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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
GRC INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
CILLUFFO ASSOCIATES, L.P.
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CILLUFFO ASSOCIATES, L.P.
160 Broadway, East Building
New York, NY 10038
October 22, 1999
IT'S TIME FOR A CHANGE AT GRC INTERNATIONAL
Dear Fellow GRC International Stockholder:
Cilluffo Associates owns approximately 14% of the common shares of GRC
International, Inc., which makes us the Company's second largest stockholder.
We are long-term owners of the Company, having first purchased GRC shares ten
years ago in 1989. Frank J.A. Cilluffo has been a member of the Company's
Board of Directors since 1996. General Edward C. Meyer (Ret.), a managing
general partner of our firm, was a director from 1992 to 1998.
We, like many of you, have been severely disappointed with the Company's
performance. We are writing to offer you - the owners of GRC - a choice as to
who would best serve your interests on the Board. We seek your support of our
director-nominees, who are running in opposition to the current Board's
candidates at the November 15 Annual Meeting. Enclosed is a BLUE proxy card
which can be used to support the Cilluffo nominees.
Please consider the following:
PERFORMANCE AND CORPORATE GOVERNANCE
. A $100 investment made on June 30, 1994 in the S&P 500 Index and the S&P
Technology 500 would have grown to $309 and $635, respectively, by June
30, 1999. In marked contrast, the same investment in GRC International
DECLINED to $71 during the same period!
. Between June 30, 1998 and June 30, 1999, the S&P 500 Index increased 23%
and the S&P Technology 500 increased 65%. GRC shares DECLINED 17% during
this period.
. Regarding corporate governance matters, two shareholder proposals
regarding the elimination of the Company's "poison pill" and the
declassification of the Board of Directors received a majority of the
votes cast at the 1998 annual meeting. Yet the Company chose not to
follow the expressed wishes of its owners. Instead, the Board amended the
poison pill to accelerate the termination date to August 31, 2000, and
reserved the right to implement a new pill without shareholder approval.
The Board also flatly rejected the proposal to declassify the Board.
. The Board has further demonstrated disregard for its shareholders' votes
by stating that, if the shareholders do not reelect both of its director-
nominees, the Board may nevertheless put a director-nominee ousted by
vote of the shareholders back on the Board. Cilluffo Associates would be
adamantly opposed to such an action by the Board, which we believe would
counteract the shareholders' right to elect directors.
We believe the Board should be more responsive to the wishes of its owners!
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EXCESSIVE MANAGEMENT COMPENSATION AND EXPENSES
You should know that your management has disclosed that it plans to spend
$500,000 of shareholder funds - your money - fighting us and our initiative to
let shareholders decide who shall serve on the Board. Cilluffo Associates is
spending its own money - and less than $500,000 - to provide you, in the best
traditions of corporate democracy, with a genuine choice of directors.
JUDGE FOR YOURSELF WHETHER JOE WRIGHT AND GARY DENMAN SHOULD BE RE-ELECTED TO
THE GRC BOARD
We also believe management receives compensation that is excessive in
relation to the value delivered for shareholders.
. Consider that when Gary L. Denman became CEO on July 1, 1998, he was
awarded a salary of $330,000, plus a bonus equal to 2% of consolidated
net income. In FY 99 this would have resulted in a bonus of $182,620, but
he received, on top of that, an additional $68,500 as an adjustment to
his negotiated contract.
. Furthermore, Mr. Denman's bonus is directly affected by the net income of
acquisitions - even if they are dilutive or non-accretive to earnings per
share.
. Finally, Mr. Denman was the Company's Chief Operating Officer from March
1995 to June 1998, a time when the Company performed extremely poorly.
. Since Joseph R. Wright, Jr. became GRC's Chairman, he has received
special compensation as a non-executive chairman at levels unprecedented
in the Company's history.
. For example, in his first year as Chairman, in addition to his normal
director fees, Mr. Wright received 150,000 stock options. In his second
and third years as Chairman, he received $100,000 and $200,000,
respectively (payable at his election in cash, stock or stock options).
. Combined, Mr. Wright has accumulated benefits now worth more than
$1,000,000 (based on recent GRC stock prices) since becoming non-
executive chairman in 1997.
. We also urge you to look at Mr. Wright's compensation and record at
AmTec, Inc., where he has been chairman since 1995 and chairman,
president and CEO since 1996. In 1996, according to AmTec securities
filings, the high bid for AmTec's stock price was $9.125 per share. On
October 20, 1999, it closed at $1.00 per share.
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According to AmTec's 1999 proxy statement:
. Its stock price declined approximately 85.6% from FY 96 to FY 98.
. Yet Mr. Wright's AmTec compensation grew from $143,750 in 1996, to
$256,250 in 1997 and to $392,967 plus a $50,000 bonus in 1998 (plus
$30,000 in each of those years for personal tax and accounting expenses).
In addition, Mr. Wright received stock options for 3,000,000 shares in
1996 and stock options for an additional 3,000,000 shares in 1997, plus a
stock award valued at $281,250 in 1997.
. In 1999, AmTec is paying Mr. Wright $450,000, plus a 100,000 share stock
grant plus an option to acquire an additional 200,000 shares.
Ask yourself: is this a director who is aligned with shareholder interests?
Is this a director you want representing your interests on the GRC Board?
OUR NOMINEES ARE HIGHLY QUALIFIED
Cilluffo Associates has formed an outstanding slate of seasoned, highly
qualified nominees to serve on the GRC Board. We believe their professional
and business credentials are unsurpassed and provide you with a genuine choice
for change. We ask you to examine the relevant facts and to judge for
yourself.
Cilluffo Associates supports the following candidates for the two Board
seats currently open:
. Neal B. Freeman--the Chairman and CEO of The Blackwell Corporation and a
director of COMSAT Corporation.
. Richard N. Perle--a consultant and a Resident Fellow of the American
Enterprise Institute's Commission of Future Defenses. From 1981 to 1987,
Mr. Perle was Assistant Secretary of Defense for International Security
Policy.
If the class of directors to be elected is expanded to three, Cilluffo
Associates would also support the following nominee:
. Guy P. Wyser-Pratte--President of Wyser-Pratte & Co., Inc., a money
management firm and a leading corporate governance activist. He is a
director of COMSAT Corporation and a member of the Council on Foreign
Relations.
Cilluffo Associates nominated 3 candidates because, at the time of our
nominations in August 1999, there were 3 seats in the class of directors to be
elected. The Board subsequently reduced the class to be elected to 2 seats,
effective at the 1999 Annual Meeting. Cilluffo Associates has not withdrawn
any of our nominees because, if the class of directors for election were
increased to three again before the annual meeting, we want to make certain
that we have a nominee for every open Board seat. Further details of our
nominees' backgrounds can be found in our enclosed proxy statement which we
urge you to read carefully in its entirety.
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TIME IS SHORT. THE ANNUAL MEETING IS NOVEMBER 15.
VOTE YOUR BLUE PROXY CARD TODAY!
We appreciate your consideration of our platform and director nominees. The
annual meeting, scheduled for November 15 is quickly approaching. Please vote
your enclosed BLUE proxy card in support of the Cilluffo nominees. Please do
so today!
Remember--even if you have already voted in favor of management's nominees,
you have every legal right to change your vote in support of the Cilluffo
nominees. Only your latest-dated proxy card will count in the final tally.
If you have questions, or need assistance with your vote, please contact
MacKenzie Partners, Inc., which is assisting Cilluffo Associates with this
proxy contest, toll-free at (800) 322-2885.
Sincerely,
Frank J.A. Cilluffo
Managing General Partner
