Exhibit 10.2
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[HALIFAX]
CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
This Convertible Securities Subscription Agreement (the "Agreement") dated
as of January 21, 1997 has been executed by the undersigned (the "Subscriber")
in connection with the sale of 5% Convertible Debentures due January 30, 2000
(the "Debentures"), of GRC International, Inc., a Delaware corporation (the
"Company"), convertible into shares of Common Stock, par value $0.10 per share
(the "Common Stock"), of the Company. The Company is offering an aggregate
amount of $4,000,000 of Debentures at an aggregate price of $4,000,000 (the
"Offering"). The form of the Debentures, including the terms on which the
Debentures may be converted into Common Stock, is attached hereto as EXHIBIT A.
The solicitation of this Agreement and, if accepted by the Company, the offer
and sale of Debentures, are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission ("SEC") under the United States Securities Act of 1933, as amended
(the "Securities Act"). The Debentures, the Common Stock issuable upon
conversion thereof, the Warrants issuable pursuant to the Common Stock Purchase
Warrant attached as Exhibit B hereto (the "Warrants") and the shares of Common
Stock issuable upon exercise thereof are sometimes collectively referred to in
this Agreement as the "Securities." The Common Stock issuable upon conversion
of the Debentures and upon the exercise of the Warrants is sometimes referred to
as the "Underlying Stock." Upon the terms and subject to the conditions set
forth herein, the Subscriber hereby agrees to purchase, and the Company hereby
agrees to issue and sell, the principal amount of Debentures and at the
aggregate purchase price set forth in Section 14. In consideration of the
mutual promises, representations, warranties and conditions set forth hereto,
and intending to be legally bound hereby, the Company and the Subscriber agree
as follows:
1. Agreement to Subscribe; the Subscriber
1.1 Purchase and Issuance of Debentures. The Subscriber hereby
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subscribes for the principal amount of Debentures and at the
aggregate purchase price set forth in Section 14. The closing of
the purchase (the "Closing") shall occur on January 30, 1997 (the
"Closing Date"); provided that (i) the purchase price has been
delivered by the Subscriber to the Company, a mutually acceptable
escrow agent or as otherwise agreed between the parties (in same
day funds via a wire transfer pursuant to instructions previously
delivered for such purpose), (ii) the Debentures subscribed for
hereby shall have been executed, issued and delivered by the
Company to Subscriber, a mutually acceptable escrow agent or as
otherwise agreed between the parties, (iii) the Common Stock
Purchase Warrant shall have been executed, issued and delivered
by the Company to Subscriber and (iv) other conditions precedent
to the obligations of the Subscriber set forth herein shall have
been satisfied.
1.2 Nature of the Subscriber. The Subscriber is either purchasing
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the Debentures for its own account or as an agent for a principal
(under a discretionary or similar account), in which case all of
the representations,
warranties, covenants and agreements of the Subscriber herein
shall be deemed to apply to such principal and not the Subscriber
and to have been made by such principal and not by the
Subscriber. In such case, the Subscriber so acting as agent
represents and warrants that (a) its principals have confirmed to
the Subscriber the accuracy of such representations and
warranties with respect to its principals, and (c) the Subscriber
has full authority to act on behalf of its principal in executing
and delivering this Agreement and consummating the transactions
contemplated hereby.
1.3 Conditions Precedent to the Obligation of the Company to Sell the
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Debentures. The obligation hereunder of the Company to issue
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and/or sell the Debentures to the Subscriber is subject to the
satisfaction, at or before the Closing, of each of the conditions
set forth below. These conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Subscriber's Representations and Warranties.
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The representations and warranties of the Subscriber shall
be true and correct as of the date when made and in all
material respects as of the Closing Date as though made at
each such time.
(b) Performance by the Subscriber. The Subscriber shall have
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performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with
by the Subscriber at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
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order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement, and no proceeding shall have
been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated
hereby.
1.4 Conditions Precedent to the Obligation of the Subscriber to
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Purchase the Debentures. The obligation of Subscriber hereunder
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to acquire and pay for the Debentures is subject to the
satisfaction, at or before the Closing, of each of the following
conditions. Each of these conditions is for Subscriber's sole
benefit and may be waived by Subscriber at any time in its sole
discretion.
(a) Accuracy of the Company's Representations and Warranties.
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The representations and warranties of the Company shall be
true and correct as of the date when made and in all
material respects as of the Closing Date as though made at
each such time.
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(b) Performance by the Company. The Company shall have
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performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with
by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
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order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits or adversely effects any of the transactions
contemplated by this Agreement, and no proceeding shall have
been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated
hereby.
(d) Adverse Changes. For the period from September 30, 1996
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until Closing except as publicly disclosed since September
30, 1996 in Company press releases or Exchange Act filings
issued or made prior to or on the date hereof listed on
Schedule 1.4(d) ("Prior Public Disclosures"), no event shall
have occurred or be threatened to occur which has had or is
likely to have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole. The Company shall have
received and delivered to the Subscriber (i) the consent of
all applicable lenders to the issuance of the Debentures and
(ii) the waiver of any and all pending events of default (or
pending events which with lapse of time or notice or both
would constitute an event of default) thereunder.
(e) No Suspension of Trading in or Delisting of Common Stock.
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The trading in the Common Stock shall not have been
suspended by the SEC, the New York Stock Exchange (the
"NYSE") or the National Association of Securities Dealers,
Inc. (the "NASD"); the Common Stock shall not have been
delisted from the NYSE; and trading in securities generally
as reported by the NYSE shall not have been suspended or
limited or minimum prices shall not have been established on
securities whose trades are reported by the NYSE.
(f) Legal Opinion. The Company shall have delivered to the
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Subscriber opinions of the General Counsel of the Company
and Xxxxxx & Xxxxxx, independent counsel to the Company,
each in form and substance reasonably satisfactory to the
Subscriber.
(g) Officer's Certificate. The Company shall have delivered to
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the Subscriber a certificate in form and substance
reasonably satisfactory to the Subscriber, executed by an
executive officer of the Company, to the effect that all the
conditions to the Closing shall have been satisfied.
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(h) Registration Rights Agreement. The Company and the
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Subscriber shall have entered into the Registration Rights
Agreement contemplated by Section 5.1.
(i) Common Stock Purchase Warrant. The Company shall execute
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and deliver the Common Stock Purchase Warrant to the
Subscriber.
2. Representations and Warranties of Subscriber
The Subscriber represents and warrants to the Company that:
2.1 No Government Recommendation or Approval. The Subscriber understands
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that no United States federal or state agency or similar agency of any
other country, has passed upon or made any recommendation or
endorsement of the Company or the offering of the Securities.
2.2 Intent. The Subscriber is purchasing the Securities for its own
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account and not with a view towards distribution and the Subscriber
has no present arrangement to sell the Debentures or the Underlying
Stock to or through any person or entity; provided, however, that by
making the representation herein, the Subscriber does not agree to
hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Subscriber understands that the Securities must be
held indefinitely unless such Securities are subsequently registered
under the Securities Act or an exemption from registration is
available. The Subscriber has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.
2.3. Sophisticated Investor. The Subscriber is a sophisticated investor
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(as defined in Rule 506(b)(2)(ii) of Regulation D promulgated under
the Securities Act ("Regulation D")) and an accredited investor (as
defined in Rule 501 of Regulation D), and Subscriber has such
experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Securities.
The Subscriber acknowledges that the Securities are speculative and
involve a high degree of risk.
2.4. Independent Investigation. The Subscriber, in making the decision to
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purchase the Securities subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and
has not relied on any information or representations made by third
parties or on any oral or written representations or assurances from
the Company or any representative or agent of the Company other than
as set forth in this Agreement and the public filings of the Company,
the Prior Public Disclosures and the documents described below. Prior
to the date hereof, the Subscriber has been furnished with and has
reviewed the Company's latest proxy statement and Annual Report on
Form 10-K sent to the Company's shareholders and all documents filed
by the Company with the Securities and Exchange Commission (the "SEC")
since June 30, 1993 pursuant to sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
excluding preliminary
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proxy statement filings (such documents are collectively referred to
in this Agreement as the "Exchange Act Reports" and the Prior Public
Disclosures). Subject to the foregoing, the Subscriber has had a
reasonable opportunity to ask questions of and receive answers from
the Company concerning the Company and the Offering and has received
complete and satisfactory answers to all inquiries it has made with
respect to the Company and the Securities. The Subscriber acknowledges
the price and terms of the Securities offered hereby has been
determined by negotiation based in part on the market price for the
Common Stock, and does not necessarily bear any relationship to the
assets, book value or potential performance of the Company or any
other recognized criteria of value.
2.5 Authority. This Agreement has been duly authorized and validly
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executed and delivered by the Subscriber and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
2.6 No Legal Advice from Company. The Subscriber acknowledges that it has
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had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and
investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement and the legal
opinion called for by Section 1.4 hereof, the Subscriber is relying
solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents
for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws
of any jurisdiction.
2.7 No Brokers. The Subscriber has taken no action which would give rise
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to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 Not an Affiliate. The Subscriber is not an officer, director or
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"affiliate" (as that term is defined in Rule 405 of Securities Act) of
the Company.
2.9 Reliance on Representations and Warranties. The Subscriber
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understands that the Securities are being offered and sold to it in
reliance on specific provisions of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth in this
Agreement in order to determine the applicability of such provisions.
3. Representations and Warranties of Company
The Company represents and warrants to the Subscriber that:
3.1 Company Status. The Company has registered its Common Stock pursuant
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to Section 12(b) or 12(g) of the Exchange Act, is in full compliance
with all reporting requirements of the Exchange Act, and the Company
has maintained all requirements for the continued listing of its
common stock, and such common
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stock is currently listed, on the NYSE. The Company is eligible to use
Form S-3 under the Securities Act.
3.2 Current Public Information. The Exchange Act Reports are the only
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filings made by the Company since June 30, 1993 pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act.
3.3 No Directed Selling Efforts or General Solicitation in Regard to this
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Transaction. The Company has not conducted any general solicitation
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(as that term is used in Regulation D) with respect to any of the
Securities, nor has it made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Securities under the Securities Act.
3.4 Valid Issuance of Debentures and Capital Stock. The Company has an
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authorized capitalization consisting of 30,000,000 shares of Common
Stock, par value $0.10 per share. The Company has issued and
outstanding 9,642,557 shares of Common Stock on the date hereof,
300,000 of which are held in treasury. All of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable; prior to the Closing Date,
the authorized capitalization shall include the Securities; upon
issuance of the Securities, the Securities will be duly and validly
issued, fully paid and non-assessable; the shares of Common Stock
issuable upon conversion or exercise of the Debentures and the
Warrants, when issued and delivered in accordance with the terms of
the Debentures and the Warrants, will be duly and validly issued,
fully paid and non-assessable; and the holders of outstanding capital
stock of the Company are not and shall not be entitled to preemptive
or other rights afforded by the Company to subscribe for the capital
stock or other securities of the Company as a result of the sale of
the Securities or the issuance of Common Stock upon the conversion or
exercise thereof.
3.5 Organization and Qualification. The Company is a corporation duly
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incorporated and existing in good standing under the laws of the State
of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The
Company does not have any subsidiaries except as listed in EXHIBIT D
hereto. The Company and each such subsidiary, if any, is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary
other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the business, operations, properties, prospects, or
financial condition of the Company and its subsidiaries taken as a
whole and/or any condition or situation which would prohibit or
otherwise adversely interfere with the ability of the Company to enter
into and perform its obligations under this Agreement, the Debentures,
the Registration Rights Agreement and the Common Stock Purchase
Warrants.
3.6 Authorization: Enforcement. (i) The Company has the requisite
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corporate power and authority to enter into and perform this Agreement
and the Registration
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Rights Agreement and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Debentures and
the Common Stock Purchase Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required, (iii) this Agreement has been, and on the
Closing Date the Registration Rights Agreement, the Debentures and the
Common Stock Purchase Warrants will be, duly executed and delivered by
the Company and (iv) this Agreement constitutes, and upon execution,
issuance and delivery thereof the Registration Rights Agreement, the
Debentures and the Common Stock Purchase Warrants shall be, valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
3.7 Corporate Documents. The Company has furnished or made available to
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the Subscriber true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws"), certified in each case by the Secretary of the
Company.
3.8 No Conflicts. The execution, delivery and performance of this
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Agreement, including the conversion of the debentures into, and the
exercise of the Warrants for, the Common Stock of the Company, the
Registration Rights Agreement, the Debentures and the Common Stock
Purchase Warrants by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby do not and will
not (i) result in a violation of the Company's Certificate of
Incorporation or By-Laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any federal, state, local or
foreign law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset
of the Company or any of its subsidiaries is bound or affected (except
for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect); provided that, for
purposes of such representation as to federal, state, local or foreign
law, rule or regulation, no representation is made herein with respect
to any of the same applicable solely to the Subscriber and not to the
Company. The business of the Company and its subsidiaries is not
being conducted in violation of any law, ordinance or regulations of
any governmental entity, except for possible violations which either
singly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under federal, state or local
law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or
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registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement or issue and sell the
Securities in accordance with the terms hereof and thereof (other than
any SEC, NYSE, NASD or state securities filings which may be required
to be made by the Company subsequent to the Closing, and any
registration statement which may be filed pursuant hereto); provided
that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Subscriber herein.
3.9 Exchange Act Reports. The Company has delivered or made available to
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the Subscriber true and complete copies of the Exchange Act Reports
(including, without limitation, proxy information and solicitation
materials). The Company has not provided to the Subscriber any
information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not
been so disclosed. As of their respective dates, the Exchange Act
Reports complied (and as of its effective date, the Registration
Statement for the Underlying Stock will comply) in all material
respects with the requirements of the Exchange Act (or in the case of
such Registration Statement, the Securities Act) and the rules and
regulations of the SEC promulgated thereunder and other applicable
federal, state and local laws, rules and regulations, and none of the
Exchange Act Reports contained (and, as of its effective date, such
Registration Statement will not contain) any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included (or to
be included) in the Exchange Act Reports and the Registration
Statement comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC or other applicable rules and regulations with respect thereto.
Such financial statements have been (or will be) prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present (or will fairly present) in all
material respects the consolidated financial position of the Company
as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
3.10 No Material Adverse Change. Since September 30, 1996, the date
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through which the most recent Quarterly Report of the Company on Form
10-Q has been prepared and filed with the SEC, a copy of which is
included in the Exchange Act Reports, except as disclosed in the Prior
Public Disclosures, no Material Adverse Effect has occurred or exists
with respect to the Company and its subsidiaries taken as a whole.
3.10A No Violation of Creditor Covenants. Except as set forth in Schedule
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3.10A, no event of default has occurred and is continuing (or event
which with lapse of
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time or notice or both would constitute such an event) under any of
the revolving credit facilities or other financing arrangements of the
Company or its subsidiaries.
3.11 No Undisclosed Liabilities. The Company and its subsidiaries have no
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liabilities or obligations not disclosed in the Exchange Act Reports,
other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since September 30, 1996 and
which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole.
3.12 No Undisclosed Events or Circumstances. No event or circumstance has
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occurred or exists with respect to the Company or its subsidiaries or
their respective business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
3.13 No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act.
3.14 No Brokers. The Company has taken no action which would give rise to
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any claim by any person for brokerage commissions, finder's fees or
similar payments by the Subscriber relating to this Agreement or the
transactions contemplated hereby, except for dealings with Investment
Research International, whose commissions and fees will be paid for by
the Company.
3.15 Effectiveness of SEC Filings. The SEC has not issued any stop order
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or other order suspending the effectiveness of any registration
involving the Company or its subsidiaries.
3.16 No Material Litigation Proceedings. Except as disclosed in the
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Exchange Act Reports, neither the Company nor any of its subsidiaries
is a party to or the subject of any litigation, arbitration or other
proceeding which if adversely determined would singly or in the
aggregate have a Material Adverse Effect.
4. Covenants of the Subscriber
4.1 Resales. The Subscriber shall not make any offers or sales of the
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Securities other than pursuant to a registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. Subscriber will comply with applicable prospectus
delivery requirements.
4.2 Low Trades. The Subscriber covenants and agrees that it will not,
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directly or through any Affiliate, (i) create the lowest reported
sales price on the NYSE (or NASDAQ National Market System) for the
Common Stock on any trading day or (ii) offer to sell shares of Common
Stock at a price lower than the then prevailing
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bid price for the Common Stock on the NYSE (or NASDAQ National Market
System).
5. Covenants of the Company
5.1 Registration Rights. The Company will file and use its best efforts
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to cause to become effective, as promptly as possible a registration
statement ("Registration Statement") on Form S-3 under the Securities
Act (or in the event that the Company is ineligible to use such form,
such other form as the Company is eligible to use under the Securities
Act) covering the resale of the Underlying Stock issuable on
conversion of the Debentures and shall take all action necessary to
qualify the Underlying Stock under all applicable state "blue sky"
laws, in accordance with terms of the Registration Rights Agreement
(the "Registration Rights Agreement") in the form of EXHIBIT C hereto,
which the Company and the Subscriber shall enter into at the Closing
of this Agreement.
5.2 Reservation of Common Stock. As of the date hereof, the Company has
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reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue
shares of its Common Stock upon conversion of the Debentures;
provided, however, that the number of shares so reserved shall at all
times be at least 1,800,000 shares. The number of shares so reserved
may be reduced by the number of shares actually delivered pursuant to
conversion of Debentures (provided that in no event shall the number
of shares so reserved be less than the number required to satisfy the
remaining conversion rights on the unconverted Debentures) and the
number of shares so reserved shall be increased to reflect stock
splits and stock dividends and distributions.
5.3 Listing of Underlying Shares. The Company hereby agrees, promptly
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following the Closing of the transactions contemplated by this
Agreement, to take such action to cause the Underlying Stock to be
listed on the NYSE as promptly as possible but no later than the
effective date of the Registration Statement referred to in Section
5.1. The Company further agrees, if the Company applies to have the
Common Stock traded on any other principal stock exchange or market,
it will include in such application the Underlying Stock and will take
such other action as is necessary to cause the Underlying Stock to be
listed on such other exchange or market as promptly as possible.
5.4 Exchange Act Registration. The Company will cause its Common Stock to
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continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any
document (whether or not permitted by said Act or the rules
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said Act. The
Company will take all action necessary to continue the listing and
trading of its Common Stock on the NYSE (or the NASDAQ National Market
System) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and
the NYSE (or the NASDAQ National Market System, if the Common Stock is
so listed).
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5.5 Legends. The Underlying Stock and certificates evidencing the same
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shall at all times be free of legends (except as provided in Section
6.1 below), "stop transfers", "stock transfer restrictions" or other
restrictions, upon the effectiveness of the Registration Statement.
5.6 Corporate Existence. The Company will take all steps necessary to
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preserve and continue the corporate existence of the Company.
5.7 Right of First Refusal. In the event that at any time or from time to
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time during the six (6) month period immediately following the Closing
Date, the Company proposes to issue or sell any shares of its Common
Stock or any of its securities which are convertible into or
exchangeable for its Common Stock or any convertible security, or any
warrants or other rights to subscribe for or to purchase or any
options for the purchase of its Common Stock (other than shares or
options issued or which may be issued pursuant to the Company's
employee, officer, director or consultant stock or option or similar
equity-based compensation plans or shares issued upon exercise of
options, warrants or rights outstanding on the Closing Date listed in
the Exchange Act Reports) whether singly or together with other
securities at an effective purchase price per Common Share which is at
a discount to the Market Price Per Common Share, then the Company
shall give written notice (the "Proposal Notice") to the Subscriber of
such proposed issuance, specifying the terms thereof in reasonable
detail, and the Subscriber shall have the right, exercisable by
written notice delivered within 30 days of the date of receipt by the
Subscriber of the Proposal Notice, to subscribe for and purchase all
(or such lesser portion as the Subscriber shall specify in writing) of
the Common Stock or other securities proposed to be issued, on terms
and conditions no less favorable to the Subscriber as those specified
in the Proposal Notice.
5.8 Withholding. It is the intent of the Company that the Debentures be
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treated as "registered obligations" under Section 871(h)(2)(B) of the
Internal Revenue Code of 1986, as amended (the "Code") and that the
interest payments thereon be treated as "portfolio interest" within
the meaning of Section 871(h) of the Code. Assuming no changes in the
current law applicable hereto, so long as the Subscriber (or any
transferee thereof who is a "Holder" under the Debenture) complies
with the requirements for exemption from taxation under the Code
(including any compliance with any documentation requirements
reasonably requested by the Company to establish and support such
exemption) and the interest on the Debentures is not determined to be
other than "portfolio interest", the Company agrees that it shall not
withhold federal income taxes in respect of interest payments on the
Debentures.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company will issue one or more Debentures in the name of
------
the Subscriber and in such denominations to be specified by the
Subscriber prior to (or from time to time subsequent to) Closing. The
Debentures, and any shares of Common Stock issued upon conversion
thereof prior the effectiveness of the Registration Statement, will
bear the following legend (the "Legend"):
11
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the Company
will promptly instruct its transfer agent, upon surrender of the
Debentures for conversion and/or Underlying Stock, to remove the
Legend from any of the Underlying Stock. In addition, and if
applicable, the Company shall reissue certificates representing the
Securities without the legend set forth above at such time as (i) the
Holder thereof is permitted to dispose of such Securities pursuant to
Rule 1 44(k) under the Securities Act or (ii) the Securities are sold
to a purchaser or purchasers in a transaction exempt from registration
under the Securities Act, as evidenced by an opinion of counsel to the
transferor delivered to and reasonably satisfactory to the Company.
6.2 No Other Legend or Stock Transfer Instructions. No legend has been or
----------------------------------------------
shall be placed on the share certificates representing the Securities
and no stock transfer instructions have been or shall be given to the
Company's transfer agent with respect thereto other than as set forth
in this Section 6.
6.3 Subscriber's Compliance. Nothing in this section shall affect in any
-----------------------
way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
6.4 Other Restrictions on Transfer. The Subscriber shall not transfer the
------------------------------
Debentures or the Common Stock Purchase Warrants to any party not
constituting an affiliate of the Palladin Group, L.P. without the
prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed.
7. Governing Law; Jurisdiction; Waiver of Jury Trial
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of
law or choice of law. The Company and Subscriber hereby agree that all
actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall be litigated only in the Supreme Court of the
State of New York or the United States District Court for the Southern
District of New York located in New York County, New York. To the extent
permitted by applicable law, the Company and Subscriber consent to the
jurisdiction and venue of the foregoing courts and consent that any process
or notice of motion or other application to either of said courts or a
judge thereof may be served inside or outside the State of New York or the
Southern District of New York by registered mail, return receipt requested,
directed to the such party at its address set forth in this Agreement (and
service so made shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such other manner as
12
may be permissible under the rules of said courts. The parties hereto
hereby waive any right to a jury trial in connection with any litigation
pursuant to this Agreement.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights of the Subscriber
----------
hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, the provisions of this Agreement, the
Debentures and the Registration Rights Agreement shall inure to the
benefit of, and be enforceable by, any transferee of any of the
Securities purchased by the Subscriber hereunder with respect to the
Securities held by such person.
8.2 Entire Agreement: Amendment. This Agreement, the Debentures, the
---------------------------
Registration Rights Agreement, the Common Stock Purchase Warrant and
the other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to
the subjects hereof and thereof, and no party shall be liable or bound
to any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or
therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
9. Publicity
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of the Subscriber without its expressed
written consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Except as may be required by law, the Company and the Subscriber shall
consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement and shall not
issue any such press release or make any such public statement prior to
such consultation.
10. Notices, Etc.; Expenses; Indemnity
10.1 Notices. Any notice, demand or request required or permitted to be
-------
given by either the Company or the Subscriber pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when
delivered personally or by facsimile, with a hard copy to follow by
two day courier addressed to the parties at the addresses of the
parties set forth at the end of this Agreement or such other address
as a party may request by notifying the other in writing. Copies of
all notices to the Subscriber shall be sent to its designee or
representative.
10.2 Costs and Expenses. The Company shall be responsible for the
------------------
Subscriber's costs and expenses, due and payable at Closing,
(including legal fees and expenses) incurred in entering into this
Agreement and the transactions contemplated hereby and in conducting a
due diligence examination in
13
connection with the transactions contemplated hereby, but not to
exceed $20,000.
10.3 Indemnification. Each party shall indemnify the other against any
---------------
loss, cost or damages (including reasonable attorney's fees and
expenses) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12. Survival; Severability
The representations, warranties, covenants and agreements of the parties
hereto shall survive the Closing notwithstanding any due diligence
investigation conducted by or on behalf of the Subscriber. In the event
that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided
that no such severability shall be effective if it materially changes the
economic benefit of this Agreement to any party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this
Agreement.
14. Amount
The undersigned hereby subscribes for U.S.$4,000,000 in principal amount of
Debentures.
[SIGNATURE PAGE FOLLOWS]
14
Subscriber's Representative Name of the Subscriber
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
------------------------------- as Attorney-in-Fact
Name:
By: PALLADIN CAPITAL MANAGEMENT, L.L.C.,
General Partner
00 Xxxx 00xx Xx., XX, XX 00000 By:
------------------------------- ------------------------------------
Address Xxxxxx Xxxxxx, Authorized Representative
-------------------------------
Telephone
Date of Subscription:
------------------
000 000 0000
-------------------------------
Fax Place of Execution: New York
------------------
Place of Organization or Citizenship:
Cayman Islands
Place of Residency and/or Principal Place of
Business
c/o CITCO Fund Services (Cayman
Islands) Limited
Corporate Center, West Bay Road
-------------------------------
Grand Cayman, Cayman Islands, BWI
---------------------------------
Attn: Xxxxxxx Xxxxxxx/Dre Xxxxxx
---------------------------------
(Telephone): (000) 000-0000
--------------
(Fax): (000) 000-0000
--------------
Registration instructions:
(Name) (Please Print) Halifax Fund, L.P.
------------------
15
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 21st DAY OF
JANUARY 1997.
GRC INTERNATIONAL, INC.
By:
-----------------------------
Print Name: X X XxXxxx
Its: SVP, Gen. Cnsl. & Sec'y.
Address: 0000 Xxxxxxx Xx.
Xxxxxx, XX 00000
16
EXHIBIT A
FORM OF DEBENTURE
EXHIBIT B
COMMON STOCK PURCHASE WARRANT
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
SUBSIDIARIES OF THE COMPANY
General Research Corporation
SWL Inc.
SCHEDULE 1.4(d)
PRIOR PUBLIC DISCLOSURES
Press Releases
--------------
1. October 7, 1996
2. October7, 1996
3. October 15, 1996
4. October 17, 1996
5. October31, 1996
6. November 1, 1996
7. November 13, l996
8. December9, 1996
9. December 19, 1996
10. Press Release to be issued on or about January 22, 1997 in conjunction with
the execution of this Agreement.
SCHEDULE 3.10A
VIOLATION OF CREDITOR COVENANTS
Default under Section 4.6 (unsecured indebtedness covenant) and potential event
of default under Section 4.1 5(c)(minimum Tangible Net Worth covenant) under the
terms of the Amended and Restated Revolving Credit and Term Loan Facility, dated
as of February 12, 1996, by and among GRC International, Inc., SWL Inc., General
Research Corporation and Mercantile Safe Deposit & Trust Company.
Default and potential default have been waived by Mercantile Safe Deposit &
Trust Company pursuant to a letter dated January 6, 1997.
