Shares of Titan Corp. (TTN) plummeted Friday as a planned $1.66 billion buyout by Lockheed Martin Corp. (LMT) appeared to unravel over an ongoing probe of alleged overseas bribery at Titan subsidiaries.

Titan said Thursday it wouldn't be able to enter into a plea agreement with the Justice Department (search) by a Friday deadline that was part of the terms of the deal. That prompted Lockheed, which had extended the deadline twice, to say it would not give Titan more time.

Titan shares fell $4.21, or 23 percent, to $14.39 in trading Friday afternoon on the New York Stock Exchange (search). Lockheed shares gained 4 cents to $52.15.

Both Lockheed and Titan said late Thursday that it was too early to declare the deal officially dead. But Lockheed, wary of taking on any liabilities from Titan's legal woes, had made the plea agreement a requirement for the sale to close.

"We were under no obligation to amend the agreement again," Lockheed spokesman Tom Jurkowsky said Thursday.

Gene Ray, Titan's chairman and chief executive, said in a phone interview Thursday night that it was too early to declare the deal dead, but he was already eager to discuss a future without Lockheed. He said he would continue in his current job if Lockheed withdraws.

"It's important for the investing community to know that if this deal doesn't go through, Titan is a very strong company with good prospects for the future," said Ray, a former Pentagon physicist who co-founded Titan in 1981.

San Diego-based Titan has said settlement discussions with the Justice Department involved Titan's businesses in Benin and Saudi Arabia. Ray declined to elaborate.

One of Titan's most prized assets is that most of its employees have U.S. government security clearances — about 8,800 of 11,500 employees at the end of last year — paving the way to bid on lucrative deals.

Titan also offers expertise in information technology, a much faster-growing part of the defense business than traditional work like building planes and missiles, said Cynthia Houlton, an analyst at RBC Capital Markets in New York.

The company's revenues have more than doubled since 2000 to $1.78 billion last year, partly for providing the Army with translators and building a high-speed, catamaran vessel for the Navy. The company employs about 4,200 people in Iraq under a five-year-old contract to provide translation services to the Army.

The deal ran into trouble shortly after Lockheed, based in Bethesda, Md., said in September that it would buy Titan for $1.8 billion, or $22 a share, in cash and stock. In February, the companies said the Justice Department and Securities and Exchange Commission (search) were investigating Titan's overseas payments.

In April, Titan agreed to cut the price to $1.66 billion, or $20 a share, in cash, citing the federal probe. It said earlier this month that SEC staff planned to recommend civil action in connection with the alleged payments.

Wachovia Securities lowered its rating on Titan shares Thursday to "underperform" from "market perform," saying it was becoming more likely that Lockheed would withdraw from the deal.