Examples of Titan Systems' information systems solutions, support services and communications products include
the following:



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Contract Profile.Titan Systems is one of a select group of qualified suppliers of information technology solutions and
services to the U.S. government under multiple long-term contract vehicles. Titan Systems is currently performing work under approximately 1,000 contracts. No single Titan Systems contract
accounted for more than 2.5% of Titan Systems' total 2000 revenues. Of Titan Systems' total revenues from government business in 2000, approximately 39% were generated by time and materials contracts,
approximately 43% were generated by cost reimbursement contracts, and approximately 18% were generated by fixed-price contracts.

Backlog.Titan Systems possesses a substantial backlog of contracts that provide multiyear revenues. Most of its
contracts generate revenue over a one to five-year period. In the past, Titan Systems has generally been successful in expanding the scope of its principal contracts by offering more
comprehensive information technology solutions. Titan Systems had an estimated total funded contract backlog of $332 million, total unfunded contract backlog of $1,665 million, and total
commercial backlog of $14 million as of December 31, 2000.

We
believe that year-to-year comparisons of backlog are difficult and not necessarily indicative of future revenues. Titan Systems' backlog is typically
subject to large variations from quarter to quarter as existing contracts are renewed or new contracts are awarded. Additionally, all U.S. government contracts included in backlog, whether or not
funded, may be terminated at the convenience of the U.S. government.

Competition.Titan Systems is one of many companies involved in providing information systems solutions, support
services and communications products for a variety of programs for agencies of the U.S. government. Most activities in which Titan Systems engages are very competitive and require Titan Systems to
have highly skilled and experienced technical personnel to compete. Many of Titan Systems' competitors have significantly greater financial, personnel and other resources than Titan Systems. Titan
Systems' competitors include Anteon Corporation, Autometric Incorporated, BAE Systems Canada Inc., BTG, Inc., Booz, Allen & Hamilton Inc., CACI International Inc.,
Computer Sciences Corporation, Dynamics Research Corporation, General Dynamics Corporation, Lockheed Martin Corporation, Raytheon Company, Science Applications International Corporation,
TRW Inc., Veridian Corporation, and ViaSat, Inc. Titan Systems believes that the primary competitive factors for its information systems solutions, support services and communications
products include technical skills, past contract performance, experience in the industry and customer relationships.

SureBeam

Overview.SureBeam is a leading provider of electronic irradiation systems and services for the food industry.
SureBeam's electronic food irradiation system combines its patented conveyor and shielding systems and proprietary software with publicly available electron beam, x-ray and linear
accelerator technology, and was developed from technology we developed under contracts with the federal government related to strategic defense initiatives during the 1980s. SureBeam intends to
generate revenue from processing food using its electronic food irradiation system as well as from the sale of its systems. SureBeam has designed its systems so that it can install a system as part of
a customer's production line, and, in addition to company-owned service centers, plans to retain ownership and operate any systems that it does install within customers' production lines. SureBeam may
also sell systems to third parties who would own and operate service centers in the United States or internationally. SureBeam generally structures these sale transactions so that it can participate
in the potential future value created through the use of the systems that it sold. Typically, SureBeam obtains a right to acquire a minority equity interest in the entity that owns and operates the
system, and SureBeam currently holds a minority equity interest in one such entity. SureBeam recognizes revenue from the sale of the systems and expects to recognize income from processing revenue
commensurate with its equity ownership in these entities. SureBeam has provided and may in the future provide limited working capital or project financing in connection with these third party service
centers.

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SureBeam built, owns and operates in Sioux City, Iowa the first commercial electronic food irradiation service center in the United States. SureBeam uses this service center for both
commercial processing of ground beef for customers and for testing the processing of products for other customers. SureBeam plans on building additional company-owned service centers in Los Angeles,
Philadelphia and Chicago during the next 18 months. Hawaii Pride, LLC, an entity with which SureBeam has a strategic business relationship, also opened the first third-party-owned processing
center in July 2000. This facility is used for the disinfestation of fruits and vegetables. Additionally, SureBeam has entered into strategic relationships to open electronic irradiation
facilities with Tech Ion Industrial Brasil S.A. in Brazil in the third quarter of 2001 and Zero Mountain Cold Storage in Arkansas in the fourth quarter of 2001. SureBeam has a minority equity interest
in the special business entity formed by Tech Ion and the right to acquire equity interests in each of Hawaii Pride and the special business entity formed by Zero Mountain to share in the potential
future value created through irradiation processing revenues.

SureBeam
owns 21 U.S. and foreign patents and patent applications, consisting of nine U.S. and foreign issued patents and 12 patent applications pending in the United States and
abroad. The U.S. and foreign issued patents relating to the SureBeam technology have claims relating to methods of transporting products through the electron beam process, means of increasing the
efficiency and reliability of the process, and ways of shielding the process that miniaturizes the size of the system.
SureBeam's pending patent applications include claims relating to improvements in the operation, efficiency, and reliability of the SureBeam technology, shielding, multiple pass x-ray
system and in-line processing systems. These patents have been issued or are pending in markets that are key targets for SureBeam's expansion objectives. While electron beam,
x-ray and linear accelerator machines and technology are considered to be part of the public domain and not patentable, SureBeam believes its patents cover the most efficient method of
utilizing electron beam, x-ray and linear accelerator technology for food and other applications.

SureBeam
has executed agreements with many of the major meat and poultry providers and processors in the United States, including American Food Service Corporation, Cargill, Emmpak,
Huisken Meats, IBP, Omaha Steaks, Tyson Foods and United Food Group. SureBeam's customers account for approximately 75% of the $57.2 billion in sales of beef and approximately 57% of the
$92.5 billion in sales of all meat (including beef, pork and poultry) in the United States in 1999. In addition, SureBeam has signed agreements with Anchor Foods, Del Monte and Kraft for
applying the SureBeam technology to processed foods. SureBeam's customer agreements generally provide that it will be the exclusive provider of food irradiation services, including gamma irradiation
services that SureBeam does not provide, for a multi-year period, even if the customer terminates the agreement before the end of that period, which SureBeam's customers typically may do
with a nominal termination fee and upon short notice. SureBeam generally must release a customer from the exclusive provider arrangement if the customer can find a comparable service at a lower price
and SureBeam chooses not to match that price, if SureBeam cannot fully meet the customer's demand or if SureBeam cannot demonstrate compatibility with the customer's product. Currently, SureBeam is
electronically irradiating ground beef for commercial sale by Cargill, Emmpak, Huisken, IBP, Omaha Steaks, and Schwan's, and its other customers are testing products processed by the SureBeam system.
Products processed by the SureBeam system are currently in approximately 2,000 stores.

For
the year ended December 31, 2000, SureBeam had revenues of approximately $25.2 million.

Industry Overview.There is growing concern about the safety of the world's food supply. The Centers for Disease
Control reported that food-borne bacteria cause more than 5,100 deaths, 325,000 hospitalizations, and 76 million cases of illness annually in the United States alone. In 1997, the
United States Department of Agriculture, or USDA, ordered Hudson Foods Inc. to close its Columbus, Nebraska meat processing plant and recall 25 million pounds of ground beef after it was
linked to an outbreak of E-coli contamination. In 1999, the USDA recalled nearly 40 million pounds of food in approximately 60 reported product recalls. Additionally, zero tolerance
liability laws on E-coli and listeria and increasing litigation related to other food-borne illnesses are exerting additional pressure on food processors to meet increasing

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food safety standards. As a result, food processors spend substantial amounts of capital to minimize the risk of food contamination.

The
United States Food and Drug Administration, or FDA, has stated that the only effective methods of safeguarding against E-coli and other food-borne bacteria
are cooking foods to 160o F or irradiating food. Relying solely on cooking as a safeguard against food-borne illnesses is not satisfactory since bacteria can be spread when
contaminated food is handled prior to cooking and remain if food is undercooked. Irradiation offers food producers and processors a method to safeguard against food-borne bacteria before
their products reach consumers.

Other
longstanding and continual food industry concerns are food infestation and spoilage. Hawaii and countries such as Brazil and Australia that produce fruits and vegetables with
known insect infestations are prohibited from shipping those fruits and vegetables into the United States and other countries unless they comply with disinfestation regulations. These regulations are
becoming more difficult to meet as traditional methods of disinfestation are being banned or reevaluated due to environmental concerns and negative effects on food taste, texture and nutritional
value.

Traditional
methods of disinfesting food products such as fruits and vegetables include the use of vapor heat, fumigation and gamma irradiation. Using heat to disinfest fruit can
compromise taste, texture and nutritional value. The use of fumigation, such as methyl bromide, is being challenged due to its negative environmental impact. The use of radioactive isotopes to
disinfect food products elicits the same negative reaction from food processors and consumers that is associated with using radioactive isotopes to eliminate food-borne bacteria.

Food
spoilage is a major concern for food growers, processors and retailers since it limits shelf life and the distance food products may be shipped, thereby limiting market access.
Food spoilage in developing countries is estimated to be 30% in fresh fruits and vegetables. In addition, transportation distances in an increasingly global food industry contribute to the food
spoilage problem.

SureBeam
has identified several global markets for the SureBeam process, which include over 19 billion pounds of ground beef and over one trillion pounds of fruits and
vegetables. SureBeam also plans to target the poultry, pork, cut beef, egg and processed food markets, subject to regulatory approval for the use of irradiation to treat processed food. Each of these
markets is substantial and represents a significant opportunity since SureBeam intends to derive the majority of its revenue by charging a per pound fee for food processed with its electronic
irradiation systems.

Irradiation
of food by any technology, whether using the SureBeam process or nuclear radioactive materials, is opposed by several organized and vocal consumer groups who claim that
irradiated food products are unsafe for consumption or pose a danger to the environment. These groups attempt to influence public policy and promote consumer opposition to irradiated food through
activities such as
picketing stores that offer irradiated food and lobbying politicians. Because irradiation of foods by electron beam technology is a new process, consumers need to be informed about the benefits and
safety of food irradiation. Since irradiation of food by any method, whether using electron beam or nuclear radioactive materials, must be disclosed under the same label "Treated with Radiation" or
"Treated by Irradiation," consumers may fear that the SureBeam process makes food unsafe for consumption, has unknown future health effects or poses a danger to the environment.

The SureBeam Solution.We believe that our SureBeam electronic irradiation system addresses food safety, disinfestation
and spoilage concerns and provides many benefits including:



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Strategy.SureBeam's objective is to leverage its proprietary technology to be the premier global provider of
electronic irradiation systems and services to the food industry. To achieve this objective, SureBeam intends to pursue the following strategies:



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The SureBeam System.The SureBeam system is comprised of a linear accelerator that produces a beam of electrons. A
series of resonant microwave cavities are then used to accelerate the electrons to nearly the speed of light. A magnetic deflection system is then used to scan the beam across the product. The
electrons disrupt the DNA chain of the organisms hit and either destroy them or prevent their reproduction, thereby rendering them harmless. The SureBeam process utilizes ordinary electricity to
generate electrons to administer a direct electron or x-ray treatment that is suitable for a wide range of products of various sizes, shapes and densities. X-rays are produced
when electrons exit the accelerator
and make contact with a metal target. The x-rays are directed at the product being processed and have the same ability as electron beams to kill bacteria or pests, or inhibit their
reproduction. X-rays are generally used to penetrate larger and denser products than electron beams. Electron beams can generally penetrate food products of up to a thickness of
approximately four inches, while x-rays can penetrate thicker products. The processing time using x-rays is generally somewhat longer than the processing time required when
using electron beams.

The
SureBeam system is designed to contain the irradiation process inside a protective shield to ensure the operator's safety. The operator and maintenance staff are not exposed to a
hazardous environment when they need to enter the protective shield because the system is shut off and no electrons are generated when the power supply is cut off and because the SureBeam process does
not use radioactive isotopes, toxic gases or high temperatures. In addition to the protective shield, a safety control system monitors the operation of the system to detect abnormal operating
conditions, such as smoke and fire, intrusion into a restricted area, loss of utilities or equipment failures (power, compressed air or cooling), and the system is designed to shut down if any
abnormal conditions are detected.

The
SureBeam system can be configured to include electron beam or x-ray capabilities or both, can provide doses in one or more directions, and can handle food products in
individual packages or cases. SureBeam's proprietary SureTrack information and control system guides both the operator and material loaders through the overall process checking for the completion of
each task and verifying the integrity of the process. The dose, or the amount of energy deposited, is controlled by SureBeam's proprietary software, the SureTrack system. The dose varies depending on
the thickness and density of the product and on whether the objective is to pasteurize, disinfest or extend shelf life. SureBeam's control systems include components to detect failures and unscheduled
downtime. The SureTrack system provides dose verification and validation, and continuously archives all the processing information required to substantiate the successful completion of the SureBeam
process. Unlike systems that utilize nuclear isotopes, the SureBeam system can be turned off at any time.

The
SureBeam system can be integrated into a customer's production line such that a packaged or unpackaged product can be processed by the SureBeam system. SureBeam intends to install
SureBeam systems within customers' production lines, retain ownership of and operate those systems, and generate revenue when those systems process food. We believe that a growing number of food
processors will integrate the SureBeam process into their food production operations.

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Competition.SureBeam competes against several companies seeking to address the food safety market. SureBeam's
electronic food irradiation technology competes with gamma ray irradiation, as well as alternatives to irradiation such as thermal sterilization, gas fumigation, chemical washes and
high-pressure sterilization techniques. SureBeam believes that none of its competitors currently is using electron beam technology to irradiate food for commercial sale. However, Ion Beam
Applications s.a. claims that it provides electronic food irradiation systems and services. SureBeam's competitors include Flow International Corporation, Ion Beam Applications s.a., MDS/Nordion, Food
Technologies Corporation and STERIS Corporation. SureBeam is aware of other companies that are attempting to develop in-line electronic food irradiation systems. While SureBeam believes
that its patents with respect to its conveyor and shielding systems provide it with an advantage in processing products through the electron beam, competitors may develop their own different methods
of processing that would not fall within the scope of its patents and would adversely effect its competitive position.

Flow
International Corporation is a developer and manufacturer of ultrahigh-pressure technology for cutting, cleaning and food safety applications. Ion Beam Applications s.a. is a
provider of gamma ray technology systems for medical product sterilization, food irradiation and other industrial applications, and, additionally, it claims to provide electronic food irradiation
systems. STERIS Corporation offers services including gamma ray technology and gas fumigation, which are primarily for medical product sterilization. STERIS and Ion Beam Applications have each
announced that they intend to pursue food irradiation opportunities using electronic irradiation. MDS/Nordion, both independently and through its majority ownership of Food Technologies Service,
currently offers only gamma ray technology irradiation. These organizations may have significantly more capital, research and development, regulatory, manufacturing, marketing, human and other
resources than SureBeam does. SureBeam believes that its system has advantages over gamma ray irradiation in that its system uses ordinary electricity, can be integrated into a customer's production
line and pasteurizes food faster than gamma ray irradiation. In addition, the cost of overall operation of the SureBeam system is comparable to that of other irradiation products. However, gamma ray
irradiation does not require products to be removed from the shipping pallet prior to processing, while the SureBeam process does when products are processed in the service centers. The SureBeam
system also has advantages over alternatives to irradiation. Thermal and high pressure sterilization can alter the flavor and quality of most food products. Gas fumigation is not approved for food use
in the United States and chemical washes kill surface bacteria but have little effect on pathogens beneath the surface of food. However, to the extent a customer is concerned with killing surface
pathogens only or is not concerned with alteration of food flavor or quality, these alternative methods may be sufficient and less expensive.

Titan Wireless

Overview.Titan Wireless provides communications services and systems to developing countries primarily in Asia,
Africa, the Middle East, Latin America and Eastern Europe. In conjunction with its subsidiaries Sakon and Ivoire Telecom, Titan Wireless has built a global communications network. This network
currently consists of:



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While
Titan Wireless has historically generated most of its revenues by supplying communications systems and products and providing related integration services in developing
countries, Titan Wireless is increasingly generating revenues from providing communications services over this network. Service revenues are being generated from retail customers in developing
countries as well as from wholesale sales to long distance carriers that use the network to carry their long distance communications traffic. Titan Wireless's network has been built using its own
communications products, which include advanced satellite ground terminals or gateways, Very Small Aperture Terminals, or VSATs, monitoring and control software, and satellite voice/data modems, as
well as products purchased from other equipment vendors.

Titan
Wireless is continuing to seek service revenues from communications systems it installs, and is now in the process of installing wireless systems, or wireless local loops (WLL),
to connect local businesses with the PSTN and/or to its long distance international gateways in several of its target markets. Upon installation of a system in a target market, Titan Wireless will be
able to offer a full range of communications services, including voice, facsimile, data, Internet and network communications services, to customers in that market. Titan Wireless installs an
on-site antenna at businesses that use its wireless systems for local and/or long distance communications services. The cost of that
antenna and its installation is paid for either by Titan Wireless or the businesses, depending on the terms of the business arrangement.

Titan
Wireless's project for the national telephone company of Benin, Africa, illustrates the combination of Titan Wireless's communications services and product offerings. Titan
Wireless, the prime contractor for the project, was hired to install and operate several important components of the government's communications infrastructure, including a global system for mobile
communications, or GSM, cellular network, rural telephony network, fiber optic backbone, and local telephone switching equipment. Alcatel of France is a major subcontractor to Titan Wireless on this
project, with responsibility for installing, among other parts of the project, the GSM cellular network. The entire system is expected to be completed by the end of 2001. Under the terms of the
applicable contracts governing the project, Titan Wireless will co-operate the system with the national telephone company until all equipment has been paid for and then transfer the
operations to the national telephone company. In addition to realizing revenue and profit on the equipment portion of the project, Titan Wireless will share in the revenue generated by the system. The
terms of the Titan Wireless agreement with the customer include, among other things, a revenue sharing of total net receipts on this project for up to a maximum of nine years, depending upon when the
equipment has been paid for. Revenues of approximately $50.1 million, or approximately 61%, of Titan Wireless's revenues were generated from the Benin project during 2000.

Titan
Wireless's core network technology relies heavily on our DAMA technology, which was developed under Department of Defense contracts beginning in 1983. DAMA enables more
cost-effective and efficient use of satellite transmission capacity by increasing the amount of information that can pass through a satellite transponder and by allowing each VSAT in a
satellite network to communicate with any other VSAT in the network without going through a central hub. We believe that our DAMA technology allows us to route customer connectivity requests more
efficiently than any of our competitors.

Titan
Wireless has also developed substantial expertise in critical engineering disciplines such as satellite ground system design, radio frequency and digital engineering, digital
and communications signal processing software, network management and modem technology. This expertise, combined with the adaptable core technologies and design supporting Titan Wireless's network,
allows Titan Wireless to offer customers in developing countries complete communications systems that can use satellite-based technology, terrestrial-based wireless local loop technology, and/or GSM
technology. Through its subsidiaries Sakon and Ivoire Telecom and its local partners, Titan Wireless is currently providing long distance or other communications services in more than 20 developing
countries. For the year ended December 31, 2000, Titan Wireless had revenues of approximately $81.5 million.

Industry Overview.Vast regions of the world remain without adequate communications infrastructure. In 1998, according
to the International Telecommunication Union, countries in our targeted markets

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had fewer than two subscriber lines per 100 inhabitants compared to 66.13 in the United States. Internet connections and broadband systems are even less available. Government deregulation combined
with unmet demand for communications services, including voice, data, and Internet connectivity, in many developing countries has provided numerous opportunities for companies able to provide
cost-effective, high quality services. A combination of several factors, including advancement in voice and data transmission technologies, development of low cost ground terminals, the
existence of commercial satellite availability, and the development of relatively low cost terrestrial-based wireless local loop equipment has made the commercial delivery of communications services,
including voice, facsimile, data, Internet and network communications services, to developing countries more feasible.

Competitive Strengths.Titan Wireless considers the following to be its competitive strengths:



Strategy.Titan Wireless's objective is to become a leading provider of communications services and systems in
developing countries. To achieve this objective, Titan Wireless intends to pursue the following strategies:



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Competition.The industries and markets in which Titan Wireless competes are highly competitive, and we expect that
competition will increase in such markets. Titan Wireless encounters competition from numerous companies, including large and emerging domestic and international companies, many of which have far
greater financial, engineering, technological, marketing, sales and distribution and customer service resources than Titan Wireless. Some of Titan Wireless's competitors include Gilat Satellite
Networks Ltd., Hughes Network Systems, STM Wireless, Inc. and ViaSat, Inc. Others are long distance carriers like IDT Corporation, Primus Telecommunications Group, AT&T Corp.,
Sprint Corporation and WorldCom, Inc.

Cayenta

Overview.As a total services provider, or TSP, Cayenta provides software applications and implementation and
integration services to customers to solve specific business and operating problems. These software applications can be tailored for the customers' business and operating requirements and made
accessible via the Internet. Cayenta's target markets include municipalities/utilities, transportation/logistics, retailing, and manufacturing. Cayenta currently offers proprietary software
applications and related customized services for revenue cycle management, equipment monitoring and maintenance, and retailing. For the year ended December 31, 2000, Cayenta had revenues of
approximately $77.4 million.

Industry Overview.The rapid growth of the Internet and related increases in accessibility of information and frequency
of e-business and e-government transactions is creating significant new opportunities and challenges for businesses and governmental entities. Businesses and governmental
entities face

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significant technical challenges in their efforts to use the Internet to improve communications with their trading partners, customers and constituents and enhance operational efficiencies, including:



Many
businesses and governmental entities currently have to manage multiple software applications, systems integrators and service vendors to address their challenges in doing
business, increasing operational efficiencies and managing information over the Internet. Many information technology companies specialize in only a single aspect of services delivery, such as web
design, software application development, systems integration or hosting of commercially available software applications. We believe that the complexity of combining all of these elements from
different providers makes it difficult for businesses and governmental entities to implement information technology products and services in a cost-effective and timely manner.

We
believe that a significant market opportunity exists for information technology providers such as Cayenta that understand their customers' businesses and governmental functions and
provide consulting and integration services and customized software applications. The Gartner Group forecasts that the market for e-business services will grow from $75.8 billion in
2000 to $527 billion by 2005.

The Cayenta Solution.Cayenta believes that the following features of its information technology products and services
differentiate Cayenta from its competitors:



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Strategy.Cayenta's objective is to be the leading TSP. To achieve this objective, Cayenta intends to pursue the
following strategies:



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Competition.The information technology services business is intensely competitive and subject to rapid technological
change. Cayenta expects the competition to continue and intensify. Cayenta's competitors include:



In
comparison with Cayenta, many of its competitors are larger, have more brand recognition and have substantially greater financial infrastructure, personnel, and marketing
resources. Existing or future competitors may independently develop and patent or copyright technologies that are superior or substantially similar to Cayenta's technologies. The costs to develop and
to provide information technology services are relatively low. Moreover, barriers to entry, particularly in the areas of information technology consulting and integrating software applications, are
low. Therefore, Cayenta will likely continue to face additional competition from new entrants into its industry. Cayenta believes that the primary competitive factors for its business include client
value and service, the experience, technical knowledge and creative skills of personnel delivering solutions and services, and the success and reliability of the delivered solutions and services.

Emerging Technologies and Businesses

Overview.In Emerging Technologies and Businesses, we leverage our intellectual property portfolio to create commercial
technology applications or individual businesses from technologies originally developed in government-sponsored or self-funded research and development programs or obtained through an
acquisition. We include in Emerging Technologies and Businesses at any given time those commercial technology applications and individual businesses that we have not at that point developed into core
subsidiaries and designated as separate operating segments. For the year ended December 31, 2000, Emerging Technologies and Businesses had revenues of approximately $52.9 million.

The
following are examples of some of the technology-based businesses that are currently included in our Emerging Technologies segment.



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Competition.Because it is attempting to commercialize a number of diverse technologies and products, Emerging
Technologies and Businesses effectively competes in many areas. Other companies are engaged in significant research and development activities in these areas, either on their own or in collaboration
with others. Some of these companies have greater financial and personnel resources, and more experience in these specific areas than we do. We anticipate that Emerging Technologies and Businesses
will face increased competition in the future as new companies enter these areas and additional and potentially more sophisticated technologies become available.

Government Contracts

A substantial portion of our revenues are dependent upon continued funding of United States and allied government agencies, as well as continued funding of the
programs targeted by our businesses. Our revenues from U.S. government business represented approximately 85% of our total revenues for the year ended December 31, 1998, approximately 84% of
our total revenues for the year ended December 31, 1999, and approximately 74% of our total revenues for the year ended December 31, 2000. Any significant

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reductions in the funding of United States government agencies or in the funding areas targeted by our businesses could materially and adversely affect our operating results and hinder our ability to
execute our commercialization strategy.

U.S.
government contracts are subject to termination for the convenience of the government, as well as termination, reduction or modification in the event of budgetary constraints or
any change in the government's requirements. When we subcontract with prime contractors, such subcontracts are also subject to the ability of the prime contractor to perform its obligations under its
prime contract. We often have 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 our loss of our subcontract. In addition, our contract-related costs and fees, including allocated indirect costs, are subject to audits and adjustments by negotiation between us 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 our contract-related costs and fees could result in material adjustments to our
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 Congress makes appropriations for future fiscal years. Any failure of such agencies to continue to fund such contracts could have a material adverse effect on our
operating results and hinder our ability to execute our commercialization strategy.

Our
business with the U.S. government and prime contractors is generally performed under cost reimbursement, fixed-price or time and materials contracts. Cost reimbursement contracts
for the government provide for reimbursement of costs plus the payment of a fee. Under fixed-price contracts, we agree to perform certain work for a fixed price. Under time and materials contracts, we
are reimbursed for labor hours at negotiated hourly billing rates and are reimbursed for travel and other direct expenses at actual costs plus applied general and administrative expense. The following
table gives the percentage of revenues realized by us from the three primary types of government contracts during the periods indicated.

|                   |  | Year Ended December 31, |  
|------------------ |  | ----------------------- | -
|
|Cost Reimbursement |  | 42.2                    | %
|Time and Materials |  | 38.8                    |  
|Fixed-Price        |  | 19.0                    |  
|                   |  |                         |  
|                   |  | 100.0                   | %
|                   |  |                         |  

Backlog

Contracts undertaken by us may extend beyond one year. Accordingly, portions are carried forward from one year to the next as part of backlog. Because many
factors affect the scheduling of projects, no assurance can be given as to when revenue will be realized on projects included in our backlog. Although backlog represents only business which is
considered to be firm, we cannot guarantee that cancellations or scope adjustments will not occur. The majority of backlog represents contracts under the terms of which cancellation by the customer
would entitle us to all or a portion of our costs incurred and potential fees.

Many
of our contracts with the U.S. government are funded by the procuring agency from year to year, primarily based on its fiscal requirements. This results in two different
categories of U.S. government backlog: funded and unfunded backlog. "Funded backlog" consists of the aggregate contract revenues remaining to be earned by us at a given time, but only to the extent
such amounts have been appropriated by Congress and allocated to the contract by the procuring government agency. "Unfunded backlog"

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consists of the aggregate contract revenues expected to be earned as our customers incrementally allot funding to existing contracts, whether we are acting as a prime contractor or subcontractor, and
the aggregate contract revenues to be funded on contracts which have been newly awarded to us. Unfunded backlog includes priced options, which consist of the aggregate contract revenues expected to be
earned as a result of a customer exercising an option period that has been specifically defined in the original contract award. "Backlog" is the total of the government and commercial funded and
unfunded backlog.

Our
backlog consisted of the following approximate amounts as of the following dates:

|                                 |  | Year Ended December 31,
|-------------------------------- |  | -----------------------
|
|
|U.S. Government funded backlog   |  | $                      
|U.S. Government unfunded backlog |  |                        
|Commercial backlog               |  |                        
|                                 |  |                        
|Total backlog                    |  | $                      
|                                 |  |                        

We
expect to realize approximately 47% of our December 31, 2000 backlog by December 31, 2001.

Management
believes that year-to-year comparisons of backlog are difficult and not necessarily indicative of future revenues. The actual timing of receipt of
revenues, if any, on projects included in backlog could change because many factors affect the scheduling of projects. In addition, cancellations or adjustments to contracts may occur. Backlog is
typically subject to large variations from quarter to quarter as existing contracts are renewed or new contracts are awarded. Additionally, all United States government contracts included in backlog,
whether or not funded, may be terminated at the convenience of the United States government.

Manufacturing

We operate both fabrication and assembly facilities and also purchase certain components and assemblies from other suppliers. No one supplier accounts for a
significant portion of total purchases. In
limited cases, we obtain products from a sole supplier or a limited group of suppliers. Consequently, we risk disruptions in our supply of key products and components if these suppliers fail or are
unable to perform because of strikes, natural disasters, financial condition or other factors.

Patents, Trademarks and Trade Secrets

Our policy is to apply for patents and other appropriate statutory protection when we develop new or improved technology. We presently hold over 100 U.S. and
foreign issued patents, as well as a number of trademarks and copyrights. However, we do not rely solely on these statutory protections to protect our technology and intellectual property. In addition
to seeking patent protection for our inventions, we rely on the laws of unfair competition and trade secrets to protect our unpatented proprietary rights. We attempt to protect our trade secrets and
other unpatented proprietary information through agreements with customers, vendors, employees and consultants. In addition, various names used by us for our products and services have been registered
with the United States Patent and Trademark Office.

SureBeam
owns nine of our U.S. and foreign issued patents. SureBeam also owns 12 patent applications that are pending in the United States and abroad. The U.S. and foreign issued
patents relating to the SureBeam technology have claims relating to methods of transporting products through the electron beam process, means of increasing the efficiency and reliability of the
process, and ways of shielding the process that miniaturizes the size of the system. SureBeam's pending patent applications include claims relating to improvements in the operation, efficiency, and
reliability of the SureBeam technology, shielding, multiple pass x-ray system and in-line processing systems. These patents will expire over the period from 2009 to 2018, and
have been issued or are pending in markets that are key targets for SureBeam's

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expansion objectives. While electron beam, x-ray and linear accelerator machines and technology are considered to be part of the public domain and not patentable, SureBeam believes its
patents cover the most efficient method of utilizing electron beam, x-ray and linear accelerator technology for food and other applications.

Third
parties could independently develop competing technology or design around our technology. If we are unable to successfully detect infringement and enforce our rights in our
technology, we may lose competitive position in the applicable market. We cannot be certain that our means of protecting our proprietary rights in the U.S. or abroad will be adequate or that competing
companies will not independently develop similar technology.

To
date we have not been notified that our technologies infringe the proprietary rights of any third parties, but third parties may, in the future, claim that our current or future
technologies infringe upon their proprietary rights. In addition, third parties have and may continue to challenge the validity or enforceability of our proprietary rights. Any such claim, whether
meritorious or not, could be time consuming, result in costly litigation, cause delays in our development of technologies and products, or require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements may not be available on terms acceptable to us, or at all. As a result, any such claim could harm our business and prospects.

Research and Development

We maintain a staff of engineers, other scientific professionals and support personnel engaged in development of new applications of technology and improvement
of existing products. These programs' costs are expensed as incurred. Titan-funded research and development expenditures were $5.6 million in 1998, $6.7 million in 1999 and $12.3 million
in 2000. The majority of our research and development activities during 2000 were customer-funded and as such were paid for through contract revenues with an associated expense in operating expenses.
The majority of our customer-funded research and development activity is funded under contracts with the U.S. government.

Government and Environmental Regulations

We must comply with and are affected by various government regulations. These regulations affect how we and our customers can do business and, in some
instances, impose added costs to our businesses. Any changes in applicable laws could adversely affect the financial performance of the business affected by the changed regulations. Any failure to
comply with applicable laws could result in material fines and penalties or affect how we conduct our business in the future.

We
are subject to environmental and safety laws and regulations governing the use, storage and disposal of hazardous substances or wastes and imposing liability for the cleanup of
contamination from these substances. We cannot completely eliminate the risk of contamination or injury from these substances or wastes, and, in the event of such an incident, we could be held liable
for any damages that result. From time to time, we have been notified of violations of government and environmental regulations. We attempt to correct these violations promptly without any material
impact on our operations. In addition, we may be required to incur significant additional costs to comply with environmental laws and regulations in the future. These costs, and any future violations
or liability under environmental laws or regulations, could have a material adverse effect on our business, financial condition and results of operations.

Domestically,
our SureBeam technology is subject to significant regulation as a food additive under the Federal Food, Drug and Cosmetic Act, which is administered by the Food and Drug
Administration, or FDA. Use of the SureBeam system, including product labeling, is also subject to regulation by the U.S. Department of Agriculture's, or USDA, Food Safety and Inspection Service and
by health and environmental safety departments within various states.

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Food irradiation first gained regulatory approval in the U.S. in 1963 for use in the control of insects in wheat and wheat flour, followed by approval in 1964 for the prevention of
sprouting in potatoes. In February 1984, the FDA granted approval for irradiation to inhibit the maturation of fresh fruits and vegetables, to disinfest food of insects, and to disinfect spices
of microorganisms. In 1990, the FDA approved the irradiation of poultry. In December 1997, the FDA approved the irradiation of meat. In December 1999, the USDA issued regulations setting
forth the guidelines for irradiation of beef and other fresh meats, leading to the approval of commercial sales in February 2000. Our SureBeam technology complies with these regulations. FDA
approvals for the use of irradiation to treat processed foods and seafood are currently pending. The USDA has approved the use of irradiation for the purposes of reducing food borne pathogens and
extending shelf life in meat and poultry in accordance with the requirements established by the FDA. While the FDA has approved the use of irradiation for reducing food borne pathogens in meat and
poultry, it has not approved the use of irradiation to extend shelf life of poultry.

Internationally,
each country sets its own irradiation regulations. Government regulatory bodies in 38 countries have approved the use of irradiation to destroy bacteria and pests on
only specified foods. SureBeam is required to obtain regulatory approval from a number of foreign regulatory authorities before it can offer its services in those jurisdictions. These jurisdictions
may apply different criteria from the FDA in connection with their approval processes. SureBeam believes that it currently complies with all applicable regulations in countries where it intends to
provide services.

In
the U.S. and other countries that follow World Health Organization guidelines, all electronically irradiated food, whether processed with electron beam or x-rays, must
be labeled with the symbol for irradiation, known as the Radura symbol, and the phrase "Treated with Radiation" or "Treated by Irradiation." In the U.S., this label does not have to be any larger than
the ingredients' font size. If the irradiated product is to be used as an ingredient in a further processed product, the Radura symbol is not required and the only label required is in the ingredients
section (e.g. potatoes, irradiated ground beef, natural flavors). Bulk or wholesale items processed with irradiation require labeling only on the case of irradiated items and not the individual
contents. For items not in packages but processed in their entirety (e.g. fruit, vegetables) the label may either be placed on each individual item, on the bulk container, or on a counter sign as long
as it is next to the product and plainly in view. U.S. federal regulations do not require retail food service providers, such as fast food restaurants, to disclose that their food products have been
irradiated. Since irradiation is regulated as a food additive, SureBeam's
customers also are subject to packaging and labeling requirements. Additionally, states like Vermont have, and others may, adopt similar labeling requirements.

SureBeam's
processing facilities also are subject to various other federal, state and municipal regulations with regards to health, safety and environmental issues. Such facilities
are subject to supervision or periodic inspection by other regulators. All SureBeam locations in the United States that process meat are required to have a USDA inspector on the premises when
processing.

Titan
Wireless must comply with applicable laws and obtain the approval of the regulatory authorities of each foreign country in which it operates. The laws and regulatory
requirements relating to satellite communications and other wireless communications systems vary from country to country. Some countries have substantially deregulated satellite communications and
other wireless communications, while other countries maintain strict and often burdensome regulations. The procedure to obtain these regulatory approvals can be time-consuming and costly,
and the term of the approvals vary from different countries. In addition, in some countries there may be restrictions on the ability to interconnect satellite communications with ground-based
communications systems. Titan Wireless's sale of products outside the U.S. is also subject to compliance with the regulations of the U.S. Export Administration Regulations.

Employees

As of December 31, 2000, we employed approximately 7,670 employees, most of whom were located in the United States.

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RISK FACTORS

Risks Relating to Our Business

Our SureBeam business and our other commercial businesses in our Emerging Technologies and Businesses segment operate in new and unproven markets and we  will be unable to expand these businesses
and our Titan Wireless and Cayenta businesses if their principal products and services do not gain increased market acceptance.

We
are committed to creating, building and launching technology-based businesses. As part of implementing this strategy, we have developed the technology-based businesses known as
SureBeam, Titan Wireless and Cayenta, and are in the process of developing and commercializing the technology applications and businesses in our Emerging Technologies and Businesses segment. If any of
the primary markets targeted by SureBeam or Titan Wireless fails to develop and grow as we anticipate, or those markets do develop and grow as anticipated but SureBeam's, Titan Wireless's and/or
Cayenta's principal products and services do not meet with increased market acceptance, our revenues will be less than we expect, our business will suffer and we may be unable to recoup the equity
investments and intercompany advances we have made to develop and grow those businesses. To grow as currently contemplated, we will need to derive an increasing portion of our revenues from our
commercial businesses, including the businesses in our Emerging Technologies and Businesses segment. If the markets for some or all of the businesses in our Emerging Technologies and Businesses
segment fail to develop and grow as expected, or those markets do develop and grow as expected but those businesses' principal products and services do not meet with market acceptance, our future
prospects may suffer. If any of our businesses fail to grow as we anticipate, we may not be able to monetize these businesses and enable our stockholders to realize value from that process.

SureBeam
faces the challenges associated with the risks of a new enterprise and the commercialization of a technology with an unproven market. The use of our SureBeam electron beam
technology for food irradiation and the market for electronically irradiated food is at an early stage of development. Six
food processors are currently selling food electronically irradiated by SureBeam. Other food processors are testing SureBeam's technology and it is uncertain whether or when they will choose to begin
commercial production. We also do not know whether or when any fast food or other national chain restaurants or food retailers will decide to offer irradiated meat and create demand for SureBeam's
electronic food irradiation systems. We expect that some food processors will not irradiate food unless industry leaders first commit to distribute irradiated food. Market acceptance of SureBeam's
technology will also depend on consumer acceptance of irradiated food. Accordingly, a market for irradiated foods has only recently begun to develop, and its continued development will depend on broad
acceptance of irradiated foods by consumers, food producers and providers, restaurant chains and food retailers. This consumer and market acceptance may not occur.

Titan
Wireless's principal strategy is to provide communications services and systems in developing countries. As part of this strategy, Titan Wireless is increasingly generating
revenues from providing long distance communications services over its network and is now also in the process of installing fixed wireless systems, or wireless local loops, to connect local businesses
with local and/or long distance communications networks in several of its target markets. Titan Wireless's future success will depend substantially on the rate and the extent to which the markets for
communications services and systems develop in the developing countries that it targets. We cannot guarantee that substantial markets for communications services and systems in these developing
countries will ever develop, or if those markets do develop, that communications services based on fixed-site satellite technology, wireless local loop technology, or global system for
mobile communications technology, all of which Titan Wireless can provide, will capture a significant portion of those markets. The development of a market for communications services and systems in a
particular developing country will depend upon a variety of factors including whether that

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country has sufficient resources to support such a market and whether the communications services and systems are offered at an affordable cost to their end users so that adequate traffic can be
generated. Titan Wireless's success will also depend to a significant extent on its continued ability to identify and enter into strategic relationships with effective local partners who act as Titan
Wireless's intermediaries with local regulators and experts in the local market. If Titan Wireless is unable to continue to cultivate and maintain these relationships, its overall business will
suffer.

Cayenta's
market is characterized by changes in demand for its products and services based on overall economic conditions and their impact on government and corporate information
technology budgets as well as changes in user sentiment toward particular technologies, technology applications and related services. Cayenta's market is also intensely competitive.

Cayenta's
competitors include numerous companies across various segments of the information technology services and software products markets. Existing or future competitors may
independently develop and patent or copyright technologies that are superior or substantially similar to Cayenta's technologies.
The costs to develop and to provide information technology services are relatively low. Moreover, barriers to entry, particularly in the areas of information technology consulting and integrating
software applications, are low. Therefore, Cayenta will likely continue to face additional competition from new entrants into its market. If overall economic conditions weaken demand for Cayenta's
products and services or if Cayenta is unable to anticipate and respond effectively to changing market conditions or to compete effectively for any reason, its viability and business prospects may
suffer.

The
businesses in our Emerging Technologies and Businesses segment face the ongoing challenges of developing technology applications that anticipate and satisfy consumers'
requirements and achieving market acceptance for those technology applications in new and rapidly changing markets. To the extent these businesses fail to effectively meet either of those challenges,
our ability to execute our monetizing strategy and provide increased value to our stockholders will be diminished.

We have a limited history of commercializing new technologies and our commercial businesses may not remain or ever become successful.

In 1991, we adopted a strategy of seeking to develop commercial businesses using technology developed for government purposes in our government defense
businesses. Our SureBeam and Titan Wireless businesses are a product of this strategy. For the most part, our commercial businesses are in an early stage of development or have only recently begun to
offer their products, services, systems or solutions in the markets, including new markets, in which they operate. These technology-based businesses are subject to risks and uncertainties inherent in
companies at these early stages of development, including:



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We
balance our investment objectives for each of our businesses with our overall profitability objectives. This balancing is a basic part of our approach to creating and building new
commercial businesses and creates the possibility that any or all of our businesses may not grow at the pace or to the level that they otherwise might if they were independent companies. These factors
could affect our ability to monetize our investments in our businesses or diminish the value that our stockholders ultimately recognize from those investments.

We may make equity investments or intercompany advances to some of our businesses which we could lose or have to write off.

We have in the past and may in the future fund businesses in our Emerging Technologies and Businesses segment, as well as our other businesses, with equity
investments and/or intercompany advances. At the time we make these investments or advances, these businesses are typically at an early stage of development. If these businesses do not become
profitable or we are unable to monetize our investments in them, we could lose all or a portion of our equity in those businesses and be required to write off some or all of any amounts advanced.

Our commercial businesses' growth may be impaired because of investment or funding choices we make or because we are unable to access capital from external sources.

We typically fund our businesses' growth with equity investments, intercompany advances and/or public or private financing. We may choose not to fund potential
growth opportunities for our businesses with equity investments or intercompany advances based on risk considerations or our balancing of our investment objectives for those businesses with our
overall profitability objectives. We may be unable to fund potential growth opportunities for our businesses to the extent that we do not have capital on hand at the Titan level and/or cannot access
adequate capital at the Titan level. We may also be precluded from funding potential growth opportunities for our commercial businesses with public or private financing based on market conditions. To
the extent that we do not or are unable to provide capital to our commercial businesses to fund potential growth opportunities, our commercial businesses' growth could be impaired.

Market conditions and legal and contractual restrictions may impair our ability to monetize our investments in commercial technology applications and businesses.

We intend to monetize our investments in our commercial technology applications and businesses through either an initial public offering of a subsidiary, a
complete spin-off to our stockholders, an outright sale of a subsidiary, or a technology license or sale. We cannot guarantee that we will be able to monetize any of our investments in our commercial
technology applications or businesses. However, market or competitive conditions may be such that we are unable to complete initial public offerings of our subsidiaries or spin-offs of our
subsidiaries to our stockholders at valuations that we consider appropriate, in which case we may choose to delay or forego initial public offerings or spin-offs of these subsidiaries. Based on market
or competitive conditions, we may also be unable to sell or license our commercial technology applications or sell our businesses at valuations or for other consideration we consider appropriate, in
which case we may choose to delay or forego those sales or licenses. To the extent possible, we intend to structure any initial public offerings that our subsidiaries conduct in a manner to preserve
the ability to later distribute the stock we retain in the subsidiaries to our stockholders on a tax-free basis. Under current law, there are a number of tax and other legal requirements
that must be satisfied in order to successfully execute this strategy and we cannot guarantee that they will be met. Contractual restrictions may also restrict our ability to successfully execute this
strategy. With the exception of SureBeam and Cayenta, our credit facility does not permit our subsidiaries to conduct initial public offerings or, with the exception of Cayenta, allow us to distribute
the stock of our subsidiaries to Titan stockholders without the consent of the lenders. We may distribute the stock of Cayenta to Titan stockholders without the consent

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of the lenders so long as we are in compliance with financial ratios specified in, and not otherwise in default under, our credit facility.

We depend on government contracts for a substantial majority of our revenues and the loss of government contracts or a decline in funding of existing or future government  contracts could adversely affect our revenues and
cash flows and our ability to fund our commercial businesses.

Our revenues from U.S. government business represented approximately 85% of our total revenues in 1998, approximately 84% of our total revenues in 1999, and
approximately 74% of our total revenues in 2000. Our U.S. government contracts are only funded on an annual basis, and the U.S. government may cancel these contracts at any time without penalty or may
change its requirements, programs or contract budget or decline to exercise option periods, any of which could reduce our revenues and cash flows from U.S. government contracts. Our revenues and cash
flow from U.S. government contracts could also be reduced by declines in U.S. defense and other federal agency budgets.

A
significant percentage of our products and services are predominantly sold and performed under contracts with various parts of the U.S. Navy or U.S. Air Force or with prime
contractors to the U.S. Navy or U.S. Air Force. Although these various parts of the U.S. Navy or U.S. Air Force are subject to common budgetary pressures and other factors, our various U.S. Navy and
U.S. Air Force customers exercise independent purchasing decisions. However, because of such concentration of our contracts, we are vulnerable to adverse changes in our revenues and cash flows if a
significant number of our U.S. Navy or U.S. Air Force contracts and subcontracts are simultaneously delayed or canceled for budgetary or other reasons.

In
addition to contract cancellations and declines in agency budgets, we may be adversely affected by:



These
or other factors could cause U.S. defense and other federal agencies to reduce their purchases under contracts, to exercise their right to terminate contracts or not to exercise
options to renew contracts. Any of these actions or any of the other actions described above could reduce our revenues and cash flows and impair our ability to make equity investments in or
intercompany advances to our commercial subsidiaries as part of our approach to creating and building new businesses.

Government audits of our government contracts could cause a material negative adjustment to our revenues.

Our government contracts are subject to cost audits by the government. These audits may occur several years after completion of the audited work. We could have
a material adjustment to revenue as a result of an audit, including an audit of one of the companies we have recently acquired. Some of our acquired companies did not historically impose internal
controls as rigorous as those we impose on the government contracts we perform.

29

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Our operating margins may decline under our fixed-price contracts if we fail to estimate accurately the time and resources necessary to satisfy our obligations.

Some of our contracts are fixed-price contracts under which we bear the risk of any cost overruns. Our profits are adversely affected if our costs under these
contracts exceed the assumptions we used in bidding for the contract. In 1999, approximately 33% of our revenues were derived from fixed-price contracts and in 2000 approximately 19% of our revenues
were derived from fixed-price contracts. Often, we are required to fix the price for a contract before we finalize the project specifications, which increases the risk that we will misprice these
contracts. The complexity of many of our engagements makes accurately estimating our time and resources more difficult.

If we are not able to retain our contracts with the U.S. government and subcontracts under U.S. government prime contracts in the competitive rebidding process, our revenues  may suffer.

Upon expiration of a U.S. government contract or subcontract under U.S. government prime contracts, if the government customer requires further services of the
type provided in the contract, there is frequently a competitive rebidding process. We cannot guarantee that we, or the prime contractor, will win any particular bid, or that we will be able to
replace business lost upon expiration or completion of a contract. Further, all U.S. government contracts are subject to protest by competitors. The termination of several of our significant contracts
or nonrenewal of several of our significant contracts, the imposition of fines or damages, or our suspension or debarment from bidding on additional contracts could result in significant revenue
shortfalls.

We may be liable for penalties under a variety of procurement rules and regulations, and changes in government regulations could adversely affect our business.

Our defense and commercial businesses must comply with and are affected by various government regulations. Among the most significant regulations are the
following:



These
regulations affect how our customers and we do business and, in some instances, impose added costs on our businesses. Any changes in applicable laws could adversely affect the
financial performance of the business affected by the changed regulations. With respect to U.S. government contracts, any failure to comply with applicable laws could result in contract termination,
price or fee reductions or suspension or debarment from contracting with the U.S. government.

30

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Our failure to identify, attract and retain qualified technical and management personnel could adversely affect our existing businesses and our ability to build additional  commercial businesses.

We need to maintain our workforce of highly qualified technical personnel for each of our segments, including our engineers, computer programmers and personnel
with security clearances required for classified work. Our success also depends to a significant extent on the continued contributions of our management personnel for each of our segments. Our ability
to build additional commercial businesses in our Emerging Technologies and Businesses segment as part of executing our strategy will depend in part on our ability to attract management personnel from
outside Titan with relevant market expertise and management skills, and on our ability to retain and motivate these managers. In addition, our future success will depend to a significant degree on our
ability to identify, recruit and retain additional qualified personnel, including individuals with security clearances required for classified work. We cannot guarantee that we will be able to
continue to attract and retain personnel with the advanced management, technical and security clearance qualifications necessary for maintaining and growing our existing businesses or building
additional commercial businesses as part of executing our strategy.

We compete in highly competitive markets against many companies that are larger, better financed and better known than us. If we are unable to compete effectively, our business  and prospects will be adversely affected.

Our businesses operate in highly competitive markets. Many of our competitors are larger, better financed and better known companies who may compete more
effectively than we can. Our commercial businesses compete against other technologies as well as against companies with similar products and services. In order to remain competitive, we must invest to
keep our products technically advanced and compete on price and on value added to our customers. Our ability to compete may be adversely affected by limits on our capital resources and our ability to
invest in maintaining and expanding our market share. Our competition for each of Titan Systems, SureBeam, Titan Wireless and Cayenta is described in the business section of this document at the end
of the description of each segment.

We have completed numerous strategic acquisitions and may complete others, which could increase our costs or liabilities or be disruptive.

Since January 1, 1998, we have acquired twelve government information technology companies as part of our strategy of consolidating government
information technology businesses. Six of these twelve transactions were structured as stock-for-stock pooling of interests transactions. In addition, since January 1,
1999, we have acquired four information technology services and solutions companies as part of Cayenta's development of its total services provider offering. Several of the companies that we acquired
had themselves acquired other companies prior to their acquisition by us. The acquisition and integration of new companies involves risk. The integration of acquired businesses may be costly and may
result in a decrease in the value of our common stock for the following reasons, among others:



31

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We
intend to continue to look for strategic acquisitions. We may not be able to integrate successfully any acquired businesses without substantial expense, delay or other operational
or financial problems. In addition, instability in the U.S. securities markets and volatility in our stock price may make acquisitions with our stock more expensive.

We may incur significant costs in protecting our intellectual property which could adversely affect our profit margins. Our inability to protect our patents and proprietary  rights in the U.S. and foreign countries could
adversely affect our businesses' prospects and competitive positions.

As part of our strategy, we seek to protect our proprietary technology and inventions through patents and other proprietary-right protection in the U.S. and
other countries. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S. If we are unable to obtain or maintain these protections, we may not be
able to prevent third parties from using our proprietary rights. In addition, we may incur significant expense both in protecting our intellectual property and in defending or assessing claims with
respect to intellectual property owned by others.

We
regularly assess the strength of our patent and intellectual property protection for our technologies and products. Despite our assessments and our belief in the strength of our
patent protection for particular technologies or products, our patents may not provide effective barriers to entry against competitors in the markets targeted by particular technologies and products.
We also could choose to modify or abandon one or more planned or current products because of these assessments or actual or threatened claims by other companies. We are not certain that our pending
patent applications will be issued.

We
also rely on trade secrets, proprietary know-how and continuing technological innovation to remain competitive. We have taken measures to protect our trade secrets and
know-how, including the use of confidentiality agreements with our employees, consultants and advisors. It is possible that these agreements may be breached and that any remedies for a
breach will not be sufficient to compensate us for damages incurred. We generally control and limit access to, and the distribution of, our product documentation and other proprietary information. We
also cannot guarantee that other parties will not independently develop our know-how or otherwise obtain access to our technology.

On
January 6, 2000, Ion Beam Applications s.a., a Belgian corporation, and its related U.S. subsidiaries filed an action for declaratory judgment in a federal court in Virginia
against us relating to our patents for our SureBeam systems. The action attacks the validity of our core patent, seeks a declaration that Ion Beam Applications and its customers have not infringed any
of the claims in our patent, and alleges that we have engaged in unfair competition and that our conduct constitutes patent misuse. The
case has been moved to the federal court in San Diego. On November 22, 2000, Ion Beam filed an amended complaint alleging, in addition to the original claims, that we have engaged in false
advertising, monopolization, restraint on trade and unfair business practices. We intend to vigorously defend our patent position and defend against all allegations. However, a finding in favor of Ion
Beam Applications in this action could adversely affect our business, financial condition and results of operations by allowing Ion Beam and other potential competitors to develop and commercialize
electron beam food irradiation systems that would compete against our SureBeam systems and services, thereby potentially reducing the growth of our SureBeam business segment and preventing us from
generating the revenues that we expect from food irradiation.

Risks of our international operations, including economic conditions in other countries, could adversely affect the prospects of our Titan Wireless, SureBeam and Cayenta  businesses.

Our Titan Wireless, SureBeam and Cayenta businesses each operate in international markets. Through our subsidiary Titan Wireless, we sell communications
services and systems primarily in developing countries. Although we generally sell our communications services and systems in U.S. dollars,

32

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currency devaluations and adverse market conditions in developing countries in the past have and in the future could negatively affect demand for our communications services and systems and,
consequently, our revenues for this segment. In addition, we may in the future bill for our communications services in local currency. As a result, revenues in this segment may be adversely affected
by economic conditions in developing countries. We also intend to increase our sales of our SureBeam systems abroad as we obtain regulatory approvals to market and sell those systems in other
countries. Those jurisdictions may apply different criteria from the U.S. regulatory agencies in connection with their approval processes. Monitoring changes in, and SureBeam's compliance with,
diverse and numerous foreign regulatory requirements may increase SureBeam's costs. The possibility of such added costs due to the complexity of maintaining compliance with varied foreign regulatory
requirements is a risk that all of our businesses that operate in international markets face. To date, we do not believe that the international operations of our existing businesses currently subject
us to material risks from fluctuations in currency exchange rates. However, as we increase the international operations of our businesses, our risks from fluctuations in currency exchange rates, to
the extent we bill for our products in foreign currencies, will increase.

Selling
products or services in international markets also entails other market, economic, cultural, legal and political risks, conditions and expenses. These risks include:



Any
one of these factors or other international business risks could adversely affect our financial performance.

The covenants in our credit facility restrict our financial and operational flexibility and our failure to comply with them could have a material adverse effect on our  business.

Our credit facility contains covenants that restrict, among other things, our ability to borrow money, make particular types of investments or other restricted
payments, swap or sell assets, merge or consolidate, or make acquisitions. An event of default under our credit facility could allow the lenders to declare all amounts outstanding to be immediately
due and payable. We have pledged substantially all of our consolidated assets, other than SureBeam's assets, and the stock of our subsidiaries to secure the debt under our credit facility. If the
amounts outstanding under the credit facility were accelerated, the lenders could proceed against those consolidated assets and the stock of our subsidiaries. Any event of default, therefore, could
have a material adverse effect on our business. Our credit facility also requires us to maintain specified financial ratios. Our ability to meet these financial ratios can be affected by events beyond
our control, and we cannot assure you that we will meet those ratios. We also may incur future debt obligations that might subject us to restrictive covenants that could affect our financial and
operational flexibility or subject us to other events of default. Any such restrictive covenants in any future debt obligations we incur could limit our ability to fund our commercial businesses with
equity investments or intercompany advances, which would impede our ability to execute our approach to creating and building new businesses.

33

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Our operating results may be adversely affected by disruptions in our supply of products and components or services.

Because our internal manufacturing capacity is limited, we use contract manufacturers. While we use care in selecting our manufacturers, this arrangement gives
us less control over the quality and price of products or components than if we manufactured them ourselves. In some cases, we obtain products from a sole supplier or a limited group of suppliers.
Consequently, we risk disruptions in our supply of key products and components if our suppliers fail or are unable to perform because of strikes, natural disasters, financial condition or other
factors. Any material supply disruptions could adversely affect our business, financial condition and results of operations as well as our ongoing product cost structure.

Our business is subject to significant environmental regulation. Compliance costs, or any future violations or liability under environmental laws, could harm our business.

We are subject to environmental and safety laws and regulations governing the use, storage and disposal of hazardous substances or wastes and imposing
liability for the cleanup of contamination from these substances. We cannot completely eliminate the risk of contamination or injury from these substances or wastes, and, in the event of such an
incident, we could be held liable for any damages that result. From time to time, we have been notified of violations of government and environmental regulations. We attempt to correct these
violations promptly without any material impact on our operations. In addition, we may be required to incur significant additional costs to comply with environmental laws and regulations in the
future. These costs, and any future violations or liability under environmental laws or regulations, could have a material adverse effect on our business.

Risks Relating to our Common Stock

Our results of operations have historically fluctuated and may continue to fluctuate significantly in the future.

Our revenues are affected by factors such as the unpredictability of sales and contracts awards due to the long procurement process for most of our products
and services, defense and intelligence budgets,
the time it takes for the new markets we target to develop and for us to develop and provide products and services for those markets, competition and general economic conditions. Our product mix and
unit volume, our ability to keep expenses within budgets, our distribution channels and our pricing affect our gross margins. These factors and other risk factors described herein may adversely affect
our results of operations within a period and cause our financial results to fluctuate significantly on a quarterly or annual basis. Consequently, we do not believe that comparison of our results of
operations from period to period is necessarily meaningful or predictive of our likely future results of operations. It is possible that in some future quarter or quarters our operating results will
be below the expectations of public market analysts or investors. If so, the market price of our common stock may decline significantly.

We believe that third parties have disseminated inaccurate statements regarding our business. These parties may continue to do so in the future, which may adversely affect our  stock price.

We believe that third parties have disseminated inaccurate statements regarding our business. These parties may continue to do so in the future. Inaccurate
information may artificially cause our stock price to rise or fall depending on the nature of the inaccurate information.

Market perception and performance of our publicly-traded subsidiary SureBeam could have a disproportionate impact on our stock price.

SureBeam recently completed its initial public offering. As the publicly-traded parent company of SureBeam, the market price of our common stock could be
disproportionately impacted by news or other

34

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publicity concerning SureBeam, including public concerns about the safety of irradiated foods, as well as SureBeam's financial performance and the market price of its common stock.

Antitakeover provisions in our certificate of incorporation, bylaws and Delaware law, as well as our shareholder rights plan, could discourage, delay or prevent a change of  control that our stockholders may favor.

Provisions in our certificate of incorporation, our bylaws and Delaware law could make it difficult and expensive for a third party to pursue a takeover
attempt we oppose even if a change in control of us
would be beneficial to the interests of our stockholders. These provisions could discourage potential takeover attempts and could adversely affect the market price of our common stock. These
provisions:



In
addition to the provisions described above, in 1995 our board of directors adopted a "poison pill" shareholder rights plan, which may further discourage a third party from making a
proposal to acquire us which we have not solicited or do not approve, even if the acquisition would be beneficial to our stockholders. As a result, our stockholders who wish to participate in such a
transaction may not have an opportunity to do so. Under our rights plan, preferred share purchase rights, which are attached to our common stock, generally will be triggered upon the acquisition, or
actions that would result in the acquisition, of 15% or more of our common stock by any person or group. If triggered, these rights would entitle our stockholders other than the acquiror to purchase,
for the exercise price, shares of our common stock having a market value of two times the exercise price. In addition, if a company acquires us in a merger or other business combination not approved
by the board of directors, these rights will entitle our stockholders other than the acquiror to purchase, for the exercise price, shares of the common stock of the acquiring company having a market
value of two times the exercise price.

There may be volatility in the price of our common stock.

Stock prices of many companies in the high technology industry have experienced wide fluctuations that have often been unrelated to the operating performance
of these companies. The market price of our common stock may vary widely as a result of several factors, including:



These
factors could lead to a significant decrease in the market price of our common stock.

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Item 2. Properties

The Company's operations occupy approximately 1,766,000 square feet of space located primarily throughout the United States. The large majority of the space is
office space. Substantially all of the Company's facilities are leased. For lease commitment information, reference is made to Note 9 to the accompanying consolidated financial statements.

It
is management's policy to maintain the Company's facilities and equipment in good condition and at a high level of efficiency. Existing facilities are considered to be generally
suitable and adequate for the Company's present needs. The Company owns substantially all of the machinery and equipment employed by it in its business.

Item 3. Legal Proceedings

On January 6, 2000, Ion Beam Applications s.a., a Belgian corporation, and its related U.S. subsidiaries filed an action for declaratory judgment in a
federal court in Virginia against us relating to our patents
for our SureBeam systems. The action attacks the validity of our core patent, seeks a declaration that Ion Beam Applications and its customers have not infringed any of the claims in our patent, and
alleges that we have engaged in unfair competition and that our conduct constitutes patent misuse. The case has been moved to the federal court in San Diego. On November 22, 2000, Ion Beam
filed an amended complaint alleging, in addition to the original claims, that we have engaged in false advertising, monopolization, restraint on trade and unfair business practices. We intend to
vigorously defend our patent position and defend against all allegations. However, a finding in favor of Ion Beam Applications in this action could adversely affect our business, financial condition
and results of operations by allowing Ion Beam and other potential competitors to develop and commercialize electron beam food irradiation systems that would compete against our SureBeam systems and
services, thereby potentially reducing the growth of our SureBeam business segment and preventing us from generating the revenues that we expect from food irradiation.

In
the ordinary course of business, defense contractors are subject to many levels of audit and investigation by various government agencies. Further, we are subject to claims and
from time to time are named as defendants in legal proceedings. We may also assert claims from time to time. In the opinion of management, the amount of ultimate liability or recovery with respect to
these actions will not materially affect our financial position or results of operations taken as a whole.

Item 4. Submission of Matters To a Vote of Security Holders

No information is required by Item 4.

36

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PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters

The Company's common stock and cumulative convertible preferred stock are traded on the New York Stock Exchange (NYSE). As of March 23, 2001, there were
approximately 3,540 holders of record of the Company's common stock and 550 holders of record of the Company's preferred stock, excluding beneficial owners of shares held in the names of
brokers or other nominees. The closing prices for the common and preferred stock on the NYSE as of March 23, 2001, were $18.84 and $13.50, respectively. The quarterly market price ranges for
the Company's common and preferred stock on the NYSE in 2000 and 1999 were as follows:

2000

1999Common Stock
Fiscal Quarter

High

Low

High

LowFirst

$
60.50

$
32.50

$
6.25

$
4.75Second


55.50


25.31


11.00


4.94Third


44.56


15.38


14.63


9.38Fourth


21.81


11.13


48.38


13.132000

1999Cumulative Convertible
Preferred Stock
Fiscal QuarterHigh

Low

High

LowFirst

$
11.98

$
10.66

$
11.63

$
10.63Second


11.74


11.11


14.25


11.25Third


12.07


11.50


15.25


14.06Fourth


12.28


11.28


32.00


14.31


No
dividends were paid on the Company's common stock in 2000 or 1999. Regular quarterly dividends of $.25 per share were paid on the cumulative convertible preferred stock in both
years.

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Item 6. Selected Financial Data(in thousands of dollars, except per share data)

|                                                                                                                                                                 |  | 2000 |           | 1999 |   | 1998    |  | 1997 |         | 1996 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ------- |  | ---- | ------- | ---- | -
|Operating Results:                                                                                                                                               |  |      |           |      |   |         |  |      |         |      |  
|Revenues                                                                                                                                                         |  | $    | 1,033,213 |      | $ | 809,139 |  | $    | 532,236 |      | $
|Income (loss) from continuing operations before minority interests, extraordinary loss and cumulative effect of change in accounting principle                   |  |      | (16,653   | )    |   | 43,357  |  |      | 14,021  |      |  
|Income (loss) from continuing operations before minority interests, extraordinary loss and cumulative effect of change in accounting principle per common share: |  |      |           |      |   |         |  |      |         |      |  
|Basic                                                                                                                                                            |  | $    | (.31      | )    | $ | .91     |  | $    | .32     |      | $
|Diluted                                                                                                                                                          |  |      | (.32      | )    |   | .80     |  |      | .31     |      |  
|Financial Position:                                                                                                                                              |  |      |           |      |   |         |  |      |         |      |  
|Cash, cash equivalents and investments                                                                                                                           |  | $    | 27,291    |      | $ | 13,469  |  | $    | 13,868  |      | $
|Total assets                                                                                                                                                     |  |      | 959,438   |      |   | 634,658 |  |      | 369,923 |      |  
|Amounts outstanding under lines of credit, long-term                                                                                                             |  |      | 260,625   |      |   | 215,987 |  |      | 98,215  |      |  
|Other long-term debt                                                                                                                                             |  |      | 38,265    |      |   | 14,802  |  |      | 36,796  |      |  
|Company obligated mandatory redeemable convertible preferred securities                                                                                          |  |      | 250,000   |      |   |        |  |      |        |      |  
|Redeemable preferred stock                                                                                                                                       |  |      |          |      |   |        |  |      |        |      |  
|Stockholders' equity                                                                                                                                             |  |      | 167,416   |      |   | 166,348 |  |      | 98,440  |      |  
|Preferred dividends                                                                                                                                              |  |      | 692       |      |   | 695     |  |      | 778     |      |  

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Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations

The following discussion is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto,
included in this document. (Amounts in thousands, except share and per share data, or as otherwise noted.)

Overview and Outlook

We are a diversified technology company whose business is to create, build and launch technology-based businesses. We have organized our business into four
core segments that reflect the specific markets and industries in which we operate and our Emerging Technologies and Businesses segment:

|Segment                                            |  | Segment Description                                                                                                                                                                                                                                                                                          
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Titan Systems                                      |  | Information technology and communications solutions, services and products for defense, intelligence, and other U.S. and allied government agencies                                                                                                                                                          
|SureBeam                                           |  | Electronic food irradiation systems and services                                                                                                                                                                                                                                                             
|Titan Wireless                                     |  | Satellite-based and wireless-based communication services and systems which provide cost-effective voice, facsimile, data, Internet and network communications services in developing countries                                                                                                              
|Cayenta (included in our Software Systems segment) |  | Total services provider of information technology services and software applications for its customers' business and governmental functions, including retailing, finance, accounting, customer billing and collection, contract management, supply chain
management and equipment monitoring and maintenance
|Emerging Technologies
and Businesses               |  | Development of commercial applications and businesses for technologies created by Titan. We currently have several new businesses in development, including businesses in which we have applied for patent protection for the underlying
technology.                                                         

The
results of operations shown for each of our operating segments includes substantially all of the segment's direct costs of operations and administration. The segment performance
is based upon profit or loss before interest expense, income taxes and before allocated costs of corporate overhead. Corporate overhead may include, among other things, costs for financial,
accounting, marketing, administrative and legal activities incurred by Titan. Consequently, the results of operations of the segments may not be indicative of the actual results that would be shown in
the financial statements of these segments if prepared on a stand-alone basis.

Each
of Titan Systems and Titan Wireless is a wholly owned subsidiary of ours. We have created stock option plans for each of Titan Systems and Titan Wireless. As of
December 31, 2000, Titan Systems had approximately 18% of its fully diluted common stock that had been reserved for issuance under its
plan, and Titan Wireless had approximately 17% of its fully diluted common stock that had been reserved for issuance under its plan.

At
December 31, 2000, we controlled approximately 99.95% of the voting power and 99.5% of the outstanding equity ownership of SureBeam through our ownership of 46,583,850 shares of
Class B common stock. SureBeam recently completed its initial public offering of 6,700,000 shares of its Class A common stock. Upon completion of the initial public offering of SureBeam,
the number of shares owned by Titan represents approximately 98% of the voting power of SureBeam. Each Class A share is entitled to

39

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one vote and each Class B share is entitled to ten votes, with Class A and Class B shares voting together on all matters submitted to the vote of the holders of common stock. As
of December 31, 2000, SureBeam had also reserved 10,395,937 shares of Class A common stock under stock option and employee stock purchase plans.

We
control approximately 97% of the voting power of Cayenta through our ownership of 10 million shares of Class B common stock, which represents approximately 76% of
Cayenta's outstanding equity ownership. Each Class A share is entitled to one vote and each Class B share is entitled to ten votes, with Class A and Class B shares voting
together on all matters submitted to the vote of the holders of common stock. In addition to Class A and Class B common stock, Cayenta has outstanding 2,345,000 shares of Series A
preferred stock that are convertible into its Class A common stock and warrants for 495,800 shares of its Class A common stock that have a weighted average exercise price of $13.11 per
share. As of December 31, 2000, Cayenta had also reserved approximately 21% of its fully diluted common stock under stock option plans.



Titan Systems provides and is expected to continue to provide the largest percentage of our consolidated revenues. During the year ended December 31,
2000, Titan Systems had total revenues of $796.2 million, which represented 77% of our consolidated revenues for the period. Titan Systems' revenues have grown internally and through our
well-defined strategy of increasing our core competencies through acquiring government information technology companies as part of the industry consolidation.

Titan
Systems' backlog, including both funded and unfunded backlog, was approximately $2.0 billion at December 31, 2000. Although backlog represents only business which
is considered to be firm, we
cannot guarantee that cancellations or scope adjustments will not occur. We describe funded and unfunded backlog in the Business section under the caption "Backlog."

Titan
Systems' operating margin is affected by the mix of contract types (cost reimbursement, fixed-price or time and materials) as well as by the mix of prime contracts versus
subcontracts. Significant portions of Titan Systems' contracts are cost reimbursement contracts, under which Titan Systems is reimbursed for all actual costs, plus a fee or profit. The financial risks
under these contracts generally are lower than those associated with other types of contracts, and margins are also typically lower. The U.S. government also has awarded Titan Systems fixed-price
contracts. Such contracts carry higher financial risks because Titan Systems must deliver the contracted services at a cost below the fixed price in order to earn a profit. Of Titan Systems' total
revenues from government business in 2000, approximately 39% were generated by time and materials contracts, approximately 43% were generated by cost reimbursement contracts, and approximately 18%
were generated by fixed price contracts.

Revenues
on cost reimbursement contracts are recognized to the extent of costs incurred plus a proportionate amount of fees earned. Revenues on time and materials contracts are
recognized at the contractual rates as labor hours and direct expenses are incurred. Revenues on fixed-price contracts are recognized on the percentage-of-completion method
based on costs incurred in relation to total estimated costs.

During
2000, we consummated a merger with Advanced Communication Systems, Inc., or ACS, in a stock-for-stock, pooling of interests transaction. ACS provides
communications, information systems and aerospace services and solutions primarily to U.S. government agencies. We issued approximately 5,082,000 shares of common stock for all the outstanding
shares of ACS, and assumed ACS stock options representing approximately 263,000 shares of our common stock. ACS's operations are primarily included in Titan Systems, with certain information
assurance operations being reported in the Emerging Technologies and Businesses segment.

40

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Also
during 2000, we consummated a merger with AverStar, Inc., or AverStar, in a stock-for-stock, pooling of interests transaction. AverStar provides
services and software focused on the areas of information technology assurance, information technology development and information technology management and operations for the mission-critical systems
of a significant number of civilian and defense agencies of the U.S. government. We issued approximately 2,850,000 shares of common stock for all the outstanding shares of AverStar common stock, and
assumed AverStar stock options representing approximately 551,000 shares of our common stock. AverStar's operations are primarily included in Titan Systems, with its AverCom business being reported in
the Emerging Technologies and Business segment.

Also
during 2000, we acquired Pulse Engineering (Pulse), LinCom Corporation (LinCom) and SenCom Corporation (SenCom) in transactions that were accounted for as purchases. The excess
of our purchase price for these entities over the estimated fair market value of the net assets acquired is being amortized on a straight line basis over 30 years and was approximately
$73.2 million at December 31, 2000. We describe our acquisitions in Note 2 to our consolidated financial statements.



We developed our SureBeam electron beam process from technology developed under contracts with the federal government related to strategic defense initiatives
during the 1980s. In August 2000, SureBeam Corporation was formed and we contributed to it specified assets, liabilities and operations related to our electronic food irradiation business. In
the fourth quarter of 2000, we formed a new business unit, Titan Scan Technologies, within our Emerging Technologies and Businesses segment. The new business unit encompasses all of our medical
product sterilization operations which were previously a part of SureBeam. As a result, all prior period data have been restated to reflect this change in our segment reporting.

SureBeam's
revenues are predominantly derived from sales of electronic food irradiation systems and to a lesser extent from food processing services it provides to its customers. To
date, SureBeam's agreements with the third parties to its strategic relationships represent substantially all of its sales of SureBeam systems for food irradiation. SureBeam has historically derived a
significant portion of its revenues from a limited number of customers, and expects that it will continue to do so during 2001. Food processing service revenue has been primarily derived in connection
with SureBeam's customer production runs as well as test marketing programs. SureBeam expects to derive a larger amount of its revenues from providing food processing services in future periods.
SureBeam also expects to derive a larger amount of its income from food irradiation services through its equity ownership interests in the special purpose entities that operate service centers.
SureBeam's profit margins on irradiation services
currently are higher than its profit margins on system sales. Accordingly, if SureBeam can increase the portion of its revenues attributable to processing, as opposed to system sales, its profit
margins could increase.

Revenues
derived from providing electronic food irradiation services are recorded at the time services are performed. Revenues derived from sales of electronic food irradiation
systems under fixed price contracts are accounted for using the percentage-of-completion method. These systems currently take a total of approximately nine to 15 months
to design, construct, install, integrate and deliver. These systems are highly customized to meet a customer's strict specifications and require SureBeam to construct new facilities or effect
significant modifications to existing facilities to ensure efficient operation as they are integrated into the customer's facilities. SureBeam plans to make advances in the technology so that it may
deliver complete systems in a shorter time period.

Historically,
SureBeam's cash requirements have been met primarily through advances from us and from cash flows from operations. In connection with our contribution of the specified
assets, liabilities and operations related to our electronic food irradiation business to SureBeam in August 2000, SureBeam assumed the cumulative advances of approximately $39 million,
as evidenced by a subordinated, unsecured promissory note payable to us. Under this note, we have agreed to lend SureBeam a maximum of $75 million. The promissory note is due in
August 2005 and bears interest, payable quarterly, at the greater

41

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of the rate of 10% per annum or our effective weighted average interest rate under our senior credit facility. As of December 31, 2000, SureBeam had approximately $58.1 million in
principal outstanding under the note. Our effective weighted average interest rate under our senior credit facility as of December 31, 2000 was 9.67%. Under the terms of the promissory note,
SureBeam cannot use any of the proceeds of its recently completed initial public offering to pay amounts outstanding under the promissory note or under any indebtedness SureBeam incurs to refinance
the promissory note.

SureBeam
has incurred operating losses in each quarter since it commenced operations and expects its operating losses to increase and to continue to incur operating losses for at
least the balance of 2001 and into 2002. We expect SureBeam to experience significant growth in its operating expenses for the foreseeable future. Accordingly, SureBeam anticipates that its operating
expenses, primarily selling general and administrative expenditures, will constitute a greater portion of future cash requirements. SureBeam expects its research and development expenses to increase
as it further develops its electronic food irradiation business on an independent basis and not on a basis effectively financed through government contracts.



Titan Wireless has historically generated most of its revenues by supplying communications systems and products and providing related integration services in
developing countries. Titan Wireless is increasingly generating revenues from providing communications services over its global communications network. Service revenues are being generated from retail
customers in developing countries as well as from wholesale sales to long distance carriers that use the network to carry their long distance communications traffic. Titan Wireless is continuing to
seek service revenues from communications systems it installs, and is now in the process in several of its target markets of installing fixed wireless systems to connect local businesses with their
country's public switched telephone network and/or to Titan Wireless's long distance international gateways. Titan Wireless installs an on-site antenna at businesses that use its fixed
wireless systems for local and/or long distance communications services. The cost of that antenna and its installation is paid for either by Titan Wireless or the businesses, depending on the terms of
the business arrangement. Titan Wireless derived approximately 37% of its revenues during 2000 from providing communications services.

Titan
Wireless's wholly-owned subsidiary, Titan Africa, Inc., is building a satellite-based communications system for Benin's national telephone company. Revenues for Titan
Wireless for 2000 included revenues of approximately $50.1 million from the Benin project. Titan Wireless, the prime contractor for the project, was hired to install and operate several
important components of the government's communications infrastructure including a global system for mobile communications, or GSM, cellular network, rural telephony network, fiber optic backbone, and
local telephone switching equipment. Alcatel of France is a major subcontractor to Titan Wireless on this project, with responsibility for installing, among other parts of the project, the GSM
cellular network. The entire system is expected to be completed by the end of 2001. Under the terms of the applicable contracts governing the project, Titan Wireless will co-operate the
system with the national telephone company until all equipment has been paid for and then transfer the operations to the national telephone company. A majority of the build-out costs under
this contract will be subcontract costs payable by Titan Wireless to Alcatel. Titan Wireless's operating margin on work performed by subcontractors can be substantially lower than its operating margin
on work it performs itself. The terms of Titan Wireless's agreement with the customer include, among other things, a revenue sharing of total net receipts on this project for up to a maximum period of
9 years, depending upon when the equipment has been paid for.

Titan
Wireless recognizes revenue on a percentage of completion basis. Service revenues are recognized as the related services are performed.

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In 1999, Titan Wireless formed Sakon LLC with Sakon Corporation to provide carrier, direct dial telephony and enhanced communications services, including voice over Internet protocol
and Internet
services, in certain developing countries. Titan Wireless holds a 49.9% equity interest in Sakon LLC. In June 2000, Titan Wireless Africa, one of Titan Wireless's wholly-owned subsidiaries,
acquired an 80% interest in Ivoire Telecom S.A. Holding (Ivoire Telecom) and a controlling equity interest in each of its subsidiaries to acquire communications licenses covering a number of
developing countries in Africa.



Cayenta has historically derived its revenues from its consulting services and from sales of its proprietary software applications. For the year ended
December 31, 2000, Cayenta's revenues from consulting services represented 78.6% of its revenues and its revenues from sales of its software applications represented 19.7% of its revenues.
Cayenta provides its services primarily on a fixed-time, fixed-price basis and on a time and materials basis. Under its fixed-time, fixed-price contracts, Cayenta recognizes
revenues on a percentage of completion basis. Cayenta's fixed-time, fixed-price contracts usually require an advance payment from its customer with additional payments due on achievement
of specific milestones or on a predetermined schedule. Revenues earned but not yet billed are recorded as unbilled receivables. Under its time and materials contracts, Cayenta is paid at an agreed
upon hourly rate for the actual time spent on a customer's projects, and revenues are recorded at the time services are performed. For the year ended December 31, 2000, Cayenta's consulting
services revenues from fixed-time, fixed-price contracts represented 56.9% of its consulting services revenues and its consulting services revenues from time and materials contracts
represented 43.1% of its consulting services revenues. Cayenta recognizes revenues from the sale of its proprietary software when the software is delivered and accepted, in accordance with the
American Institute of Certified Public Accountants' Statement of Position 97-2, "Software Revenue Recognition." The related software support and maintenance is billed at the beginning of
the maintenance period, recognized ratably over the term of the applicable contract and recorded as deferred revenues until recognized. Cayenta has historically derived a significant portion of its
revenues from a limited number of customers, and we expect that it will continue to do so during 2001.

Historically,
Cayenta's interest expense has related to borrowings from us to fund its acquisitions and working capital requirements. As of December 31, 2000, Cayenta owed
approximately $80.3 million to us under a promissory note on which interest accrues at the greater of the rate of 10% per annum or our effective weighted average interest rate under our senior credit
facility. Principal under the promissory note is due in December 2004. Our effective weighted average interest rate under our senior credit facility as of December 31, 2000 was 9.67%.

During
the remainder of 2001, Cayenta intends to reduce its selling, general and administrative expenses as a percentage of revenues.

In
September 1999, together with Sempra Energy Information Solutions, a subsidiary of Sempra Energy, and modis, a company that focuses on implementing software applications for
its customers, Cayenta established Soliance, LLC, a joint venture that markets and delivers information technology products and services, including total services provider, or TSP, offerings, to the
utility industry. Cayenta owns a 10% equity interest in Soliance and has a management services agreement with Soliance under which it provides TSP services to Soliance's customers.



Emerging Technologies and Businesses pursues commercial applications for technologies originally developed by Titan. This segment's operating activities
consist primarily of various early stage commercial businesses in which we hold equity interests, including, in some cases, less than 20% equity interests.

The
businesses included in Emerging Technologies and Businesses may change over time as we develop new commercial applications and transition those applications into businesses in
which we hold a

43

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minority or controlling equity interest that becomes included in Emerging Technologies and Businesses. The businesses included in Emerging Technologies and Businesses also change over time when we
designate businesses that had been historically included in that segment as stand-alone operating segments and as a result report their results of operations separately or when we sell or spin-off
businesses that have previously been included. We also may move businesses that had been historically included in a different operating segment into Emerging Technologies and Businesses when we
consider it appropriate to include those businesses' results of operations in Emerging Technologies and Businesses.

In
1996, we contributed the core technology to form Servnow! NetTechnologies, Inc., which later became known as IPivot. In October 1999, as a result of the acquisition
by Intel Corporation of IPivot, we received approximately $42 million for our approximate 8% equity interest. We received an additional $3 million in October 2000 as final
consideration for our equity interest. The entire amount received from Intel, net of expenses, was recorded as a gain.

During
2000, AverStar, prior to our acquiring AverStar, acquired MJR Associates, Inc. or MJR, a provider of information technology staffing solutions to large corporations,
through a stock purchase for a purchase price of $9.6 million plus contingent consideration of up to $3.75 million based upon the company's performance during 2000. The potential
$3.75 million in contingent consideration is due in
April 2001, and we accrued for this contingent liability as of December 31, 2000. MJR Associates' operations are included in Emerging Technologies and Businesses as part of our AverCom
business. The excess of our purchase price for MJR Associates over the estimated fair market value of the assets acquired, including the contingent consideration, is being amortized on a straight line
basis over 20 years and was approximately $11.5 million as of December 31, 2000.

Deferred Compensation

We and each of our SureBeam and Cayenta subsidiaries have recently recorded deferred compensation as follows:

Titan.Option grants to our employees in 1999 exceeded the remaining common shares available under our stock option
plans. Our stockholders approved our 2000 Employee and Director Stock Option and Incentive Plan on May 30, 2000. The option grants in 1999 that covered shares in excess of the shares available
under our stock option plans at the time of their grant were placed under the 2000 stock option plan following its approval by our stockholders. Under the provisions of Financial Accounting Standards
Board Interpretation No. 44 "Accounting for Certain Transactions Involving Stock Compensation" (an Interpretation of APB Opinion No. 25), the approval date for the 2000 stock option plan
becomes the grant date for purposes of comparing the market value of the shares covered by those option grants against those options' exercise price. This resulted in deferred compensation of
$15.6 million. The deferred compensation is being amortized to expense over the four-year vesting period of the applicable option grants, including $4.9 million expensed in
2000. Unamortized deferred compensation as of December 31, 2000 was $10.2 million.

SureBeam.During 1999, SureBeam granted 3,237,578 options to purchase shares of its Class A common stock with a
weighted average exercise price of $0.1438 per share. These option grants resulted in deferred compensation to SureBeam calculated as the difference between the fair market value of the shares of
common stock underlying the option at the date of grant and the option exercise price. The deferred compensation is amortized over the vesting period of the underlying options which is four years.
Accordingly, SureBeam recorded deferred compensation of approximately $17 which resulted in an insignificant non-cash compensation amortization expense for the year ended
December 31, 1999. During 2000, SureBeam recorded deferred compensation of approximately $3.2 million which resulted in a non-cash compensation amortization expense of
approximately $0.6 million. SureBeam also recorded $78.6 million as deferred compensation at the time its recently completed initial public offering closed. This amount was recognized as
a non-cash charge to SureBeam's earnings of approximately $38.9 million

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in March 2001 at the time its recently completed initial public offering closed, with the balance being recognized over the remaining four-year vesting period of the options.

Cayenta.Under its variable stock option plan, Cayenta has granted options to certain employees who have agreed to
resell shares purchased with those options to Cayenta. Cayenta has recorded a deferred compensation charge related to these option grants of approximately $0.6 million in the year ended
December 31, 2000. As of December 31, 2000, there are 654,500 options outstanding that are subject to this buyback provision. Cayenta also issued 645,500 options to employees not covered
by this buyback option at exercise prices that were less than the deemed fair market value of the underlying common shares on the date of grant. Cayenta has recognized deferred compensation relating
to these grants of approximately $1.1 million and will amortize this deferred charge to expense over the four-year vesting period of these options.

Consolidated Financial Data

|                                                           |  | Year Ended December 31, |        
|---------------------------------------------------------- |  | ----------------------- | -------
|
|Revenues                                                   |  | $                       | 532,236
|Cost of revenues                                           |  |                         | 395,492
|Selling, general and administrative                        |  |                         | 86,968 
|Research and development                                   |  |                         | 5,590  
|Acquisition related charges and other                      |  |                         | 9,891  
|                                                           |  |                         |        
|Operating profit                                           |  |                         | 34,295 
|Interest expense, net                                      |  |                         | 11,090 
|Income tax provision (benefit)                             |  |                         | 9,184  
|Minority interests                                         |  |                         |       
|Loss from discontinued operations, net                     |  |                         | (12,566
|Extraordinary loss from early extinguishments of debt, net |  |                         |       
|Cumulative effect of change in accounting principle, net   |  |                         | (19,474
|                                                           |  |                         |        
|Net income (loss)                                          |  | $                       | (18,019
|                                                           |  |                         |        

As a Percentage of Revenues

|                                                           |  | Year Ended December 31, |   
|---------------------------------------------------------- |  | ----------------------- | --
|
|Revenues                                                   |  | 100.0                   | % 
|Cost of revenues                                           |  | 74.3                    |   
|Selling, general and administrative                        |  | 16.3                    |   
|Research and development                                   |  | 1.1                     |   
|Acquisition related charges and other                      |  | 1.9                     |   
|                                                           |  |                         |   
|Operating profit                                           |  | 6.4                     |   
|Interest expense, net                                      |  | 2.1                     |   
|Income tax provision (benefit)                             |  | 1.7                     |   
|Minority interests                                         |  |                        |   
|Loss from discontinued operations, net                     |  | (2.4                    | ) 
|Extraordinary loss from early extinguishments of debt, net |  |                        |   
|Cumulative effect of change in accounting principle, net   |  | (3.6                    | ) 
|                                                           |  |                         |   
|Net income (loss)                                          |  | (3.4                    | )%
|                                                           |  |                         |   

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Segment Financial Data

|                                     |  | Year Ended December 31, |        
|------------------------------------ |  | ----------------------- | -------
|
|Titan Systems                        |  |                         |        
|Revenues                             |  | $                       | 488,207
|Operating profit                     |  |                         | 41,212 
|SureBeam                             |  |                         |        
|Revenues                             |  |                         |       
|Operating profit (loss)              |  |                         |       
|Titan Wireless                       |  |                         |        
|Revenues                             |  |                         | 6,717  
|Operating profit (loss)              |  |                         | (6,732 
|Software Systems                     |  |                         |        
|Revenues                             |  |                         | 21,470 
|Operating profit (loss)              |  |                         | 5,137  
|Emerging Technologies and Businesses |  |                         |        
|Revenues                             |  |                         | 15,842 
|Operating profit                     |  |                         | 1,155  
|Corporate                            |  |                         | (6,477 
|                                     |  |                         |        
|Total Revenues                       |  | $                       | 532,236
|Total Operating Profit               |  | $                       | 34,295 

|                                                    |  | Year Ended December 31, |  
|--------------------------------------------------- |  | ----------------------- | -
|
|                                                    |  |                         |  
|Segment Revenues as a Percentage of Total Revenues: |  |                         |  
|Titan Systems                                       |  | 91.7                    | %
|SureBeam                                            |  |                        |  
|Titan Wireless                                      |  | 1.3                     |  
|Software Systems                                    |  | 4.0                     |  
|Emerging Technologies and Businesses                |  | 3.0                     |  
|                                                    |  |                         |  
|                                                    |  | 100.0                   | %
|                                                    |  |                         |  

On
October 1, 2000, we formed a new business unit, Titan Scan Technologies, within our Emerging Technologies and Businesses segment. The new business unit encompasses all of our
medical equipment sterilization operations, which were previously a part of SureBeam. Accordingly, our business segment that we call our SureBeam segment is now comprised entirely of our electronic
food irradiation business. The financial information included in this document has been restated to reflect this change in our segment accounting.

The
2000 results of operations presented below for our Software Systems segment include only the results of operations of our Cayenta subsidiary. Prior to 2000, the results of
operations presented below for our Software Systems segment include the results of operations for our Year 2000 business as well as, following its formation, our Cayenta subsidiary.

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Results of Operations

Fiscal Years Ended December 31, 1998, 1999 and 2000

Revenues

Consolidated.Our consolidated revenues increased 52.0% from $532.2 million in 1998 to $809.1 million in
1999 and increased 27.7% to $1.0 billion in 2000. Increased revenues were reported across all business segments in 2000, with the most notable percentage increases in our Titan Wireless
segment, our SureBeam segment, and our Software Systems segment, with revenue increases of 198.1%, 572.8% and 68.6%, respectively, in 2000. Revenue growth in 2000 was primarily attributable to the
impact of the purchase acquisitions made in 2000 in our Titan Systems segment, the purchase acquisitions made in the fourth quarter of 1999 by Cayenta and other new business in our Software Systems
(which includes Cayenta) segment, revenues on our project in Benin, Africa, in which we are building a telecommunications system for the national telephone company, and increased long distance service
revenues in our Titan Wireless segment and revenues recorded under the percentage of completion method for electron beam irradiation systems in our SureBeam segment. Revenue growth in 1999 was
primarily attributable to the impact of acquisitions made in our Titan Systems segment, work performed on new business in the Software Systems segment, shipments of hardware and increased integration
services for our customer in Benin, and the growth in our AverCom business in our Emerging Technologies and Businesses segment.

Titan Systems.Titan Systems' revenues increased 41.2% from $488.2 million in 1998 to $689.5 million in
1999 and increased 15.5% to $796.2 million in 2000. The increase in 2000 reflects the impact of the acquisitions of SenCom, Pulse and LinCom, as well as the acquisitions of System Resources
Corporation (SRC) and Atlantic Aerospace Electronics Corporation (AAEC) made in mid 1999, all of which were accounted for as purchases. These acquisitions comprised approximately $98.0 million
of the revenue increase in 2000. In addition, to a lesser degree, 2000 revenues were impacted by increased production of Titan Systems' manpacks and Mini-DAMA units and increased demand for signal
processing antennas, as well as increased demand for systems design and integration services from the Air Force, Army and intelligence community. These increases were partially offset by a reduction
of
revenues of approximately $31.6 million resulting from an ACS contract termination in late 1999 prior to acquisition by Titan, as well as the wind-down of certain year 2000 business of AverStar
resulting in reduced revenues of $25.7 million. The increase in 1999 primarily relates to the acquisitions of SRC, AAEC, Semcor, Inc. (Semcor) (acquired by ACS), and Computed Based
Systems, Inc. (CBSI) (acquired by AverStar), which contributed increased aggregate revenues of $163.8 million, and to a lesser extent, due to internal revenue growth experienced in
certain of our information technology businesses.

SureBeam.Prior to 1999, SureBeam did not have any significant activity in its food irradiation business. Accordingly,
there were no results of operations for 1998. SureBeam's revenues were $3.7 million in 1999 and increased 572.8% to $25.2 million in 2000. The increase in 2000 is primarily related to
revenues recognized from sales of SureBeam's electronic food irradiation systems, using the percentage-of-completion method of accounting, principally to Tech Ion Industrial
Brasil, S.A., a Brazilian food irradiation company and, to a lesser extent, to Hawaii Pride and Texas A&M University. Revenues in 1999 are primarily related to sales of SureBeam's electronic food
irradiation systems, under the percentage-of-completion method of accounting, principally attributable to the sale of an electronic food irradiation system with
x-ray capabilities to Hawaii Pride. There were no revenues recorded in 1998.

Titan Wireless.Titan Wireless' revenues increased 306.8% from $6.7 million in 1998 to $27.3 million in
1999 and increased 198.1% to $81.4 million in 2000. The increase in 2000 revenues was due primarily to continued shipments of hardware and increased integration services resulting in increased
revenues of $29.3 million on our project in Benin, for which Titan Wireless is building a telecommunications system for its customer, The Office of Post and Telecommunications (the OPT) of
Benin, and, to a lesser extent, the increased services revenues of $23.9 million generated by Titan's consolidated joint venture, Sakon LLC, in

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Latin America, Africa, and the Middle East. The increase in 1999 revenues was due primarily to shipments to the OPT in Benin of approximately $21.5 million as well as the launching of
international long distance service by Sakon.

Software Systems (including Cayenta).Software Systems' revenues increased 113.9% from $21.5 million in 1998 to
$45.9 million in 1999 and increased 68.6% to $77.4 million in 2000. The increase in 2000 was primarily driven by software license revenues and implementation revenues principally
generated by the companies acquired by Cayenta in the fourth quarter of 1999, which resulted in approximately $27.9 million of increased revenues over 1999, as well as by growth in Cayenta's
enterprise application business, including new work on an international systems integration project which contributed approximately $9 million, partially offset by the reduced revenues
previously generated by our Year 2000 business. The increase in 1999 resulted primarily from revenues generated from several new customers, the largest of which was the government of Washington D.C.,
which contributed revenues of $15.3 million in 1999, and revenues of approximately $11.1 million derived from Cayenta's contract with Sempra Energy.
Revenues from one federal agency accounted for approximately $11.2 million, $8.5 million and $5.8 million of Software Systems' revenues during 1998, 1999 and 2000, respectively.

Emerging Technologies and Businesses.Emerging Technologies' revenues increased 169.1% from $15.8 million in
1998 to $42.6 million in 1999 and increased 24.1% to $52.9 million in 2000. The increase in 2000 is principally impacted by the acquisitions of MJR and LinCom Wireless, a part of LinCom
Corporation, in March 2000. The increase in 1999 was principally due to growth in our AverCom business, as well as, to a lesser degree, due to increased shipments of digitized fingerprint
systems and the completion of two medical sterilization in line systems.

Selling, General and Administrative

Our consolidated SG&A expenses increased from $87.0 million in 1998 to $131.9 million in 1999 and to $209.0 million in 2000. SG&A, as a
percentage of revenues, remained flat at 16.3% in 1998 and 1999 and increased from 16.3% in 1999 to 20.2% in 2000. The increase in 2000 is due to an increase in goodwill amortization of
$21.0 million, as well as an increase in deferred compensation of $6.2 million. Excluding the impact of the amortization and deferred compensation, SG&A increased from 15.2% in 1999 to
16.8% in 2000 as a percentage of revenues. Increased goodwill amortization in 1999 resulting from the acquisitions made during that year were offset by the impact of cost reduction measures as well as
economies of scale and efficiencies that had been achieved, which resulted in the flat SG&A as a percentage of revenues from 1998 to 1999. These cost reduction measures included the elimination of
many duplicate functions and costs as part of our process of integrating certain of our acquired businesses and the implementation of a streamlining process of our administrative functions begun in
1997. This streamlining process focused on eliminating redundancies, and resulted in increased efficiencies, reduced infrastructures, and, ultimately, reduced costs. This process continued throughout
1998, 1999 and 2000, and we intend to continue this process throughout the balance of 2001.

Research and Development

Our consolidated R&D expenses increased from $5.6 million in 1998 to $6.7 million in 1999 and to $12.3 million in 2000. The increased R&D
expenditures in 2000 were principally incurred in our Software Systems segment to web enable and to develop added features and functionality for certain of our software applications within Cayenta,
and to a lesser degree, to develop the next generation Xpress Connection product within our Titan Wireless segment. The increased level of R&D expenditures in 1999 was primarily related to increased
development costs for certain imaging and video processing products.

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Acquisition Related Charges and Other

Consolidated acquisition related charges of $39.4 million in 2000 include costs of $30.5 million related to the ACS merger including direct
transaction costs of approximately $9.1 million comprised of accounting, legal, investment banking, financial printing and other direct costs. Also included in the ACS merger costs was a
write-down of approximately $5.5 million related to the impairment of certain receivables, for which the realizability of such assets were impaired as a result of the merger with
Titan, which impacted the recoverability of certain contract costs, approximately $2.1 million of employee termination and retention costs, $3.8 million of costs to eliminate duplicate
facilities and assets and a $10.0 million valuation allowance against certain contract receivables provided in connection with certain of the Company's integration activities, particularly as
they relate to conforming ACS to Titan's accounting policies and procedures, and determining appropriate valuation allowances against potential contract receivables which may not be realizable under
normal contract reimbursement cycles.

Included
in acquisition related charges is $8.3 million related to the merger with AverStar. These costs consisted of approximately $2.5 million of direct transaction
costs, approximately $5.5 million of employee termination and retention costs, and costs to eliminate duplicate facilities of approximately $0.3 million. The acquisition related charges
in the year ended December 31, 2000 also include $2.7 million of transaction costs related to the filing of a registration statement with the Securities and Exchange Commission (SEC) for
the initial public offering of Cayenta which was subsequently withdrawn by the Company in February 2001. These costs are primarily comprised of direct transaction costs, including accounting,
legal, investment banking, financial printing, and other direct costs. Also included in acquisition related charges is a $2.1 million gain resulting from the final consideration from the sale
of the Company's approximate 8% equity interest in IPivot, which was sold in October of 1999.

Acquisition
and related charges in 1999 were $13.8 million, which included approximately $4.5 million of legal costs and approximately $9.3 million of integration and
restructuring expenses. The integration and restructuring expenses include $2.1 million related to the wind-down of our Year 2000 business, consisting primarily of employee termination costs and lease
termination costs, a $2.1 million write-off of intangible costs to estimated realizable value, approximately $1.7 million for severance, outplacement and relocation costs related to approximately 32
employees across the Company, and $3.4 million related to the closure and elimination of leased facilities, primarily duplicate field offices.

On
October 26, 1999, the Company received approximately $41.8 million in cash as a result of the acquisition by Intel Corporation of IPivot, Inc. ("IPivot"), a
technology spin-off from Titan. The cash payment to the Company was for its ownership interest in IPivot of approximately 8% after the dilutive impact of IPivot stock options, warrants and other
equity investments. In addition, approximately $3 million was received in October 2000 as final consideration. The income is netted against the charges discussed above in acquisition
related charges and other for the 1999 and 2000 amounts received.

During
the year ended December 31, 1998, the Company recorded acquisition-related and other charges of $9.9 million, which includes approximately $5.5 million of direct
transaction costs (consisting primarily of investment banking and other professional fees), $3.8 million of integration expenses and $0.6 million of pre-operating and start-up costs of the Titan
Africa, Inc., Benin operation. Approximately $4.6 million of the direct transaction costs were incurred in connection with our acquisitions during 1998 of DBA Systems, Inc. (DBA), Horizons Technology,
Inc (Horizons), VisiCom Laboratories, Inc. (VisiCom), and Delfin Systems (Delfin). The remaining $0.9 million in transaction fees was related to costs incurred to file a withdrawn registration
statement of the Company's former Communications Systems segment. The integration costs included approximately $3.5 million for severance, outplacement and retention costs incurred in the Titan
Systems and Titan Wireless segments. Included in these amounts were termination benefits associated with employment agreements, as well as retention amounts associated with employee retention
agreements. The integration costs also included $0.3 million related to the closure and elimination of leased facilities, primarily duplicate field offices.

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Operating Profit

Consolidated.Our operating profit increased from $34.3 million in 1998 to $87.5 million in 1999 and
decreased to $15.4 million in 2000. Our operating profits have been significantly impacted by a number of factors in each of 1998, 1999 and 2000. The 2000 operating results include the net
acquisition charge of $39.4 million noted above, and the 1999 operating results include a net credit of $28.0 million, reflecting a $41.8 gain we realized on the sale of our minority
ownership interest in IPivot, net of $13.8 million of acquisition, integration, and reorganization costs. In addition, the decrease in operating profit from 1999 to 2000 was impacted by the
increase in goodwill amortization from $8.6 million in 1999 to $29.5 million in 2000, as well as the $6.2 million in deferred compensation in 2000, up from $0 in 1999. Excluding
the impact of the acquisition related charges, amortization of goodwill and the deferred compensation, operating profit increased from $68.1 million in 1999 to $90.4 million in 2000.

Segment Operating Profit.Operating profit reported by business segment includes substantially all of the segment's
costs of operations and administration. The segment performance is based upon profit or loss before interest expense, income taxes and before allocated costs of corporate overhead, exclusive of any
gains or losses on disposition of investments, or other assets. Corporate overhead may include, among other things, costs for financial accounting, marketing, administrative and legal activities
incurred by Titan. Consequently, the results of operations of the segments may not be indicative of the actual results that would be shown in the financial statements of these segments if prepared on
a stand-alone basis. The discussion of segment operating profit below includes only the operating profits for each of our business segments, and does not include separate discussion of our corporate
overhead.

Titan Systems.Titan Systems' operating profit increased from $41.2 million in 1998 to $43.5 million in
1999 and decreased to $28.5 million in 2000. The operating results for 1998, 1999 and 2000 include acquisition related charges of $7.2 million, $5.5 million, and
$38.8 million, respectively. The 2000 acquisition related charges related to the ACS and AverStar acquisitions, as well as for certain activities to integrate these businesses into Titan
Systems. The 1999 acquisition related costs were primarily comprised of costs to eliminate duplicate facilities, estimated costs to integrate and consolidate employee benefit plans and employee
termination costs. In addition, 1999 operating results include write-offs recorded by ACS, prior to our acquisition, which were comprised of a $3.9 million write-off of capitalized software
costs and a $1.8 million write-off of an uncollected receivable. The 1998 acquisition related charges were principally comprised of $5.1 million of direct transaction and integration
costs incurred by us in conjunction with the mergers of DBA, Horizons, VisiCom and Delfin and $0.4 million of costs incurred to file a registration statement with the SEC which was
ultimately withdrawn. Excluding the impact of the acquisition related charges, Titan Systems' operating income increased from $48.4 million in 1998 to $49.0 million in 1999 and to
$67.3 million in 2000. Operating income in 2000 increased primarily due to the increased revenue volume discussed previously.

SureBeam.Prior to 1999, SureBeam did not have any significant activity in its food irradiation business. Accordingly,
there were no results of operations for 1998. SureBeam's operating results was an operating loss of $0.1 million in 1999 and increased to operating income of $2.9 million in 2000.
Included in the 2000 operating results are amortization of $2.0 million and a deferred compensation charge of $0.6 million. Included in the 1999 operating results is $0.7 million
of reorganization and restructuring costs we incurred as a result of positioning our existing business for entrance into the food pasteurization market. Excluding the impact of the amortization,
deferred compensation and reorganization costs, SureBeam's operating income increased from operating income of $0.5 million in 1999 to $5.5 million in 2000. Increased operating profits
in 2000 were a result of the increased revenue volumes noted previously. We expect that SureBeam's future operating results will be significantly impacted by increased sales, marketing and
administrative costs as SureBeam increases its consumer branding effort.

Titan Wireless.Titan Wireless' operating performance improved from an operating loss of $6.7 million in 1998 to
operating profit of $5.1 million in 1999 and to $11.6 million in 2000. The 1998 operating

50

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results include special charges of $2.4 million including pre-operating and start-up costs of $0.5 million related to the Titan Africa Benin operation,
$1.4 million related to employee termination and retention costs related to the reorganization of this business, as well as approximately $0.5 million related to costs on the previously
mentioned registration statement with the SEC which was ultimately withdrawn. Excluding the impact of these charges, operating loss, as adjusted, was $4.3 million in 1998 compared to operating
profit of $5.1 million in 1999 and operating income of $11.6 million in 2000. The improved operating profit in 1999 and 2000 is directly related to the increase in revenues noted
previously.

Software Systems (including Cayenta).Software Systems' operating profit increased from $5.1 million in 1998 to
$7.0 million in 1999 and decreased to an operating loss of $18.0 million in 2000. Included in the 2000 operating results is a $2.7 million charge reflecting the direct transaction
costs related to the withdrawn registration statement for Cayenta. Included in the 1999 operating results is a $2.1 million charge related to reorganization and restructuring costs we incurred
primarily during the fourth quarter to restructure and wind-down our year 2000 business unit. Employee termination costs, facilities costs and lease termination costs comprised a
substantial portion of this charge. Included in 2000 operating results is a deferred compensation charge of $0.6 million, and goodwill amortization of $0.6 million and
$16.9 million in 1999 and 2000, respectively. Excluding the impact of the charges noted previously, the deferred compensation charge and the amortization of goodwill, Software Systems'
operating profit decreased from $9.7 million in 1999 to $2.1 million in 2000. The impact of the increased revenues noted above was more than offset by the increased SG&A efforts to build
the infrastructure of Cayenta and increased sales and marketing efforts, as well as increased R&D costs. The increased operating profit in 1999 reflects the impact of the increased revenues discussed
previously.

Emerging Technologies and Businesses.Emerging Technologies' operating results improved from operating income of
$1.2 million in 1998 to $46.6 million in 1999 and decreased to $6.7 million in 2000. Included in the operating results of 1999 and 2000 is a $41.8 million gain and a
$2.1 million gain, respectively, resulting from the sale of the Company's approximate 8% equity interest in IPivot. The Company sold its interest in IPivot in October 1999, for which the
final consideration was paid in October 2000. Excluding the gains from IPivot, as well as approximately $0.2 million of reorganization costs in 2000, operating income improved from
$1.2 million in 1998 to $4.8 million in 1999 and decreased slightly from $4.8 million in 1999 to $4.5 million in 2000, primarily reflecting the increase in revenues in
those years.

Interest Expense, Net

Our consolidated net interest expense increased from $11.1 million in 1998 to $17.5 million in 1999 and to $36.0 million in 2000. Net
interest expense has increased over 1998, 1999 and 2000, primarily as a direct result of the increased level of our borrowings, to fund the growth in the various segments and to fund the acquisitions
made in our Titan Systems segment during 1999 and 2000 and in our Software Systems segment during 1999. Our increased effective interest rates also resulted in increased interest expense in 1999 and
2000. In addition, net interest expense in 2000 increased due to the issuance of our Remarketable Term Income Deferrable Equity Securities or HIGH TIDES. In 1998 the principal component of interest
expense was related to our convertible senior subordinated debentures, all of which had been converted into our common stock or redeemed by the end of the fourth quarter of 1999. Borrowings from our
primary bank lines of credit, excluding working capital lines from acquired companies, averaged $28.9 million at a weighted average interest rate of 7.7% during 1998, $88.8 million at a
weighted average interest rate of 7.9% during 1999 and $196.9 million at a weighted average interest rate of 10.5% during 2000. Also included in interest expense is interest on our deferred
compensation and retiree medical obligations. Interest expense related to these items was $0.9 million for 1998, $1.1 million for 1999 and $0.6 million for 2000.

51

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Income Taxes

Consolidated income taxes reflect effective rates of a provision rate of 40% in 1998 and 38% in 1999 and a benefit rate of 19% in 2000. The reduced rate for
the tax benefit in 2000 is primarily due to significant non-deductible expenses which were recorded for financial reporting purposes, which resulted in a reduced benefit rate for the net
loss reported.

Net Income (Loss)

In 1998, we reported a net loss of $18.0 million, net income of $37.8 million in 1999 and a net loss of $18.7 million in 2000. Included in
the net income (loss) for 1998, 1999 and 2000 are net losses from discontinued operations of $12.6 million, $5.6 million and $1.5 million, respectively, relating to our winding
down of our access control systems and broadband communications businesses and the disposal of our commercial information security and assurance business as well as operations discontinued by certain
of the companies acquired by us during 1998 and 2000. In addition, we adopted Statement of Position (SOP) 98-5 ("Start-up Costs") in 1998, which resulted in a
$19.5 million write-off of capitalized start-up costs recorded as a cumulative effect of a change in accounting principle. Included in the net loss for 2000 is an
extraordinary loss of $4.7 million, net of tax, related to the early payoff and extinguishments of AverStar's credit facility in the second quarter of 2000 and our existing credit facility with
Scotia Bank in the first quarter of 2000. Also included in the 2000 net loss is goodwill amortization of $29.5 million, a deferred compensation charge of $6.2 million and acquistition
related charges of $39.4 million. Also included in the 1999 net income is a net acquisition related credit of $28.0 million, and goodwill amortization of $8.6 million.

Liquidity and Capital Resources

We have used our cash principally to acquire businesses and fund our capital expenses and working capital. We fund our cash requirements principally from cash
flows from our operations, borrowings under our senior credit facility and the proceeds from the sale of securities. Our operating activities used $70.1 million, primarily resulting from
increased accounts receivable balances of $56.0 million, with the most significant increases reflecting the revenue growth in our Titan Systems, Titan Wireless and SureBeam business segments.
Also included in our cash uses from operating activities is approximately $18 million of cash paid for acquisition related charges. In addition, income tax payments of $11.9 million were
made during 2000, primarily resulting from the taxes due from our gain on sale of
our interest in IPivot. The Company expects that future tax liabilities will require cash outflow as the Company utilized a significant portion of its net operating losses to reduce the taxes due on
the IPivot proceeds.

Our
investing activities used cash of $191.9 million during 2000, primarily to fund the acquisitions of Pulse, LinCom, SenCom, MJR, and Ivoire Telecom and to fund capital
expenditures of $49.8 million primarily in our Software Systems, SureBeam and Titan Wireless segments. Our financing activities provided cash of $289.6 million, which amount primarily
reflected proceeds from the funding of the $150 million term loan, the issuance of $250 million of Remarketable Term Income Deferrable Equity Securities (HIGH TIDES), partially offset by
net reductions in borrowings under debt assumed on the ACS and AverStar mergers. In relation to our acquisition of a majority interest of Ivoire Telecom, the Company has committed to provide up to a
maximum of $25 million for capital expenditures to build out the Ivoire Telecom network, subject to Titan's approval of each equipment expenditure requirement. At December 31, 2000,
approximately $9.8 million has been expended for such expenditures. In addition, in connection with the Company's agreement to acquire an additional 30.0% equity interest in Sakon, an
additional $12.5 million of consideration is due and payable upon certain revenue targets being attained. The Company estimates that the consideration will be paid by the second or third
quarter of 2001.

52

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On
February 9, 2000, Titan Capital Trust, our wholly owned subsidiary, issued 4 million HIGH TIDES at $50 per security, for an aggregate total of $200 million,
with an overallotment exercised on February 16, 2000 for an additional 1 million securities, for an additional $50 million. The trust used the proceeds from the sale of the HIGH
TIDES to purchase from us 53/4% Convertible Senior Subordinated Debentures, due February 15, 2030.

On
February 23, 2000, the Company entered into a credit agreement for $275 million of financing from a syndicate of commercial banks. The credit facility also allowed
the Company to increase total availability by an additional $100 million, if needed, for an aggregate of $375 million. The credit facility was subsequently amended on June 1, 2000
to provide for an increase in total availability for an additional $50 million, for an aggregate total of $425 million. The proceeds of the loan were used in part to refinance
outstanding indebtedness on the Company's $190 million credit facility arranged by Bank of Nova Scotia in June 1999. The credit facility is secured by substantially all of our and our
subsidiaries' assets and guaranteed by substantially all of our subsidiaries other than SureBeam. The $425 million facility is comprised of a six-year senior secured
multi-draw term loan facility in an aggregate principal amount of up to $75 million, two seven-year senior secured term loan facilities in an aggregate principal amount
of $250 million, and a five-year senior secured revolving credit facility in an aggregate principal amount of up to $100 million. Loans made under the multi-draw
term loan facility mature on the sixth anniversary of the closing date of the credit facility, and amortize as follows: 2.5% quarterly in year two of the credit facility, 3.75% quarterly in year three
of the credit facility, 5% quarterly in year four of the credit facility, 6.25% quarterly in year five of the credit facility and 7.5% quarterly in year six of the credit facility. Loans made under
the term loan facilities mature on the seventh anniversary of the closing date of the credit facility, and amortize as follows: 0.25% quarterly for years one through six of the credit facility and
23.5% quarterly for year seven of the credit facility. Under each of the term loan facilities and the revolving facility, the Company has the option to borrow at the bank's base rate or at adjusted
LIBOR plus, in each case, an applicable ratio based on the ratio of our total debt to EBITDA (earnings before interest and taxes and depreciation and amortization). The agreement contains financial
covenants that set maximum debt to EBITDA limits and require the Company to maintain minimum interest and fixed charge coverages and levels of net worth. SureBeam Corporation is no longer a guarantor
under the credit facility, and its assets are no longer collateral for the senior credit facility following its recently completed initial public offering on March 16, 2001 (See
Note 16).

At
December 31, 2000, total borrowings outstanding were $263.1 million on the term loan at a weighted average interest rate of 9.67%. Commitments under letters of credit
were $6.6 million at December 31, 2000, which reduces availability of the working capital line. Of the total borrowings, $2.5 million was short-term.

We
used $100 million of the new term loan facility and part of the total $250 million proceeds from the sale of the HIGH TIDES to repay all outstanding balances on our
previous credit facility, which
aggregated approximately $152 million. In addition, we used proceeds of approximately $74 million from the HIGH TIDES to repay existing indebtedness of Advanced Communication Systems
when we closed the acquisition on February 25, 2000, and to pay certain acquisition-related expenses. As of March 16, 2001, we had $338.1 million in outstanding borrowings on our
secured term loan facilities, $6.6 million in letters of credit outstanding and $21.2 million in cash and equivalents.

We
collected all outstanding amounts due from our Indonesian customer, PSN, during the fourth quarter of 2000. We received a payment of $2.6 million, plus accrued interest, and
accepted the return of certain terminals valued at approximately $1.3 million as satisfaction for all amounts outstanding. These terminals have subsequently been utilized on other international
projects.

On
December 10, 1999, the Company's wholly owned subsidiary, Titan Africa, Inc. (Titan Africa), in connection with its contract to build a satellite-based telephone
system for its customer, the national telephone company of Benin, Africa, entered into a Loan Facility agreement for up to 30.0 billion Francs

53

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CFA (the currency of the African Financial Community), equivalent to approximately $45.0 million U.S. dollars, with a syndicate of five banks, with Africa Merchant Bank as the arranger. This
medium term financing is a non-recourse loan to Titan Africa which is guaranteed by the national telephone company of Benin, Africa and secured by the national telephone company's
equipment and revenues related to the project. The facility has a fixed interest rate of 9.5% and will be repaid in seven equal semi-annual payments from the net receipts of this project,
or by the OPT in the event that such receipts are not adequate to make these payments, which commenced on December 31, 2000, and end on December 31, 2003. The borrowings on this facility
will be utilized to fund the subcontractor costs incurred by Alcatel of France, a major subcontractor to this project. The non-Alcatel equipment provided by Titan Africa will be paid for by the OPT in
seven equal semi-annual installments which commenced on December 31, 2000. The terms of Titan Africa's agreement with the customer include, among other things, a revenue sharing of
total net receipts earned on this project for up to a maximum period of 9 years depending upon when the equipment has been paid for. If Titan Africa's proportionate interest of the revenue
sharing portion of the project exceeds these fixed semi-annual payments, the amounts outstanding on the equipment provided by Titan Africa could be paid in full prior to
December 31, 2003. As of December 31, 2000, approximately $36.7 million was drawn on this facility. In October 2000, under the Benin program, the Company collected an
$18 million receivable from an African group related to its sale of a portion of its economic interest, net of all fixed equipment payments, in the revenue sharing of this project.

As
part of our strategy of seeking external financing to grow our commercial businesses, our SureBeam subsidiary completed its initial public offering of its common stock on
March 16, 2001 and raised gross proceeds of $67 million. We have extended a credit facility of up to a maximum of $75.0 million under
which SureBeam owed us approximately $64.6 million as of February 28, 2001. SureBeam may not use the proceeds of its initial public offering to pay amounts outstanding under its credit
facility with us.

Funding
for the advancement of our strategic goals, including acquisitions and continued investment in targeted commercial businesses and start-up ventures, is expected to
continue. We plan to finance these requirements from a combination of sources, which include cash generation from our businesses, our credit facility as described above and other available cash
sources. Management believes that the combination of our existing cash, amounts available under our credit facility and cash flow expected to be generated from our operations will be sufficient to
fund planned investments and working capital requirements for at least the next twelve months. However, we could elect, or we could be required, to raise additional funds during that period and we may
need to raise additional capital in the future. Additional capital may not be available at all, or may not be available on terms favorable to us. Any additional issuance of equity or equity-linked
securities may result in substantial dilution to our stockholders. Management is continually monitoring and reevaluating its level of investment in all of its operations, specifically the increased
investment required in fiscal 2001 to further grow its commercial businesses, and the financing sources available to achieve our goals in each business area.

54

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Item 7A. Quantitative And Qualitative Disclosures About Market Risk

Market Risk

The principal objective of our asset/liability management activities is to maximize net investment income, while maintaining acceptable levels of interest rate
risk and facilitating our funding needs. Our net investment income and interest expense are subject to the risk of interest rate fluctuations. To mitigate the impact of fluctuations in interest rates,
we manage the structure of the maturity of debt and investments. As of December 31, 2000, we did not hold any material amounts of marketable securities. The amount of marketable securities we
hold fluctuates based upon our cash needs, including the use of our available cash resources to fund acquisitions. As a policy matter, we invest cash in excess of our cash needs for limited periods in
cash equivalents.

On
February 9, 2000, we received $250 million in proceeds from the issuance of 5 million convertible preferred securities (Remarketable Term Income Deferrable Equity
Securities, "HIGH TIDES"). On February 23, 2000, we entered into a credit agreement for $275 million of financing from a syndicate of
commercial banks which replaced our current credit facility. The terms of both are more fully discussed in Note 8 of the notes to our consolidated financial statements. We used $100 million of the
credit facility and part of the HIGH TIDES proceeds to repay all outstanding balances on our previous credit facility, which aggregated approximately $152 million. In addition, we used proceeds of
approximately $74 million from the HIGH TIDES proceeds to repay existing indebtedness of Advanced Communication Systems when we closed the acquisition on February 25, 2000, and to pay certain
acquisition-related expenses. The remaining HIGH TIDES proceeds were invested in commercial paper with ratings of A1/P1 and a money market fund with a rating of Class A at interest rates of
5.60% to 5.97% to fund operations and our strategic goals. These funds were fully utilized in 2000.

The
following table provides information about our financial instruments that are sensitive to changes in interest rates as of December 31, 2000. For debt obligations, the
table presents principal cash flows and related weighted average interest rates by expected maturity dates. For terms relating to our long-term debt, see Note 8 of the notes to our consolidated
financial statements.

|                                                    |  | 2001 |        | 2002 |   | 2003   |   | 2004 |        | 2005 |   | Beyond |   | Total |        | Fair
Value |  
|--------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | - | ---- | ------ | ---- | - | ------ | - | ----- | ------ | ---------- | -
|Assets: None                                        |  |      |        |      |   |        |   |      |        |      |   |        |   |       |        |            |  
|Liabilities:                                        |  |      |        |      |   |        |   |      |        |      |   |        |   |       |        |            |  
|Long-term debt, including debt due within one year: |  |      |        |      |   |        |   |      |        |      |   |        |   |       |        |            |  
|Fixed rate                                          |  | $    | 13,411 |      | $ | 12,517 |   | $    | 12,378 |      | $ | 122    |   | $     | 69     |            | $
|Average interest rate                               |  |      | 9.33   | %    |   | 9.49   | % |      | 9.51   | %    |   | 9.40   | % |       | 8.58   | %          |  
|Variable rate                                       |  | $    | 3,500  |      | $ | 3,500  |   | $    | 3,500  |      | $ | 3,500  |   | $     | 18,535 |            | $
|Average interest rate                               |  |      | 9.71   | %    |   | 9.71   | % |      | 9.71   | %    |   | 9.71   | % |       | 9.10   | %          |  
|HIGH TIDES                                          |  | $    |       |      | $ |       |   | $    |       |      | $ |       |   | $     |       |            | $
|Fixed rate                                          |  | $    |       |      | $ |       |   | $    |       |      | $ |       |   | $     |       |            |  

55

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Item 8. Financial Statements and Supplementary Data

Index to Financial Statements and Financial Statement Schedule

PageReport of Independent Public Accountants

57Financial Statements:Consolidated Statements of Operations

58Consolidated Balance Sheets

59Consolidated Statements of Cash Flows

60Consolidated Statements of Stockholders' Equity

61Notes to Consolidated Financial Statements

62Supporting Financial Schedule Covered by the Foregoing Report of
Independent Public Accountants:Schedule II  Valuation and Qualifying Accounts

100


56

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Titan Corporation:

We
have audited the accompanying consolidated balance sheets of The Titan Corporation (a Delaware corporation) and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Titan Corporation and subsidiaries as of
December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States.

Our
audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements and financial
statement schedules is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR
ANDERSEN LLP

San
Diego, California
February 12, 2001 (except with respect to the
  matter discussed in Note 16, as to
  which the date is March 16, 2001)

57

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THE TITAN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

|                                                                                                                                                             |  | For the Years Ended December 31, |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ---------
|
|Revenues                                                                                                                                                     |  | $                                | 1,033,213
|                                                                                                                                                             |  |                                  |          
|Costs and expenses:                                                                                                                                          |  |                                  |          
|Cost of revenues                                                                                                                                             |  |                                  | 757,266  
|Selling, general and administrative expense                                                                                                                  |  |                                  | 208,956  
|Research and development expense                                                                                                                             |  |                                  | 12,261   
|Acquisition related charges and other                                                                                                                        |  |                                  | 39,358   
|                                                                                                                                                             |  |                                  |          
|Total costs and expenses                                                                                                                                     |  |                                  | 1,017,841
|                                                                                                                                                             |  |                                  |          
|Operating profit                                                                                                                                             |  |                                  | 15,372   
|Interest expense                                                                                                                                             |  |                                  | (39,592  
|Interest income                                                                                                                                              |  |                                  | 3,582    
|                                                                                                                                                             |  |                                  |          
|Income (loss) from continuing operations before income taxes, minority interests, extraordinary loss and cumulative effect of change in accounting principle |  |                                  | (20,638  
|Income tax provision (benefit)                                                                                                                               |  |                                  | (3,985   
|                                                                                                                                                             |  |                                  |          
|Income (loss) from continuing operations before minority interests, extraordinary loss and cumulative effect of change in accounting principle               |  |                                  | (16,653  
|Minority interests                                                                                                                                           |  |                                  | 4,131    
|                                                                                                                                                             |  |                                  |          
|Income (loss) from continuing operations before extraordinary loss and cumulative effect of change in accounting principle                                   |  |                                  | (12,522  
|Loss from discontinued operations, net of tax benefit of $487, $2,400 and $4,446                                                                             |  |                                  | (1,462   
|                                                                                                                                                             |  |                                  |          
|Income (loss) before extraordinary loss and cumulative effect of change in accounting principle                                                              |  |                                  | (13,984  
|Extraordinary loss from early extinguishments of debt, net of tax benefit of $1,541                                                                          |  |                                  | (4,744   
|Cumulative effect of change in accounting principle, net of tax benefit of $1,970                                                                            |  |                                  |         
|                                                                                                                                                             |  |                                  |          
|Net income (loss)                                                                                                                                            |  |                                  | (18,728  
|Dividend requirements on preferred stock                                                                                                                     |  |                                  | (692     
|                                                                                                                                                             |  |                                  |          
|Net income (loss) applicable to common stock                                                                                                                 |  | $                                | (19,420  
|                                                                                                                                                             |  |                                  |          
|Basic earnings (loss) per share:                                                                                                                             |  |                                  |          
|Income (loss) from continuing operations                                                                                                                     |  | $                                | (0.31    
|Loss from discontinued operations, net of taxes                                                                                                              |  |                                  | (0.03    
|Extraordinary loss from early extinguishments of debt, net of taxes                                                                                          |  |                                  | (0.09    
|Cumulative effect of change in accounting principle, net of taxes                                                                                            |  |                                  |         
|                                                                                                                                                             |  |                                  |          
|Net income (loss)                                                                                                                                            |  | $                                | (0.43    
|                                                                                                                                                             |  |                                  |          
|Weighted average shares                                                                                                                                      |  |                                  | 52,717   
|                                                                                                                                                             |  |                                  |          
|Diluted earnings (loss) per share:                                                                                                                           |  |                                  |          
|Income (loss) from continuing operations                                                                                                                     |  | $                                | (0.32    
|Loss from discontinued operations, net of taxes                                                                                                              |  |                                  | (0.03    
|Extraordinary loss from early extinguishments of debt, net of taxes                                                                                          |  |                                  | (0.09    
|Cumulative effect of change in accounting principle, net of taxes                                                                                            |  |                                  |         
|                                                                                                                                                             |  |                                  |          
|Net income (loss)                                                                                                                                            |  | $                                | (0.44    
|                                                                                                                                                             |  |                                  |          
|Weighted average shares                                                                                                                                      |  |                                  | 52,717   
|                                                                                                                                                             |  |                                  |          

The accompanying notes are an integral part of these consolidated financial statements.

58

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THE TITAN CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

|                                                                                                                                                                        |  | As of December 31, |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------
|
|Assets                                                                                                                                                                  | 
|Current Assets:                                                                                                                                                         |  |                    |        
|Cash and cash equivalents                                                                                                                                               |  | $                  | 27,291 
|Accounts receivable  net                                                                                                                                               |  |                    | 347,133
|Inventories                                                                                                                                                             |  |                    | 25,367 
|Prepaid expenses and other                                                                                                                                              |  |                    | 33,932 
|Deferred income taxes                                                                                                                                                   |  |                    | 28,764 
|Net assets of discontinued operations                                                                                                                                   |  |                    | 812    
|                                                                                                                                                                        |  |                    |        
|Total current assets                                                                                                                                                    |  |                    | 463,299
|Property and equipment  net                                                                                                                                            |  |                    | 88,077 
|Goodwill  net of accumulated amortization of $46,487 and $16,522                                                                                                       |  |                    | 347,976
|Other assets  net                                                                                                                                                      |  |                    | 59,796 
|Net assets of discontinued operations                                                                                                                                   |  |                    | 290    
|                                                                                                                                                                        |  |                    |        
|Total assets                                                                                                                                                            |  | $                  | 959,438
|                                                                                                                                                                        |  |                    |        
|Liabilities and Stockholders' Equity                                                                                                                                    | 
|Current Liabilities:                                                                                                                                                    |  |                    |        
|Amounts outstanding under lines of credit                                                                                                                               |  | $                  | 2,500  
|Accounts payable                                                                                                                                                        |  |                    | 74,936 
|Acquisition debt                                                                                                                                                        |  |                    | 4,200  
|Current portion of long-term debt                                                                                                                                       |  |                    | 991    
|Accrued compensation and benefits                                                                                                                                       |  |                    | 45,700 
|Other accrued liabilities                                                                                                                                               |  |                    | 67,020 
|Income taxes payable                                                                                                                                                    |  |                    | 176    
|Net liabilities of discontinued operations                                                                                                                              |  |                    |       
|                                                                                                                                                                        |  |                    |        
|Total current liabilities                                                                                                                                               |  |                    | 195,523
|                                                                                                                                                                        |  |                    |        
|Amounts outstanding under lines of credit                                                                                                                               |  |                    | 260,625
|                                                                                                                                                                        |  |                    |        
|Other long-term debt                                                                                                                                                    |  |                    | 38,265 
|                                                                                                                                                                        |  |                    |        
|Other non-current liabilities                                                                                                                                           |  |                    | 36,342 
|                                                                                                                                                                        |  |                    |        
|Commitments and Contingencies                                                                                                                                           |  |                    |        
|Company obligated mandatory redeemable convertible preferred securities of a subsidiary trust whose sole assets are senior subordinated convertible debentures of Titan |  |                    | 250,000
|                                                                                                                                                                        |  |                    |        
|Minority interests                                                                                                                                                      |  |                    | 11,267 
|                                                                                                                                                                        |  |                    |        
|Stockholders' Equity:                                                                                                                                                   |  |                    |        
|Preferred stock: $1 par value, authorized 5,000,000 shares:                                                                                                             |  |                    |        
|Cumulative convertible, $13,800 liquidation preference:                                                                                                                 |  |                    |        
|689,978 and 694,850 shares issued and outstanding                                                                                                                       |  |                    | 690    
|Series A junior participating: designated 1,000,000 authorized shares:                                                                                                  |  |                    |        
|None issued                                                                                                                                                             |  |                    |       
|Common stock: $.01 par value, authorized 200,000,000 shares, issued and outstanding: 54,068,167 and 52,456,641 shares                                                   |  |                    | 541    
|Capital in excess of par value                                                                                                                                          |  |                    | 191,358
|Deferred compensation                                                                                                                                                   |  |                    | (13,882
|Retained earnings (deficit)                                                                                                                                             |  |                    | (9,960 
|Cumulative foreign currency translation adjustment                                                                                                                      |  |                    | 108    
|Treasury stock (787,885 and 966,398 shares), at cost                                                                                                                    |  |                    | (1,439 
|                                                                                                                                                                        |  |                    |        
|Total stockholders' equity                                                                                                                                              |  |                    | 167,416
|                                                                                                                                                                        |  |                    |        
|Total liabilities and stockholders' equity                                                                                                                              |  | $                  | 959,438
|                                                                                                                                                                        |  |                    |        

The accompanying notes are an integral part of these consolidated financial statements.

59

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THE TITAN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

|                                                                                                                                                                   |  | For the Years Ended December 31, |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | --------
|
|Cash Flows From Operating Activities:                                                                                                                              |  |                                  |         
|Income (loss) from continuing operations                                                                                                                           |  | $                                | (12,522 
|Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) continuing operations, net of effects of businesses acquired: |  |                                  |         
|Depreciation and amortization                                                                                                                                      |  |                                  | 43,692  
|Deferred income taxes and other                                                                                                                                    |  |                                  | (11,129 
|Nonmonetary research consideration                                                                                                                                 |  |                                  | (4,701  
|Write-off of capitalized software development costs                                                                                                                |  |                                  |        
|Minority interests                                                                                                                                                 |  |                                  | (4,131  
|Poolings of interests                                                                                                                                              |  |                                  | 1,352   
|Deferred compensation charge                                                                                                                                       |  |                                  | 6,187   
|Changes in operating assets and liabilities, net of effects of businesses acquired:                                                                                |  |                                  |         
|Accounts receivable                                                                                                                                                |  |                                  | (56,008 
|Inventories                                                                                                                                                        |  |                                  | (9,649  
|Prepaid expenses and other assets                                                                                                                                  |  |                                  | (17,211 
|Accounts payable                                                                                                                                                   |  |                                  | 13,072  
|Income taxes payable/refundable                                                                                                                                    |  |                                  | (10,590 
|Accrued compensation and benefits                                                                                                                                  |  |                                  | 1,595   
|Other liabilities                                                                                                                                                  |  |                                  | (10,028 
|                                                                                                                                                                   |  |                                  |         
|Net cash provided by (used for) continuing operations                                                                                                              |  |                                  | (70,071 
|                                                                                                                                                                   |  |                                  |         
|Loss from discontinued operations                                                                                                                                  |  |                                  | (1,462  
|Changes in net assets and liabilities of discontinued operations                                                                                                   |  |                                  | (7,687  
|                                                                                                                                                                   |  |                                  |         
|Net cash used for discontinued operations                                                                                                                          |  |                                  | (9,149  
|                                                                                                                                                                   |  |                                  |         
|Net cash provided by (used for) operating activities                                                                                                               |  |                                  | (79,220 
|                                                                                                                                                                   |  |                                  |         
|Cash Flows From Investing Activities:                                                                                                                              |  |                                  |         
|Capital expenditures                                                                                                                                               |  |                                  | (49,794 
|Payment for purchase of businesses, net of cash acquired                                                                                                           |  |                                  | (117,712
|Capitalized software development costs                                                                                                                             |  |                                  | (3,359  
|Proceeds from sale of investments                                                                                                                                  |  |                                  |        
|Other investments                                                                                                                                                  |  |                                  | (21,677 
|Other                                                                                                                                                              |  |                                  | 588     
|                                                                                                                                                                   |  |                                  |         
|Net cash used for investing activities                                                                                                                             |  |                                  | (191,954
|                                                                                                                                                                   |  |                                  |         
|Cash Flows From Financing Activities:                                                                                                                              |  |                                  |         
|Issuance of redeemable covertible preferred securities                                                                                                             |  |                                  | 250,000 
|Additions to debt                                                                                                                                                  |  |                                  | 154,085 
|Retirements of debt                                                                                                                                                |  |                                  | (109,562
|Redemption of Series B Preferred Stock                                                                                                                             |  |                                  |        
|Issuance of stock by subsidiary                                                                                                                                    |  |                                  | 6,373   
|Deferred debt issuance costs                                                                                                                                       |  |                                  | (19,614 
|Proceeds from stock issuances                                                                                                                                      |  |                                  | 5,413   
|Dividends paid                                                                                                                                                     |  |                                  | (692    
|Purchase of stock                                                                                                                                                  |  |                                  | (173    
|Other                                                                                                                                                              |  |                                  | (975    
|                                                                                                                                                                   |  |                                  |         
|Net cash provided by financing activities                                                                                                                          |  |                                  | 284,855 
|                                                                                                                                                                   |  |                                  |         
|Net cash from financing of discontinued operations                                                                                                                 |  |                                  |        
|                                                                                                                                                                   |  |                                  |         
|Effect of exchange rate changes on cash                                                                                                                            |  |                                  | 141     
|                                                                                                                                                                   |  |                                  |         
|Net increase (decrease) in cash and cash equivalents                                                                                                               |  |                                  | 13,822  
|Cash and cash equivalents at beginning of year                                                                                                                     |  |                                  | 13,469  
|                                                                                                                                                                   |  |                                  |         
|Cash and cash equivalents at end of year                                                                                                                           |  | $                                | 27,291  
|                                                                                                                                                                   |  |                                  |         

The accompanying notes are an integral part of these consolidated financial statements.

60

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THE TITAN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In thousands of dollars, except per share data)

|                                                                        |  | Cumulative Convertible Preferred Stock |     | Common Stock |   | Capital In Excess of Par Value |   | Deferred Compensation |         | Retained Earnings (Deficit) |   | Cumulative Foreign Currency Translation Adjustment |   | Treasury Stock |         | Total |  
|----------------------------------------------------------------------- |  | -------------------------------------- | --- | ------------ | - | ------------------------------ | - | --------------------- | ------- | --------------------------- | - | -------------------------------------------------- | - | -------------- | ------- | ----- | -
|Balances at December 31, 1997                                           |  | $                                      | 695 |              | $ | 396                            |   | $                     | 89,270  |                             | $ |                                                   |   | $              | (12,878 | )     | $
|Conversion of subordinated debt                                         |  |                                        |     |              |   | 15                             |   |                       | 5,368   |                             |   |                                                    |   |                |         |       |  
|Sale of common stock                                                    |  |                                        |     |              |   | 9                              |   |                       | 22,638  |                             |   |                                                    |   |                |         |       |  
|Stock issued for acquisitions                                           |  |                                        |     |              |   | 11                             |   |                       | 13,178  |                             |   |                                                    |   |                |         |       |  
|Stock repurchase                                                        |  |                                        |     |              |   | (1                             | ) |                       | (806    | )                           |   |                                                    |   |                |         |       |  
|Exercise of stock options and other                                     |  |                                        |     |              |   | 4                              |   |                       | 1,480   |                             |   |                                                    |   |                |         |       |  
|Conversion of warrants                                                  |  |                                        |     |              |   | 1                              |   |                       | 349     |                             |   |                                                    |   |                |         |       |  
|Poolings of interests                                                   |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (109    | )     |  
|Shares contributed to employee benefit plans                            |  |                                        |     |              |   |                                |   |                       | (100    | )                           |   |                                                    |   |                |         |       |  
|Income tax benefit from employee stock transactions                     |  |                                        |     |              |   |                                |   |                       | 297     |                             |   |                                                    |   |                |         |       |  
|Foreign currency translation adjustment                                 |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (1      | )     |  
|Dividends on preferred stock 
Cumulative Convertible, $1.00 per share  |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (695    | )     |  
|Series B, 6% annual                                                     |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (83     | )     |  
|Net loss                                                                |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (18,019 | )     |  
|                                                                        |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                |         |       |  
|Balances at December 31, 1998                                           |  |                                        | 695 |              |   | 435                            |   |                       | 131,674 |                             |   |                                                   |   |                | (31,785 | )     |  
|Conversion of subordinated debt                                         |  |                                        |     |              |   | 79                             |   |                       | 26,191  |                             |   |                                                    |   |                |         |       |  
|Exercise of stock options and other                                     |  |                                        |     |              |   | 11                             |   |                       | 3,940   |                             |   |                                                    |   |                |         |       |  
|Shares contributed to employee benefit plans                            |  |                                        |     |              |   |                                |   |                       | (364    | )                           |   |                                                    |   |                |         |       |  
|Deferred compensation, related to the issuance of stock options         |  |                                        |     |              |   |                                |   |                       | 841     |                             |   | (738                                               | ) |                |         |       |  
|Purchase of stock                                                       |  |                                        |     |              |   |                                |   |                       | (487    | )                           |   |                                                    |   |                |         |       |  
|Income tax benefit from employee stock transactions                     |  |                                        |     |              |   |                                |   |                       | 892     |                             |   |                                                    |   |                |         |       |  
|Distribution to shareholders of net liablity of discontinued operations |  |                                        |     |              |   |                                |   |                       | 565     |                             |   |                                                    |   |                |         |       |  
|Dividends on preferred stock 
Cumulative Convertible, $1.00 per share  |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (695    | )     |  
|Foreign currency translation adjustment                                 |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | 6       |       |  
|Net income                                                              |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | 37,757  |       |  
|                                                                        |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                |         |       |  
|Balances at December 31, 1999                                           |  |                                        | 695 |              |   | 525                            |   |                       | 163,252 |                             |   | (738                                               | ) |                | 5,283   |       |  
|Pooling adjustments                                                     |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | 1,352   |       |  
|Exercise of stock options and other                                     |  |                                        |     |              |   | 16                             |   |                       | 3,577   |                             |   |                                                    |   |                |         |       |  
|Proceeds from stock issuances                                           |  |                                        |     |              |   |                                |   |                       | 1,820   |                             |   |                                                    |   |                |         |       |  
|Issuance of stock for equity interest                                   |  |                                        |     |              |   |                                |   |                       | 900     |                             |   |                                                    |   |                |         |       |  
|Deferred compensation, related to the issuance of stock options         |  |                                        |     |              |   |                                |   |                       | 19,331  |                             |   | (19,331                                            | ) |                |         |       |  
|Amortization of deferred compensation                                   |  |                                        |     |              |   |                                |   |                       |         |                             |   | 6,187                                              |   |                |         |       |  
|Purchase of treasury stock                                              |  |                                        |     |              |   |                                |   |                       | (173    | )                           |   |                                                    |   |                |         |       |  
|Shares contributed to employee benefit plans                            |  |                                        |     |              |   |                                |   |                       | 1,167   |                             |   |                                                    |   |                |         |       |  
|Foreign currency translation adjustment                                 |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                |         |       |  
|Conversion of preferred stock                                           |  |                                        | (5  | )            |   |                                |   |                       | 5       |                             |   |                                                    |   |                |         |       |  
|Income tax benefit from employee stock transactions                     |  |                                        |     |              |   |                                |   |                       | 1,479   |                             |   |                                                    |   |                |         |       |  
|Gain related to issuance of stock in subsidiary                         |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | 2,825   |       |  
|Dividends on preferred stock 
Cumulative Convertible, $1.00 per share  |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (692    | )     |  
|Net loss                                                                |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                | (18,728 | )     |  
|                                                                        |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                |         |       |  
|Balances at December 31, 2000                                           |  | $                                      | 690 |              | $ | 541                            |   | $                     | 191,358 |                             | $ | (13,882                                            | ) | $              | (9,960  | )     | $
|                                                                        |  |                                        |     |              |   |                                |   |                       |         |                             |   |                                                    |   |                |         |       |  

The accompanying notes are an integral part of these consolidated financial statements.

61

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THE TITAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data, or as otherwise noted)

Note 1. Summary of Significant Accounting Policies

Nature of Operations.The Titan Corporation (the "Company" or "Titan") is a diversified
technology company whose business is to create, build and launch technology-based businesses. The Company groups its businesses into four core business segments  Titan Systems,
SureBeam, Titan Wireless, and Software Systems,  and a fifth business segment, Emerging Technologies and Businesses. Titan Systems
provides information technology and communications solutions, services and products for defense, intelligence, and other U.S. and allied government agencies. SureBeam provides electronic food
irradiation systems and services for the food industry. Titan Wireless provides satellite-based and wireless-based communication services and systems which provide cost-effective voice, facsimile,
data, Internet and network communications services in developing countries. Software Systems is a total services provider ("TSP") of information technology services and software applications for its
customers' business and governmental functions, including retailing, finance, accounting, customer billing and collection, contract management, supply chain management and equipment monitoring and
maintenance. The Emerging Technologies and Businesses segment develops commercial applications and businesses for technologies created by the Company.

The
Company is involved in a number of commercial businesses that operate in new markets, most notably the TSP business in Software Systems, the provision of communication services in
developing countries in the Titan Wireless segment and the electronic food irradiation business of SureBeam. The Company believes that the primary source of revenues for the Titan Wireless business
will be international customers in developing countries, primarily within Africa, Asia, the Middle East and South America.

Principles of Consolidation.The consolidated financial statements include the accounts of
Titan and its subsidiaries. All significant intercompany transactions and balances have been eliminated. From time to time, the Company makes investments in joint ventures which may involve
international locations and operations. Management evaluates its investment in each joint venture on an individual basis for purposes of determining whether or not consolidation is appropriate.
Investments in such ventures are generally consolidated in instances where the Company retains control through decision-making ability and/or a greater than 50% ownership interest. In the
absence of such factors, the Company generally accounts for these investments under the equity method.

On
February 25, 2000, the Company consummated a merger with Advanced Communication Systems, Inc. ("ACS") in a stock-for-stock, pooling of interests transaction (see Note 2). On
June 26, 2000, the
Company consummated a merger with AverStar, Inc. ("AverStar") in a stock-for-stock, pooling of interests transaction (see Note 2). The accompanying consolidated financial
statements have been restated to reflect these acquisitions for all periods presented.

One
of the Company's consolidated subsidiaries with operations in Africa reports its results of operations with a two-month lag, which allows more time to compile results. The time
lag results in an intercompany receivable or payable from advances to or from the subsidiary during this lag period. The effect of this lag period on the Company's results of operations and financial
condition is not material.

Minority Interest in Subsidiaries.Minority interest in subsidiaries consists primarily of
equity securities issued in 1999 and 2000 by the Company's subsidiary, Cayenta, Inc., which is the ongoing operations of the Software Systems business, and equity securities issued in 2000 by
the Company's SureBeam subsidiary. The Company owned substantially all of the voting equity of Cayenta and SureBeam both before and after the transactions. The Company records minority interest to
reflect the portion of the earnings or losses of majority-owned operations which are applicable to the minority interest partners. The minority interest

62

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percentages of Cayenta and SureBeam are approximately 24.1% and 0.5%, respectively, as of December 31, 2000. These amounts were not significant in 1999. In March 2001, as discussed in
Note 16, SureBeam completed its initial public offering, which changed the minority interest percentage to approximately 16.4%.

Foreign Currency Translation.The financial statements of certain of the Company's foreign
subsidiaries are measured using the local functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates in effect as of the balance sheet date. Revenues and
expenses are translated at average rates of exchange in effect during the year. The resulting cumulative translation adjustments
have been recorded as a separate component of stockholders' equity. Foreign currency transaction gains and losses are included in consolidated net income.

Use of Estimates.The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition.A majority of the Company's revenue, both government and commercial, is
derived from products manufactured and services performed under cost-reimbursement, time-and-materials, and fixed-price contracts wherein revenues are generally recognized as services are performed,
using the percentage-of-completion method, which includes revenues recognized as units are delivered. Total estimated costs are based on management's assessment of costs to complete the project based
upon evaluation of the level of work achieved and costs expended to date. Estimated contract losses are fully charged to operations when identified.

The
Company's Software Systems segment also generates revenues from licensing the rights to use its software products primarily to end users. This segment further generates revenues
from post-contract support (maintenance), consulting and training services performed for customers who license its products.

Revenues
from software license agreements are recognized currently, provided that all of the following conditions are met, a noncancelable license agreement has been signed, the
software has been delivered, there are no material uncertainties regarding customer acceptance, collection of the resulting receivable is deemed probable and the risk of concession is deemed remote,
and no other significant vendor obligations exist. Revenues from maintenance services are recognized ratably over the term of
the maintenance period, generally one year. Maintenance revenues which are bundled with license agreements are unbundled using vendor specific objective evidence.

As
most of the Company's revenue recognition practices are in accordance with AICPA Statement of Position 81-1 "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts ("SOP 81-1") and Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"), the adoption of Securities and Exchange Commission ("SEC") Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements" in 2000 had no material impact on the Company's financial statements.

Deferred Revenues.Included in other accrued liabilities are deferred revenues which consist
principally of customer deposits and payments for software maintenance agreements with customers whereby the

63

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Company receives payment in advance of performing the service. Revenue from these contracts is recognized ratably over the contract period.

Cash Equivalents.All highly liquid investments purchased with an original maturity of three
months or less are classified as cash equivalents.

Unbilled Accounts Receivable.Unbilled accounts receivable are included in accounts receivable
and include work-in-process which will be billed in accordance with contract terms and delivery schedules, as well as amounts billable upon final execution of contracts, contract completion,
milestones or completion of rate negotiations. Generally, unbilled accounts receivable are expected to be collected within one year. Payments to the Company for performance on certain U.S. Government
contracts are subject
to audit by the Defense Contract Audit Agency. Revenues have been recorded at amounts expected to be realized upon final settlement.

Concentration of Risk.As the Company expands its business into international markets and
developing countries, certain accounts receivable may be exposed to credit risk due to political and economic instability in these areas. To mitigate credit risk in foreign countries, the Company
generally denominates its foreign contracts in U.S. dollars and requires payment primarily in the form of stand-by letters of credit, advance deposits, or wire transfers, prior to
shipment. In addition, the Company has obtained political risk insurance to cover equipment located in certain foreign countries to cover loss or damage resulting from abandonment, deprivation,
expropriation, riot and terrorism and other acts of revolution in those countries.

A
majority of the Company's total revenues are from U.S. government contracts. Any cancellations or modifications of our significant contracts or subcontracts, or failure by the U.S.
government to exercise an option period relating to those contracts or subcontracts, could adversely affect the Company's financial condition and results of operations in the short- and long-term.
Continuing declines in U.S. defense and other federal agency budgets also may negatively impact our business. Although we bid for and are awarded long-term U.S. government contracts and subcontracts,
the U.S. government only funds these contracts on an annual basis, and many of the Company's contracts and subcontracts include option years. The U.S. government may cancel these contracts at any time
without penalty or may change its requirements, programs or contract budget, and generally has the right not to exercise option periods. The U.S. Congress may decline to appropriate funds needed to
complete the contracts awarded to us or the prime contractor. On our subcontracts, we generally do not control the prime contractor's allocation of resources. We also depend upon the prime contractor
to perform its obligations on the primary government contract. In addition to contract cancellations and declines in agency budgets, the Company's financial condition and results of operations may be
adversely affected by:



64

---



These
or other factors could cause government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts or not to exercise options to renew
contracts. Any of these actions could have a material adverse effect on our business, financial condition and results of operations.

Inventories.Inventories include the cost of material, labor and overhead, and are stated at
the lower of cost, determined on the first-in, first-out (FIFO) and weighted average methods, or market. The Company periodically evaluates its on-hand stock and makes appropriate disposition of any
stock deemed excess or obsolete.

Property and Equipment.Property and equipment are stated at cost. Depreciation is provided
using the straight-line method, with estimated useful lives of 25 to 40 years for buildings, 2 to 40 years for leasehold improvements and 3 to 10 years for machinery and equipment and furniture and
fixtures. Certain machinery and equipment in the Company's medical sterilization and food irradiation businesses is depreciated based on units of production.

Goodwill.The excess of the cost over the fair value of net assets of purchased businesses
("goodwill") is amortized on a straight-line basis over varying lives ranging from 2 to 40 years. The Company periodically re-evaluates the original assumptions and rationale utilized in the
establishment of the carrying value and estimated lives of its goodwill. The criteria used for these evaluations include management's estimate of the asset's continuing ability to generate positive
income from operations and positive cash flow in future periods as well as the strategic significance of the intangible asset to the Company's business objectives.

Impairment of Long-Lived Assets.Periodically, the Company reviews for possible impairment its
long-lived assets and certain identifiable intangibles to be held and used. Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable,
asset values are adjusted accordingly. In evaluating whether an asset impairment exists, the Company compares the carrying value of the asset to the estimated undiscounted cash flows. If an impairment
is deemed to exist, the asset's carrying value is adjusted to the present value of its estimated future cash flows.

Stock-Based Compensation.The Company has elected to adopt the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, the Company will continue to account for its stock-based compensation plans
under the provisions of APB No. 25.

Income Taxes.The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires the use of the liability method of accounting for deferred income taxes. Under this method, deferred income taxes are
recorded to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities

65

---

and their financial reporting amounts at each year-end. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Per Share Information.The Company computes earnings per share based on the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").

The
following data summarize information relating to the per share computations for continuing operations before the cumulative effect of a change in accounting principle:

For the Year Ended December 31, 2000Income (Loss)
(Numerator)

Shares (000's) (Denominator)

Per-Share AmountsLoss from continuing operations

$
(12,522
)Less preferred stock dividends


(692
)Effect of minority interests


(3,308
)Basic EPS:Loss from continuing operations available to common stockholders


(16,522
)
52,717

$
(.31
)Effect of minority interests


(283
)



(.01
)Diluted EPS:Loss from continuing operations available to common stockholders plus assumed conversions

$
(16,805
)
52,717

$
(.32
)For the Year Ended December 31, 1999Income (Numerator)

Shares (000's) (Denominator)

Per-Share AmountsIncome from continuing operations

$
43,357Less preferred stock dividends


(695
)Basic EPS:Income from continuing operations available to common stockholders


42,662

47,094

$
.91Effect of dilutive securities:Stock options




2,650


(.05
)Debentures


769

4,392


(.06
)Diluted EPS:Income from continuing operations available to common stockholders plus assumed conversions

$
43,431

54,136

$
.80


66

---

For the Year Ended December 31, 1998Income (Numerator)

Shares (000's) (Denominator)

Per-Share AmountsIncome from continuing operations

$
14,021Less preferred stock dividends


(778
)Basic EPS:Income from continuing operations available to common stockholders

$
13,243

41,657

$
.32Effect of dilutive securities:Stock options




1,515


(.01
)Diluted EPS:Income from continuing operations available to common stockholders plus assumed conversions

$
13,243

43,172

$
.31


In
1999 and 1998, options to purchase approximately 85,000 and 1,232,000 shares, respectively, of common stock were not included in the computation of diluted EPS, because the
options' exercise price was greater than the average market price of the common shares. In 2000, 1999 and 1998, approximately 463,200 shares of common stock that could result from the conversion of
cumulative convertible preferred stock and 5,038,000 shares that could result from the conversion of the remarketable term income deferrable equity securities (HIGH TIDES) in 2000, and
8,513,000 common shares in 1998 that could result from the conversion of the Company's convertible subordinated debentures were not included in the computation of diluted EPS, as the effect would have
been anti-dilutive on the
results of continuing operations. The effect of minority interests outstanding in 1999 did not affect the above computation.

Comprehensive Income.Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes standards for reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. The objective of the statement is to report a measure of all changes in equity of an enterprise that result from transactions and other economic
events of the period other than transactions with owners. Comprehensive income is the total of net income and all other nonowner changes in equity.

During
the year ended December 31, 2000, the Company's only element of other comprehensive income resulted from foreign currency translation adjustments in 2000, which are
reflected in the consolidated statements of changes in stockholders' equity as foreign currency translation adjustments.

Start-Up Costs.The Company expenses the costs of start-up activities as incurred in accordance
with the provisions of AICPA Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). The Company adopted SOP 98-5 in 1998, recording a one-time, non-cash charge of
$19,474, reflected as a cumulative effect of a change in accounting principle in the Statement of Operations for the year ended December 31, 1998. The charge primarily represents previously
capitalized start-up costs and deferred contract costs as well as non-recurring engineering costs previously carried in inventory.

67

---

Business Segments.The Company reports its business segment information in accordance with
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"). In the fourth quarter of 2000, the Company formed a new
business unit, Titan Scan Technologies within its Emerging Technologies and Businesses segment. The new business unit encompasses all of Titan's medical product sterilization operations, which were
previously a part of SureBeam. This realignment conforms to the provisions of SFAS 131. As a result, all prior period data have been restated to reflect this change in Titan's segment reporting.

Gain on Issuance of Stock in Subsidiary.In 2000, the Company became subject to the provisions
of SEC Staff Accounting Bulletin No. 51 ("SAB 51") to reflect the issuance of approximately 5% of Cayenta Class A Common Stock in connection with an acquisition. In accordance
with the provisions of SAB 51, the transaction is reflected as an equity transaction, and the net effect of the transaction is reflected in the accompanying Consolidated Statement of
Stockholders' Equity as "Gain related to issuance of stock in subsidiary."

New Accounting Standards.In December 1999, the SEC issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements," which became effective in 2000. This SAB summarizes the SEC's view in applying generally accepted accounting principles to revenue recognition in
financial statements. As most of the Company's revenue recognition practices are in conformance with AICPA SOP 81-1 and SOP 97-2, the adoption of SAB 101 had no material impact on the Company's
financial statements.

In
June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS No. 133 was
amended in June 1999 by SFAS No. 137 "Accounting for Derivative Instrument and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133," and in June 2000
by SFAS No. 138 for "Accounting for Certain Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133." These statements establish accounting and reporting
standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. They require that an
entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value with changes from fair value reflected in earnings. The Company adopted the provisions of
SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, in January 2001. The adoption did not have a material impact on the Company's financial position or results of
operations.

Note 2. Acquisitions and Investments

On June 28, 2000, the Company's subsidiary, Titan Wireless Africa, a wholly owned subsidiary of Titan Wireless, completed the acquisition of a majority
interest (80%) of Ivoire Telecom S.A. Holding (Ivoire Telecom), and through such interest acquired a controlling (minimum of 50.1%) equity interest in each of the principal subsidiaries owned by
Ivoire Telecom. The purchase consideration consisted of $5.0 million in cash subject to certain indemnification obligations. The excess of purchase consideration over net assets acquired of
$5.0 million has been recorded as goodwill. In addition, Titan has committed to provide up to a maximum of $25 million for capital expenditures to build out the Ivoire Telecom network,
subject to Titan's approval of each equipment expenditure requirement. At December 31, 2000, approximately

68

---

$9.8 million has been expended for such expenditures. The impact of all such expenditures has been reflected as property and equipment in the Company's consolidated balance sheet at
December 31, 2000.

On
June 26, 2000, the Company acquired AverStar in a stock-for-stock transaction. AverStar provides services and software focused on the areas of
information technology assurance, information technology development and information technology management and operations for the mission-critical systems of civilian and defense agencies of the U.S.
government. AverStar's operations are primarily included in the Titan Systems segment, with certain operations reported in the Emerging Technologies and Businesses segment. Titan issued approximately
2,850,000 shares of common stock for all the outstanding shares of AverStar common stock, subject to a holdback of 180,045 shares held in escrow to cover certain indemnification obligations, and
assumed AverStar stock options representing approximately 551,000 shares of Titan common stock, based on an exchange ratio of approximately .41415 shares of Titan common stock for each share of
AverStar common stock. In September 2000, 171,645 shares were released from escrow to AverStar shareholders in fulfillment of the Company's obligations. The remaining 8,400 shares were
released from escrow in November 2000. The acquisition constituted a tax-free reorganization and has been accounted for as a pooling of interests.

On
June 7, 2000, the Company completed the acquisition of all of the stock of SenCom Corporation (SenCom) for a purchase price of approximately $35 million in cash,
subject to certain post-closing adjustments and indemnification obligations, less a $5.0 million holdback, and less $1.3 million for employee related expenses to be paid one
year from the closing date. Of the $5.0 million holdback, $3 million was paid in September 2000, and the remaining $2 million holdback is due 18 months from the closing
date, and accrues interest at 7% per annum. An additional $2 million was paid in September 2000 as a result of post-closing adjustments. SenCom, included in the Titan Systems
segment, provides
information technology services to government customers and specializes in the engineering and analysis of radar and electro-optical sensors, command and control system development, computer and
network security, and business process engineering and program management. The transaction was accounted for as a purchase, and accordingly, SenCom's results of operations have been consolidated with
the Company's results of operations since June 8, 2000. The excess of the purchase price over the estimated fair market value of the net assets acquired, to be amortized on a straight line
basis over 30 years, was approximately $29.5 million at December 31, 2000.

On
March 30, 2000, the Company completed the acquisition of all of the stock of LinCom Corporation (LinCom) for a purchase price of approximately $23 million in cash,
subject to certain post-closing adjustments and indemnification obligations, less a $1 million holdback and a $2 million promissory note. The $1 million holdback was
due approximately 60 days after the closing date, and approximately $978 was paid in the fulfillment of the Company's obligations, and the $2 million note is due one year after the
closing date and accrues interest at 7%. The Company expects that the $2 million note, plus accrued interest, will be paid by March 31, 2001. LinCom is a developer of wireless
communications and information systems for both commercial and government customers. The operations of LinCom are primarily reported in the Titan Systems segment. The commercial applications within
LinCom are reported in the Emerging Technologies and Businesses segment. The transaction was accounted for as a purchase, and accordingly, LinCom's results of operations have been consolidated with
the Company's results of operations since March 31, 2000. The excess of the purchase price over the estimated fair market value of the net assets acquired, to be amortized on a straight line
basis over 30 years, was approximately $20.2 million at December 31, 2000.

69

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On March 24, 2000, the Company completed the acquisition of all the outstanding stock of Pulse Engineering (Pulse) for a purchase price of approximately $27.4 million in
cash, subject to certain post-closing adjustments and indemnification obligations, less a $1 million holdback placed in escrow and a $2 million deferred payment due in March
2001. The holdback was paid to Pulse shareholders in October 2000 in fulfillment of the Company's obligations, and the Company expects that the $2 million deferred payment, plus interest
of 8%, will be made by March 31, 2001. Pulse provides specialized information security and signals intelligence systems and services to the intelligence community and is included in the Titan
Systems segment. The transaction was accounted for as a purchase, and accordingly, Pulse's results of operations have been consolidated with the Company's results of operations since March 25,
2000. The excess of the purchase price over the estimated fair market value of the net assets acquired, to be amortized on a straight line basis over 30 years, was approximately
$23.5 million at December 31, 2000. In connection with the determination of the fair value of assets acquired in the quarter ended June 30, 2000, and pursuant to the provisions of
Accounting Principles Board Opinion No. 16, the Company has valued acquired contracts in process at contract price, minus the estimated costs to complete and an allowance for the normal industry
profit on its effort to complete such contracts, which amounted to $1,066. This adjustment has been reflected in the accompanying balance sheet as an increase to goodwill and a corresponding increase
to deferred profit. The Company recognized approximately $291 in the year ended December 31, 2000, as a reduction of costs, with the
remaining $775 to be recorded as a reduction of costs in future periods as work on certain contracts is performed, which is estimated to be through fiscal 2004.

On
March 10, 2000, AverStar acquired all of the outstanding shares of the common stock of MJR Associates, Inc. (MJR), which provides information technology staffing solutions
to major corporations. Consideration paid for the acquisition amounted to $9.6 million in cash plus contingent consideration up to a maximum of $3.75 million based upon fiscal year 2000
performance, which amount will be due and payable in April 2001. The acquisition was accounted for as a purchase, and accordingly, MJR's results of operations have been consolidated with the Company's
results of operations since March 11, 2000. The excess of the purchase price over the estimated fair market value of the net assets acquired, including an accrual for the contingent
consideration, to be amortized on a straight line basis over 20 years, was approximately $11.5 million at December 31, 2000.

On
February 25, 2000, the Company acquired Advanced Communication Systems, Inc. (ACS), a government information technology services company, in a
stock-for-stock transaction. ACS' operations are primarily included in the Titan Systems segment, with certain operations reported in the Emerging Technologies and Businesses
segment. Titan issued approximately 5,082,000 shares of common stock for all the outstanding shares of ACS common stock and assumed ACS stock options representing approximately 263,000 shares of Titan
common stock, based on an exchange ratio of approximately .57 shares of Titan common stock for each share of ACS common stock. The acquisition constituted a tax-free reorganization
and has been accounted for as a pooling of interests.

Effective
January 1, 2000, ACS' September 30 fiscal year-end has been changed to coincide with the Company's year-end. The 1999 and 1998
financial statements presented have been restated to include the combined results of operations, financial position and cash flows as if the merger had occurred at the beginning of the periods
presented. A pooling of interests adjustment has been made in the consolidated statement of cash flows and consolidated statement of stockholders' equity for the year ended December 31, 2000,
to reflect the activity for ACS in the quarter ended December 31, 1999, as reported in ACS'

70

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Form 10-Q for the fiscal quarter ended December 31, 1999. For the quarter ended December 31, 1999, ACS' revenues were $46,255 and net income was $1,352.

The
separate and combined results of Titan, ACS and AverStar in 2000 and 1999 are as follows:

Year Ended December 31, 2000Revenues

Income (Loss) from Continuing Operations

Net Income (Loss)Titan

$
648,535

$
2,342

$
30ACS


192,841


(21,230
)

(17,249
)AverStar


191,837


1,622


(1,509
)$
1,033,213

$
(17,266
)
$
(18,728
)


Year Ended December 31, 1999Revenues

Income from Continuing Operations

Net IncomeTitan

$
406,551

$
37,200

$
31,600ACS


218,252


3,581


3,581AverStar


184,336


2,576


2,576$
809,139

$
43,357

$
37,757


The
revenues of ACS were impacted in 2000 by a contract termination that occurred in late 1999, prior to Titan's acquisition, which resulted in reduced revenues of approximately
$31.6 million. AverStar's revenues in 2000 were impacted by the wind-down of its year 2000 business in early 2000, which resulted in reduced revenues of approximately $25.7 million.

Included
in the 2000 results from continuing operations are merger related expenses of $30.5 million and $8.3 million related to the acquisitions of ACS and AverStar,
respectively. In addition, Net Income (Loss) reflects an extraordinary loss, net of taxes, of $3.4 million and $1.3 million related to the early debt extinguishment of Titan and
AverStar's credit facilities, respectively. AverStar's net loss reflects a loss from discontinued operations of $1.5 million. Included in ACS' 1999 operating results is a write-off of
$3.9 million of capitalized software costs and a $1.8 million write-off of an uncollected receivable. All interest expense is reflected in the Titan operating results from the date of
acquisition.

In
1999, the Company or its subsidiaries acquired Atlantic Aerospace Corporation ("AAEC"), Systems Resources Corporation ("SRC") and Program Support Associates Inc. ("PSA"), all
reporting in the Company's Titan Systems segment, and SFG Technologies Inc. ("SFG"), Assist Cornerstone Technologies, Inc. ("Assist"), JB Systems, Inc. doing business as Mainsaver, and Transnational
Partners II, LLC ("TNP"), all reporting in the Company's Cayenta segment, in purchase transactions. In conjunction with the Mainsaver and Assist acquisitions, approximately $4.3 million
of the purchase price was held back, subject to purchase price adjustments and indemnification obligations, of which $3 million is due in January 2001 and the remaining $1.3 million is
due in June 2001. Related to the acquisition of SRC, a

71

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$2 million promissory note, subject to post-closing working capital adjustments and indemnification obligations, was due on June 9, 2000. The post-closing working capital adjustments and
indemnification obligations are currently in dispute with the stockholders of SRC. Accordingly, the promissory note has not been paid. Related to the AAEC acquisition, up to an additional
$3 million in contingent consideration may be due upon the award of future contracts. As of December 31, 2000, the Company estimates that a potential $2.4 million may be paid in
2001.

Unaudited
pro forma data giving effect to the purchase of Pulse, LinCom, SenCom, MJR, SRC, AAEC, PSA, Mainsaver, Assist and SFG as if they had been acquired at the beginning of 1999
are shown below. Pro forma information related to the TNP acquisition is not included, because the effect is not significant.

Twelve months ended December 31,2000

1999(unaudited)Revenues

$
1,071,516

$
966,579Income (loss) from continuing operations before extraordinary loss and cumulative effect of change in accounting principle


(12,361
)

34,159Net income (loss)


(18,567
)

28,559Basic earnings (loss) per share:Income (loss) from continuing operations before extraordinary loss and cumulative effect of change in accounting principle

$
(.23
)
$
.71Net income (loss)


(.35
)

.59Diluted earnings (loss) per share:Income (loss) from continuing operations before extraordinary loss and cumulative effect of change in accounting principle

$
(.23
)
$
.63Net income (loss)


(.35
)

.53


In
January 1999, the Company invested approximately $0.5 million for a 19.9% ownership interest in a joint venture with Sakon. In July 2000, Titan loaned Sakon
$15 million pursuant to a loan agreement with Sakon. In October 2000, Titan exercised its option pursuant to the agreement to convert amounts owed under the loan into additional equity
interest of 30.0% of Sakon, bringing the total equity interest in Sakon to 49.9%. At such time, the amount outstanding of $15 million under the loan was converted to purchase consideration as
the initial payment due under the terms of the agreement and recorded as goodwill. Under the terms of the agreement, an additional $12.5 million of consideration is due and payable upon certain
revenue targets being attained. The Company estimates that the remaining consideration will be paid by the second or third quarter of 2001. Such amount will be amortized over an estimated useful life
of 20 years. Titan has consolidated the operating results of Sakon beginning in 1999 in accordance with the joint venture agreement which assigns 100% of the joint venture revenues and
operating results to Titan. Titan will continue to consolidate the operating results of Sakon until a liquidity event, defined as an initial public offering or the sale of Sakon.

72

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In September 1999, together with Sempra Energy Information Solutions, a subsidiary of Sempra Energy, and modis, a company that focuses on configuring customers' software
applications, Cayenta established Soliance, LLC, a joint venture that markets and delivers information technology systems and solutions, including TSP offerings, to the utility industry. Cayenta owns
a 10% equity interest in Soliance and has a management services agreement with Soliance under which it provides TSP services to Soliance's customers. At December 31, 2000 and 1999, the
Company's investment of $5 million in this joint venture is included in Other Assets. The investment is being accounted for under the cost method.

In
1998, the Company consummated mergers with Delfin Systems ("Delfin"), VisiCom Laboratories, Inc. ("VisiCom"), Horizons Technology, Inc. ("Horizons") and DBA Systems, Inc. ("DBA")
in poolings of interests transactions. Also in 1998, the Company acquired Validity Corporation ("Validity") and Advanced Management Incorporated ("AMI") in purchase transactions. All of these
businesses report primarily in the Company's Titan Systems segment.

In
connection with the determination of the fair value of assets acquired in connection with the acquisitions of SRC, Semcor and Validity, and pursuant to the provisions of Accounting
Principles Board Opinion No. 16, the Company has valued acquired contracts in process at contract price, minus the estimated costs to complete and an allowance for the normal industry profit on
its effort to complete such contracts, which amounted to $10,904. This adjustment has been reflected in the accompanying balance sheet as an increase to goodwill and a corresponding increase to
deferred profit. The Company recognized approximately $6,936 and $2,606 as a reduction of costs in 2000 and 1999, respectively, with the remaining $1,362 to be recorded as a reduction of costs in
future periods as work on certain contracts is performed. At December 31, 2000, there was $13,150 and $1,300 in Other Accrued Liabilities and Other Non-current Liabilities, respectively, of
holdbacks of purchase consideration, subject to post-closing adjustments and indemnification obligations, related to acquisitions in 2000 and 1999.

Note 3. Acquisition Related Charges and Other

Acquisition related charges of $39.4 million in 2000 include costs of $30.5 million related to the ACS merger including direct transaction costs
of approximately $9.1 million comprised of accounting, legal,
investment banking, financial printing and other direct costs. Also included in the ACS merger costs was a write-down of approximately $5.5 million related to the impairment of
certain receivables, for which the realizability of such assets were impaired as a result of the merger with Titan, which impacted the recoverability of certain contract costs, employee termination
and retention costs of approximately $2.1 million, $3.8 million of costs to eliminate duplicate facilities and assets and a valuation allowance of $10.0 million against certain
contract receivables provided in connection with certain of the Company's integration activities, particularly as is relates to conforming ACS to Titan's accounting policies and procedures, and
determining appropriate valuation allowances against potential contract receivables which may not be realizable under normal contract reimbursement cycles. Unpaid amounts at December 31, 2000,
are primarily employee related costs and costs related to lease terminations which will be paid by December 31, 2001.

73

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THE TITAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share and per share data, or as otherwise noted)

Note 3. Acquisition Related Charges and Other (Continued)

Included
in acquisition related charges in 2000 is $8.3 million related to the merger with AverStar. These costs consisted of approximately $2.5 million of direct
transaction costs, approximately $5.5 million of employee termination and retention costs, and costs to eliminate duplicate facilities of approximately $0.3 million. The acquisition
related charges in the year ended December 31, 2000 also include $2.7 million of transaction costs related to the filing of a registration statement with the Securities and
Exchange Commission (SEC) for the initial public offering of Cayenta which was subsequently withdrawn by the Company in February 2001. These costs are primarily comprised of direct transaction
costs, including accounting, legal, investment banking, financial printing, and other direct costs. Also included in acquisition related charges is a $2.1 million gain resulting from the final
consideration from the sale of the Company's approximate 8% equity interest in IPivot, which was sold in October of 1999. Unpaid amounts at December 31, 2000 are primarily employee related
costs which will be paid by December 31, 2001.

During
the year ended December 31, 1999, the Company recorded acquisition and related charges of $13.8 million, which include approximately $4.5 million of legal
costs and approximately $9.3 million of integration and restructuring expenses. The integration and restructuring expenses include $2.1 million related to the wind-down of our Year 2000 business,
consisting primarily of employee termination costs and lease termination costs, a $2.1 million write-off of intangible costs to estimated realizable value, approximately $1.7 million for severance,
outplacement and relocation costs related to approximately 32 employees across the Company, and $3.4 million related to the closure and elimination of leased facilities, primarily duplicate field
offices. These charges were all cash charges, with the exception of the write-off of intangible costs. Accruals for unpaid special charges of $5,880 remain in other current liabilities at
December 31, 1999. Unpaid amounts at December 31, 1999 were primarily termination and other integration costs which were paid by December 31, 2000.

On
October 26, 1999, the Company received approximately $41.8 million in cash as a result of the acquisition by Intel Corporation of IPivot, Inc. ("IPivot"), a
technology spin-off from Titan. The cash payment to the Company was for its ownership interest in IPivot of approximately 8% after the dilutive impact of IPivot stock options, warrants and other
equity investments. In addition, approximately $3 million was received in October 2000 as final consideration. The income is netted against the charges discussed above in acquisition
related charges and other for the 1999 and 2000 amounts received.

During
the year ended December 31, 1998, the Company recorded acquisition-related and other charges of $9,891, which includes approximately $5.5 million of direct transaction
costs (consisting primarily of
investment banking and other professional fees), $3.8 million of integration expenses and $0.6 million of pre-operating and start-up costs of the Titan Africa, Inc., Benin operation. Approximately
$4.6 million of the direct transaction costs were incurred in connection with the Delfin, VisiCom, Horizons and DBA mergers. The remaining $0.9 million in transaction fees were related to costs
incurred to file a withdrawn registration statement of the Company's former Communications Systems segment. The integration costs included approximately $3.5 million for severance, outplacement and
retention costs incurred in the Titan Systems and Titan Wireless segments. Included in these amounts were termination benefits associated with employment agreements, as well as retention amounts
associated with employee retention agreements. The integration costs also included $0.3 million related to the closure and elimination of leased facilities, primarily duplicate field offices. All
amounts accrued at December 31, 1998 were substantially paid by December 31, 1999.

74

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Note 4. Discontinued Operations

In November 2000, the Company's Board of Directors adopted a plan to dispose of the Company's commercial information assurance and network monitoring
businesses. In 1998 and 1997, the Company's Board of Directors adopted a plan to wind down the Company's access control systems business and broadband communications business, respectively.
Accordingly, the results of these businesses have been accounted for as discontinued operations. In addition, the accompanying consolidated financial statements reflect operations discontinued by
certain of the companies acquired by Titan during 1998 and 2000. All periods presented reflect these specific operations as discontinued operations. Net assets of discontinued operations of
approximately $800 at December 31, 2000 consist primarily of current
assets of approximately $4,900 (primarily accounts receivable, inventories and capitalized software) net of accrued liabilities of approximately $4,100. In accordance with EITF 85-36, "Discontinued
Operations with expected Gain and Interim Operating Losses", all operating losses incurred in the commercial information assurance and network monitoring businesses from the measurement date are being
deferred until the date of disposal. The liabilities consist of accruals for contract losses, estimated wind-down costs and costs related to the closure and elimination of certain leased facilities.
Charges of approximately $7,000 were made against the accrued liabilities in 2000. The liabilities were increased by a $5,600 charge in 1999 based on management's most recent review of estimated
future wind-down costs. Long-term net assets of discontinued operations are primarily fixed assets. Management continues to assess the estimated wind-down and and/or disposal costs associated with the
businesses, and may from time to time adjust the allowance for such costs accordingly.

Note 5. Other Financial Data

Following are details concerning certain balance sheet accounts:

At December 31,2000

1999Accounts Receivable:U.S. Government  billed

$
205,618

$
170,428U.S. Government  unbilled


31,818


47,083Trade


114,016


53,576Less allowance for doubtful accounts


(4,319
)

(4,099
)$
347,133

$
266,988Inventories:Materials

$
11,562

$
7,725Work-in-process


9,856


4,357Finished goods


3,949


3,558$
25,367

$
15,640Property and Equipment:Machinery and equipment

$
119,945

$
77,948Furniture and fixtures


22,979


19,038Land, buildings and leasehold improvements


23,568


20,180Construction in progress


12,896


2,023179,388


119,189Less accumulated depreciation and amortization


(91,311
)

(71,633
)$
88,077

$
47,556


75

---

Supplemental
disclosures of cash flow information:

2000

1999

1998Noncash investing and financing activities:Non-monetary research consideration

$
4,701

$


$
Extraordinary loss on early extinguishments of debt


4,744





Gain related to issuance of stock in subsidiary


2,825





Equity issued in exchange for services


2,000





Shares contributed to employee benefit plans


2,364


3,594


100Issuance of stock for equity interest


900





Subsidiary options granted in exchange for services


1,911





Subsidiary options granted in exchange for equity interest


508





Conversion of subordinated debt





26,270


Stock issued for acquisitions








13,189Cash paid for interest

$
34,828

$
18,281

$
11,225Cash paid for taxes


11,909


6,119


3,022


Note 6. Segment Information

Management evaluates the performance of its operating segments separately to individually monitor the different factors affecting financial performance.
Segment profit or loss includes substantially all of the segment's direct costs of operations and administration. The Company manages income taxes on a corporate-wide basis. Thus, the Company
evaluates segment performance based on profit or loss before interest expense, income taxes and before allocated costs of corporate overhead, exclusive of any significant gains or losses on the
disposition of investments or other assets. Corporate overhead may include, among other things, costs for financial, accounting, marketing, administrative and legal activities. The Company typically
manages and evaluates equity investments and related income on a segment level. However, certain significant investments are managed at the corporate level. Financial costs, such as gains and losses
and interest income and expense, are managed at the Corporate segment. Consequently, the results of operations of the segments may not be indicative of the actual results that would be shown in the
financial statements of these segments if prepared on a stand-alone basis.

In
the fourth quarter of 2000, the Company formed a new business unit, Titan Scan Technologies within its Emerging Technologies and Businesses segment. The new business unit
encompasses all of
Titan's medical product sterilization operations, which were previously a part of SureBeam. As a result, all prior period data have been restated to reflect this change in Titan's segment reporting.

On
March 31, 1999, the Company realigned certain operations among its business segments to better position these operations for strategic transactions pursuant to the Company's
corporate strategy. As a result, the Company is reporting all commercial satellite communications operating results in its Titan Wireless segment, and all defense information technologies and services
operating results are reported in its Titan Systems segment. This realignment also conforms to the provisions of SFAS 131. All current and prior year segment data presented in these financial
statements have been restated to conform to the 1999 realignment.

76

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The Titan Systems segment provides comprehensive information systems solutions and services to U.S. and allied government defense and intelligence agencies and to civil government
agencies with sophisticated data management, information processing, information fusion and knowledge-based systems and communications requirements. The Titan Systems segment also develops and
manufactures digital imaging products, electro-optical systems, threat simulation/training systems, intelligence electronic hardware and defense communications systems. The Titan Systems segment also
installs, tests and maintains government information systems.

The
SureBeam segment provides electronic food irradiation systems and services for the food industry.

The
Titan Wireless segment provides satellite-based and wireless-based communication systems and services which provide cost-effective voice, facsimile, data, Internet and network
communications services in developing countries, primarily Asia, Africa, the Middle East and Latin America.

The
Software Systems segment is a total services provider, or TSP, of information technology products and services for commercial and government customers' business functions,
including retailing, finance, accounting, customer billing and collection, contract management, supply chain management and equipment monitoring and maintenance. Also included in this segment is the
Company's Year 2000 business unit, which has been wound-down.

The
Software Systems segment contains the Company's majority owned subsidiary, Cayenta, Inc. The Company recorded a $2.7 million charge in 2000 related to a registration
statement for the initial public offering of Cayenta which was withdrawn in February 2001.

The
Emerging Technologies and Businesses segment includes several businesses which apply the Company's proprietary knowledge and core competencies to create commercial technology
applications or individual businesses, including the Company's antenna business, e-tenna, its wireless networking chip business, LinCom Wireless, its information technology consulting business,
AverCom, and its medical products sterilization systems and services business, Titan Scan Technologies.

Substantially
all of the Company's operations are located in the United States. Export and foreign revenues amounted to approximately $82,602, $33,986, and $19,760 in 2000, 1999 and
1998, respectively, primarily to countries in Africa, Asia, Western Europe and South America. Substantially all international sales are denominated in U.S. dollars.

The
following tables summarize industry segment data for 2000, 1999 and 1998.

2000

1999

1998Revenues:Titan Systems

$
796,202

$
689,513

$
488,207SureBeam


25,210


3,747


Titan Wireless


81,450


27,325


6,717Software Systems


77,435


45,922


21,470Emerging Technologies and Businesses


52,916


42,632


15,842$
1,033,213

$
809,139

$
532,236


77

---

Sales
to the United States Government, including both defense and non-defense agencies, and sales as a subcontractor as well as direct sales, aggregated approximately $766,540 in
2000, $677,492 in 1999, and $453,623 in 1998. Inter-segment sales were not significant in any year.

2000

1999

1998Operating Profit (Loss):Titan Systems

$
28,462

$
43,469

$
41,212SureBeam


2,901


(121
)

Titan Wireless


11,644


5,063


(6,732
)Software Systems


(18,028
)

6,962


5,137Emerging Technologies and Businesses


6,683


46,590


1,155Corporate


(16,290
)

(14,417
)

(6,477
)$
15,372

$
87,546

$
34,295


Operating
results for the Titan Systems and Software Systems segments for the year ended December 31, 2000, include acquisition and other charges of $38,820 and $2,678,
respectively. Operating profit in 2000 for Emerging Technologies and Businesses includes the final $2,140 gain from the IPivot stock sale as discussed in Note 2, net of expenses.

Operating
profit for the Titan Systems, Software Systems and SureBeam segments for the year ended December 31, 1999, included acquisition and other charges of $5,535, $2,111
and $651, respectively. In addition, 1999 operating results included a $3,893 charge related to previously capitalized software development costs as well as a $1,800 in 1999 charge for an uncollected
receivable. Operating profit for Emerging Technologies and Businesses includes the $41,788 gain on IPivot stock sale as discussed in Note 3, net of acquisition related charges and other of $160
related to other business in the Emerging Technologies segment. Operating profit for the Titan Systems and Titan Wireless segments for the year ended December 31, 1998, included
acquisition-related and other charges of $7,218 and $2,398 respectively.

Corporate
includes corporate general and administrative expenses, certain corporate, integration, legal and restructuring charges ($5,296 in 1999 and $275 in 1998), and gains or
losses from the sale of businesses. Corporate general and administrative expenses are generally recoverable from contract revenues by allocation to operations.

78

---

As of December 31,2000

1999

1998Identifiable Assets:Titan Systems

$
518,712

$
420,129

$
306,270SureBeam


53,008


24,242


14,518Titan Wireless


128,579


35,598


5,085Software Systems


109,211


94,450


14,959Emerging Technologies and Businesses


54,696


4,610


67Discontinued Operations, net


570


557


645General corporate assets


94,662


55,072


28,379$
959,438

$
634,658

$
369,923


General
corporate assets are principally cash, accounts receivable, prepaid expenses, property and equipment, deferred income taxes and other assets.

As of December 31,2000

1999

1998Depreciation and Amortization of Property and Equipment, Goodwill, and Other Assets:Titan Systems

$
17,595

$
16,695

$
10,261SureBeam


2,527





Titan Wireless


1,540


607


381Software Systems


19,530


1,063


475Emerging Technologies and Businesses


1,763


911


901Corporate


737


1,129


600$
43,692

$
20,405

$
12,618Capital Expenditures:Titan Systems

$
9,447

$
7,839

$
7,758SureBeam


5,625





Titan Wireless


14,263


3,839


463Software Systems


13,430


1,002


325Emerging Technologies and Businesses


5,357


3,678


241Corporate


1,672


832


358$
49,794

$
17,190

$
9,145


79

---



The
components of the income tax provision (benefit) from continuing operations are as follows:

2000

1999

1998Current:Federal

$
(281
)
$
21,391

$
4,648State


1,227


4,831


1,220946


26,222


5,868Deferred


(4,931
)

447


3,316$
(3,985
)
$
26,669

$
9,184


Following
is a reconciliation of the income tax provision from continuing operations expected (based on the United States federal income tax rate applicable in each
year) to the actual tax provision on income:

2000

1999

1998Expected Federal tax provision on continuing operations

$
(6,998
)
$
24,400

$
7,889State income taxes, net of Federal income tax benefit


(621
)

4,226


1,037Goodwill amortization


6,664


378


218Change in valuation allowance


(8,100
)




Acquistion charges and other


3,943


(660
)

(293
)Utilization of NOL not realized in prior periods





(2,000
)

Foreign losses not benefited


642





Meals and entertainment


457





Other


28


325


333Actual tax provision on continuing operations

$
(3,985
)
$
26,669

$
9,184


The
net deferred tax asset as of December 31, 2000 and 1999, results from the following temporary differences:

2000

1999Loss carryforward

$
9,201

$
9,037Employee benefits


12,691


6,256Tax credit carryforwards


1,075


999Inventory, contract loss and other reserves


15,573


9,957Accounts and unbilled receivables


(9,558
)

(6,458
)Acquired in-process R&D write-off





659Accrued liabilities


2,079


3,297Depreciation and amortization


(1,622
)

(1,614
)Other


803


(91
)30,242


22,042Valuation allowance


(3,100
)

(11,200
)Deferred tax asset, net


27,142


10,842


Realization
of certain components of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to expiration of loss and
credit carryforwards. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset will

80

---

be realized. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are
changed.
Also, under Federal tax law, certain potential changes in ownership of the Company may limit annual future utilization of these carryforwards. Other non-current liabilities at December 31, 2000
and 1999 include a deferred liability of $1,622, and $2,519, respectively.

Note 8. Debt

On February 9, 2000, the Company and Titan Capital Trust (the Trust), our wholly owned subsidiary, issued 4 million convertible preferred
securities (Remarketable Term Income Deferrable Equity Securities, or HIGH TIDES) at $50 per security, for a total of $200 million, with an over-allotment exercised on February 16, 2000
for an additional 1 million securities, for an additional $50 million. The trust used the proceeds from the sale of the HIGH TIDES to purchase from the Company 53/4%
Convertible Senior Subordinated Debentures, due February 15, 2030. The debentures have the same financial terms as the HIGH TIDES. The HIGH TIDES will accrue distributions of
53/4% per annum, with quarterly distributions to be paid in arrears on February 15, May 15, August 15 and November 15, commencing May 15, 2000. The
trust's ability to pay distributions on the HIGH TIDES is solely dependent on its receipt of interest payments from the Company on the debentures. Approximately five years after issuance of the HIGH
TIDES, the HIGH TIDES may be remarketed, which means that a remarketing agent will attempt to establish an annual distribution rate, conversion price and redemption features for the HIGH TIDES that
are consistent with a price per HIGH TIDES equal to 101% of its liquidation preference and also are most favorable to the Company. The 53/4% per annum rate will be applicable from the
date of original issuance to, but excluding the reset date. The reset date is any date (a) not later than February 15, 2005, or the final reset date, or, if the day is not a business
day, the next succeeding day, and (b) not earlier than 70 business days prior to February 15, 2005, as may be determined by the remarketing agent, in its sole discretion. On or after the
reset date, the applicable rate will be the term rate established by the remarketing agent based on the outcome of the remarketing. The Company can, on one or more occasions, defer the interest
payments due on the debentures for up to 20 consecutive quarters unless an event of default under the debentures has occurred and is continuing. The holders of the HIGH TIDES may convert each security
into shares of common stock of Titan at the initial rate of 1.0076 shares of common stock for each HIGH TIDES (equivalent to an initial conversion price of $49.625 per share of common stock). The
Company may redeem the debentures in whole or in part, at any time on or after February 20, 2003 until but excluding the tender notification date, at a redemption price equal to 101.44% of the
principal amount of the debentures, declining to 100% of the principal amount of the debentures on or after February 20, 2004, plus any accrued and unpaid interest; and after the reset date, in
accordance with the term call projections, if any, established in the remarketing or, upon a failed final remarketing, on or after the third anniversary of the reset date at a redemption price equal
to 100% of the principal amount of debentures, plus any accrued and unpaid interest.

On
February 23, 2000, the Company entered into a credit agreement for $275 million of financing from a syndicate of commercial banks including Credit Suisse First Boston
acting as Lead Arranger and Administrative Agent, First Union Securities, Inc. acting as Co-Arranger and Syndication Agent and the Bank of Nova Scotia serving as Documentation
Agent. The credit facility also allowed the Company to increase total availability by an additional $100 million, if needed, for an aggregate of $375 million. The credit facility was
subsequently amended on June 1, 2000 to provide for an increase in total availability for

81

---

an additional $50 million, for an aggregate total of $425 million. The proceeds of the loan were used in part to refinance outstanding indebtedness on the Company's $190 million
credit facility arranged by Bank of Nova Scotia in June 1999. The senior credit facility is secured by substantially all of our and our subsidiaries' assets (other than the assets of SureBeam)
and guaranteed by substantially all of our subsidiaries. The $425 million facility is comprised of a six-year senior secured multi-draw term loan facility in an
aggregate principal amount of up to $75 million, two seven-year senior secured term loan facilities in an aggregate principal amount of $250 million, and a
five-year senior secured revolving credit facility in an aggregate principal amount of up to $100 million. Loans made under the multi-draw term loan facility mature on
the sixth anniversary of the closing date of the new credit facility, and amortize as follows: 2.5% quarterly in year two of the credit facility, 3.75% quarterly in year three of the credit facility,
5% quarterly in year four of the credit facility, 6.25% quarterly in year five of the credit facility and 7.5% quarterly in year six of the credit facility. Loans made under the term loan facilities
mature on the seventh anniversary of the closing date of the new credit facility, and amortize as follows: 0.25% quarterly for years one through six of the credit facility and 23.5% quarterly for year
seven of the credit facility. Under each of the term loan facilities and the revolving facility, the Company has the option to borrow at the bank's base rate or at adjusted LIBOR plus, in each case,
an applicable ratio based on the ratio of our total debt to EBITDA (earnings before interest and taxes and depreciation and amortization). The agreement contains financial covenants that set maximum
debt to EBITDA limits and require the Company to maintain minimum interest and fixed charge coverages and levels of net worth. SureBeam Corporation is no longer a guarantor under the credit facility,
and its assets shall no longer be collateral for the senior credit facility.

At
December 31, 2000, deferred financing costs included in Other Assets related primarily to this facility were approximately $17.8 million and are being amortized over
the term of the agreement. Upon consummation of this agreement in February 2000, the Company expensed the deferred financing costs related to the previous agreement as an extraordinary item in
the first quarter of 2000.

At
December 31, 2000, total borrowings outstanding were $263.1 million on the term loan at a weighted average interest rate of 9.67%. Commitments under letters of credit
were $6.6 million at December 31, 2000, which reduces availability of the working capital line. Of the total borrowings, $2.5 million was short-term.

In
November 1996, Titan issued $34,500 of 81/4% convertible subordinated debentures due 2003. On September 7, 1999, the Company announced a call for
redemption on November 2, 1999, of the debentures still outstanding. At the time of the call, the Company had outstanding debentures in the aggregate principal amount of approximately $11.6
million. All except $1 of the debentures were converted prior to the redemption date. Accordingly, the remaining $1 was redeemed on November 2, 1999. The conversion of the debentures was a
non-cash transaction.

On
December 10, 1999, the Company's wholly owned subsidiary, Titan Africa, Inc. ("Titan Africa"), in connection with its contract to build a satellite-based telephone
system for the national telephone company of Benin, Africa, the OPT, entered into a Loan Facility Agreement for up to 30.0 billion Francs CFA (the currency of the African Financial Community),
equivalent to approximately $45.0 million U.S. dollars, with a syndicate of five banks, with Africa Merchant Bank as the Arranger. This medium-term financing is a non-recourse loan to Titan Africa
which is guaranteed by the national telephone company of Benin, Africa and secured by the national telephone company's equipment and revenues related to the project. The facility has a fixed interest
rate of 9.5% and will be repaid in seven equal semi-annual

82

---

payments from the net receipts of this project, or by the OPT in the event that such receipts are not adequate to make these payments, beginning on December 31, 2000, and ending on
December 31, 2003. Approximately $36.7 million was drawn on this facility at December 31, 2000.

At
December 31, 2000 and 1999, Titan had $946 and $2,227, respectively, outstanding under two promissory notes, secured by certain machinery and equipment, at interest rates of
8.5% and 7.42%. At December 31, 2000, $794 is due within one year. At December 31, 2000 and 1999, ACS had $1,177 and $1,668, respectively, outstanding under two loans at interest rates
of 9.3% and 8.6%. At December 31, 2000, $79 is due within one year.

Advanced Communication Systems Debt

In February 1998, ACS entered into a line of credit arrangement, consisting of two credit facilities aggregating $35 million with a commercial bank,
refinancing ACS' then existing line of credit and the outstanding commercial bank debt of a 1997 acquisition. The credit facility was also used to finance the acquisition of AMI and to provide for the
working capital needs of ACS. The first facility, in an amount up to $15 million, could be used to finance acquisitions, working capital, and other corporate purposes, and bore interest at
either the bank's prime rate or at a London interbank offered rate ("LIBOR") for one, two or three month periods, plus a percentage, not more than 2.2%, which depended on ACS' historical performance.
The second facility, in an amount up to $20 million, could be
used to finance acquisitions and bore interest at either the bank's prime rate or at a LIBOR rate plus a percentage, not more than 2.45%, which depended on ACS' historical financial performance.

In
June 1998, the line of credit arrangement was increased to $45 million, from $35 million, to finance the acquisition of Semcor and to provide for the working capital
needs of ACS. In February 1999, the line of credit arrangement was increased to $60 million to finance the additional contingent payment to the selling shareholders of Semcor and to provide for
the working capital needs of ACS. These credit arrangements were subject to similar terms and conditions as the original arrangement that was entered into in February 1998. As of September 30,
1999, $58,400 was available on this credit arrangement and the outstanding balance was $46 million with an additional $3.8 million in standby letters of credit.

In
September 1999, ACS acquired PSA, and as a result, assumed its liabilities that, in part, consisted of $50 outstanding under a line of credit. This credit arrangement with a
commercial bank, in the amount of $400, bore interest at the bank's prime rate plus one percent and was due on demand.

At
September 30, 1999, ACS had $46,050 outstanding under these arrangements. For the years ended September 30, 1999 and 1998, interest expense under these credit facilities was
approximately $3,803 and $1,410, respectively, at weighted average interest rates of 8.16% and 8.10%, respectively.

AverStar Debt

On March 18, 1999, AverStar entered into an agreement that provided up to $75 million of secured financing based upon availability, comprised of
$45 million in Senior Term Loans A and B and a $30 million revolving credit facility note, secured by substantially all of AverStar's assets. Expenses associated with the financing
amounted to approximately $1.8 million. Proceeds from the financing agreement were used to fund an acquisition, retire existing debt and provide for working capital requirements.

83

---

The facility carried variable interest rates ranging from LIBOR plus 2.75% up to Prime plus 1.75%. The weighted average interest rate on the revolving facility note was 8.47% in 1999.

At
December 31, 1999, AverStar had $43.5 million and $8.6 million payable under the senior term loans and revolving credit facility note, respectively. The interest paid
on all borrowings was $4,896 and $2,809 for the years ended December 31, 1999 and 1998, respectively.

The
ACS and AverStar lines of credit were retired by the Company in connection with the mergers.

Titan Debt Maturities

Maturities
of long-term debt, excluding the Company's line of credit with Scotia Bank, are as follows:

2001

$
13,4112002


12,5172003


12,3782004


1222005 and thereafter


828$
39,256


At
December 31, 2000 the Company was in compliance with all financial covenants under its various debt agreements.

Note 9. Commitments and Contingencies

The Company leases certain buildings and equipment under non-cancelable operating lease agreements. These leases generally require the Company to pay all
executory costs such as taxes, insurance and maintenance related to the leased assets. Certain of the leases contain provisions for periodic rate accelerations to reflect cost-of-living increases.
Rental expense under these leases was $23,523 in 2000, $18,622 in 1999 and $15,536 in 1998. Through August 1999, the Company was obligated under a long-term lease agreement for facilities which are
owned by an entity in which Titan has a minority ownership interest. Rental expense in 2000, 1999 and 1998 includes $792, $593 and $921, respectively, paid under this agreement. In
February 2000, Cayenta entered into a new long-term lease agreement with this entity which requires future minimum lease payments of approximately $6.6 million over 7 years. There is additional
space in the facilities which, if vacant or desired by Cayenta, could obligate Cayenta for additional future minimum lease payments of approximately $0.7 million over the 7 years. The Company is a
guarantor on the lease. Also included in rent expense is $280 and $336 for 1999 and 1998, respectively, incurred by ACS on a lease for office space with a related party which includes the principal
stockholders of ACS. In 1999, this facility was sold to a non-affiliated third party from whom ACS currently leases the office space.

84

---

Future minimum lease payments under noncancellable operating leases at December 31, 2000, are as follows:

2001

$
22,5742002


18,3822003


15,0042004


11,1102005


8,532Thereafter


21,461Total minimum lease payments

$
97,063


In
1997, DBA recorded a $3.0 million charge in recognition of certain environmental matters at its Kissimmee facility including, but not limited to, soil contamination and potential
asbestos and lead-based paint contamination. These matters became known to DBA as a result of an environmental study performed as part of Titan's due diligence process related to the
merger with DBA. The accrual was recorded in accordance with SFAS No. 5 and SOP 96-1 and represented an initial estimate for the cost of clean-up activities. These activities are substantially
complete, and the property is currently in escrow (see Note 15). Based on the completion of the clean-up activities as well as the pending sale of the land and building, the Company determined that
the unused portion of the associated liability was not required as of December 31, 2000.

On
January 6, 2000, Ion Beam Applications s.a., a Belgian corporation, and some of its U.S. subsidiaries filed an action for declaratory judgment in a federal court in Virginia
against the Company relating to our patents for our SureBeam systems. The action attacks the validity of the Company's core patent, seeks a declaration that Ion Beam Applications and its customers
have not infringed any of the 62 claims in the Company's patent, and alleges that the Company has engaged in unfair competition and that Titan's conduct constitutes patent misuse. The case has been
moved to the federal court in San Diego. On November 22, 2000, Ion Beam filed an amended complaint alleging, in addition to the original claims, that we have engaged in false advertising,
monopolization, restraint on trade and unfair business practices. We intend to vigorously defend our patent position and defend against all allegations. However, a finding in favor of Ion Beam
Applications in this action could adversely affect our business, financial condition and results of operations by allowing Ion Beam and other potential competitors to develop and commercialize
electron beam food irradiation systems that would compete against our SureBeam systems and services, thereby potentially reducing the growth of our SureBeam business segment and preventing us from
generating the revenues that we expect from food irradiation. The Company intends to vigorously defend its patent position.

In
the ordinary course of business, defense contractors are subject to many levels of audit and investigation by various government agencies. Further, the Company and its subsidiaries
are subject to claims and from time to time are named as defendants in legal proceedings. The Company may also assert claims from time to time. In the opinion of management, the amount of ultimate
liability or recovery with respect to these actions will not materially affect the financial position or results of operations of the Company.

85

---

Note 10. Series B Cumulative Convertible Redeemable Preferred Stock

The Company's Series B Preferred Stock had a par value of $1.00, accrued dividends at a rate of 6% per annum payable quarterly in arrears cumulatively,
had a liquidation preference of $6.00 per share plus accrued and unpaid dividends (the "Series B Liquidation Preference") and entitled the holder thereof to one vote per outstanding share,
voting together as a class with the holders of shares of outstanding Common Stock (and any other series or classes entitled to vote therewith) on all matters submitted for a shareholder vote. The
Series B Preferred Stock was redeemable at the Series B Liquidation Preference (i) at the holder's option, after May 24, 1998 until May 24, 2001, and (ii) at
the Company's option, after May 24, 2001 until May 24, 2006. The Company redeemed all of the outstanding shares of Series B Preferred Stock in 1998.

Note 11. Cumulative Convertible Preferred Stock

Each share of $1.00 cumulative convertible preferred stock is entitled to 1/3 vote, annual dividends of $1 per share and is convertible at any
time into 2/3 share of the Company's common stock (subject to customary anti-dilution adjustments). Common stock of 459,986 shares has been reserved for this purpose. The $1.00
cumulative convertible preferred stock is redeemable at the Company's option at a redemption price of $20 per share, plus cumulative dividends in arrears. Upon liquidation, the $1.00 cumulative
convertible preferred stockholders are entitled to receive $20 per share, plus cumulative dividends in arrears, before any distribution is made to the common stockholders.

Note 12. Common Stock

At December 31, 2000, approximately 14,611,000 common shares were reserved for future issuance for conversion of preferred stock, employee benefit and
stock incentive plans and acquisition-related obligations.

On
August 17, 1995, the Board of Directors adopted a Shareholder Rights Agreement and subsequently distributed one preferred stock purchase right ("Right") for each outstanding
share of the Company's common stock. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share (the "Preferred Shares") at a price of $42.00 per one one-hundredth of a Preferred Share, subject to adjustment. The Rights become exercisable if a person or group acquires, in a
transaction not approved by the Company's Board of Directors ("Board"), 15% or more of the Company's common stock or announces a tender offer for 15% or more of the stock.

If
a person or group acquires 15% or more of the Company's common stock, each Right (other than Rights held by the acquiring person or group which become void) will entitle the holder
to receive upon exercise a number of shares of the Company's common stock having a market value of twice the Right's exercise price. If the Company is acquired in a transaction not approved by the
Board, each Right may be exercised for common shares of the acquiring company having a market value of twice the Right's exercise price. Titan may redeem the Rights at $.01 per Right, subject to
certain conditions. The Rights expire on August 17, 2005.

86

---

Note 13. Stock-Based Compensation Plans

The Company provides stock-based compensation to officers, directors and key employees through various fixed stock option plans and to all non-executive
employees through an employee stock purchase plan. The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Compensation cost if any, is measured as the excess of the quoted market price of the Company's stock on the date of grant over the exercise price of the grant. No compensation has been
recognized for the Company's stock purchase plan. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under
those plans consistent with the
method of SFAS 123, the Company's results of operations would have been reduced to the pro forma amounts indicated below:

2000

1999

1998Net income (loss)

As reported

$
(18,728
)
$
37,757

$
(18,019
)Pro forma


(22,348
)

34,337


(19,624
)Net income (loss) per share, basic

As reported


(.43
)

.79


(.45
)Pro forma


(.51
)

.71


(.49
)Net income (loss) per share, diluted

As reported


(.44
)

.70


(.43
)Pro forma


(.51
)

.64


(.47
)


Options
authorized for grant under the Stock Option Plans of 1994 and 1997 and The 1996 Directors' Stock Option and Equity Participation Plan (the "1996 Directors' Plan") are
2,000,000 and 125,000, respectively. Grants in 1999 and the beginning of 2000 exceeded the remaining shares available under these plans. The 2000 Employee and Director Stock Option and Incentive Plan
(the "2000 Plan") was approved by the Company's shareholders on May 30, 2000, authorizing 4,000,000 shares available for grant. Under all plans, the options outstanding have been granted
at prices that are equal to the market price of the Company's stock on the date of grant. Under the intrinsic value method prescribed by APB 25, no compensation cost is recorded. However, the
grants in 1999 that exceeded the shares available at that time were placed under the 2000 Plan after its approval by the shareholders. Under
the provisions of Financial Accounting Standards Board Interpretation No. 44 "Accounting for Certain Transactions Involving Stock Compensation" (an Interpretation of APB 25), the plan
approval date becomes the grant date for purposes of comparison of market value to exercise price. This resulted in deferred compensation related to these options of $15,568 in 2000 based on the
difference in market value at May 30, 2000, and the grant price. This deferred compensation will be amortized to expense over the four year vesting period of these options, including $4,901
expensed in 2000. Unamortized deferred compensation related to these options at December 31, 2000 was $10,222.

Under
the employee plans, an option's maximum term is ten years. Under the 1996 Directors' Plan, options expire 90 days after the option holder ceases to be a director. Under the
applicable plans, directors may elect to receive stock in lieu of fees, such stock to have a fair market value equal to the fees. Employee options may be granted throughout the year; directors'
options are granted annually. Under the 2000 Plan, vesting for directors and first-time option grantees is over four years, with 25% exerciseable at the completion of one year, and monthly vesting
thereafter. For option grants prior to the 2000 Plan, vesting is monthly over 4 years. Options in the Stock Option Plans of 1994 and 1997 and the Directors' Plan vest in 25% increments
beginning one year after the grant date. Stock options assumed by the Company as a result of the mergers discussed in Note 2 generally retain the terms under which they were granted.

87

---

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions: zero dividend
yield and an expected life of 5 years in all years; expected volatility of 72% in 2000, 67% in 1999, and 71% in 1998; and a risk free interest rate of 5.05% in 2000, 6.55% in 1999 and 4.74% in 1998.

A
summary of the status of the Company's fixed stock option plans as of December 31, 2000, 1999 and 1998, and changes during the years ending on those dates is presented below:

|                                                                         |  | 2000 |       | 1999 |   | 1998 
|------------------------------------------------------------------------ |  | ---- | ----- | ---- | - | -----
|
|Outstanding at beginning of year                                         |  |      | 4,813 |      | $ | 4.99 
|Granted                                                                  |  |      | 1,148 |      |   | 26.34
|Exchanged                                                                |  |      |      |      |   |     
|Exercised                                                                |  |      | (718  | )    |   | 28.11
|Canceled                                                                 |  |      | (271  | )    |   | 11.33
|                                                                         |  |      |       |      |   |      
|Outstanding at end of year                                               |  |      | 4,972 |      |   | 11.42
|                                                                         |  |      |       |      |   |      
|Options exercisable at year-end                                          |  |      | 2,578 |      |   |      
|Weighted-average fair value of options granted/exchanged during the year |  | $    | 17.51 |      |   |      

The
following table summarizes information about fixed stock options outstanding at December 31, 2000:

Options Outstanding

Options ExercisableRange of Exercise Prices

Number Outstanding at 12/31/00

Weighted-Average Remaining Contractual Life

Weighted-Average Exercise Price

Number Exercisable at 12/31/00

Weighted-Average Exercise Price$1.12 - $5.00

1,664,662

5.66 years

$
3.53

1,358,813

$
3.405.06 - 9.75

1,839,424

7.46 years


8.29

994,747


8.0410.25 - 23.25

1,222,442

8.35 years


21.80

209,235


19.4827.81 - 47.50

245,000

9.27 years


36.69

15,620


38.324,971,528

7.17 years


11.42

2,578,415


6.70


Under
the 2000 Employee Stock Purchase Plan, the Company is authorized to issue up to 1,500,000 shares of common stock to its full-time employees. This plan replaced the Company's
1995 Employee Stock Option Plan, which was authorized to issue 500,000 shares. Elected officers of the Company are not eligible to participate. Under the terms of the plan, employees may elect to have
between 1 and 15 percent of their regular earnings, as defined in the plan, withheld to purchase the Company's common stock. The purchase price of the stock is 85 percent of the lower of its market
price at the beginning of a two-year period or at the end of each offering period. An offering period is two years, beginning
January 1 and July 1 of each year. Approximately 27%, 10% and 13% of eligible employees participated in the Plan and

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purchased approximately 559,000, 216,000 and 92,000 shares of the Company's common stock in 2000, 1999 and 1998, respectively. The weighted-average fair value of the purchase rights granted in 2000,
1999 and 1998 was $3.33, $5.60 and $1.61, respectively.

Each
of Titan Systems, SureBeam and Titan Wireless is a wholly owned subsidiary of Titan and has its own key employee stock option plan. The Company has created stock option plans for
each of Titan Systems, SureBeam and Titan Wireless. As of December 31, 2000, Titan Systems had approximately 18% of its fully diluted common stock that had been reserved for issuance under its
plan, and each of SureBeam and Titan Wireless had approximately 17% of their fully diluted common stock that had been reserved for issuance under their respective plans.

At
December 31, 2000, Titan Systems and Titan Wireless had options outstanding of approximately 5,657,500 and 572,750, respectively. LinCom Wireless, part of the Company's Emerging
Technologies and Businesses segment, had 1,360,300 options outstanding at December 31, 2000. A summary of the status of SureBeam's stock-based compensation plans as of December 31, 2000, 1999,
and 1998 and changes during the periods ended on those dates is presented below:

|                                            |  | 2000       |   | 1999 |      | 1998
|------------------------------------------- |  | ---------- | - | ---- | ---- | ----
|
|Outstanding at beginning of period          |  | 6,451,863  |   | $    | 0.14 |     
|Granted                                     |  | 2,124,216  |   | $    | 0.14 |     
|Exercised                                   |  |           |   |      |      |     
|Terminated                                  |  | (512,436   | ) | $    | 0.14 |     
|                                            |  |            |   |      |      |     
|Outstanding at end of period                |  | 8,063,643  |   | $    | 0.14 |     
|                                            |  |            |   |      |      |     
|Weighted average remaining contractual life |  | 8.41 years |   |      |      |     
|Options exercisable at end of period        |  | 2,102,096  |   | $    | 0.14 |     
|                                            |  |            |   |      |      |     

During 1999, SureBeam granted 3,237,578 options to purchase shares of its Class A common stock with a weighted average exercise price of
$0.1438 per share. These option grants resulted in deferred compensation to SureBeam calculated as the difference between the fair market value of the shares of common stock underlying the option at
the date of grant and the option exercise price. The deferred compensation is amortized over the vesting period of the underlying options which is four years. Accordingly, SureBeam recorded deferred
compensation of approximately $17 which resulted in an insignificant non-cash compensation amortization expense for the year ended December 31, 1999. During 2000, SureBeam recorded
deferred compensation of approximately $3.2 million which resulted in a
non-cash compensation amortization expense of approximately $0.6 million. SureBeam also recorded $78.6 million as deferred compensation at the time its recently completed
initial public offering closed. This amount was recognized as a non-cash charge to SureBeam's earnings of approximately $38.9 million in March 2001 at the time its recently
completed initial public offering closed, with the balance being recognized over the remaining four-year vesting period of the options.

Under
its variable stock option plan, Cayenta has granted options to certain employees who have agreed to resell shares purchased with those options to Cayenta. Cayenta has recorded a
deferred compensation charge related to these option grants of approximately $0.6 million in the year ended December 31, 2000. As of December 31, 2000, there are 654,500 options
outstanding that are subject to this buyback provision. Cayenta also issued 645,500 options to employees not covered by this buyback

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option at exercise prices that were less than the deemed fair market value of the underlying common shares on the date of grant. Cayenta has recognized deferred compensation relating to these grants
of approximately $1.1 million and will amortize this deferred charge to expense over the four-year vesting period of these options.

Note 14. Benefit Plans

The Company has various defined contribution benefit plans covering certain employees. The Company's contributions to these plans were $11,241, $9,893 and
$5,591 in 2000, 1999 and 1998, respectively. The Company's combined discretionary contributions to their Employee Stock Ownership Plans were $1,055 and $295 in 1999 and 1998, respectively. No
contribution was made in 2000. Discretionary contributions to a profit sharing plan covering certain employees were $150 in both 1999 and 1998.

The
Company has a non-qualified executive deferred compensation plan for certain officers and key employees. The Company's expense for this plan, including interest, was $809, $1,039
and $824 in 2000, 1999 and 1998, respectively. Interest expense for the years ended December 31, 2000, 1999 and 1998 includes $330, $828 and $650, respectively, related to the plan. Included in
other non-current liabilities is $5,736 and $4,643 related to this plan at December 31, 2000 and 1999, respectively. Cash surrender value of the life insurance related to this plan was $9,781 and
$8,401 included in Other Assets at December 31, 2000 and 1999, respectively. The Company also has performance bonus plans for certain
of its employees. Related expense amounted to approximately $12,392, $6,333 and $4,917 in 2000, 1999 and 1998, respectively.

The
Company has previously provided for postretirement benefit obligations of operations discontinued in prior years. The Company has no postretirement benefit obligations for any of
its continuing operations nor for its recently discontinued businesses.

Note 15. DBA Asset Impairments

The Company has a 141,000 square foot manufacturing facility located in Kissimmee, Florida which was acquired in the merger with DBA. The property has been
held for sale since June 1996. As a result of several factors, including offers received by third parties, management concluded that there had been an impairment in the carrying value of the
asset. A charge of $2.0 million was recorded in the Company's financial statements for the year ended December 31, 1997 which reflected management's estimate of the impairment, including
estimated disposal costs. Titan management has a program of ongoing maintenance (and environmental remediation  see Note 9) and the property is currently in escrow and
scheduled to close in the first quarter of 2001. As the estimated net sales price approximates the net carrying value as of December 31, 2000, the Company believes that the carrying value is
not less than net realizable value.

In
September 1997, DBA invested $1.6 million in a start-up venture. To date, this start-up venture has not yet generated any significant business and has generated no
significant revenue. In light of these circumstances, Titan management believed that there was an impairment in the value of the investment as recorded by DBA. An adjustment to write down the
investment by $1.6 million was recorded in the results of operations for the year ended December 31, 1997.

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Note 16. Subsequent Event

On March 16, 2001, SureBeam completed its initial public offering of 6,700,000 shares of its Class A common stock. In connection with the
offering, warrants for 2,236,023 shares of SureBeam's Class A common stock also were exercised. SureBeam anticipates using the net proceeds of $61.5 million to build new systems and
service centers, expand manufacturing capacity, increase marketing activities, pursue strategic relationships and acquisition opportunities, as well as for general working capital purposes. Expenses
associated with the offering of approximately $1.9 million will be reflected in the net proceeds recorded in the first quarter of 2001. The Company will record deferred compensation of
approximately $78.6 million, of which $38.9 million will be expensed in the first quarter of 2001.

Note 17. Unaudited Quarterly Financial Data (in thousands, except per share data)

|2000                                                               |  | First Quarter |         | Second Quarter |   | Third Quarter |   | Fourth Quarter |         | Total Year |  
|------------------------------------------------------------------ |  | ------------- | ------- | -------------- | - | ------------- | - | -------------- | ------- | ---------- | -
|Revenues                                                           |  | $             | 220,221 |                | $ | 253,719       |   | $              | 274,495 |            | $
|Gross profit                                                       |  |               | 53,941  |                |   | 63,928        |   |                | 71,022  |            |  
|Income (loss) from continuing operations before extraordinary loss |  |               | (11,686 | )              |   | (10,769       | ) |                | 6,221   |            |  
|Net income (loss)                                                  |  |               | (15,236 | )              |   | (12,485       | ) |                | 5,691   |            |  
|Basic earnings per share:                                          |  |               |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing operations before extraordinary loss |  | $             | (.26    | )              | $ | (.21          | ) | $              | .10     |            | $
|Net income (loss)                                                  |  |               | (.32    | )              |   | (.24          | ) |                | .09     |            |  
|Diluted earnings per share:                                        |  |               |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing operations before extraordinary loss |  |               | (.26    | )              |   | (.21          | ) |                | .10     |            |  
|Net income (loss)                                                  |  |               | (.32    | )              |   | (.24          | ) |                | .09     |            |  

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|1999                              |  | First Quarter |         | Second Quarter |   | Third Quarter |  | Fourth Quarter |         | Total Year |  
|--------------------------------- |  | ------------- | ------- | -------------- | - | ------------- |  | -------------- | ------- | ---------- | -
|Revenues                          |  | $             | 162,559 |                | $ | 191,446       |  | $              | 212,890 |            | $
|Gross profit                      |  |               | 39,972  |                |   | 49,537        |  |                | 52,291  |            |  
|Income from continuing operations |  |               | 4,777   |                |   | 6,562         |  |                | 9,028   |            |  
|Net income                        |  |               | 4,777   |                |   | 6,562         |  |                | 9,028   |            |  
|Basic earnings per share:         |  |               |         |                |   |               |  |                |         |            |  
|Income from continuing operations |  | $             | .11     |                | $ | .14           |  | $              | .18     |            | $
|Net income                        |  |               | .11     |                |   | .14           |  |                | .18     |            |  
|Diluted earnings per share:       |  |               |         |                |   |               |  |                |         |            |  
|Income from continuing operations |  |               | .10     |                |   | .12           |  |                | .16     |            |  
|Net income                        |  |               | .10     |                |   | .12           |  |                | .16     |            |  

The
above financial information for each quarter reflects all normal and recurring adjustments.

Loss
from continuing operations and net loss for 2000 include acquisition related charges of $41.5 million, net of other income of $2.1 million. Income from continuing
operations and net income for 1999 include other income of $41.8 million, net of acquisition and integration charges of $13.8 million and write-offs recorded by ACS, prior to our acquisition, of
$3.9 million of capitalized software development costs and a $1.8 million write-off of an uncollected receivable, in the fourth quarter of 1999.

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PART III

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

No information is required by Item 9.

Item 10. Directors and Executive Officers of the Company

The information required by Item 10 with respect to the directors and the executive officers of the Company is incorporated herein by this reference to such
information on pages 6-11 and 20 of the Company's definitive proxy statement for the 2001 Annual Meeting of Stockholders.

Item 11. Executive Compensation

The information required by Item 11 is incorporated herein by this reference to such information on pages 12-17 of the Company's definitive proxy
statement for the 2001 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by Item 12 is incorporated herein by this reference to such information on page 4-5 of the Company's definitive proxy statement
for the 2001 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated herein by this reference to such information on pages 17-18 of the Company's definitive proxy
statement for the 2001 Annual Meeting of Stockholders.

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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Page No.
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|3.1         |  | Registrant's Certificate of Amendment of Restated Certificate of Incorporation dated as of October 21, 1998, which was Exhibit No. 3.1 to Registrant's Quarterly Report on Form 10-Q dated November 16,
1998, is incorporated herein by this reference. Registrant's Restated Certificate of Incorporation dated as of November 6, 1986, which was Exhibit No. 3.1 to Registrant's 1987 Annual Report on Form 10-K is incorporated herein by this
reference. Registrant's Certificate of Amendment of Restated Certificate of Incorporation dated as of June 30, 1987, which was Exhibit 3.2 to Registrant's 1987 Annual Report on Form 10-K is incorporated herein by this
reference. |  | *       
|3.2         |  | Registrant's By-laws, as amended, which was filed with the Company's Quarterly Report on Form 10-Q dated November 13, 1995, as Exhibit 6(a)(3)is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | *       
|3.3         |  | Registrant's By-laws, which was Exhibit 3.3 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | *       
|4.1         |  | Rights Amendment, dated as of August 21, 1995, between The Titan Corporation and American Stock Transfer and Trust Company, which was Exhibit 1 to Registrant's Form 8-A dated September 5, 1995, is
incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | *       
|4.2         |  | Letter Agreement dated February 4, 1998 between the Company and DBA Systems, Inc. ("DBA") regarding certain registration rights granted in connection with the acquisition of DBA, which was Exhibit 10.38 to
Registration Statement on Form S-4 (no. 333-45719), is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                            |  | *       
|10.1        |  | Stock Option Plan of 1990, which was filed in the 1990 definitive proxy statement and was Exhibit 10.11 to Registrant's 1989 Annual Report on 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | *       
|10.2        |  | Stock Option Plan of 1994, which was filed in the 1994 definitive proxy statement and was Exhibit 10.17 to Registrant's 1993 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | *       
|10.3        |  | Amendment to Stock Option Plan Of 1994, which was Exhibit 10.3 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | *       
|10.4        |  | Stock Option Plan of 1997, which was filed in the Company's 1997 Definitive Proxy Statement as Appendix A, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | *       
|10.5        |  | Amendment to Stock Option Plan of 1997, which was Exhibit 10.5 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | *       
|10.6        |  | 1992 Directors' Stock Option Plan which was filed in the 1993 definitive proxy statement and was Exhibit 10.14 to Registrant's 1992 Annual Report on Form 10-K, is incorporated herein by this
reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | *       

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|10.7  |  | 1996 Directors' Stock Option and Equity Participation Plan, which was filed in the 1996 definitive proxy statement and was Exhibit 10.7 to Registrant's 1995 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                 |  | *
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.8  |  | Supplemental Retirement Plan for Key Executives, which was filed in the 1990 definitive proxy statement and was Exhibit 10.13 to Registrant's 1989 Annual Report on Form 10-K, is incorporated herein by this
reference.                                                                           |  | *
|10.9  |  | Amendment to The Titan Corporation Supplemental Retirement Plan For Key Executives dated February 17, 2000, which was Exhibit 10.9 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                      |  | *
|10.10 |  | 1995 Employee Stock Purchase Plan, which was Exhibit 4 to Registrant's Form S-8 dated December 18, 1995, is incorporated herein by this reference.                                                                                                                                                 |  | *
|10.11 |  | Lease Agreement dated as of July 9, 1991, by and between Torrey Pines Limited Partnership, a California limited partnership, as landlord, and Registrant, as tenant, which was Exhibit 10.1 to Registrant's Form
 8-K dated July 11, 1991, is incorporated herein by this reference.               |  | *
|10.12 |  | Agreement and Plan of Reorganization of Eldyne, Inc. dated as of April 19, 1996, by and among Eldyne, Inc., Jack Witt, ELD Acquisition Sub, Inc. and Registrant, which was Exhibit 2.1 to
Registrant's Form 8-K dated May 24, 1996, is incorporated herein by this reference.                      |  | *
|10.13 |  | Agreement and Plan of Reorganization of Unidyne Corporation dated as of April 19, 1996, by and among Unidyne Corporation, Jack Witt, UNI Acquisition Sub, Inc. and Registrant, which was Exhibit 2.2 to
Registrant's Form 8-K dated May 24, 1996, is incorporated herein by this reference.        |  | *
|10.14 |  | Executive Severance Plan entered into by the Company with Ronald B. Gorda, which was Exhibit 6(a)(10) to Registrant's Quarterly Report on Form 10-Q dated November 13, 1995, is incorporated herein by
this reference.                                                                             |  | *
|10.15 |  | Executive Severance Plan entered into by the Company with Gene W. Ray, Eric M. DeMarco and Nicholas J. Costanza, which was Exhibit 10.15 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                |  | *
|10.16 |  | Loan and Security Agreement, dated December 29, 1995, by and between Registrant and Capital Associates International, Inc., which was Exhibit 10.17 to Registrant's 1995 Annual Report on Form 10-K, is
incorporated by this reference.                                                            |  | *
|10.17 |  | Rider dated August 13, 1996, to Loan and Security Agreement dated December 29, 1995 by and between Registrant and Capital Associates International, Inc. which was Exhibit 10.28 to Registrant's 1996
Annual Report on Form 10-K, is incorporated herein by this reference.                        |  | *
|10.18 |  | Loan and Security Agreement dated January 31, 1996, by and between Registrant and Sanwa General Equipment Leasing, a division of Sanwa Business Credit Corporation, which was Exhibit 10.18 to Registrant's 1995
Annual Report on Form 10-K, is incorporated herein by this reference.             |  | *
|10.19 |  | Agreement and Plan of Merger and Reorganization dated January 6, 1998 among The Titan Corporation, Titan Acquisition Sub, Inc. and DBA Systems, Inc. which was filed as Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (No. 333-45719), is incorporated herein by this reference. |  | *

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|10.20 |  | Agreement and Plan of Merger and Reorganization dated February 26, 1998, among The Titan Corporation, Sunrise Acquisition Sub, Inc., Horizons Technology, Inc. ("Horizons") and certain stockholders of
Horizons, which was filed as Appendix A to the Company's Registration Statement on Form S-4 (No. 333-47633), is incorporated herein by this reference.                                                                                   |  | *
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -
|10.21 |  | Stock Purchase Agreement dated as of March 24, 1998 between Titan Technologies and Information Systems Corporation, Validity Corporation and the Shareholders of Validity Corporation, which was Exhibit 10.21 to
Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                        |  | *
|10.22 |  | Agreement and Plan of Reorganization dated as of June 30, 1998 by and among The Titan Corporation, Delsys Merger Corp., and Delfin Systems, which was filed as Exhibit 2.1 to the Company's Registration Statement
on Form S-4 (No. 333-60127), is incorporated herein by this reference.                                                                                                                                                        |  | *
|10.23 |  | Agreement and Plan of Merger and Reorganization dated as of August 7, 1998 among The Titan Corporation, Merger Sub Acquisition Corp., VisiCom Laboratories, Inc., and Certain Shareholders of VisiCom Laboratories,
 Inc., which was Exhibit 10.23 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                    |  | *
|10.24 |  | Stock Purchase Agreement dated as of June 9, 1999 among Titan Technologies and Information Systems Corporation, System Resources Corporation and the Stockholders of System Resources Corporation, which was filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 9, 1999, is incorporated herein by this reference.                                                                                                      |  | *
|10.25 |  | Agreement and Plan of Merger and Reorganization dated as of July 1, 1999 among Titan Technologies and Information Systems Corporation, TTIS MergerCo, Inc., Atlantic Aerospace Electronics Corporation, and the
Designated Stockholders, which was Exhibit 10.25 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                      |  | *
|10.26 |  | Limited Liability Company Agreement of Soliance Networks, LLC dated as of August 25, 1999 among Sempra Energy Information Solutions, modis, Inc., and Cayenta.com, Inc., which was Exhibit 10.26 to
Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                      |  | *
|10.27 |  | Agreement and Plan of Merger, as amended, dated as of October 4, 1999 among IPIVOT, Inc., Intel Corporation, WCXT Acquisition Corporation and Brett Helm and William Strensrud as the representatives of the Escrow
Securityholders, which was Exhibit 10.27 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                          |  | *
|10.28 |  | Stock Purchase Agreement dated as of November 2, 1999 among Cayenta.com, Inc., J B Systems, Inc, d.b.a. Mainsaver Corporation and Mainsaver, JKS Separate Property Trust, The Gehl Living Trust, JBS Acquisition
Company, LLC, Epicor Software Corporation, Mark Stevens and The Titan Corporation, which was filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated November 2, 1999, is incorporated herein by this reference. |  | *

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|10.29 |  | Stock Exchange and Stock Purchase Agreement dated as of December 7, 1999 among Cayenta, Cayenta Operating Company, The Titan Corporation, Assist Cornerstone Technologies, Inc. and the Selling Shareholders We
have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule, which was Exhibit 10.29 to Registrant's 1999 Annual Report on Form
 10-K, is incorporated herein by this reference.                     |  | *
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.30 |  | Agreement and Plan of Merger dated as of December 9, 1999 among The Titan Corporation, Advanced Communication Systems, Inc., and AT Acquisition Corp, which was filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 9, 1999, is incorporated herein by this reference.                                                                                                                                                                                                                                |  | *
|10.31 |  | Agreement and Plan of Merger, dated as of December 9, 1999 as amended as of January 20, 2000, among the Company, Merger Sub and ACS, which was filed as Exhibit 2.1 to the Company's Registration Statement on Form
 S-4 (No. 333-95245), is incorporated herein by this reference.                                                                                                                                                                                                                                               |  | *
|10.32 |  | Loan Facility Agreement dated as of December 10, 1999 among Titan Africa, Inc., Office des Postes et Telecommunications of the State of Benin, Banque Belgolaise, Eco Bank Benin, Banque Ouest Africain pour le
Developpement, Banque Internationale du Benin, Continental Bank Benin and Bank of Africa Benin, which was Exhibit 10.32 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                |  | *
|10.33 |  | Stock Purchase Agreement dated as of December 23, 1999 among Cayenta, SFG Technologies, Inc., the Common Selling Shareholders, the Preferred Selling Shareholders and the Option Holders, which was filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 22, 1999, is incorporated herein by this reference.                                                                                                                                                                                           |  | *
|10.34 |  | Agreement and Plan of Reorganization dated as of January 28, 2000 among The Titan Corporation, MT Acquisition Corp., William C. Lindsey, Inc. (DBA LinCom Corporation) and the Principal Shareholder of William C.
Lindsey, Inc., which was Exhibit 10.34 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference. We have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish
supplementally to the Commission a copy of any omitted schedule. |  | *
|10.35 |  | 53/4 % Convertible Preferred Securities Remarketable Term income Deferrable Equity Securities (High Tides) dated as of February 3, 2000, which was Exhibit 10.35 to Registrant's 1999 Annual
Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                       |  | *
|10.36 |  | Senior Secured Credit Agreement, dated as of February 23, 2000 among the Company, Various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston, as the Lead Arranger and
as the Administrative Agent for the Lenders, First Union Securities, Inc. as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent, which was Exhibit 10.36 to Registrant's 1999 Annual Report on Form 10-K, is
incorporated herein by this reference.             |  | *
|10.37 |  | Agreement and Plan of Merger dated as of March 10, 2000 among The Titan Corporation, Titan Acquisition Corporation and Pulse Engineering, Inc., which was Exhibit 10.37 to Registrant's 1999 Annual Report on
Form 10-K, is incorporated herein by this reference. We have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                                   |  | *

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|10.38 |  | Agreement and Plan of Merger, dated as of March 24, 2000, by and among The Titan Corporation, V T Acquisition Corp. and AverStar, Inc., which was Exhibit 2.1 to Registrant's Form S-4 dated April
 20, 2000, is incorporated herein by this reference.                                                                                                                                                                             |  | *
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.39 |  | Stock Purchase Agreement, dated as of May 31, 2000, by and among The Titan Corporation, Sencom Corp. and The Stockholders of Sencom Corp. We have not filed Schedules and similar attachments to this Exhibit. Upon
request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                                                              |  |  
|10.40 |  | First Amendment to Senior Secured Credit Agreement, dated June 1, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston,
 as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.      |  |  
|10.41 |  | Second Amendment to Senior Secured Credit Agreement, dated June 22, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First
Boston, as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.     |  |  
|10.42 |  | Stock Purchase Agreement, dated June 28, 2000, by and among Titan Wireless, Inc., Titan Wireless Afripa Holding, Inc., Ivoire Telecom S.A. Holding and M. Louis N'Ki Diakite. We have not filed Schedules and
similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                          |  |  
|10.43 |  | The Titan Corporation 2000 Employee Stock Purchase Plan, which was Exhibit 4.1 to Registrant's Form S-8 dated July 11, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                                              |  | *
|10.44 |  | The Titan Corporation 2000 Employee and Director Stock Option and Incentive Plan, which was Exhibit 4.2 to Registrant's Form S-8 dated July 11, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                     |  | *
|10.45 |  | Third Amendment to Senior Secured Credit Agreement, dated August 22, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston,
as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.    |  |  
|10.46 |  | Fourth Amendment to Senior Secured Credit Agreement, dated November 20, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First
Boston, as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent. |  |  
|13    |  | The Titan Corporation 2000 Annual Report to Shareholders.                                                                                                                                                                                                                                                                                                                                                                           |  |  
|21    |  | Subsidiaries of Registrant as of December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                 |  |  
|23    |  | Consent of Arthur Andersen LLP, Independent Public Accountants.                                                                                                                                                                                                                                                                                                                                                                     |  |  

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98

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|               |  | THE TITAN CORPORATION
|-------------- |  | ---------------------
|March 30, 2001 |  | By:                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

|Signature                                     |  | Title                                                                              |  | Date          
|--------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | --------------
|                                              |  |                                                                                    |  |               
|/s/GENE W. RAYGene W. Ray                     |  | President, Chief Executive Officer and Chairman of the Board                       |  | March 30, 2001
|/s/ERIC M. DEMARCOEric M. DeMarco             |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer) |  | March 30, 2001
|/s/DEANNA HOM PETERSENDeanna Hom Petersen     |  | Vice President, Corporate Controller (Principal Accounting Officer)                |  | March 30, 2001
|/s/MICHAEL B. ALEXANDERMichael B. Alexander   |  | Director                                                                           |  | March 30, 2001
|/s/CHARLES R. ALLENCharles R. Allen           |  | Director                                                                           |  | March 30, 2001
|/s/JOSEPH F. CALIGIURIJoseph F. Caligiuri     |  | Director                                                                           |  | March 30, 2001
|/s/DANIEL J. FINKDaniel J. Fink               |  | Director                                                                           |  | March 30, 2001
|/s/ROBERT M. HANISEERobert M. Hanisee         |  | Director                                                                           |  | March 30, 2001
|/s/ROBERT E. LA BLANCRobert E. La Blanc       |  | Director                                                                           |  | March 30, 2001
|Thomas G. Pownall                             |  | Director                                                                           |  | March 30, 2001
|George A. Robinson                            |  | Director                                                                           |  | March 30, 2001
|/s/JAMES ROTHJames Roth                       |  | Director                                                                           |  | March 30, 2001
|/s/JOSEPH R. WRIGHT, JR.Joseph R. Wright, Jr. |  | Director                                                                           |  | March 30, 2001

99

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THE TITAN CORPORATION

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2000, 1999 and 1998

(in thousands of dollars)

|                                     |  | Balance at beginning of year |       | Additions (charges to expense)(c) |   | Charged to Other Accounts(a) |  | Deductions |  | Balance at end of year
|------------------------------------ |  | ---------------------------- | ----- | --------------------------------- | - | ---------------------------- |  | ---------- |  | ----------------------
|2000:                                |  |                              |       |                                   |   |                              |  |            |  |                       
|Accrued merger and integration costs |  | $                            | 5,880 |                                   | $ | 38,820                       |  |           |  | $                     
|Allowance for doubtful accounts      |  |                              | 4,099 |                                   |   | 1,313                        |  |           |  |                       
|1999:                                |  |                              |       |                                   |   |                              |  |            |  |                       
|Accrued merger and integration costs |  |                              | 3,035 |                                   |   | 9,288                        |  |           |  |                       
|Allowance for doubtful accounts      |  |                              | 2,427 |                                   |   | 4,674                        |  |           |  |                       
|1998:                                |  |                              |       |                                   |   |                              |  |            |  |                       
|Accrued merger and integration costs |  |                              |      |                                   |   |                             |  |           |  |                       
|Allowance for doubtful accounts      |  |                              | 989   |                                   |   | 768                          |  | 1,917      |  |                       

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EXHIBIT INDEX

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Page No.
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|3.1         |  | Registrant's Certificate of Amendment of Restated Certificate of Incorporation dated as of October 21, 1998, which was Exhibit No. 3.1 to Registrant's Quarterly Report on Form 10-Q dated November 16,
1998, is incorporated herein by this reference. Registrant's Restated Certificate of Incorporation dated as of November 6, 1986, which was Exhibit No. 3.1 to Registrant's 1987 Annual Report on Form 10-K is incorporated herein by this
reference. Registrant's Certificate of Amendment of Restated Certificate of Incorporation dated as of June 30, 1987, which was Exhibit 3.2 to Registrant's 1987 Annual Report on Form 10-K is incorporated herein by this
reference. |  | *       
|3.2         |  | Registrant's By-laws, as amended, which was filed with the Company's Quarterly Report on Form 10-Q dated November 13, 1995, as Exhibit 6(a)(3)is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | *       
|3.3         |  | Registrant's By-laws, which was Exhibit 3.3 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | *       
|4.1         |  | Rights Amendment, dated as of August 21, 1995, between The Titan Corporation and American Stock Transfer and Trust Company, which was Exhibit 1 to Registrant's Form 8-A dated September 5, 1995, is
incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | *       
|4.2         |  | Letter Agreement dated February 4, 1998 between the Company and DBA Systems, Inc. ("DBA") regarding certain registration rights granted in connection with the acquisition of DBA, which was Exhibit 10.38 to
Registration Statement on Form S-4 (no. 333-45719), is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                            |  | *       
|10.1        |  | Stock Option Plan of 1990, which was filed in the 1990 definitive proxy statement and was Exhibit 10.11 to Registrant's 1989 Annual Report on 10-K is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | *       
|10.2        |  | Stock Option Plan of 1994, which was filed in the 1994 definitive proxy statement and was Exhibit 10.17 to Registrant's 1993 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | *       
|10.3        |  | Amendment to Stock Option Plan Of 1994, which was Exhibit 10.3 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | *       
|10.4        |  | Stock Option Plan of 1997, which was filed in the Company's 1997 Definitive Proxy Statement as Appendix A, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | *       
|10.5        |  | Amendment to Stock Option Plan of 1997, which was Exhibit 10.5 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | *       
|10.6        |  | 1992 Directors' Stock Option Plan, which was filed in the 1993 definitive proxy statement and was Exhibit 10.14 to Registrant's 1992 Annual Report on Form 10-K, is incorporated herein by this
reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | *       
|10.7        |  | 1996 Directors' Stock Option and Equity Participation Plan, which was filed in the 1996 definitive proxy statement and was Exhibit 10.7 to Registrant's 1995 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | *       
|10.8        |  | Supplemental Retirement Plan for Key Executives, which was filed in the 1990 definitive proxy statement and was Exhibit 10.13 to Registrant's 1989 Annual Report on Form 10-K, is incorporated herein by this
reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | *       

101

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|10.9  |  | Amendment to The Titan Corporation Supplemental Retirement Plan For Key Executives dated February 17, 2000, which was Exhibit 10.9 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                                                                                  |  | *
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.10 |  | 1995 Employee Stock Purchase Plan, which was Exhibit 4 to Registrant's Form S-8 dated December 18, 1995, is incorporated herein by this reference.                                                                                                                                                                                                             |  | *
|10.11 |  | Lease Agreement dated as of July 9, 1991, by and between Torrey Pines Limited Partnership, a California limited partnership, as landlord, and Registrant, as tenant, which was Exhibit 10.1 to Registrant's Form
 8-K dated July 11, 1991, is incorporated herein by this reference.                                                                           |  | *
|10.12 |  | Agreement and Plan of Reorganization of Eldyne, Inc. dated as of April 19, 1996, by and among Eldyne, Inc., Jack Witt, ELD Acquisition Sub, Inc. and Registrant, which was Exhibit 2.1 to
Registrant's Form 8-K dated May 24, 1996, is incorporated herein by this reference.                                                                                  |  | *
|10.13 |  | Agreement and Plan of Reorganization of Unidyne Corporation dated as of April 19, 1996, by and among Unidyne Corporation, Jack Witt, UNI Acquisition Sub, Inc. and Registrant, which was Exhibit 2.2 to
Registrant's Form 8-K dated May 24, 1996, is incorporated herein by this reference.                                                                    |  | *
|10.14 |  | Executive Severance Plan entered into by the Company with Ronald B. Gorda, which was Exhibit 6(a)(10) to Registrant's Quarterly Report on Form 10-Q dated November 13, 1995, is incorporated herein by
this reference.                                                                                                                                         |  | *
|10.15 |  | Executive Severance Plan entered into by the Company with Gene W. Ray, Eric M. DeMarco and Nicholas J. Costanza, which was Exhibit 10.15 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by
this reference.                                                                                                                            |  | *
|10.16 |  | Loan and Security Agreement, dated December 29, 1995, by and between Registrant and Capital Associates International, Inc., which was Exhibit 10.17 to Registrant's 1995 Annual Report on Form 10-K, is
incorporated by this reference.                                                                                                                        |  | *
|10.17 |  | Rider dated August 13, 1996, to Loan and Security Agreement dated December 29, 1995 by and between Registrant and Capital Associates International, Inc. which was Exhibit 10.28 to Registrant's 1996
Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                    |  | *
|10.18 |  | Loan and Security Agreement dated January 31, 1996, by and between Registrant and Sanwa General Equipment Leasing, a division of Sanwa Business Credit Corporation, which was Exhibit 10.18 to Registrant's 1995
Annual Report on Form 10-K, is incorporated herein by this reference.                                                                         |  | *
|10.19 |  | Agreement and Plan of Merger and Reorganization dated January 6, 1998 among The Titan Corporation, Titan Acquisition Sub, Inc. and DBA Systems, Inc. which was filed as Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (No. 333-45719), is incorporated herein by this reference.                                                             |  | *
|10.20 |  | Agreement and Plan of Merger and Reorganization dated February 26, 1998, among The Titan Corporation, Sunrise Acquisition Sub, Inc., Horizons Technology, Inc. ("Horizons") and certain stockholders of
Horizons, which was filed as Appendix A to the Company's Registration Statement on Form S-4 (No. 333-47633), is incorporated herein by this reference. |  | *

102

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|10.21 |  | Stock Purchase Agreement dated as of March 24, 1998 between Titan Technologies and Information Systems Corporation, Validity Corporation and the Shareholders of Validity Corporation, which was Exhibit 10.21 to
Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                     |  | *
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.22 |  | Agreement and Plan of Reorganization dated as of June 30, 1998 by and among The Titan Corporation, Delsys Merger Corp., and Delfin Systems, which was filed as Exhibit 2.1 to the Company's Registration Statement
on Form S-4 (No. 333-60127), is incorporated herein by this reference.                                                                                                                                                                                                                     |  | *
|10.23 |  | Agreement and Plan of Merger and Reorganization dated as of August 7, 1998 among The Titan Corporation, Merger Sub Acquisition Corp., VisiCom Laboratories, Inc., and Certain Shareholders of VisiCom Laboratories,
 Inc., which was Exhibit 10.23 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                 |  | *
|10.24 |  | Stock Purchase Agreement dated as of June 9, 1999 among Titan Technologies and Information Systems Corporation, System Resources Corporation and the Stockholders of System Resources Corporation, which was filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 9, 1999, is incorporated herein by this reference.                                                                                                                                                                   |  | *
|10.25 |  | Agreement and Plan of Merger and Reorganization dated as of July 1, 1999 among Titan Technologies and Information Systems Corporation, TTIS MergerCo, Inc., Atlantic Aerospace Electronics Corporation, and the
Designated Stockholders, which was Exhibit 10.25 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                   |  | *
|10.26 |  | Limited Liability Company Agreement of Soliance Networks, LLC dated as of August 25, 1999 among Sempra Energy Information Solutions, modis, Inc., and Cayenta.com, Inc., which was Exhibit 10.26 to
Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                   |  | *
|10.27 |  | Agreement and Plan of Merger, as amended, dated as of October 4, 1999 among IPIVOT, Inc., Intel Corporation, WCXT Acquisition Corporation and Brett Helm and William Strensrud as the representatives of the Escrow
Securityholders, which was Exhibit 10.27 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                       |  | *
|10.28 |  | Stock Purchase Agreement dated as of November 2, 1999 among Cayenta.com, Inc., J B Systems, Inc, d.b.a. Mainsaver Corporation and Mainsaver, JKS Separate Property Trust, The Gehl Living Trust, JBS Acquisition
Company, LLC, Epicor Software Corporation, Mark Stevens and The Titan Corporation, which was filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated November 2, 1999, is incorporated herein by this reference.                                                              |  | *
|10.29 |  | Stock Exchange and Stock Purchase Agreement dated as of December 7, 1999 among Cayenta, Cayenta Operating Company, The Titan Corporation, Assist Cornerstone Technologies, Inc. and the Selling Shareholders We
have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule, which was Exhibit 10.29 to Registrant's 1999 Annual Report on Form
 10-K, is incorporated herein by this reference. |  | *

103

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|10.30 |  | Agreement and Plan of Merger dated as of December 9, 1999 among The Titan Corporation, Advanced Communication Systems, Inc., and AT Acquisition Corp, which was filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 9, 1999, is incorporated herein by this reference.                                                                                                                                                                                                                                |  | *
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.31 |  | Agreement and Plan of Merger, dated as of December 9, 1999 as amended as of January 20, 2000, among the Company, Merger Sub and ACS, which was filed as Exhibit 2.1 to the Company's Registration Statement on Form
 S-4 (No. 333-95245), is incorporated herein by this reference.                                                                                                                                                                                                                                               |  | *
|10.32 |  | Loan Facility Agreement dated as of December 10, 1999 among Titan Africa, Inc., Office des Postes et Telecommunications of the State of Benin, Banque Belgolaise, Eco Bank Benin, Banque Ouest Africain pour le
Developpement, Banque Internationale du Benin, Continental Bank Benin and Bank of Africa Benin, which was Exhibit 10.32 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                |  | *
|10.33 |  | Stock Purchase Agreement dated as of December 23, 1999 among Cayenta, SFG Technologies, Inc., the Common Selling Shareholders, the Preferred Selling Shareholders and the Option Holders, which was filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 22, 1999, is incorporated herein by this reference.                                                                                                                                                                                           |  | *
|10.34 |  | Agreement and Plan of Reorganization dated as of January 28, 2000 among The Titan Corporation, MT Acquisition Corp., William C. Lindsey, Inc. (DBA LinCom Corporation) and the Principal Shareholder of William C.
Lindsey, Inc., which was Exhibit 10.34 to Registrant's 1999 Annual Report on Form 10-K, is incorporated herein by this reference. We have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish
supplementally to the Commission a copy of any omitted schedule. |  | *
|10.35 |  | 53/4 % Convertible Preferred Securities Remarketable Term income Deferrable Equity Securities (High Tides) dated as of February 3, 2000, which was Exhibit 10.35 to Registrant's 1999 Annual
Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                       |  | *
|10.36 |  | Senior Secured Credit Agreement, dated as of February 23, 2000 among the Company, Various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston, as the Lead Arranger and
as the Administrative Agent for the Lenders, First Union Securities, Inc. as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent, which was Exhibit 10.36 to Registrant's 1999 Annual Report on Form 10-K, is
incorporated herein by this reference.             |  | *
|10.37 |  | Agreement and Plan of Merger dated as of March 10, 2000 among The Titan Corporation, Titan Acquisition Corporation and Pulse Engineering, Inc., which was Exhibit 10.37 to Registrant's 1999 Annual Report on
Form 10-K, is incorporated herein by this reference. We have not filed Schedules and similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                                   |  | *
|10.38 |  | Agreement and Plan of Merger, dated as of March 24, 2000, by and among The Titan Corporation, V T Acquisition Corp. and AverStar, Inc., which was Exhibit 2.1 to Registrant's Form S-4 dated April
 20, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                                                           |  | *
|10.39 |  | Stock Purchase Agreement, dated as of May 31, 2000, by and among The Titan Corporation, Sencom Corp. and The Stockholders of Sencom Corp. We have not filed Schedules and similar attachments to this Exhibit. Upon
request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                                                                                                                                                            |  |  

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|10.40 |  | First Amendment to Senior Secured Credit Agreement, dated June 1, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston,
 as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.      |  |  
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.41 |  | Second Amendment to Senior Secured Credit Agreement, dated June 22, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First
Boston, as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.     |  |  
|10.42 |  | Stock Purchase Agreement, dated June 28, 2000, by and among Titan Wireless, Inc., Titan Wireless Afripa Holding, Inc., Ivoire Telecom S.A. Holding and M. Louis N'Ki Diakite. We have not filed Schedules and
similar attachments to this Exhibit. Upon request, the Company will furnish supplementally to the Commission a copy of any omitted schedule.                                                                          |  |  
|10.43 |  | The Titan Corporation 2000 Employee Stock Purchase Plan, which was Exhibit 4.1 to Registrant's Form S-8 dated July 11, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                                              |  | *
|10.44 |  | The Titan Corporation 2000 Employee and Director Stock Option and Incentive Plan, which was Exhibit 4.2 to Registrant's Form S-8 dated July 11, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                     |  | *
|10.45 |  | Third Amendment to Senior Secured Credit Agreement, dated August 22, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First Boston,
as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent.    |  |  
|10.46 |  | Fourth Amendment to Senior Secured Credit Agreement, dated November 20, 2000, by and among The Titan Corporation, various financial institutions from time to time parties thereto (the "Lenders"), Credit Suisse First
Boston, as the Lead Arranger and as the Administrative Agent for the Lenders, First Union Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank of Nova Scotia as the Documentation Agent. |  |  
|13    |  | The Titan Corporation 2000 Annual Report to Shareholders.                                                                                                                                                                                                                                                                                                                                                                           |  |  
|21    |  | Subsidiaries of Registrant as of December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                 |  |  
|23    |  | Consent of Arthur Andersen LLP, Independent Public Accountants.                                                                                                                                                                                                                                                                                                                                                                     |  |  

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