<PAGE>
As filed with the Securities and Exchange Commission
on April 29, 1997.
Registration No. 333-22087
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
ON FORM S-2
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRC International, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
95-2131929
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(I.R.S. Employee Identification Number)
1900 Gallows Road, Vienna, VA 22182 (703) 506-5000
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
<PAGE>
Thomas E. McCabe
Senior Vice President, General Counsel and Secretary
GRC International, Inc.
1900 Gallows Road
Vienna, VA 22182
(703) 506-5000
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. (x)
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. (x)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( ) ___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( ) __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ( )
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . 3
INFORMATION WITH RESPECT TO THE COMPANY . . . . . . . . . . . . 3
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . 5
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . 12
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . 19
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . 21
SELLING STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . 22
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 24
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
<PAGE>
SUBJECT TO COMPLETION,
APRIL 29, 1997
PROSPECTUS
4,987,234 SHARES
GRC INTERNATIONAL, INC.
COMMON STOCK
This Prospectus covers the offering for resale from time to time of up
to 4,987,234 shares (the "Shares") of common stock, par value $.10 per share
(the "Common Stock"), of GRC International, Inc., a Delaware corporation (the
"Company"), by Cripple Creek Securities, LLC, a Delaware limited liability
company (the "Selling Stockholder"). The Company may, and in certain instances
shall, issue Shares from time to time to the Selling Stockholder pursuant to the
terms of the Structured Equity Line (as defined herein) and upon exercise of the
Warrants (as defined herein). See "THE COMPANY -- Debt and Equity Financing."
The Company will receive no part of the proceeds of sales made hereunder, but
the Company will receive proceeds upon the issuance of Shares to the Selling
Stockholder pursuant to the Structured Equity Line and the Warrants. All
expenses of registration incurred in connection with this public offering are
being borne by the Company. None of the Shares have been registered prior to
the filing of the Registration Statement of which this Prospectus is part.
The Common Stock is quoted on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "GRH." On April 25, 1997, the last
reported sale price of the Common Stock was $4 3/4.
The Selling Stockholder, acting as principal for its own account,
directly, through agents designated from time to time, or through brokers,
dealers, agents or underwriters also to be designated, may sell all or a portion
of the Shares that may be offered hereby in routine brokerage transactions on
the New York Stock Exchange, the Pacific Stock Exchange or otherwise at prices
and terms prevailing at the time of the sale. The Selling Stockholder also may
make private sales directly or through brokers or may make sales pursuant to
Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"). The
Selling Stockholder may pay customary brokerage fees, commissions and expenses.
The aggregate proceeds to the Selling Stockholder from the sale of the Shares
that may be offered hereby by the Selling Stockholder will be the purchase price
of such shares less commissions, if any. The Company has agreed to indemnify the
Selling Stockholder against certain liabilities, including liabilities under the
Securities Act of 1933. See "PLAN OF DISTRIBUTION."
The Selling Stockholder and any brokers, dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be underwriters within the meaning of the Securities Act, in
which event any commissions received by such brokers, dealers, agents or
underwriters and any profit on the resale of the Shares may be deemed to be
underwriting discounts under the Securities Act. See "PLAN OF DISTRIBUTION."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR THEIR RESPECTIVE AGENTS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION
IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION.
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661. Copies of all or part of such
materials may also be obtained at prescribed rates from the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy statements and other
information. Such materials also can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005 and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California 94104.
The Company has filed with the Commission a registration statement
(which term shall encompass any amendments thereto) on Form S-2 under the
Securities Act with respect to the securities offered hereby (the "Registration
Statement"). This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered by
this Prospectus, reference is made to the Registration Statement, including the
exhibits thereto, and the financial statements and notes thereto filed or
incorporated by reference as a part thereof, which are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.
The Registration Statement and the exhibits thereto filed by the Company with
the Commission may be inspected and copied at the locations described above.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act (Commission File No. 1-7517) are incorporated
herein by reference:
(a) the Company's annual report on Form 10-K for the fiscal year
ended June 30, 1996;
(b) the Company's quarterly reports on Form 10-Q for the
quarters ended September 30, 1996 and December 31, 1996; and
(c) the Company's current reports on Form 8-K filed on
October 16, 1996 and March 13, 1997.
The Company will provide, without charge to each person to whom this
Prospectus has been delivered, a copy of any or all of the documents referred to
above that have been or may be incorporated by reference herein other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference therein). Requests for such copies should be directed to GRC
International, Inc. 1900 Gallows Road, Vienna, VA 22182 Attention: Thomas E.
McCabe, Senior Vice President, General Counsel and Secretary. Telephone
requests may be directed to (703) 506-5000.
INFORMATION WITH RESPECT TO THE COMPANY
This Prospectus is accompanied by a copy of the Company's most recent
Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND BUSINESS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION,
STATEMENTS HEREIN UNDER "THE COMPANY" AND "RISK FACTORS" AND STATEMENTS IN THE
COMPANY'S ANNUAL AND QUARTERLY REPORTS UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FACTORS DISCUSSED HEREIN UNDER "RISK
FACTORS."
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND INCORPORATED HEREIN BY
REFERENCE. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH HEREIN
UNDER "RISK FACTORS."
The Company provides knowledge-based professional services and high-
quality technology-based product solutions to government and commercial
customers through its core professional services organization ("PSO") business.
Beginning in 1993, the Company expanded beyond PSO into telecommunications,
initially by developing the OSU(R) Network Interface. In 1995, the Company
launched a second telecommunications initiative when it began development of its
NetworkVUE(TM) software. See "THE COMPANY -- Professional Services
Organization," "-- Other Businesses."
From the inception of this expansion through early 1997, the Company
invested the free cash flow from PSO and incurred substantial debt in order to
fund the development of its telecommunications business units, but did not
realize the revenues that it had anticipated from these business units. By
January 1997, the Company concluded that it should seek to raise additional
capital in order, among other things, to continue its operations, and thus
entered into financing agreements with the Selling Stockholder and another
investor. Under the agreement with the Selling Stockholder, the Selling
Stockholder, under certain circumstances and subject to certain conditions
specified in the agreement, may be required to purchase from the Company up to
$18 million of the Company's Common Stock over a period of 42 months. The
Company also entered into an agreement with the other investor to sell a $4
million aggregate principal amount 5% debenture due January 30, 2000 convertible
at the investor's option under specified circumstances into a number of shares
of the Company's Common Stock based on a conversion price specified in the
agreement. The Company issued to the Selling Stockholder and the other investor
warrants to purchase up to 520,000 total shares of the Company's Common Stock at
specified prices. See "THE COMPANY --Debt and Equity Financing."
This Prospectus offers for resale by the Selling Stockholder up to
4,987,234 shares of Common Stock that the Company may sell to the Selling
Stockholder pursuant to the terms of the agreement between the Company and the
Selling Stockholder.
The Company expects to use the proceeds, if any, that it receives under
its agreement with the Selling Stockholder to reduce its outstanding
indebtedness under a revolving line of credit that provides working capital.
Depending upon the amount and terms of the Company's indebtedness at the time it
receives proceeds, if any, the Company also might use the proceeds to repay
other indebtedness and for general corporate purposes. See "USE OF
PROCEEDS."
The Company has closed most of its telecommunications business units and
is focusing primarily on PSO, which in the last four years has generated in
excess of 90% of the Company's revenue and during that period has been
consistently profitable with positive cash flows. The Company also expects to
pursue strategies to restructure its bank debt, which was $22.5 million at
December 31, 1996. See "RECENT DEVELOPMENTS."
The risks of investing in the shares of Common Stock offered by this
Prospectus are described more fully under the caption "RISK FACTORS," which
discusses the Company's ability to refocus on its core PSO business unit and
sell or close its other business units; the Company's high debt level; the
volatility of the price of the Company's Common Stock and the shares of the
Company's Common Stock eligible for future sale; the Company's dependence on
government contracts; the Company's dependence on significant contracts; the
Company's contract profit exposure; the potential for the Company's suspension
and debarment as a government contractor; the impact of technological change on
the Company and the Company's dependence on proprietary information; the
competitiveness of the markets that the Company services; the Company's
dependence on its professional staff; the Company's ability to meet the New York
Stock Exchange's continued listing requirements; and the potential issuance of
preferred stock by the Company.
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective investors in evaluating an
investment in the shares of Common Stock offered in this Prospectus.
EFFECTS OF RESTRUCTURING
The Company has refocused on its core PSO business unit; its OSU (R),
NetworkVUE(TM) and CIS business units have ceased operations, and its GRC
Instruments (TM) and Advanced Security Technologies/Vindicator (R) business
units are continuing their operations pending their sale or closure. See
"RECENT DEVELOPMENTS." There can be no assurance that the sale or closure of any
of these business units will be completed in a timely or satisfactory manner or
that the proceeds from the sales will meet the Company's financial goals. Delays
or other adverse developments in selling or closing these business units could
cause further losses to the Company and result in additional debt and reduced
liquidity. While the Company hopes to achieve greater profitability as a result
of these changes, there can be no assurance that this strategy will succeed.
Although PSO has generated more than 90% of the Company's revenues in
recent years, the financial and other effects of the anticipated sale or closure
of the Company's other business units could disrupt the Company's operations
further and, as noted, cause an increase in indebtedness and further reductions
in liquidity, thereby undermining the Company's goal of returning to
profitability and generating the cash flow necessary to service its debt.
HIGH DEBT LEVEL
As of December 31, 1996, the Company had outstanding $31.2 million of
debt, consisting of a $5 million term loan (the "Term Loan"), $17.5 million
drawn from a $22 million revolving line of credit (the "Revolving Credit"), a
$6.8 million equipment lease financing (the "Equipment Lease") and a $1.9
million note related to the 1996 acquisition of assets from Quintessential
Solutions. On January 30, 1997, the Company also issued the Debenture. See "THE
COMPANY -- Debt and Equity Financing." The Company may experience further
increases in debt levels during fiscal year 1997 in connection with the sale or
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<PAGE>
closure of its OSU(R), NetworkVUE(TM) and APD business units. See "THE
COMPANY -- Other Businesses."
The Company's level of indebtedness was the principal reason for the
anticipated sale or closure of its unprofitable business units. The current
level and terms of indebtedness also: (i) will require the Company to dedicate
a significant portion of its available net earnings from operations to payment
of interest and principal on the indebtedness; (ii) could limit the Company's
flexibility in reacting to business developments and changes in industry and
economic conditions generally; (iii) could limit the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
research and development, acquisitions and general corporate purposes; and (iv)
could place the Company at a competitive disadvantage inasmuch as many of its
competitors are not comparably indebted.
The Company is exploring strategies for refinancing the Term Loan, which
will come due on September 1, 1998 unless extended, and the Revolving Credit,
which is repayable on January 15, 1998 unless extended. In addition, the
Equipment Lease is repayable in monthly installments until June 2001. The
Company expects to seek to negotiate an extension to, and other new terms for,
the Term Loan and the Revolving Credit. The Company is also exploring
additional and substitute financing sources, including receivables financing and
the private sale of additional debt or equity. There can be no assurance that
the Company will be able to negotiate any extensions or additional or substitute
financing or that terms of any such financing will be favorable to the Company.
The Company also anticipates reducing its indebtedness with cash flow
from its PSO business unit. Any growth in PSO, however, could actually reduce
cash flow in the short term because of the time lag between when PSO renders
services and when PSO's principal customer, DoD, pays for those services.
Furthermore, there can be no assurance of continued growth in PSO's business,
which is subject to additional risks. See "-- Dependence on Significant
Customer," "-- Dependence on Significant Contracts," "-- Contract Profit
Exposure," "--Audits," "-- Potential Suspension and Debarment," "-- Rapid
Technological Change," "-- Competition" and "-- Dependence on Professional Staff
and Key Personnel."
The Company also expects to reduce its indebtedness by raising
additional capital through the Structured Equity Line. See "THE COMPANY -- Debt
and Equity Financing." Conditions to the sale of Common Stock under the
Structured Equity Line include (i) effectiveness of a registration statement
under the Securities Act for the resale of the shares of Common Stock to be sold
to the Selling Stockholder, (ii) the Selling Stockholder and
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<PAGE>
its affiliates not beneficially owning more than 4.9% of the Company's Common
Stock, (iii) listing of the Company's Common Stock on the NYSE or AMEX or
trading of the Company's Common Stock on the Nasdaq NMS and (iv) the price of
the Common Stock being at least $4.00 per share, the value of open market
trading of the Common Stock being at least $500,000 per day, and the amount of
Common Stock sold to the Selling Stockholder in any three month period not
exceeding 8% of the average daily value of open market trading of the Common
Stock on its principal market multiplied by the number of trading days in that
period. Based on recent prices and trading volume for the Common Stock, there is
a substantial risk that the Company may not be able to sell as much as $3
million in Common Stock to the Selling Stockholder in each three month period,
and there is a substantial risk that in at least some quarters the Company may
not be able to sell any Common Stock at all.
At December 31, 1996, the Company was in default on the loan agreement
that governs the Term Loan and the Revolving Credit (the "Loan Agreement"), but
secured an amendment on February 7, 1997 that brought the Company back into
compliance as of December 31, 1996, and amended the financial covenants
prospectively to levels that the Company believes, under its current plans and
projections for continuing operations, will allow the Company to remain in
compliance over the next 12 months. There can be no assurance, however, that
the Company will be able to remain in compliance with the Loan Agreement, or
that, in the event of another default, additional amendments to the Loan
Agreement would be able to be made. If the Company is again in default under
the Loan Agreement and cannot secure a waiver or amendment thereto, then the
amounts outstanding under the Term Loan and the Revolving Credit (together with
the cross-default under the Equipment Lease) would become immediately due and
payable. It is unlikely that the Company would be able to make or finance such
a payment.
STOCK PRICE VOLATILITY; SHARES ELIGIBLE FOR FUTURE SALE
The price of the Company's Common Stock has been volatile. For the
twelve months ended April 25, 1997, the price of the Common Stock ranged from $3
3/4 to $44 5/8, and closed at $4 3/4. The price of the Common Stock could be
subject to additional significant fluctuations in response to, among other
things, variations in the Company's operating results, introduction of new
services or technologies by the Company or its competitors, changes in other
conditions or trends in the Company's industries, changes in security analysts'
estimates of the Company's or its competitors' or industries' future
performance, general market conditions and the matters described herein under
"RISK FACTORS." General market price declines or market volatility in the
future, or future declines
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<PAGE>
or volatility in the prices of stock for companies in the Company's industries,
also could affect the price of the Common Stock.
The Company's agreements with the Selling Stockholder and Halifax may
also have an effect on the price of the Company's Common Stock. Under the
Company's agreements with the Selling Stockholder, the Company may issue up to
$18,000,000 of Common Stock to the Selling Stockholder at a price equal to 94%
of the lowest reported sale price during the three days immediately preceding
the notice of purchase to the Selling Stockholder. The Company also has issued
warrants to the Selling Stockholder to purchase 125,000 shares at $8.47 per
share and may issue warrants to purchase an additional 75,000 shares at 140% of
the market price at a future time. Under the Company's agreements with Halifax,
the Company is required to convert the $4,000,000 Debenture (plus any interest
not paid in cash) into Common Stock at a price equal to the lesser of (i) $11
per share or (ii) 94% of the lowest reported sale price during the three trading
days immediately preceding the date of conversion. The Company also has issued a
warrant to Halifax to purchase 320,000 shares of Common Stock at a price of
$8.47 per share. See "THE COMPANY --Debt and Equity Financing." The resale by
the Selling Stockholder and Halifax of the Common Stock that they acquire could
depress the market price of the Company's Common Stock.
Moreover, the terms of the Structured Equity Line provide that the
Company has the right to require the Selling Stockholder to purchase up to $3
million of the Common Stock in any of the three month periods during its term,
subject to certain limitations. Although the terms of the Structured Equity
Line provide that the Selling Stockholder and its affiliates are not required to
purchase Common Stock in an amount such that they would beneficially own more
than 4.9% of the Common Stock outstanding, the Selling Stockholder also has
agreed to use its best efforts to continue to purchase Common Stock
notwithstanding this limitation. Accordingly, the Selling Stockholder may be
required to purchase Common Stock from the Company in a manner that would
require it, in order to stay under the 4.9% beneficial ownership limitation and
comply with its obligations to the Company, to sell shares without regard to any
adverse effects on price and other market factors associated with the Common
Stock. See "THE COMPANY -- Debt and Equity Financing" and "SELLING
STOCKHOLDER."
DEPENDENCE ON GOVERNMENT CONTRACTS
PSO, which is expected to generate substantially all of the Company's
revenues in the foreseeable future, derives substantially all of its business
from service contracts and subcontracts with DoD and its instrumentalities.
Typically, such
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<PAGE>
contracts have an initial term of one year combined with two, three or four one-
year renewal periods exercisable at the government's discretion. DoD and its
instrumentalities are not obligated to exercise the options to renew. At the
time of completion, a contract in its entirety may be "recompeted" against all
interested third-party providers, and awards are subject to protest by
disappointed bidders. Federal law permits DoD to terminate a contract at any
time if such termination is deemed to be in DoD's best interest. DoD's failure
to renew, or termination of any significant portion of, the Company's contracts
could have an adverse effect on the Company.
Continuation and renewal of existing contracts with the DoD, and
acquisition of additional contracts from DoD, is contingent upon, among other
things, the availability of funding for DoD. The current world political
situation and domestic political pressure to reduce the federal budget deficit
have reduced, and may continue to reduce, DoD's budget, which could have an
adverse effect on the Company's earnings.
The adoption of new or modified procurement regulations also could have
an adverse effect on the Company and its cost of competing for and performing
government contracts.
DEPENDENCE ON SIGNIFICANT CONTRACTS
Although PSO contracts at fiscal year-end 1996, 1995 and 1994 have
numbered 149, 175 and 189, respectively, the loss of one or more may have a
substantial adverse impact on PSO's revenues and profitability if the particular
contract is large in relation to the rest. There also can be no assurance that
the Company will win any follow-on contracts.
CONTRACT PROFIT EXPOSURE
The Company provides services to the government through three types of
contracts: fixed-price, time-and-materials and cost-reimbursement. The Company
assumes financial risk on fixed-price contracts (approximately 5.3% of the
Company's government contract revenues in fiscal 1996) and time-and-material
contracts (approximately 32.2% of the Company's government contract revenues in
fiscal 1996) because the Company assumes the risk of performing those contracts
at the stipulated prices or negotiated hourly rates. The failure to estimate
ultimate costs accurately or to control costs during performance of the work
could result in losses or smaller than anticipated profits. The balance of the
Company's government contract revenue in fiscal 1996 (approximately 62.5%) was
derived from cost-reimbursement contracts. To the extent that the actual costs
incurred in performing a cost-reimbursement contract are within the contract
ceiling and allowable under the terms of the contract and
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<PAGE>
applicable regulations, the Company is entitled to reimbursement of its costs
plus a stipulated profit. However, if the Company's costs exceed the ceiling or
are not allowable under the terms of the contract or applicable regulations, any
excess would be subject to adjustment and repayment upon audit by the
government.
AUDITS
Government contract payments received by the Company for allowable
direct and indirect costs are subject to adjustment and repayment after audit if
the payments exceed allowable costs as defined in such government contracts.
Audits have been completed on all of the Company's incurred contract costs
through the end of fiscal year 1986 and on certain incurred contract costs
through the end of fiscal years 1987, 1990 and 1991.
POTENTIAL SUSPENSION AND DEBARMENT
The Company is subject to federal regulations under which its right to
receive future awards of new government contracts, or extensions of existing
government contracts, may be unilaterally suspended or barred should the Company
be convicted of a crime or be indicted based on allegations of violation of
certain specific federal statutes or other activities. Suspensions, even if
temporary, can result in the loss of valuable contract awards for which the
Company otherwise would be eligible. The initiation of suspension or debarment
hearings against the Company could have an adverse effect on the Company.
TECHNOLOGICAL CHANGE AND PROPRIETARY INFORMATION
The Company's business is dependent on its technical and organizational
knowledge, practices and procedures, and its future success is based, in part,
on its ability to keep up to date with new technological breakthroughs and
incorporate such changes in its products and services. There can be no
assurance that the Company will be successful in developing and marketing in a
timely manner new products and services that respond to technological advances
by others, or that the Company's products and services will adequately and
competitively address the needs of the changing marketplace.
The Company has or licenses a proprietary interest in certain of its
work products, software programs, methodologies and know-how. Although the
Company seeks to protect its proprietary information, there can be no assurance
that it will be successful in doing so. In addition, the government acquires
certain proprietary rights to software programs and other products that result
from the Company's services under government contracts and subcontracts. The
government may disclose such information to third parties, including the
Company's
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competitors. In case of subcontracts, the prime contractor also may have certain
rights to such programs and products. Any of these factors could reduce the
Company's ability to maximize the value of its competitive information.
COMPETITION
The markets that the Company services are highly competitive, and likely
to become more so with the expected continuing decline of government defense
expenditures. Some of the Company's competitors are large, diversified firms
with substantially greater financial resources, lower debt levels and larger
technical staffs than the Company has available to it. Government agencies also
compete with the Company because they can utilize their internal resources to
perform certain types of services that the Company might otherwise perform.
DEPENDENCE ON PROFESSIONAL STAFF
To service its PSO contracts, the Company must recruit and retain key
technical personnel, such as operations research and software engineers,
computer programmers, and other skilled scientists and engineers. Competition
for such personnel is intense, and the Company often must comply with provisions
in government contracts that require employment of persons with specified levels
of education, work experience and security clearances. At December 31, 1996,
the Company had openings for approximately 219 PSO-related positions. This
contrasts with the Company's openings at June 30, 1996 for 209 PSO-related
positions. An inability to fill a substantial portion of these current openings
could have an adverse impact on the Company's revenue growth and profitability.
NEW YORK STOCK EXCHANGE CONTINUED LISTING REQUIREMENTS
The Company's Common Stock is listed and traded primarily on the NYSE.
As of December 31, 1996, the Company did not comply with the net tangible asset
continued listing criterion set forth in Section 802.00 of the NYSE Listed
Company Manual ("NYSE Manual"). The NYSE Manual states in Section 801.00 that
when a company falls below any criterion, the NYSE will review the
appropriateness of continued listing and might not permit continued listing
unless a company is proposing to make changes that would bring it in line with
original listing standards. At the present time, the Company would not meet
certain original listing standards, including "aggregate market value of
publicly-held shares" and "demonstrated earning power." Listing of the Common
Stock on the NYSE or the AMEX or trading of the Common Stock on the Nasdaq NMS
is a condition to the Company selling shares to the Selling Stockholder under
the Structured Equity Line. See "THE COMPANY -- Debt and Equity
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Financing." The Company has had no discussions with the NYSE concerning its
listing or the status of its application to list the shares offered hereby.
There can be no assurance that the Common Stock will not be delisted on the NYSE
or, if the Common Stock is delisted, that the Company will be able to list the
Common Stock on the AMEX or have it traded on Nasdaq NMS. If the Company's
Common Stock is not listed on the NYSE or AMEX and not traded on Nasdaq NMS, the
market price and trading volume of the Common Stock could be adversely
affected.
POTENTIAL ISSUANCE OF PREFERRED STOCK
The Company's Board of Directors has the authority, without any further
vote by the Company's stockholders, to issue up to 300,000 shares of Preferred
Stock in one or more series and to determine the designations, powers,
preferences and relative, participating, optional or other rights thereof,
including without limitation, the dividend rate (and whether dividends are
cumulative), conversion rights, voting rights, rights and terms of redemption,
redemption price and liquidation preference. Although the Company has no current
plans to issue any shares of Preferred Stock, the rights of the holders of
Common Stock would be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. Issuance
of Preferred Stock could have the effect of delaying, deterring or preventing a
change in control of the Company, including the imposition of various procedural
and other requirements that could make it more difficult for holders of Common
Stock to effect certain corporate actions, including the ability to replace
incumbent directors and to accomplish transactions opposed by the incumbent
Board of Directors.
RECENT DEVELOPMENTS
The Company's OSU(R), NetworkVUE(TM) and CIS business units have ceased
operations. The Company is attempting to sell the intellectual property of
OSU(R), NetworkVUE(TM) and CIS, but there can be no assurance that the Company
will succeed in doing so. The Company is in the process of addressing the
warranty, servicing and other contractual obligations of OSU(R), NetworkVUE(TM)
and CIS resulting from previous sales of their respective products. The Company
is also attempting to preserve the value of the intellectual property of OSU(R),
NetworkVUE(TM) and CIS pending disposition. For a description of these and the
Company's other businesses discussed in this section, see "THE COMPANY -- Other
Businesses."
The Company's GRC Instruments(TM) and Advanced Security
Technologies/Vindicator(R) business units are continuing their operations
pending their sale. The Company is in negotiation with potential purchasers, but
there can be no assurance that any agreements will be reached or that any sales
would be at favorable prices or without the Company incurring additional losses.
For the quarter ended March 31, 1997, the Company anticipates reporting
the financial position, results of operations and cash flows for its OSU(R),
NetworkVUE(TM), and APD businesses on a discontinued operations basis.
On March 10, 1997, the Company announced that its board of directors has
unanimously elected Joseph R. Wright, Jr., as its new chairman. Mr. Wright had
been a member of the Company's board since 1994. Mr. Wright is also Chairman
and CEO of AVIC Group International, Inc., a public company establishing joint
ventures to develop, finance, build and maintain telecommunications networks in
the People's Republic of China. From 1981 to 1982, Mr. Wright served as deputy
secretary of the Department of Commerce, then spent the next six years as deputy
director of the White House Office of Management and Budget ("OMB"). He was a
member of the President's Cabinet as director of OMB from 1988 to 1989, prior to
becoming vice chairman and executive vice president of W.R. Grace & Co.,
positions he held from 1989 until 1994.
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THE COMPANY
The Company provides knowledge-based professional services and high-
quality technology-based product solutions to government and commercial
customers through its core professional services organization ("PSO") business.
Beginning in 1993, the Company expanded beyond PSO into telecommunications,
initially by developing the OSU(R) Network Interface. In 1995, the Company
launched a second telecommunications initiative when it began development of its
NetworkVUE(TM) software. From the inception of this expansion through early
1997, the Company invested the free cash flow from PSO and incurred substantial
debt in order to fund the development and marketing of these products. During
this time, PSO generated in excess of 90% of the Company's revenue and was
consistently profitable with positive cash flows. As discussed under "RECENT
DEVELOPMENTS," the Company has decided to sell or close most of the
telecommunications business units and certain other business units and focus
primarily on PSO. The Company also expects to pursue strategies to restructure
its bank debt, which was $22.5 million at December 31, 1996.
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PROFESSIONAL SERVICES ORGANIZATION
The Company's principal business is PSO, which focuses on providing
information technology consulting services, primarily to the United States
Department of Defense ("DoD") and its instrumentalities. Areas of expertise
include: software and system engineering; business decision support systems;
analytical modeling and simulation; database design and implementation; legacy
migration engineering; network design and integration; systems integration;
post-deployment software support; operation support and management; virtual
manufacturing consulting; communication engineering; and testing and evaluation.
These services are applied to such areas as: financial and personnel
management; automated acquisition systems; transportation planning and analysis;
manufacturing analysis; logistics planning; security clearance processing;
WAN/LAN analysis; training systems; and information warfare systems relying on
radar, optics, communication networks, electronics, navigation and guidance,
control, space, and surveillance systems. PSO had revenues of $27.8 million for
the quarter ended December 31, 1996 and $117.7 million for the fiscal year ended
June 30, 1996.
OTHER BUSINESSES
Telecommunications Division. The Company's Telecommunications Division
---------------------------
consisted of three business units: OSU(R), NetworkVUE(TM) and the Application
Software Group ("ASG"). As described above under "RECENT DEVELOPMENTS," the
Company has shut down its OSU(R) and NetworkVUE(TM) business units, which
constituted the bulk of the Telecommunications Division, but the Company remains
fully committed to ASG. OSU(R) is a section terminating regenerator that
provides demarcation between any two entities with a synchronous optical network
transmission protocol fiber network. NetworkVUE(TM) is a suite of software
modules that automates the analysis, design and planning of telecommunications
networks based on optimizing cost, performance and reliability. ASG develops
custom software for the telecommunications industry. OSU(R) had revenues of
$71,000 and $1.5 million for the quarter ended December 31, 1996 and the fiscal
year ended June 30, 1996, respectively, and for the same periods, NetworkVUE(TM)
had revenues of $172,000 and $460,000 and ASG had revenues of $605,000 and
$0.
Advanced Products Division. As described above under "RECENT
--------------------------
DEVELOPMENTS," the Company is pursuing the sale or closure of the three business
units that constitute its Advanced Products Division ("APD"): GRC
Instruments(TM), Commercial Information Solutions (CIS) and Advanced Security
Technologies/Vindicator(R). GRC Instruments(TM) designs, manufactures, markets
and sells electronically instrumented
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impact testing equipment for dynamic materials testing under the Dynatup(R)
label. Commercial Information Solutions (CIS) develops and markets the FLOW
GEMINI(TM) line of environmental, health and occupational safety software
products, which facilitates compliance with federal and state recordkeeping.
Vindicator(R) provides physical security and access control systems for critical
resource protection requirements. GRC Instruments(TM) had revenues of $894,000
and $3.5 million for the quarter ended December 31, 1996 and the fiscal year
ended June 30, 1996, respectively; Commercial Information Solutions had revenues
of $189,000 and $1.5 million, and Vindicator(R) had revenues of $451,000 and
$422,000 for the same periods. The Company will retain and move to PSO a small
part of its Advanced Security Technologies business, the Advanced Technology
Services Group, which had revenues of $137,000 and $1.1 million for the quarter
ended December 31, 1996 and the fiscal year ended June 30, 1996, respectively.
DEBT AND EQUITY FINANCING
The Company entered into financing agreements with the Selling
Stockholder and another investor in January 1997 in order to raise additional
capital to continue its operations. The Company sought to raise additional
capital because, since 1993, the Company had invested the free cash flow from
PSO and incurred substantial debt to finance the development of products for its
telecommunications business units but had not realized the revenues that it had
anticipated from these business units. Before entering into the financing
agreements, the Company sought the advice of its financial advisor, Smith Barney
Inc. ("Smith Barney"), which the Company had engaged to advise the Company with
respect to a full range of financial and strategic options. In particular,
Smith Barney, on the Company's behalf, sought strategic partnerships,
distributorship, licensing agreements and other transactions. Among the goals
of any such transaction was to find a corporate partner that could provide
additional capital and financial resources to assist the Company in continuing
to develop its telecommunications business units. By January 1997, these
efforts had not been successful, and the Company believed that obtaining near-
term commitments for additional capital was in its best interest. The Company
also considered, as alternatives to the financing agreements, other debt and
equity financings, but concluded that such financings were not likely to be
available within an acceptable time frame and/or on acceptable terms. Thus, the
financing agreements provided what the Company believed were terms for
additional capital in the needed time frame that were in the best interest of
the Company.
Structured Equity Line. The Company and the Selling Stockholder entered
----------------------
into a Structured Equity Line Flexible Financing Agreement (the "Structured
Equity Line"), dated as of January 21, 1997 (the "Registration Rights
Agreement"), and a related Registration Rights Agreement, dated as of January
30, 1997 whereby the Company agreed to file under the Securities Act a
registration statement for the resale by the Selling Stockholder of shares of
Common Stock of which this Prospectus is a part (the "Registration Statement").
Pursuant to the terms of the Structured Equity Line, the Selling Stockholder is
required to purchase shares of Common Stock over a period of 42 months (subject
to adjustment upon the occurrence of certain events) from the date of
effectiveness under the Securities Act of the Registration Statement, for an
aggregate purchase price of up to $18 million. The Company may terminate the
Structured Equity Line on the first anniversary of the date of effectiveness of
the Registration Statement, provided that the Selling Stockholder has, as of or
on such first anniversary, purchased shares of Common Stock for an aggregate
purchase price of at least $5 million. If the Company issues less than $5
million of its Common Stock under the Structured Equity Line, it must pay the
Selling Stockholder up to $300,000. Under the terms of the Structured Equity
Line, during the first six months of effectiveness of the Registration
Statement, the Selling Stockholder may, but is not required to, purchase shares
of the Company's Common Stock for an aggregate purchase price of up to $3
million. During each three month period following that initial six month period,
the Company, subject to the satisfaction of certain conditions, can require the
Selling Stockholder to purchase shares of Common Stock for an aggregate purchase
price of at least $1.5 million and up to $3 million. At the beginning of each
three-month period, the Company shall notify the Selling Stockholder of the
aggregate purchase price of shares of Common Stock required to be purchased by
the Selling Stockholder during such three-month period. The Selling Stockholder
will select and notify the Company of the date on which the purchase of shares
of Common Stock from the Company shall close within each such three-month period
following notification by the Company, and of the purchase of additional shares
of Common Stock during such period if the aggregate purchase price of the shares
of Common Stock to be acquired pursuant to the Company's notification is less
than $3 million. The purchase price per share to be paid by the Selling
Stockholder for shares Common Stock acquired under the Structured Equity Line is
equal to 94% of the lowest reported sale price during the three trading days
immediately preceding the notice of purchase by the Selling Stockholder.
The Selling Stockholder's obligation to purchase shares of Common Stock
under the Structured Equity Line is subject to various conditions, including,
without limitation: (i) effectiveness of the Registration Statement under the
Securities Act with respect to the Shares; (ii) the price of the Common Stock
being at least $4.00 per share; (iii) reported trading volume of the Common
Stock in its principal trading market multiplied by the weighted average trading
price (by trading volume) of the Common Stock ("the value of open market
trading")
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being during a period of 20 trading days prior to the commencement of each
three-month period of at least $500,000 per day in any three month period in
which the Company requires the Selling Stockholder to purchase shares of Common
Stock for an aggregate purchase price in excess of $1.5 million; (iv) the lesser
of the amount of Common Stock sold to the Selling Stockholder in any three month
period not exceeding 8% of the average daily value of open market trading of the
Common Stock on its principal market multiplied by the number of trading days in
that period and the immediately preceding three month period; (v) listing of the
Company's Common Stock on the New York Stock Exchange ("NYSE") or American Stock
Exchange ("AMEX") or trading of the Company's Common Stock on the Nasdaq
National Market System ("Nasdaq NMS"); and (vi) the percentage of the Company's
Common Stock beneficially owned by the Selling Stockholder and its affiliates
not being more than 4.9% of the outstanding Common Stock on each closing date
for the purchase of shares of Common Stock in accordance with the terms of the
Structured Equity Line.
As consideration for entering into the Structured Equity Line, the
Selling Stockholder received a seven year warrant to purchase 125,000 shares of
the Company's Common Stock at an exercise price equal to $8.47 per share (the
"Warrant"). The Warrant is not exercisable for 18 months from the date of
issuance, but will become immediately exercisable if the Company declares a
material dividend or distribution (other than in Shares of Common Stock), sells
substantially all of its assets, or enters into a merger, consolidation or other
similar transaction, or there is a termination of the Structured Equity Line in
accordance with its terms, and in such event the exercise price will be the
lesser of (i) $8.47 or (ii) 80% of the "Transaction Value." "Transaction Value"
is defined in the Warrant to mean, in the case of a merger, acquisition, sale of
Common Stock, sale of assets or similar transaction, the fair market value of
the consideration to be received per share of Common Stock, as evidenced by the
average of the closing sale price for the Common Stock during the 10 trading
days following the announcement of such definitive agreement, and in the case of
a material special dividend or distribution, the fair market value of such
dividend or distribution.
If the Company elects to issue Common Stock under the Structured Equity
Line for an aggregate purchase price of more than $5 million or to extend the
term thereof beyond one year, the Company will issue an additional seven year
warrant for the purchase of 75,000 shares of the Company's Common Stock (the
"Additional Warrant" and, together with the Warrant, the "Warrants") at an
exercise price equal to 140% of the closing sale price of the Common Stock at
the time of the issuance of the Additional Warrant. The Additional Warrant will
be exercisable at the same time as the Warrant, or upon issuance if the Warrant
is exercised prior to the issuance of such Additional Warrant, and shall contain
provisions similar to those in the Warrant.
Under the Structured Equity Line and the related Registration Rights
Agreement, the Company agreed to file under the Securities Act a registration
statement, of which this Prospectus is a part, for the resale by the Selling
Stockholder of the shares of the Company's Common Stock to be issued under the
Structured Equity Line, the Warrant and the Additional Warrant.
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Convertible Debenture. The Company also has entered into a Convertible
---------------------
Securities Subscription Agreement, dated as of January 21, 1997 (the
"Subscription Agreement"), with Halifax Fund, L.P., a Cayman Islands exempted
limited partnership ("Halifax"). A member of the Selling Stockholder, The
Palladin Group, L.P., is the investment manager for Halifax. Pursuant to the
Subscription Agreement, Halifax purchased a $4 million aggregate principal
amount 5% Convertible Debenture due January 30, 2000 (the "Debenture").
Interest on the Debenture is payable quarterly in cash or, at the Company's
option, the amount due may be added to the outstanding principal due under the
Debenture. The Debenture is convertible, at Halifax's option 60 days after
January 30, 1997 at any time and from time to time, into the Company's Common
Stock at the lesser of (i) $11 per share, subject to adjustment under certain
circumstances, or (ii) 94% of the lowest reported sale price during the three
trading days immediately preceding the date of conversion. If the Company is in
default under the terms of the Debenture, Halifax may sell the Debenture to the
Company at 120% of the amount of the outstanding principal due under the
Debenture plus accrued but unpaid interest.
As consideration for entering into the Subscription Agreement, the
Company has issued to Halifax a seven year warrant, which, subject to certain
exceptions, is not exercisable until July 30, 1998, to purchase 320,000 shares
of the Company's Common Stock at a price of $8.47 per share (the "Debenture
Warrant"). If the Company (i) sells all or substantially all of its assets, (ii)
enters into a merger, consolidation, reorganization or other similar transaction
that results in the shareholders of the Company owning in the aggregate less
than 50% of the common equity and having less than 50% of the voting power of
the surviving entity, or (iii) fixes a record date for the declaration of a
material special distribution or dividend, then Halifax may sell the Debenture
to the Company at 115% of the outstanding principal due under the Debenture plus
accrued but unpaid interest, and the Debenture Warrant becomes immediately
exercisable at a price equal to the lesser of (i) $8.47 per share or (ii) 80% of
the "Transaction Value" per share ("Transaction Value" has the same meaning as
set forth above).
The Company is obligated to register the resale under the Securities Act
by Halifax of all or any part of the shares of the Company's Common Stock
issuable upon conversion of the Debenture and the Debenture Warrant and is doing
so in a registration statement, which will be filed separately from the
registration statement of which this Prospectus forms a part.
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OTHER INFORMATION
The Company was organized in California in 1961 and has been a Delaware
corporation since 1974. The Company's principal executive offices are located
at 1900 Gallows Road, Vienna, Virginia 22182, and its telephone number is (703)
506-5000. For further information about the business and operations of the
Company, reference is made to the Company's reports incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, $.10 par value per share, and 300,000 shares of undesignated
Preferred Stock, $1.00 par value per share. As of March 31, 1997, 9,342,557
shares of Common Stock were issued and outstanding. There were no shares of
Preferred Stock designated or issued.
Common Stock. The holders of the Common Stock have one vote per share
and are entitled to cumulative voting in the election of directors of the
Company. The holders of the Common Stock are entitled to receive, subject to
the preferential rights of the holders of the Preferred Stock (as hereinafter
described),
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out of the assets legally available therefor, dividends at such time and in such
amounts as the Board of Directors may determine. Subject to the preferential
rights of the holders of the Preferred Stock, upon liquidation, dissolution or
winding up of the Company, the assets legally available for distribution to
stockholders of the Company shall be distributed ratably among the holders of
the Common Stock.
Preferred Stock. The Board of Directors is empowered to issue up to
300,000 shares of preferred stock from time to time in one or more series,
fixing in each case, among other things: (i) the rate of dividends and whether
they shall be cumulative, (ii) voting rights, if any, (iii) redemption price,
(iv) the amount payable in the even of involuntary or voluntary liquidation and
(v) the terms and conditions on which shares may be converted if the shares of
that series are to be issued with the privilege of conversion.
Shareholder Rights Plan. The Company has a Shareholder Rights Plan
under which a dividend of one Common Stock Purchase Right (a "Right") is
automatically issued for each share of Common Stock. The Rights are not
exercisable or transferable apart from the Common Stock until ten business days
after a person has acquired beneficial ownership of 25% or more of the Common
Stock, or commences, or announces an intention to commence, a tender offer for
25% or more of the Common Stock. Separate certificates for the Rights will be
mailed to holders of the Common Stock as of such date, and each Right will
entitle the holder thereof to buy one share of Common Stock at an exercise price
of $100. However, if any person or group becomes the beneficial owner of 25% or
more of the Common Stock (other than pursuant to an offer for all shares that
the independent Directors of the Company determine is fair to, and otherwise in
the best interest of, the Company and its shareholders), each Right not owned by
such person or group will entitle the holder to purchase, at the exercise price
of the Rights, that number of shares of Common Stock (or other consideration)
that would have a market value of two times the exercise price of the Rights.
Similarly, in the event that the Company is a party to a merger or other
business combination transaction, each Right will entitle the holder to
purchase, at the exercise price of the Rights, that number of shares of common
stock of the acquiring company that would have a market value of two times the
exercise price of the Rights. The Rights are redeemable at $.05 per Right prior
to the tenth business day following the public announcement that a person has
acquired beneficial ownership of 25% of the Common Stock. Upon redemption, the
right to exercise the Rights will terminate. The Rights expire on December 31,
2005.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the resale by the
Selling Stockholder of the Shares of Common Stock offered by this Prospectus.
The Company will receive proceeds from the original issuance of the Shares to
the Selling Stockholder under the Structured Equity Line, the Warrant and the
Additional Warrant. There can be no assurance that the Company will issue any,
Shares or receive any proceeds, and under the terms of the Structured Equity
Line, it is possible that the Company will receive no proceeds at all. See "THE
COMPANY -- Debt and Equity Financing." The Company could receive, before
expenses, up to $18,000,000 under the Structured Equity Line and up to
$1,058,750 under the Warrant. Under the Additional Warrant, the amount of gross
proceeds received will depend on the exercise price of the Additional Warrant,
which is specified in the Structured Equity Line as 140% of the closing sale
price of the Common Stock on the date of issuance of the Additional Warrant.
Thus, if, for example, the closing sale price on the date of issuance were $10,
the gross proceeds from the Additional Warrant, assuming full exercise, would be
$1,050,000 (i.e. 140% x $10 x 75,000 shares). The actual amount of proceeds from
the Structured Equity Line, the Warrant and the Additional Warrant, if any, will
depend upon the market price of the Common Stock, whether the Selling
Stockholder elects to exercise the Warrant and the Additional Warrant, if any,
whether the Selling Stockholder elects to purchase Common Stock as permitted
under the terms of the Structured Equity Line, and whether the Company elects to
require the Selling Stockholder to purchase Common Stock as permitted under the
terms of the Structured Equity Line. For a description of the terms of the
Structured Equity Line, the Warrant and the Additional Warrant, see
"THE COMPANY--Debt and Equity Financing."
The Company expects that any net proceeds from the Structured Equity
Line, the Warrant and the Additional Warrant will be used to reduce the amount
of outstanding indebtedness under the Revolving Credit, which provides working
capital for the Company. Depending upon the amount and terms of the Company's
indebtedness at the time the Company receives proceeds from the Structured
Equity Line, the Warrant and the Additional Warrant, if any, the Company also
might use the proceeds to repay other indebtedness or for general corporate
purposes to satisfy operating cash flow requirements.
As of December 31, 1996, the Company had outstanding $31.2 million of
debt, consisting of the $5 million Term Loan, $17.5 million drawn from the $22
million Revolving Credit, the $6.8 million Equipment Lease and the $1.9 million
Note. On January 30, 1997, the Company also issued the Debenture.
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The Term Loan is due on September 1, 1998, and bears interest at the
bank's floating prime rate, currently 8.5% per annum. The Revolving Credit is
due on January 15, 1999, and, if the Company is not in default, the Revolving
Credit is automatically renewable for one-year renewal terms unless the bank, at
its option, delivers written notice of non-renewal to the Company at least 15
months in advance; the Revolving Credit bears interest at the bank's floating
prime rate, currently 8.5% per annum. The Equipment Lease is payable through
June 2001 in monthly installment rental payments that include an interest
component of 9.0%. The Note is due in November 1997 (except for a principal
amount of $600,000, which was due in November 1996 but as to which a dispute
exists) and bears interest at 8.0%. The terms of the Debenture are described
herein under "THE COMPANY -- Debt and Equity Financing."
The Company's debt increased from $12.1 million on December 31, 1995 to
$31.2 million on December 31, 1996 primarily because of the Company's investment
in its Telecommunications Division. See "THE COMPANY."
SELLING STOCKHOLDER
The Selling Stockholder is Cripple Creek Securities, LLC, a Delaware
limited liability company. The Selling Stockholder has not had a material
relationship with the Company within the past three years, other than as a
result of entering into the Structured Equity Line and related agreements. One
of the Selling Stockholder's members, The Palladin Group, L.P., a Delaware
limited partnership, is the investment manager for Halifax Fund, L.P., which
entered into a Subscription Agreement and related agreements with the Company.
See "THE COMPANY --Debt and Equity Financing." As of the date hereof, the
Selling Stockholder owns no shares of the Company's Common Stock and is offering
herein for resale all of the shares of the Company's Common Stock that it may
acquire under the Structured Equity Line, the Warrant and the Additional
Warrant. As of the date hereof, Halifax owns no shares of the Company's Common
Stock and will register the resale of all of the shares that it may acquire upon
the conversion of the Convertible Debenture and the exercise of the Debenture
Warrant in a separate registration statement to be filed with the Securities and
Exchange Commission.
PLAN OF DISTRIBUTION
The Selling Stockholder, acting as principal for its own account,
directly, through agents designated from time to time,
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or through brokers, dealers, agents or underwriters also to be designated, may
sell all or a portion of the Shares from time to time on terms to be determined
at the time of sale. The Selling Stockholder may from time to time sell all or a
portion of the Shares in routine brokerage transactions on the New York Stock
Exchange, the Pacific Stock Exchange or otherwise at the prices and terms
prevailing at the time of the sale. The Selling Stockholder also may make
private resales directly or through brokers or may make resales pursuant to Rule
144 under the Securities Act. The Selling Stockholder may pay customary
brokerage fees, commissions and expenses.
To the extent required pursuant to Rule 424 under the Securities Act, a
Prospectus Supplement will be filed with the Securities and Exchange Commission
with respect to a particular offering setting forth the terms of any offering,
including the name or names of any underwriters or agents, if any, any
underwriting discounts and other items constituting underwriters' compensation,
the offering price and any discounts or concessions allowed or reallowed or paid
to dealers. Any offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in a sale, shares of Common Stock will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The shares may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of shares to be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters, will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Shares
will be subject to conditions precedent and the underwriters will be obligated
to purchase all of the shares if any are purchased.
If dealers are utilized in the sale of shares of Common Stock in respect
of which this Prospectus is delivered, the Selling Stockholder will sell such
shares to the dealers as principals. The dealers may then resell such shares to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in a Prospectus Supplement relating thereto.
-23-
<PAGE>
If an agent is used, the agent will be named, and the terms of the
agency and any commissions will be set forth in a Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
Shares may be sold directly by the Selling Stockholder to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales, including the terms of any bidding or auction process, will be described
in the Prospectus Supplement relating thereto.
Agents, dealers and underwriters may be entitled under agreements
entered into with the Selling Stockholder to indemnification against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters
may be customers of, engage in transactions with, or perform services for the
Company or the Selling Stockholder in the ordinary course of business.
The Company will bear all costs and expenses of the registration of the
Shares under the Securities Act and certain state securities laws. The Selling
Stockholder will pay any transaction costs associated with effecting any sales
that occur.
The Selling Stockholder is not restricted as to the price or prices at
which it may resell Shares acquired upon the conversion of the Debentures or the
exercise of the Warrants. Such resales may have an adverse effect on the market
price of the Common Stock. Moreover, the Selling Stockholder is not restricted
as to the number of Shares that may be sold at any one time, and it is possible
that a significant number of Shares could be sold at the same time, which also
may have an adverse effect on the market price of the Common Stock.
The Company has agreed to indemnify the Selling Stockholder against
certain civil liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Thomas E. McCabe, the Company's Senior Vice President, General Counsel
and Secretary, has rendered an opinion to the effect that the Common Stock
offered by this Prospectus is duly authorized, validly issued, fully paid and
non-assessable.
-24-
<PAGE>
EXPERTS
The consolidated financial statements and the related financial
statement schedule as of June 30, 1996 and 1995 and for each of the three years
in the period ended June 30, 1996 incorporated by reference in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
-25-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
SEC registration . . . . . . . . . . . $ 6,423
Legal fees and expenses . . . . . . . . 20,000*
Accounting fees and expenses . . . . . 12,000*
Miscellaneous .. . . . . . . . . . . . 5,000*
Total . . . . . . . . . . . . . . . . . $ 43,423*
*Estimates
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law provides, in substance, that
Delaware corporations shall have the power, under specified circumstances, to
indemnify their directors, officers, employees and agents in connection with
actions or suits by or in the right of the corporation, by reason of the fact
that they were or are such directors, officers, employees and agents, against
expenses (including attorneys' fees) and, in the case of actions, suits or
proceedings brought by third parties, against judgment, fines and amounts paid
in settlement actually and reasonably incurred in any such action, suit or
proceeding.
The Company's Certificate of Incorporation provides that a director
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director except for liability (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. The Company's Bylaws also
provide that the Company may indemnify its directors, officers and legal
representatives to the fullest extent permitted by Delaware law against all
awards and expenses (including attorneys' fees).
The Company has purchased an insurance policy that purports to insure
its officers and directors against certain liabilities incurred by them in the
discharge of their functions as officers and directors.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- - - ----------- -------------
<S> <C>
4.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994).
4.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995).
4.3++ Structured Equity Line Flexible Financing Agreement, dated as of
January 21, 1997, between the Company and Cripple Creek
Securities, LLC (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996).
4.4 125,000 Share Common Stock Purchase Warrant issued by the
Company to Cripple Creek Securities, LLC (incorporated by
reference to Exhibit 10.7 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996). 4.5
Registratio n Rights Agreement, dated as of January 30, 1997,
between the Company and Cripple Creek Securities, LLC
(incorporat ed by reference to Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996).
5.1+ Opinion of Thomas E. McCabe.
10.1 1985 Employee Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1996).
10.2 1994 Employee Option Plan (incorporated by reference to Exhibit
10.2 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1995).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.3 Officers Stock Option Plan (incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1996).
10.4 Cash Compensation Replacement Plan (incorporated by reference to
Exhibit 10.4 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.5 Incentive Compensation Plan (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1995).
10.6 Directors Fee Replacement Plan (incorporated by reference to
Exhibit 10.3 to Amendment No.1 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996).
10.7 Directors Phantom Stock Plan (incorporated by reference to
Amendment No. 1 to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.8 Directors Retirement Plan (incorporated by reference to
Amendment No. 1 to Exhibit 10.6 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.9 Amended and Restated Revolving Credit and Term Loan Agreement,
dated February 12, 1996, between the Company and Mercantile-Safe
Deposit & Trust Company, with First Confirmation and Amendment,
dated May 15, 1996, Second Confirmation and Amendment, dated
July 18, 1996, and Third Confirmation and Amendment, dated
September 24, 1996 (incorporated by reference to Amendment No. 1
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1996).
10.10 Fourth Confirmation and Amendment, dated February 7, 1997, to
Amended and Restated Revolving Credit and Term Loan Agreement,
dated February 12, 1996, between the Company and Mercantile-Safe
Deposit & Trust Company (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.11 Lease Agreement, dated as of June 30, 1989, between the Company
and Centennial III Limited Partnership (incorporated by
reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1989).
10.12 Amendment No. 1 to Lease Agreement, dated as of June 30, 1989,
between the Company and Centennial III Limited Partnership
(incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1990).
10.13 Amendments No. 2, 3, 4 and 5 to the Lease Agreement, dated as of
June 30, 1989, between the Company and Centennial III Limited
Partnership (incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended June 30,
1994).
10.14 Amendment No. 6 to the Lease Agreement, dated as of June 30,
1989, between the Company and Centennial III Limited Partnership
(incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995).
10.15 Amended and Restated Rights Agreement, dated June 30, 1995,
between the Company and American Stock Transfer & Trust Company
(incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995).
10.16 Purchase and Sale Agreement and Joint Escrow Instructions, dated
April 25, 1995, between General Research Corporation and Bermant
Development Company (incorporated by reference to Exhibit 10.19
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995).
10.17 First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated June 12, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.18 Building Lease, dated April 25, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
10.19 Interim Lease, dated April 25, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
10.20 Employment Agreement, dated July 1, 1995, between the Company
and Jim Roth (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended June 30,
1995).
10.21 Note, dated July 9, 1992, and Deed of Trust, dated August 11,
1993, between the Company and Jim Roth (incorporated by
reference to Exhibit 10.15 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994).
10.22 Employment Agreement, dated December 8, 1995, between the
Company and Gary L. Denman (incorporated by reference to Exhibit
10.17 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996 ).
10.23 Employment Agreement, dated December 8, 1995, between the
Company and James P. McCoy (incorporated by reference to Exhibit
10.18 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996).
10.24 Employment Agreement, dated December 8, 1995, between the
Company and Thomas E. McCabe (incorporated by reference to
Exhibit 10.19 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.25 Employment Agreement, dated November 2, 1995, between the
Company and Charles C. Bream (incorporated by reference to
Exhibit 10.20 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.26 Employment Agreement, dated April 29, 1996, between the Company
and Ronald B. Alexander (incorporated by reference to Exhibit
10.21 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996).
10.27 Patent Application Assignment and Royalty Agreement, dated
October 15, 1993, among the Company (as success to SWL Inc.),
Robert E. Pfister and William D. Knight (incorporated by
reference to Exhibit 10.26 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996).
10.28* Convertible Securities Subscription Agreement, dated as of
January 21, 1997, between the Company and Halifax Fund, L.P.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996).
10.29 $4,000,000 5% Convertible Debenture Due January 30, 2000 issued
by the Company to Halifax Fund, L.P. (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1996).
10.30 320,000 Share Common Stock Purchase Warrant issued by the
Company to Halifax Fund, L.P. (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996).
10.31 Registration Rights Agreement, dated as of January 30, 1997,
between the Company and Halifax Fund, L.P. (incorporated by
reference to Exhibit 10.5 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996).
13.1+ Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
23.2+ Consent of Thomas E. McCabe .
24.1+ Power of Attorney.
</TABLE>
+ Previously filed.
++ Exhibits A and B to Exhibit 4.3 are incorporated herein as Exhibits 4.4
and 4.5.
* Exhibits A, B and C to Exhibit 10.28 are incorporated herein as Exhibits
10.29, 10.30 and 10.31.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represents a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
II-7
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Fairfax, Commonwealth of Virginia, on April 29,
1997.
GRC INTERNATIONAL, INC.
By: /s/ Thomas E. McCabe
--------------------------
Thomas E. McCabe
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the
II-9
<PAGE>
following persons in the capacities and on the dates indicated below:
<TABLE>
<CAPTION>
Signature Title Date
- - - --------- ----- ----
<S> <C> <C>
*
- - - ------------------------- President April 29, 1997
Jim Roth and Chief Executive
Officer (Principal
Executive Officer)
/s/ Ronald B. Alexander April 29, 1997
- - - ------------------------- Senior Vice President-
Ronald B. Alexander Finance, Chief
Financial Officer and
Treasurer (Principal
Financial and
Accounting Officer)
*
- - - ------------------------- Chairman and Director April 29, 1997
Joseph R. Wright, Jr.
*
- - - ----------------------- Director April 29, 1997
H. Furlong Baldwin
*
- - - ----------------------- Director April 29, 1997
Frank J.A. Cilluffo
*
- - - ----------------------- Director April 29, 1997
Leslie B. Disharoon
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
*
- - - ----------------------- Director April 29, 1997
Charles H.P. Duell
*
- - - ----------------------- Director April 29, 1997
Edward C. Meyer
*
- - - ----------------------- Director April 29, 1997
George R. Packard
*
- - - ----------------------- Director April 29, 1997
Herbert Rabin
*
- - - ----------------------- Director April 29, 1997
E. Kirby Warren
</TABLE>
* /s/ Thomas E. McCabe
- - - -----------------------
Thomas E. McCabe
Power of Attorney
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- - - ---------- -----------
<S> <C>
4.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994).
4.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995).
4.3++ Structured Equity Line Flexible Financing Agreement, dated as of
January 21, 1997, between the Company and Cripple Creek
Securities, LLC (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996).
4.4 125,000 Share Common Stock Purchase Warrant issued by the
Company to Cripple Creek Securities, LLC (incorporated by
reference to Exhibit 10.7 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996). 4.5
Registratio n Rights Agreement, dated as of January 30, 1997,
between the Company and Cripple Creek Securities, LLC
(incorporat ed by reference to Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996).
5.1+ Opinion of Thomas E. McCabe.
10.1 1985 Employee Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1996).
10.2 1994 Employee Option Plan (incorporated by reference to Exhibit
10.2 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1995).
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.3 Officers Stock Option Plan (incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1996).
10.4 Cash Compensation Replacement Plan (incorporated by reference to
Exhibit 10.4 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.5 Incentive Compensation Plan (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1995).
10.6 Directors Fee Replacement Plan (incorporated by reference to
Exhibit 10.3 to Amendment No.1 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996).
10.7 Directors Phantom Stock Plan (incorporated by reference to
Amendment No. 1 to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.8 Directors Retirement Plan (incorporated by reference to
Amendment No. 1 to Exhibit 10.6 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.9 Amended and Restated Revolving Credit and Term Loan Agreement,
dated February 12, 1996, between the Company and Mercantile-Safe
Deposit & Trust Company, with First Confirmation and Amendment,
dated May 15, 1996, Second Confirmation and Amendment, dated
July 18, 1996, and Third Confirmation and Amendment, dated
September 24, 1996 (incorporated by reference to Amendment No. 1
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1996).
10.10 Fourth Confirmation and Amendment, dated February 7, 1997, to
Amended and Restated Revolving Credit and Term Loan Agreement,
dated February 12, 1996, between the Company and Mercantile-Safe
Deposit & Trust Company (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996).
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.11 Lease Agreement, dated as of June 30, 1989, between the Company
and Centennial III Limited Partnership (incorporated by
reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1989).
10.12 Amendment No. 1 to Lease Agreement, dated as of June 30, 1989,
between the Company and Centennial III Limited Partnership
(incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1990).
10.13 Amendments No. 2, 3, 4 and 5 to the Lease Agreement, dated as of
June 30, 1989, between the Company and Centennial III Limited
Partnership (incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended June 30,
1994).
10.14 Amendment No. 6 to the Lease Agreement, dated as of June 30,
1989, between the Company and Centennial III Limited Partnership
(incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995).
10.15 Amended and Restated Rights Agreement, dated June 30, 1995,
between the Company and American Stock Transfer & Trust Company
(incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995).
10.16 Purchase and Sale Agreement and Joint Escrow Instructions, dated
April 25, 1995, between General Research Corporation and Bermant
Development Company (incorporated by reference to Exhibit 10.19
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995).
10.17 First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated June 12, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
</TABLE>
II-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.18 Building Lease, dated April 25, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
10.19 Interim Lease, dated April 25, 1995, between the Company and
Bermant Development Company (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995).
10.20 Employment Agreement, dated July 1, 1995, between the Company
and Jim Roth (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended June 30,
1995).
10.21 Note, dated July 9, 1992, and Deed of Trust, dated August 11,
1993, between the Company and Jim Roth (incorporated by
reference to Exhibit 10.15 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994).
10.22 Employment Agreement, dated December 8, 1995, between the
Company and Gary L. Denman (incorporated by reference to Exhibit
10.17 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996 ).
10.23 Employment Agreement, dated December 8, 1995, between the
Company and James P. McCoy (incorporated by reference to Exhibit
10.18 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996).
10.24 Employment Agreement, dated December 8, 1995, between the
Company and Thomas E. McCabe (incorporated by reference to
Exhibit 10.19 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
10.25 Employment Agreement, dated November 2, 1995, between the
Company and Charles C. Bream (incorporated by reference to
Exhibit 10.20 to Amendment No. 1 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1996).
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.26 Employment Agreement, dated April 29, 1996, between the Company
and Ronald B. Alexander (incorporated by reference to Exhibit
10.21 to Amendment No. 1 to the Company's Annual Report on Form
10-K for the year ended June 30, 1996).
10.27 Patent Application Assignment and Royalty Agreement, dated
October 15, 1993, among the Company (as success to SWL Inc.),
Robert E. Pfister and William D. Knight (incorporated by
reference to Exhibit 10.26 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996).
10.28* Convertible Securities Subscription Agreement, dated as of
January 21, 1997, between the Company and Halifax Fund, L.P.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31,
1996).
10.29 $4,000,000 5% Convertible Debenture Due January 30, 2000 issued
by the Company to Halifax Fund, L.P. (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1996).
10.30 320,000 Share Common Stock Purchase Warrant issued by the
Company to Halifax Fund, L.P. (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1996).
10.31 Registration Rights Agreement, dated as of January 30, 1997,
between the Company and Halifax Fund, L.P. (incorporated by
reference to Exhibit 10.5 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996).
13.1+ Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
II-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
23.2+ Consent of Thomas E. McCabe .
24.1+ Power of Attorney.
</TABLE>
+ Previously filed.
++ Exhibits A and B to Exhibit 4.3 are incorporated herein as Exhibits 4.4
and 4.5.
* Exhibits A, B and C to Exhibit 10.28 are incorporated herein as Exhibits
10.29, 10.30 and 10.31.
II-17
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 on Form S-2
to Registration Statement No. 333-22087 of GRC International, Inc. on Form S-3
of our report dated August 20, 1996, included in the Annual Report on Form 10-K
of GRC International, Inc. for the year ended June 30, 1996, and to the
reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
McLean, Virginia
April 29, 1997
