Exhibit 10.3


 


ADMINISTRATIVE
SETTLEMENT AGREEMENT


BETWEEN
THE TITAN CORPORATION


AND


THE
DEPARTMENT OF THE NAVY


 


This Administrative
Settlement Agreement (“Agreement”) is entered into this 2nd day of March, 2005,
between the Department of the Navy (“Navy”), on behalf of the Department of
Defense, and The Titan Corporation (hereinafter “Titan”).


 


1.                                       Purpose.  The purpose of this Agreement is to evince
that Titan is presently responsible to contract with the Federal Government by
insuring that Titan has and will continue a program of acceptable contracting
practices and procedures, and by establishing and implementing a program of
compliance reviews, audits, and reports.


 


2.                                       Definitions.


 


A.                                   “Titan”
shall mean The Titan Corporation as a body corporate, its predecessors,
successors, affiliates, subsidiaries, and/or divisions and all directors,
officers, employees and/or consultants of any of the aforesaid entities.


 


B.                                     “Consultant”
means a natural person, other than an employee, who is (or will be) providing
personal services to Titan with respect to any contract or prospective contract
between Titan and the United States Government. 
A foreign national Consultant who provides personal services to Titan
overseas in connection with a contract between Titan and the United States
Government performed overseas shall only receive ethics training tailored to
his or her job responsibilities for Titan and may be exempted from annual
certification requirements.


 


3.                                       Scope
of Agreement.  This Agreement relates to:  (i) a criminal plea agreement (the “Plea
Agreement”) entered by Titan on or about March 1, 2005, pursuant to which
Titan has entered a plea to violations of the Foreign Corrupt Practices Act and
certain securities and tax laws (Annex 1); and (ii) a civil complaint in which
the Securities and Exchange Commission alleges that Titan violated the Foreign
Corrupt Practices Act and certain securities laws (“SEC Complaint”) (Annex
2).  Except as provided herein, or as
otherwise authorized in writing by the Debarring Official, or an appointee
thereof (hereinafter collectively “the Navy Debarring Authority”), this
Agreement shall not be used for any purpose not set forth herein with regard to
any other criminal, civil, or administrative charge, claim, or action by or
against Titan; provided, however, that Titan may disclose this
Agreement to other federal and state agencies, to any regulatory authority
having cognizance over Titan, and to Titan’s auditors, banks, and insurers to
evidence that Titan has concluded a debarment settlement with the Department of
Defense and to demonstrate the terms of that Agreement.


 


4.                                       Compliance
with the Foreign Corrupt Practices Act and Procurement Laws.  By this Agreement, Titan recognizes its
corporate responsibility to ensure that Titan fully complies with the Foreign
Corrupt Practices Act and all federal procurement laws and regulations when
contracting, directly or indirectly, with the United States Government. In this
regard, all aspects of Titan’s corporate and business operations shall be conducted
according to the highest code of corporate ethics, generally prevailing


 





















 


lawful and honest behavior, and the
guidelines set by the letter and the spirit of this Agreement.


 


5.                                       Compliance
Program. 
To fulfill its corporate responsibilities, Titan has implemented a
Compliance Program by which Titan can and will adhere to the laws of the United
States and to lawful and ethical procedures and practices in all areas of and
relating to its provision of goods and services as a Government contractor and/or
subcontractor.  This Compliance Program
has or shall have the following components (in the latter event, by the dates
set out in the Annex 3, the Schedule):


 


A.                                   Participation
by the Board of Directors.  The Compliance Program shall be administered
by the Titan Board of Directors, which will take direct responsibility to
ensure that the Program remains current and is properly implemented throughout
Titan.  In that regard, the Board of
Directors has adopted the resolution attached hereto as Annex 4, which has
revised the charters of the Titan Audit Committee and Titan Governance
Committee (also at Annex 4) to enable these Committees to manage the Titan Code
of Ethics and Standards of Conduct program.


 


B.                                     Creation
of a Corporate Compliance & Ethics Council.  The Titan Board has established a Council of
Titan’s senior management to oversee the day-to-day operation of the Compliance
Program.  The Council’s charter is
attached as Annex 5.


 


C.                                     A
Written Code of Ethics.  Titan has established a written Code of Ethics
which provides notice to all employees that the highest standard of business
ethics is mandated.  A copy of the Code
of Ethics is attached as Annex 6.


 


(1)                                  The
Code of Ethics shall be maintained, reviewed on an annual basis by the
Corporate Governance Committee of Titan’s Board of Directors, and updated as
required for compliance with statutory and/or regulatory changes.


 


(2)                                  On
an annual basis, all Titan directors, officers, employees, and consultants
shall be required to sign a certificate stating that they have read the Code of
Ethics and agree to abide by its provisions.


 


D.                                    A
Compliance Officer.  Titan has established and shall, for at least
the duration of this Agreement, maintain a position designated as the Vice
President of Compliance & Ethics (“Compliance Officer”).  The position description for the Compliance
Officer is set out at Annex 7.


 


(1)                                  The
Compliance Officer reports directly to the Chairman and Chief Executive Officer
of Titan, and indirectly to the Titan Board of Directors through the Board’s
Governance Committee.


 


(2)                                  The
identity and qualifications of the current Compliance Officer are set forth in
Annex 8.  The signature of the Navy’s
Debarring Official on this Agreement shall signify acceptance of the current
Compliance Officer.  The Compliance
Officer shall participate on behalf of Titan in the Defense Industry Initiative
and/or the Ethics Officers Association.


 


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(3)                                  Should
the current or any subsequently appointed Compliance Officer leave the
position, that fact shall be reported to the Navy Debarring Authority, in
writing, within ten (10) days of said leaving. 
A replacement shall be selected by Titan and reported to the Navy
Debarring Authority within forty-five (45) calendar days of said leaving.  Appointment of a replacement Compliance
Officer shall be subject to approval by the Navy Debarring Authority, which
approval shall be solely within the discretion of the Navy Debarring Authority.  Denial by the Debarring Authority of approval
of any replacement Compliance Officer shall be a “Failure by Titan” as the
phrase is used in paragraph 12 of this Agreement.


 


(4)                                  The
Compliance Officer shall assist Titan in identifying and reporting violations
of its Code of Ethics.


 


(5)                                  The
Compliance Officer shall manage the investigation of all instances of suspected
misconduct, coordinating such investigations (as required) with Titan’s senior
management, the General Counsel, the Chief Financial Officer, the Vice
President of Internal Audit, and external auditors or legal counsel.  The Compliance Officer shall report in
writing the findings of each investigation to Corporate Compliance & Ethics
Council and the Governance Committee of its Board on at least a quarterly
basis.  A copy of the report to the
Corporate Compliance & Ethics Council, reciting the issue, its resolution
and Titan’s response, if any, shall be provided to the Navy Debarring Authority
within 10 days of its submission to the Council or to the Governance Committee,
whichever occurs last.


 


(6)                                  The
Compliance Officer shall, within ten (10) working days after the end of each
fiscal quarter, prepare and deliver to the Navy Debarring Authority a synopsis
of each instance of suspected and/or confirmed misconduct which became known to
the Compliance Officer during the fiscal quarter.  This synopsis shall be made without regard to
the degree to which the Compliance Officer has been able, as of the due date of
the report, to investigate the misconduct. This synopsis shall include disclosure
of any remedial action taken to date.


 


E.                                      A
Hot Line. 
Titan has established and shall, for at least the duration of this
Agreement, maintain a “hot line” to facilitate the anonymous or confidential
reporting of misconduct by or within Titan. The policies and procedures
governing the Titan hot line are set out in Annex 9.  The signature of the Navy’s Debarring
Official on this Agreement shall signify acceptance of the Titan hotline
policies and procedures.


 


F.                                      A
Written Contracting Procedures Manual.  Titan has adopted a manual containing the
procedures and regulatory standards and acceptable practices for doing business
with the Government and/or Government prime contractors.  The proposed Contracting Procedures Manual is
attached as Annex 10.


 


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(a)                                  These
practices and procedures shall be applied to all of Titan’s business dealings
involving Government contracts or subcontracts.


 


(b)                                 The
signature of the Navy’s Debarring Official on this Agreement shall signify
acceptance of the Titan’s Contracting Procedures Manual.


 


G.                                     A
Written Audit and Compliance Review Procedure.  Titan has established and, for at least the
duration of this Agreement, will maintain an Audit and Compliance Review
Procedure (hereinafter “A&C Procedure”). 
Titan’s A&C Procedure is set forth in Annex 11.


 


(1)                                  The
signature of the Navy’s Debarring Official on this Agreement shall signify
acceptance of the Titan A&C Procedure.


 


(2)                                  Titan
agrees that a report, which describes and discusses the findings made during
the audits specified in the A&C Procedure, shall be part of the Compliance
Officer’s quarterly report for the quarter during which the audits are
conducted.


 


(3)                                  These
practices and procedures shall be applied to all of Titan’s business dealings
involving Government contracts or subcontracts.


 


H.                                    Training.  Titan shall create and implement a curriculum
of annual classroom and computer-based training designed to familiarize each of
its directors, officers, employees, and consultants with the concepts and
precepts of each component of this Compliance Program.


 


(1)                                  The
curriculum to be used for training with regard to each of the components of the
Compliance Program is set out as Annex 12.


 


(2)                                  The
signature of the Navy’s Debarring Official on this Agreement shall signify
acceptance of Titan’s training curriculum.


 


I.                                         Foreign
Corrupt Practices Act Policy.  Titan has established a policy on compliance
with the Foreign Corrupt Practices Act (“FCPA Policy”) (Annex 13 hereto), which
provides detailed instructions to all employees and consultants concerning the
practices and procedures that Titan has implemented to insure compliance with
that Act.  Titan has also established a
cash management policy (Annex 14 hereto) which centralizes the payment function
for international payments at the Titan corporate level, providing an
additional layer of internal controls on foreign payments.


 


(1)                                  As
set forth more fully in Annex 1 and Annex 2 hereto, Titan has agreed to
undertake certain independent reviews of its Foreign Corrupt Practices Act
compliance policies and procedures. 
Titan will provide a report to the Navy Debarring Authority regarding
the results of such reviews and Titan’s response thereto as part of the
quarterly report next occurring after any such a review shall have been
reported to Titan.


 


(2)                                  Titan
provided one-time training on this policy beginning in the first half of 2004
to its employees and consultants who were then involved in international
business.  Over 350 employees or consultants


 


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have received this
training and the remaining small number of affected persons will receive this
training by web-cast by the end of 2004.


 


(3)                                  Titan
shall hereafter provide initial training on its FCPA Policy to all employees
and to those consultants (as defined in the FCPA Policy) for whom such training
is relevant at the time they become involved in international business on
behalf of Titan, and shall establish a plan for recurring training on at least
an annual basis.


 


(4)                                  The
curriculum for this training is set out in Annex 12.


 


(5)                                  The
signature of the Navy’s Debarring Official on this Agreement shall signify
acceptance of Titan’s policy on compliance with the Foreign Corrupt Practices
Act (Annex 13) and of the training curriculum (Annex 12) to be used in
connection with that policy.


 


6.                                       Further
Agreements.  Titan further agrees to:


 


A.                                   Complete
all compliance actions identified by this Agreement on or before the date
stated in the Schedule or within the time expressly stated in another part
of this Agreement.


 


B.                                     On
each January 15th and June 15th during the term
of this Agreement, the Compliance Officer shall provide a report to the Navy
Debarring Authority describing Titan’s implementation of this Agreement.


 


C.                                     Titan’s
Compliance Officer shall, within ten (10) working days after the end of each
fiscal quarter, report regarding: (1) all instances of disciplinary action for
violations of the Code of Ethics and Standards of Conduct (not including any
disciplinary actions taken in the normal course which are not required to be
reported to senior corporate management); (2) all known, ongoing criminal
investigations; (3) all known qui tam suits; (4) all known or suspected
defective pricing cases; (5) all hotline calls received by the Compliance
Officer including a description of the complaint and any remedial action taken
or planned; and (6) any other matter which might affect Titan’s present
responsibility status, including but not limited to actual or potential
suspension and/or debarment actions by other Government and quasi-governmental
agencies.


 


D.                                    Allow
designated representatives of the Navy Debarring Authority to interview Titan
personnel and to examine Titan’s financial books, records, and other company
documents for the purpose of evaluating Titan’s compliance with the terms of
this Agreement.  Such materials described
above shall be made available by Titan after reasonable notice for inspection,
audit and/or reproduction, provided, however, the Navy Debarring Authority
shall not be entitled to examine documents properly subject to the
attorney-client or attorney work product privileges, nor to copy: (1) documents
containing technical data or computer software, except in accordance with
government contract data rights provisions, or (2) documents containing trade
secrets, or (3) financial records.


 


E.                                      In
addition to the reports made pursuant to paragraphs 5 D and 6 B and C,
disclose, within 30 calendars days of its alleged occurrence, to the Navy Debarring
Authority and to any affected Government customer each instances in 


 


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which there are
reasonable grounds to suspect that Titan, its directors, officers, employees,
consultants, suppliers and/or Government personnel have violated Federal laws
or regulations relating to government procurements (but excluding errors in
financial accounting that are typically adjusted in the normal course of
contract administration and audit). 
Further, Titan shall take immediate corrective measures to remedy the
matter disclosed, and to notify the Navy Debarring Officer and the relevant
Government customer of the corrective action taken and of Titan’s opinion
regarding any financial impact the matter may have on the Government.


 


F.                                      Cooperate
fully with any investigation by the Department of Justice or the Department of
Defense of which Titan knows or learns in the future.


 


G.                                     Upon
a conviction of Titan or a Titan director, officer, or employee, for violation
of any Federal criminal statute, take appropriate disciplinary action against
all responsible individuals.  If such
conviction occurred in connection with the individual’s performance of duties
for or on behalf of Titan, immediately remove the director, officer, employee
or consultant from active status with the Company relating to any dealings with
the U.S. Government.


 


H.                                    Upon
an unappealed conviction of, or after an unsuccessful appeal by any director,
officer, employee or consultant of Titan for violation of any criminal statute,
which violation occurred in connection with the individual’s performance of
duties for or on behalf of Titan, take prompt action to terminate the
employment of such officer, employee or consultant, or as appropriate to remove
such director from the Titan Board of Directors in recognition of Title 10,
U.S.C. § 2408.


 


I.                                         Treat
all costs associated with the termination, severance and/or removal of any
director, officer, employee or consultant of Titan under paragraphs G and H,
above, as unallowable for Federal Government Contract purposes.


 


7.                                       During
the term of this Agreement, Titan shall not knowingly employ, engage or accept
the services of an individual who is listed by a Federal Agency as debarred,
suspended, or otherwise ineligible for Federal contracting. Reasonable inquiry
shall be made into the suspension/debarment status of any potential employee or
consultant prior to the offer of employment or engagement of services.  Further, Titan shall promptly terminate the
employment of or contract for services with any individual who was suspended or
debarred as of the effective date of their association with Titan.  Moreover, Titan shall immediately remove such
individual from responsibility for or involvement with Government contract
matters until the resolution of any question there might be regarding their
suspension or debarment status as of the time of their association with Titan.


 


8.                                       During
the term of this Agreement, Titan shall not knowingly enter into any
subcontract or other business relationship relating to Federal Government
contracts with any individual or business entity listed as debarred, suspended,
or otherwise


 


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ineligible for contracting by a Federal
Agency (hereinafter “listed contractor”) without prior approval by the Navy
Debarring Authority.


 


A.                                   Titan
shall make reasonable inquiry into the listed contractor status of each
prospective business associate.


 


B.                                     Whenever
the inquiry required by the preceding paragraph (A) reveals that the
prospective business associate is a listed contractor, Titan shall submit a
notice to the Navy Debarring Authority in form and content as specified in FAR
9.405-2(b).


 


C.                                     Titan
shall also give written notice of the prohibition effected by paragraph 7 to
each prospective business associate.


 


9.                                       In
addition to those costs stated in paragraphs 6.I and 10, Titan agrees that the
costs described below shall be unallowable for United States Government
contract purposes and shall not be charged directly or indirectly to any such
contract or subcontract:


 


A.                                   All
costs of performing the actions set forth in this Agreement accomplished by
Titan subsequent to its learning of the investigation that resulted in the
administrative actions arising out of the facts and causes set forth in Annex 1
or Annex 2.


 


B.                                     All
costs of legal services whether performed by in-house or private counsel,
administrative and clerical services, services of accountants and consultants,
salaries and wages of employees, officers, and directors, travel, and any costs
directly related to the aforesaid, incurred in the implementation of and/or
continued compliance with the terms of this agreement.


 


C.                                     The
Navy agrees that if its policy with respect to cost allowability is changed in
the future, the Navy Debarring Authority will consider amending this Agreement
to incorporate the revised policy.


 


10.                                 Within
thirty days of the effective date of this Agreement, Titan will remit the sum
of $5000.00, made payable to the Treasury of the United States, as and for
final payment of those investigative and administrative costs incurred, or to
be incurred, by the Government because of the matters which gave rise to the
causes for debarment as stated herein, which include but are not limited to the
costs of monitoring, reviewing, enforcing, and administering this Agreement.


 


11.                                 Except
as provided in paragraph 15, the execution of this Agreement by the Navy in no
way waives any criminal, civil, contractual, or administrative remedy or right
that the Government may have for the acts described in Annex 1 or Annex 2.


 


12.                                 Failure
by Titan to meet any of its obligations under the terms or spirit of this
Agreement, not cured to the reasonable satisfaction of the Navy Debarring
Authority within twenty (20) working days, or as otherwise permitted by the
Navy Debarring Authority after receipt by Titan of written notice of such failure,
shall constitute a cause


 


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for debarment subject to the procedures
established by the Federal Acquisition Regulation and any other applicable
statute or regulation.


 


13.                                 By
execution of this Agreement, Titan releases the United States, its employees,
agents, and instrumentalities, in both official and person capacities, of any
and all liability arising out of or otherwise related to this Agreement.  Further, Titan agrees not to file any claim
against the United States, its employees, agents, and instrumentalities, in
both official and personal capacities, in any forum or jurisdiction, with
regard to any matter arising out of or otherwise related to this Agreement.


 


14.                                 By
execution of this Agreement, Titan avers that any adverse action taken or to be
taken against any Titan director, officer, employee, consultant, or agent, with
regard to any matter arising out of or related to the facts and circumstances
set forth in the Notice, are the result solely of Titan’s initiatives and
decisions, and are not the result of any action by or on behalf of the United
States, its employees, agents or instrumentalities.


 


15.                                 In recognition of the actions by and covenants of
Titan Corporation set forth herein, the Department of the Navy, on behalf of
the Department of Defense, agrees not to undertake any administrative action to
propose Titan Corporation for debarment based upon the facts and for those
causes set forth in Annex 1 or Annex 2; provided, however, that the Department
of the Navy reserves the right to undertake appropriate administrative action,
if deemed necessary in the sole discretion of the Suspending and Debarring
Official of the Department of the Navy, in the event of the Indictment or
Conviction of any current, as of the date of execution of this Agreement by the
Suspending and Debarring Official of the Department of the Navy, officer or director
of Titan or any of its wholly-owned subsidiaries arising out of continuing
investigations into the matters set forth in Annex 1 or Annex 2 by the
Department of Justice or the Enforcement Division of the Securities and
Exchange Commission.


 


16.                                 This,
Agreement (but not the Annexes 4 through 14) is a public document and may be
distributed by the Navy throughout the Executive Branch of the Government and
to other interested parties in accordance with the requirements of the Privacy
Act and the Freedom of Information Act.


 


17.                                 Modification
to this Agreement may be made but shall have no effect until the terms of the
Modification are expressly incorporated in a writing, which has been executed
by both parties.  Neither party shall
seek or accept the benefit of a judicial or quasi-judicial order directing the
other to execute a writing, which would, if executed, modify this Agreement.


 


18.                                 For
purposes of interpretation of this Agreement or any part hereof by any court of
competent jurisdiction (or any other judicial or quasi-judicial body), this
Agreement shall be deemed to have been drafted equally by all parties hereto.


 


19.                                 This
Agreement shall become effective on the date set forth above and shall continue
for three years or until all reports required to be submitted to the Navy
Debarring Authority have been received by the Navy Debarring Authority,
whichever occurs last.  In addition,
should Titan for any reason cease to be in full compliance with the letter and
spirit of this Agreement, this Agreement shall be extended for a period of


 


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three years following reestablishment of
full compliance as determined by the Navy Debarment Authority.


 


20.                                 This
Agreement constitutes the entire agreement between the parties and supersedes
all prior agreements and understandings, oral or written, with respect to the
subject matter hereof.  This Agreement
shall inure to the benefit of, and be binding upon, the parties and their respective
successors and assigns.


 


 


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FOR THE DEPARTMENT OF THE NAVY:


 


 


	
  /s/ William R. Molzahn

  	
   

  
	
  William R. Molzahn

  	
   

  
	
  Suspending and Debarring Official

  	
   

  
	
  Department of the Navy

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  FOR THE TITAN
  CORPORATION:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ David W. Danjczek

  	
   

  
	
  David W. Danjczek

  	
   

  
	
  VICE PRESIDENT OF COMPLIANCE & ETHICS

  
	
  The Titan Corporation

  	
   

  



 


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