<PAGE>
As filed with the Securities and Exchange Commission
on February 20, 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)
<PAGE>
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
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 4,987,234 $4.25(1) $21,195,744.50 $6,422.95
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 20, 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 February 18, 1997, the last
reported sale price of the Common Stock was $4 3/8.
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."
1
<PAGE>
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 9.
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.
2
<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.
3
<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.
4
<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(T) 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
5
<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(T) and the Application
Software Group ("ASG"). The Company expects in the near future to sell or close
OSU(R) and NetworkVUE(T), 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(T) 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(T) 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(T), Commercial Information
Solutions and Advanced Security Technologies/Vindicator(R). GRC Instruments(T)
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(T) 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(T) 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.
6
<PAGE>
DEBT AND EQUITY FINANCING
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. Under the Structured Equity Line,
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 the first six months of the effectiveness under the Securities Act of a
registration statement, of which this Prospectus is a part, for the resale by
the Selling Stockholder of the shares to be issued to the Selling Stockholder 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 the Selling Stockholder 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 shares
purchased during the initial six month period. The purchase price to be paid by
the Selling Stockholder 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 the Selling Stockholder. 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.
The Selling Stockholder'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 with respect to the underlying shares; (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 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; (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 the Selling Stockholder and its
affiliates not being more than 4.9% of the outstanding Common Stock.
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
7
<PAGE>
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." "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 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 has agreed to 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 price of the Common Stock at the time
of the issuance of the Additional Warrant. The Additional Warrant will contain
provisions similar to those in the 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, 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.
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.
8
<PAGE>
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 to be
issued pursuant to 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.
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.
9
<PAGE>
EFFECTS OF RESTRUCTURING
The Company is refocusing on its core PSO business unit and attempting
to sell or close its OSU(R), NetworkVUE(T) 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. 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, when the Company hopes to
complete the sale or closure of its OSU(R), NetworkVUE(T) 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
10
<PAGE>
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 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.
11
<PAGE>
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 18, 1997, the price of the Common Stock ranged from
$3 3/4 to $44 5/8, and closed at $4 3/8. 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 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
12
<PAGE>
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 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.
13
<PAGE>
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 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.
14
<PAGE>
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 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.
15
<PAGE>
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. 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 the Selling Stockholder 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 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.
16
<PAGE>
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.
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 may receive
proceeds from the 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 the Shares or receive such proceeds. The
Company expects to use such proceeds 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 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
17
<PAGE>
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 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, 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 sales directly
or through brokers or may make sales 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
18
<PAGE>
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.
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
19
<PAGE>
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.
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.
20
<PAGE>
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 . . . . . . . . . . . . . . . . . . . . . 20
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration . . . . . . . . . . . $ 6,423
Legal fees and expenses . . . . . . . . 20,000*
Accounting fees and expenses . . . . . 12,000*
Miscellaneous .. . . . . . . . . . . . 5,000*
Total . . . . . . . . . . . . . . . . . $ 43,423*
*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.
II-1
<PAGE>
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 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 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 report on Form 10-Q
for the quarter ended December 31, 1996).
4.5 Registration Rights Agreement, dated as of January 30, 1997,
between the Company and Cripple Creek Securities, LLC
(incorporated by reference to Exhibit 10.8 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).
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;
II-2
<PAGE>
(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
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.
II-3
<PAGE>
(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-4
<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-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 20,
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.
II-5
<PAGE>
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 February 20, 1997
- - - ------------------------ Chairman, President
Jim Roth and Chief Executive
Officer (Principal
Executive Officer)
/s/ Ronald B. Alexander February 20, 1997
- - - ------------------------ Senior Vice President-
Ronald B. Alexander Finance, Chief
Financial Officer and
Treasurer (Principal
Financial and
Accounting Officer)
/s/ H. Furlong Baldwin
- - - ------------------------ Director February 20, 1997
H. Furlong Baldwin
/s/ Frank J.A. Cilluffo
- - - ------------------------ Director February 20, 1997
Frank J.A. Cilluffo
/s/ Leslie B. Disharoon
- - - ------------------------ Director February 20, 1997
Leslie B. Disharoon
/s/ Charles H.P. Duell
- - - ------------------------ Director February 20, 1997
Charles H.P. Duell
/s/ Edward C. Meyer
- - - ------------------------ Director February 20, 1997
Edward C. Meyer
/s/ George R. Packard
- - - ------------------------ Director February 20, 1997
George R. Packard
/s/ Herbert Rabin
- - - ------------------------ Director February 20, 1997
Herbert Rabin
/s/ E. Kirby Warren
- - - ------------------------ Director February 20, 1997
E. Kirby Warren
/s/ Joseph R. Wright, Jr.
- - - ------------------------ Director February 20, 1997
Joseph R. Wright, Jr.
II-6
<PAGE>
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 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 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 report on Form 10-
Q for the quarter ended December 31, 1996).
4.5 Registration Rights Agreement, dated as of January 30, 1997,
between the Company and Cripple Creek Securities, LLC
(incorporated by reference to Exhibit 10.8 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-7
<PAGE>
Exhibit 5.1
February 20, 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 Cripple Creek
Securities, LLC
----------------------------------------
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 4,987,234 shares of the Company's common stock, par value $.10 per
share (the "Common Stock"), by Cripple Creek Securities, LLC ("Cripple
Creek"), which may acquire the Shares pursuant to the terms of a
Structured Equity Line Flexible Financing Agreement, dated as of January
21, 1997 (the "Structured Equity Line"), and upon the exercise of certain
warrants granted pursuant thereto (the "Warrants"). 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, when issued
in accordance with the terms of the Structured Equity Line and the
Warrants, 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,
/x/ 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 20, 1997
