<PAGE>
As filed with the Securities and Exchange Commission
on February 21, 1997
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRC International, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
95-2131929
---------------------------------------
(I.R.S. Employee Identification Number)
1900 Gallows Road, Vienna, VA 22182 (703) 506-5000
-------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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.
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. ( )
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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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. ( )
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Shares Amount Aggregate Aggregate Amount of
To Be To Be Price Offering Registration
Registered Registered Per Unit Price Fee
- - - ---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Common 2,120,000 $4.25(1) $9,010,000 $2730.30
Stock
</TABLE>
(1) Calculated pursuant to Rule 457(c) under the Securities Act on the basis of
the average of the high and low sale prices for a share of common stock on the
New York Stock Exchange on February 19, 1997, which is within five business days
prior to filing.
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>
SUBJECT TO COMPLETION,
FEBRUARY 21, 1997
PROSPECTUS
2,120,000 SHARES
GRC INTERNATIONAL, INC.
COMMON STOCK
This Prospectus covers the offering for resale from time to time of up
to 2,120,000 shares (the "Shares") of common stock, par value $.10 per share
(the "Common Stock"), of GRC International, Inc., a Delaware corporation (the
"Company"), by Halifax Fund, L.P., a Cayman Islands exempted limited partnership
(the "Selling Stockholder"). The Company will issue the Shares upon the
conversion of all or any part of a debenture (the "Debenture") and the exercise
of all or any part of a warrant (the "Warrant") held by the Selling Stockholder.
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 exercise of all or any part of the Warrant. 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 February 19, 1997, the last
reported sale price of the Common Stock was $4 1/8.
The Shares may be offered by the Selling Stockholder for sale from
time to time through underwriters or dealers in the over-the-counter market or
on the New York Stock Exchange, the Pacific Stock Exchange or other stock
exchanges (if the Common Stock is listed for trading thereon), at prices then
obtainable. The Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). The Selling Stockholder and any broker
executing selling orders on behalf of the Selling Stockholder may be deemed to
be underwriters within the meaning of the Securities Act. Commissions received
by any such broker may deemed to be underwriting commissions under the
Securities Act. See "PLAN OF DISTRIBUTION."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS" BEGINNING ON PAGE 9.
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<PAGE>
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.
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<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-3 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.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete, and, in each such instance, are
qualified in all respects by reference to the applicable documents filed with
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;
(c) the Company's current report on Form 8-K filed on
October 16, 1996;
(d) the description of the Company's Common Stock contained
in the Company's registration statement pursuant to Section 12(g) of
the Exchange Act on Form 8-A, filed on August 19, 1981 and amended on
February 6, 1992.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment that indicates the termination
of this offering shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of such documents.
Any statements contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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.
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<PAGE>
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."
THE COMPANY
The Company has been a leading provider of 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 below, 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.
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
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<PAGE>
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 consists of three business units: OSU(R), NetworkVUE(TM) and the
Application Software Group ("ASG"). The Company expects in the near future to
sell or close OSU(R) and NetworkVUE(TM), which constitute 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. The Company is also pursuing the sale or
--------------------------
closure in the near future of the three business units that constitute its
Advanced Products Division ("APD"): GRC Instruments(TM), Commercial Information
Solutions and Advanced Security Technologies/Vindicator(R). GRC Instruments(TM)
designs, manufactures, markets and sells electronically instrumented impact
testing equipment for dynamic materials testing under the Dynatup(R) label.
Commercial Information Solutions develops and markets the FLOW GEMINI(TM) line
of environmental, health and occupational safety software products, which
facilitate 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.
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<PAGE>
DEBT AND EQUITY FINANCING
Convertible Debenture. The Company and the Selling Stockholder
---------------------
entered into a Convertible Securities Subscription Agreement, dated as of
January 21, 1997 (the "Subscription Agreement"), pursuant to which the Selling
Stockholder agreed to purchase 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. Sixty
days after January 30, 1997, the Debenture becomes convertible, at the Selling
Stockholder's option 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, the Selling Stockholder 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 the Selling Stockholder 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 "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 or 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 the Selling Stockholder may sell the
Debenture to the Company at 115% of the outstanding principal due under the
Debenture plus accrued but unpaid interest, and the 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" is defined in the
Warrant to mean, in the case of a merger, acquisition, sale of Common Stock,
sale or 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 the
dividend or distribution.
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<PAGE>
Under a related Registration Rights Agreement, dated as of January 30,
1997, the Company agreed to file this registration statement under the
Securities Act for the resale by the Selling Stockholder of the shares of the
Company's Common Stock to be issued upon the conversion of all or any part of
the Debenture and the exercise of all or any part of the Warrant.
Structured Equity Line. The Company also has entered into a
----------------------
Structured Equity Line Flexible Financing Agreement (the "Structured Equity
Line"), dated as of January 21, 1997, with Cripple Creek Securities, LLC
("Cripple Creek"), a Delaware limited liability company. A member of Cripple
Creek, The Palladin Group, L.P., a Delaware limited partnership, is the
investment manager for the Selling Stockholder. Under the Structured Equity
Line, Cripple Creek 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 the first six months of the effectiveness under the Securities Act of a
registration statement for the resale by Cripple Creek of the shares to be
issued to Cripple Creek in connection with the Structured Equity Line. For a
period of three years after that initial six month period, the Company, subject
to the satisfaction of certain conditions, can require Cripple Creek to purchase
shares of Common Stock for an aggregate purchase price of up to $3 million
during each three month period up to an aggregate maximum of $18 million less
the amount of shares purchased during the initial six month period. The
purchase price to be paid by Cripple Creek for shares 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 Cripple
Creek. If the Company issues less than $5 million of its Common Stock under the
Structured Equity Line, it must pay Cripple Creek up to $300,000.
Cripple Creek's obligation to purchase shares of the Company's Common
Stock under the Structured Equity Line is subject to various conditions,
including: (i) the effectiveness of a registration statement under the
Securities Act for resale of the underlying shares by Cripple Creek; (ii) 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 Cripple Creek 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; (iii) 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
(iv) the percentage of the Company's Common Stock beneficially owned by Cripple
Creek and its affiliates not being more than 4.9% of the outstanding Common
Stock.
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<PAGE>
As consideration for entering into the Structured Equity Line, Cripple
Creek 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 "Equity Line
Warrant"). The Equity Line Warrant is not exercisable for 18 months from the
date of issuance, but will become immediately exercisable if the Company sells
substantially all of its assets or enters into a merger, consolidation or other
similar transaction, and in such event the exercise price will be the lesser of
(i) $8.47 or (ii) 80% of the Transaction Value per share ("Transaction Value"
has the meaning set forth above).
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 has agreed to issue an additional
seven year warrant for the purchase of 75,000 shares of the Company's Common
Stock (the "Additional Equity Line Warrant") at an exercise price equal to 140%
of the price of the Common Stock at the time of the issuance of the Additional
Equity Line Warrant. The Additional Equity Line Warrant will contain provisions
similar to those in the Equity Line Warrant.
Under the Structured Equity Line and the related Registration Rights
Agreement, dated as of January 30, 1997, the Company agreed to file under the
Securities Act a registration statement for the resale by Cripple Creek of the
shares of the Company's Common Stock to be issued pursuant to the Structured
Equity Line, the Equity Line Warrant and the Additional Equity Line Warrant.
That registration statement is separate from the registration statement of which
this prospectus is a part.
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."
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.
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<PAGE>
EFFECTS OF RESTRUCTURING
The Company is refocusing on its core PSO business unit and attempting
to sell or close its OSU(R), NetworkVUE(TM) and APD business units. See "THE
COMPANY." 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.
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 will require the redeployment of Company
personnel and further restructuring of the Company's management and operations.
While the Company hopes to achieve greater profitability as a result of this
restructuring, there can be no assurance that this strategy will succeed. The
restructuring 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, Inc. (the "Note"). 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 the fiscal year ending on
June 30, 1997, when the Company hopes to complete the sale or 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,
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<PAGE>
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, 1999 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 by Cripple Creek of the shares of Common
Stock to be sold to Cripple Creek, (ii) Cripple Creek and 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 Cripple
Creek 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
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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 February 19, 1997, the price of the Common Stock ranged from
$3 3/4 to $44 5/8, and closed at $4 1/8. 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 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 Cripple
Creek 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 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 the
Selling Stockholder to purchase 320,000 shares of Common Stock at a price of
$8.47 per share. Under the Company's agreements with Cripple Creek, the Company
may issue up to $18,000,000 of Common Stock to Cripple Creek at a price that is
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equal to 94% of the lowest reported sale price during the three days immediately
preceding the notice of purchase to Cripple Creek. The Company also has issued
a warrant to Cripple Creek to purchase 125,000 shares of Common Stock at $8.47
per share and may issue a warrant to Cripple Creek to purchase 75,000 shares at
140% of a future market price. See "THE COMPANY -- Debt and Equity Financing."
The resale by the Selling Stockholder and Cripple Creek of the Company's 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 Cripple Creek 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 Cripple Creek 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, Cripple Creek also has agreed to use its best efforts to
continue to purchase Common Stock notwithstanding this limitation. Accordingly,
Cripple Creek 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 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
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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 year 1996) and time-and-
material contracts (approximately 32.2% of the Company's government contract
revenues in fiscal year 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
year 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 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.
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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
break throughs 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.
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
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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. The Company would have difficulty meeting 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 Cripple Creek under the Structured Equity Line.
See "THE COMPANY -- Debt and Equity Financing." 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 the Common Stock on the Nasdaq NMS. If the Company's Common
Stock is not listed on the NYSE or AMEX and not traded on the 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.
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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 January 31, 1997, 9,342,557
shares of Common Stock were issued and outstanding. There were no shares of
Preferred Stock designated or issued. For further information about the
Company's authorized capital stock, reference is made to the Company's reports
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares of Common Stock offered by this Prospectus. The Company could receive up
to $2,710,400 if the Warrant is exercised in full. No assurance can be given
that the Warrant will be exercised. The Company expects that any net proceeds
from the exercise of the Warrant will be used for repaying indebtedness and
general corporate purposes. For a description of the Company's indebtedness,
see "RISK FACTORS -- High Debt Level."
SELLING STOCKHOLDER
The Selling Stockholder is Halifax Fund, L.P., a Cayman Islands
exempted limited partnership. 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 Subscription Agreement and related Registration
Rights Agreement. The Selling Stockholder's investment manager, The Palladin
Group, L.P., a Delaware limited partnership, is a member of Cripple Creek, which
entered into the Structured Equity Line and related Registration Rights
Agreement. 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 all of the shares of the Company's Common Stock that it may
acquire upon the conversion of the Debenture and the exercise of the Warrant.
As of the date hereof, Cripple Creek owns no shares of the Company's Common
Stock and will offer all of the shares of the Company's Common Stock that it may
acquire under the Structured Equity Line and upon the exercise of the Equity
Line Warrant and the Additional Equity Line Warrant in a registration statement
separate from the registration statement of which this Prospectus is a part.
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PLAN OF DISTRIBUTION
The Selling Stockholder has advised the Company that, depending on
market conditions and other factors, it may sell the shares offered hereby from
time to time, in one or more transactions, which may involve block transactions,
in the over-the-counter market, on the New York Stock Exchange, the Pacific
Stock Exchange or other stock exchanges (if the Common Stock is listed for
trading thereon), at market prices prevailing at the time of sale, at negotiated
prices, or at fixed prices, which may be changed. Such sales may be effected
directly, or through agents, or through underwriters or dealers.
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.
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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 sell Shares acquired upon the conversion of the Debentures or the
exercise of the Warrants. Such sales 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, will render an opinion to the effect that the Common Stock
offered by this Prospectus is duly authorized, validly issued, fully paid and
non-assessable.
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EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended June 30, 1996 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . 4
THE COMPANY . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . 9
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . 17
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . 17
SELLING STOCKHOLDER . . . . . . . . . . . . . . . . 17
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . 18
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . 19
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . 20
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration . . . . . . . . . . . $ 2,730
Legal fees and expenses . . . . . . . . 20,000*
Accounting fees and expenses . . . . . 8,000*
Miscellaneous . . . . . . . . . . . . . 5,000*
Total . . . . . . . . . . . . . . . . . $ 35,730*
*Estimates
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.
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ITEM 16. EXHIBITS.
Exhibit No. Description
- - - ----------- -----------
4.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
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 report on Form 10-K for the year ended June
30, 1995).
4.3 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
report on Form 10-Q for the quarter ended December 31, 1996).
4.4 $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 report on Form 10-Q
for the quarter ended December 31, 1996).
4.5 320,000 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 report on Form 10-Q for the
quarter ended December 31, 1996).
4.6 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 report on Form 10-Q
for the quarter ended December 31, 1996).
5.1 Opinion of Thomas E. McCabe.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Thomas E. McCabe (included as part of Exhibit 5.1).
24.1 Power of Attorney (included as part of the signature page).
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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.
(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
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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.
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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-3 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 February 21,
1997.
GRC INTERNATIONAL, INC.
By: /s/ Jim Roth
----------------------------
Jim Roth
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald B. Alexander, Thomas E. McCabe and Paul S.
Feira, and each of them, each with full power to act without the other, his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution, for such person and in his name, place and stead, in any and all
capacities, to sign any or all further amendments or supplements (including
post-effective amendments) to this Form S-3 Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitutes, may lawfully do or cause to be done by virtue
thereof.
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Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below:
Signature Title Date
--------- ----- ----
/s/ Jim Roth Chairman, President February 21, 1997
- - - ------------------------- and Chief Executive
Jim Roth Officer (Principal
Executive Officer)
/s/ Ronald B. Alexander Senior Vice February 21, 1997
- - - ------------------------- President--Finance,
Ronald B. Alexander Chief Financial
Officer and Treasurer
(Principal Financial
and Accounting
Officer)
/s/ H. Furlong Baldwin Director February 21, 1997
- - - -------------------------
H. Furlong Baldwin
/s/ Frank J.A. Cilluffo Director February 21, 1997
- - - -------------------------
Frank J.A. Cilluffo
/s/ Leslie B. Disharoon Director February 21, 1997
- - - -------------------------
Leslie B. Disharoon
/s/ Charles H.P. Duell Director February 21, 1997
- - - -------------------------
Charles H.P. Duell
/s/ Edward C. Meyer Director February 21, 1997
- - - -------------------------
Edward C. Meyer
/s/ George R. Packard Director February 21, 1997
- - - -------------------------
George R. Packard
/s/ Herbert Rabin Director February 21, 1997
- - - -------------------------
Herbert Rabin
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/s/ E. Kirby Warren Director February 21, 1997
- - - -------------------------
E. Kirby Warren
/s/ Joseph R. Wright, Jr. Director February 21, 1997
- - - -------------------------
Joseph R. Wright, Jr.
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EXHIBIT INDEX
Exhibit No. Description
- - - ----------- -----------
4.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
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 report on Form 10-K for the year ended June
30, 1995).
4.3 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
report on Form 10-Q for the quarter ended December 31, 1996).
4.4 $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 report on Form 10-Q
for the quarter ended December 31, 1996).
4.5 320,000 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 report on Form 10-Q for the
quarter ended December 31, 1996).
4.6 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 report on Form 10-Q
for the quarter ended December 31, 1996).
5.1 Opinion of Thomas E. McCabe.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Thomas E. McCabe (included as part of Exhibit 5.1).
24.1 Power of Attorney (included as part of the signature page).
II-8
<PAGE>
Exhibit 5.1
February 21, 1997
Board of Directors
GRC International, Inc.
1900 Gallows Road
Vienna, Virginia 22182
Re: Issuance of Shares of Common Stock by
GRC International, Inc. to Halifax
Fund, L.P.
-------------------------------------
Gentlemen:
I have acted as general counsel to GRC International, Inc. (the
"Company") in connection with the Company's filing pursuant to the
Securities Act of 1933, as amended, of a registration statement on Form S-
3 (the "Registration Statement") relating to the offering for resale of up
to 2,120,000 shares of the Company's common stock, par value $.10 per
share (the "Common Stock") by Halifax Fund, L.P. (the "Selling
Stockholder"), which may acquire the Common Stock upon the conversion of a
debenture (the "Debenture") and exercise of a warrant (the "Warrant")
granted by the Company to the Selling Stockholder. You have requested my
opinion as to certain matters with respect to the Common Stock.
I have examined such corporate records of the Company, including
its Amended and Restated Certificate of Incorporation, its Bylaws, and
resolutions of the Company's board of directors (the "Board of
Directors"), as well as such other documents as I deemed necessary for
rendering the opinion hereinafter expressed.
On the basis of the foregoing, I am of the opinion that the Common
Stock has been duly authorized by the Board of Directors and, upon the
conversion of the Debenture and exercise of the Warrant in accordance with
their terms, the Common Stock will be validly issued, fully paid, and
nonassessable.
<PAGE>
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name therein.
Sincerely yours,
/s/ Thomas E. McCabe
-----------------------------
Thomas E. McCabe
Senior Vice President,
General Counsel and Secretary
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
GRC International, Inc. on Form S-3 of our report dated August 20, 1996,
appearing 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 the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
McLean, Virginia
February 21, 1997
