S-1/A 1 a2219960zs-1a.htm S-1/A

Table of Contents

As filed with the Securities and Exchange Commission on May 5, 2014

Registration No. 333-193932


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 3 to

Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Alion Science and Technology Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  541330
(Primary Standard Industrial
Classification Code Number)
  54-2061691
(I.R.S. Employer
Identification No.)



1750 Tysons Boulevard
Suite 1300
McLean, VA 22102
(703) 918-4480

(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)



Bahman Atefi
President, Chairman and Chief Executive Officer
Alion Science and Technology Corporation
1750 Tysons Boulevard
Suite 1300
McLean, VA 22102
(703) 918-4480

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)



See Table of Additional Registrants Below



Copies to:

David S. Cole
Laurie L. Green
Holland & Knight LLP
1600 Tysons Boulevard, Suite 700
McLean, VA 22102
(703) 720-8630
  Senet S. Bischoff
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022-4834
(212) 906-1200



Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after the effective date of this registration statement.

            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, check the following box.    ý

            If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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.    o

            If this form is filed to register additional securities for an offering 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.    o

            If this form is a post-effective amendment filed pursuant to Rule 462(d) 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.    o

            Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

   


Table of Contents



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered

  Proposed Maximum
Offering Price per
Unit

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee

 

Third-Lien Senior Secured Notes due 2019 issuable in the Exchange Offer

  $235,000,000   100%   $235,000,000   $30,268
 

Guarantees of Third-Lien Senior Secured Notes due 2019 issuable in the Exchange Offer

        —(2)
 

Warrants to purchase 1,402,992 shares of Common Stock at an exercise price of $0.01 issuable in the Exchange Offer

  235,000       —(3)
 

Warrants to purchase 561,197 shares of Common Stock at an exercise price of $8.10 issuable in the Exchange Offer

  235,000       —(3)
 

Warrants to purchase 561,197 shares of Common Stock at an exercise price to be determined issuable in the Exchange Offer

  235,000       —(3)
 

Warrants to purchase 561,197 shares of Common Stock at an exercise price to be determined issuable in the Exchange Offer

  235,000       —(3)
 

Shares of Common Stock underlying Warrants exercisable at an exercise price of $0.01

  1,402,992(4)   $0.01   $14,030   $2
 

Shares of Common Stock underlying Warrants exercisable at an exercise price to be determined

  561,197(4)   $8.10(5)   $4,545,696   $586
 

Shares of Common Stock underlying Warrants exercisable at an exercise price to be determined

  561,197(4)   $8.10(6)   $4,545,696   $586
 

Shares of Common Stock underlying Warrants exercisable at an exercise price to be determined

  561,197(4)   $8.10(7)   $4,545,696   $586
 

Units

  8,877   $600   $5,326,200   $686(8)
 

Third-Lien Senior Secured Notes due 2019 issuable as a component of the Units

  $8,877,000   N/A   N/A   —(9)
 

Guarantees of Third-Lien Senior Secured Notes due 2019 issuable as a component of the Units

        —(2)
 

Warrants to purchase 60,287 shares of Common Stock at an exercise price of $0.01 issuable as a component of the Units

  8,877   N/A   N/A   —(9)
 

Warrants to purchase 24,115 shares of Common Stock at an exercise price of $8.10 issuable as a component of the Units

  8,877   N/A   N/A   —(9)
 

Warrants to purchase 24,115 shares of Common Stock at an exercise price to be determined issuable as a component of the Units

  8,877   N/A   N/A   —(9)
 

Warrants to purchase 24,115 shares of Common Stock at an exercise price to be determined issuable as a component of the Units

  8,877   N/A   N/A   —(9)
 

Shares of Common Stock underlying Warrants exercisable at an exercise price of $0.01 issuable as a component of the Units

  60,287(4)   $0.01   $603  
 

Shares of Common Stock underlying Warrants exercisable at an exercise price of $8.10 issuable as a component of the Units

  24,115(4)   $8.10   $195,332   $25
 

Shares of Common Stock underlying Warrants exercisable at an exercise price to be determined issuable as a component of the Units

  24,115(4)   $8.10(6)   $195,332   $25
 

Shares of Common Stock underlying Warrants exercisable at an exercise price to be determined issuable as a component of the Units

  24,115(4)   $8.10(7)   $195,332   $25
 

Third-Lien Senior Secured Notes due 2019 issuable as PIK Interest(10)

  $50,900,000   100%   $50,900,000   $6,556
 

Guarantees of Third-Lien Senior Secured Notes due 2019 issuable as PIK Interest(2)

        —(2)
 

Share of Series A Preferred Stock

  1(11)   N/A   N/A   —(11)
 

Total

          $305,463,989   $39,345(12)

 

(1)
Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended, or the Securities Act.
(2)
The additional registrants will guarantee the payment of the Third-Lien Senior Secured Notes due 2019. Pursuant to Section 457(n) of the Securities Act, no separate registration fee for the guarantees is payable.
(3)
Pursuant to Rule 457(g), no separate registration fee for the Warrants is payable because the shares of common stock issuable upon exercise of the Warrants are also being registered on this Registration Statement.
(4)
Pursuant to Rule 416 under the Securities Act, such number of shares of common stock registered hereby shall include an indeterminate number of shares of common stock that may be issued in connection with the anti-dilution provisions of the Warrants or stock splits, stock dividends, recapitalizations or similar events.
(5)
The exercise price of the Warrants will not be determined until after the closing of the Exchange Offer. Solely for the purposes of calculating the registration fee pursuant to Rule 457(g), the proposed maximum offering price of the shares of Common Stock issuable upon exercise of the Warrants is $8.10.
(6)
The exercise price of the Warrants will be determined on the one year anniversary of the closing of the Exchange Offer and cannot be calculated at the time of filing of the Registration Statement. Solely for the purposes of calculating the registration fee pursuant to Rule 457(g), the proposed maximum offering price of the shares of Common Stock issuable upon exercise of the Warrants is the maximum exercise price of the Warrants that are first exercisable, or $8.10.
(7)
The exercise price of the Warrants will be determined on the second year anniversary of the closing of the Exchange Offer and cannot be calculated at the time of filing of the Registration Statement. Solely for the purposes of calculating the registration fee pursuant to Rule 457(g), the proposed maximum offering price of the shares of Common Stock issuable upon exercise of the Warrants is the maximum exercise price of the Warrants that are first exercisable, or $8.10.
(8)
The registration fee is calculated pursuant to Rule 457(g) based on the Unit Price of $600 per Unit.
(9)
Issued as a component of the Units for no additional consideration.
(10)
We are registering additional Third-Lien Senior Secured Notes due 2019 that may be issued as payment of interest on such notes in accordance with the indenture governing the Third-Lien Senior Secured Notes due 2019. No additional consideration will be received for such Third-Lien Senior Secured Notes due 2019.
(11)
The share of Series A Preferred Stock is being issued to the Warrant Agent for the benefit of the Warrant holders without any separate consideration and no separate registration fee is payable.
(12)
Previously paid.



            The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants 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 the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


Table of Contents


Table of Guarantor Registrants

Exact Name of Additional Registrant as Specified in the Charter
  State or Other
Jurisdiction of
Incorporation or
Organization
  North American
Industry
Classification
System
  I.R.S. Employer
Identification
Number
 

Alion—BMH Corporation

  Virginia     541330     54-1384264  

Alion—CATI Corporation

  California     541511     77-0323371  

Alion—IPS Corporation

  Virginia     541330     54-1096826  

Alion—JJMA Corporation

  New York     541330     13-5679965  

Alion—METI Corporation

  Virginia     541690     54-1554099  

Alion International Corporation

  Delaware     999990     27-0115467  

Washington Consulting Government Services, Inc. 

  Virginia     541712     83-0488560  

Washington Consulting, Inc. 

  Virginia     561110     76-0725281  

        The address for each of the additional registrants is c/o Alion Science and Technology Corporation, 1750 Tysons Boulevard, Suite 1300, McLean, VA 22102, telephone: (703) 918-4480. The name and address, including zip code, of the agent for service of process for each additional registrant is Kevin Boyle, Alion Science and Technology Corporation, 1750 Tysons Boulevard, Suite 1300, McLean, VA, 22102, telephone: (703) 918-4480.


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer is not permitted.

SUBJECT TO CHANGE, DATED MAY 5, 2014

PRELIMINARY PROSPECTUS

LOGO

Alion Science and Technology Corporation

Offer to Exchange       Unit Offering
all of its Outstanding $235,000,000 10.25% Senior Notes due 2015 and the Related Guarantees (CUSIP 016275AF6) ("Old Notes") for an aggregate of:
up to $235,000,000 of its Third-Lien Senior Secured Notes due 2019 and the Related Guarantees (together with up to 940,000 Warrants to Purchase up to 3,086,583 Shares of Common Stock, subject to increase as set forth below) and up to $20,000,400 in Cash (Subject to Proration) and the Solicitation of Consents
  and   up to 8,877 Units
consisting of an aggregate of
up to $8,877,000 of its Third-Lien Senior Secured Notes due 2019 and the Related Guarantees (together with up to 35,508 Warrants to Purchase up to 132,632 Shares of Common Stock, subject to increase as set forth below) Available to holders of Old Notes

The Exchange Offer and Consent Solicitation will expire at 9:00 a.m., New York City time, on        , 2014 unless extended by us (we refer to that time and date, as we may extend them, as the Expiration Date). Holders who tender Old Notes at or prior to 5:00 p.m., New York City time, on        , 2014, unless extended by us (we refer to that time and date, as we may extend them, as the Early Tender Date), will receive an Early Tender Payment. Tenders of Old Notes may be withdrawn at or prior to 5:00 p.m., New York City time, on             , 2014, unless extended by us (we refer to that time and date, as we may extend them, as the Withdrawal Deadline) but not thereafter.
The Unit Offering will expire on the Early Tender Date. The election to purchase Units in the Unit Offering cannot be revoked except that a valid withdrawal of Old Notes in the Exchange Offer will be deemed to have revoked any election to purchase Units in the Unit Offering.

         Upon the terms and subject to the conditions described in this prospectus and the related consent and letter of transmittal, we will:

    offer to exchange, or the "Exchange Offer," all of our outstanding 10.25% Senior Notes due 2015 and the related guarantees, or the "Old Notes," for, at the election of the holders of the Old Notes, either the New Securities Option; subject to proration, the Cash Option; or, for holders wishing to participate in the Unit Offering, the New Securities Plus Unit Offering Option, each as described below; and

    apply the proceeds generated from the offering of Units, or the "Unit Offering", as described below, to finance the purchase of a portion of the Old Notes accepted for exchange pursuant to the Cash Option, if any.

         Each holder may participate in the Exchange Offer and the Unit Offering as summarized in this prospectus.

         The Old Notes are, and the Third-Lien Notes will be, fully and unconditionally guaranteed on a senior secured basis, jointly and severally, subject to customary release provisions as set forth in "Description of Third-Lien Notes", by certain of our existing and future subsidiaries. Each subsidiary guarantor is our wholly-owned subsidiary.

         The Exchange Offer is part of an overall transaction in which we are seeking to refinance our existing indebtedness. With substantially all of our indebtedness maturing within the next twelve months and given that our internally generated cash flow will not be sufficient to repay our indebtedness upon maturity, we have determined that the refinancing transactions described in this prospectus represent the best alternative for us to pursue and are critical to our continued viability. See "Prospectus Summary—Refinancing Transactions."

         No public market currently exists for the New Securities being offered in the Exchange Offer or the Unit Offering, or for the Warrants or the shares of our common stock underlying the Warrants.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

         See "Risk Factors" beginning on page 72 for a discussion of certain risks that you should consider before participating in the Exchange Offer or Unit Offering.

Dealer Manager and Solicitation Agent:

Goldman, Sachs & Co.

The date of this prospectus is            , 2014


TABLE OF CONTENTS

ABOUT THE EXCHANGE OFFER, CONSENT SOLICITATION AND UNIT OFFERING

    ii  

ABOUT THIS PROSPECTUS

    viii  

INDUSTRY AND MARKET DATA

    viii  

TRADEMARKS

    viii  

FORWARD-LOOKING STATEMENTS

    viii  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

    x  

QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER, THE CONSENT SOLICITATION AND THE UNIT OFFERING

    1  

PROSPECTUS SUMMARY

    23  

RISK FACTORS

    73  

USE OF PROCEEDS

    112  

CAPITALIZATION

    113  

SELECTED CONSOLIDATED FINANCIAL DATA

    115  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    116  

BUSINESS

    155  

BOARD OF DIRECTORS AND MANAGEMENT

    170  

EXECUTIVE COMPENSATION

    179  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    195  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

    196  

MARKET PRICE OF OUR COMMON STOCK

    198  

GENERAL TERMS OF THE EXCHANGE OFFER AND THE CONSENT SOLICITATION

    199  

PROPOSED AMENDMENTS

    203  

ACCEPTANCE OF OLD NOTES; ACCEPTANCE OF CONSENTS; ACCRUAL OF INTEREST; PRORATION

    205  

PROCEDURES FOR TENDERING OLD NOTES AND DELIVERING CONSENTS

    207  

WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS

    211  

CONDITIONS OF THE EXCHANGE OFFER AND THE CONSENT SOLICITATION

    213  

INFORMATION AND EXCHANGE AGENT

    215  

DEALER MANAGER AND SOLICITATION AGENT

    215  

DESCRIPTION OF SUPPORT AGREEMENT

    216  

DESCRIPTION OF UNIT OFFERING

    220  

DESCRIPTION OF OTHER INDEBTEDNESS

    227  

DESCRIPTION OF CAPITAL STOCK

    236  

DESCRIPTION OF THIRD-LIEN NOTES

    241  

DESCRIPTION OF WARRANTS

    335  

DESCRIPTION OF UNITS

    350  

DESCRIPTION OF SERIES A PREFERRED STOCK

    351  

DESCRIPTION OF STOCKHOLDERS' AGREEMENT

    359  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

    365  

CERTAIN ERISA CONSIDERATIONS

    382  

LEGAL MATTERS

    384  

EXPERTS

    384  

INDEX TO FINANCIAL STATEMENTS

    F-1  

i


Table of Contents


ABOUT THE EXCHANGE OFFER, CONSENT SOLICITATION AND UNIT OFFERING

New Securities Option

        For each $1,000 principal amount of Old Notes accepted for exchange in the Exchange Offer, holders may elect to receive the following, which we refer to as the "New Securities Option":

    $1,000 principal amount of our Third-Lien Senior Secured Notes due 5.5 years after the Settlement Date and the related guarantees, or the "Third-Lien Notes;"

    One immediately exercisable warrant to purchase no less than 5.9701768 shares of our common stock at an exercise price of $0.01 per share, or "Penny Warrant;" and

    Three warrants, each to purchase no less than 2.3880707 shares of our common stock, or the "Cash Warrants." The Cash Warrants are exercisable and have exercise prices as follows:

    One of the Cash Warrants will be exercisable on the date on which its exercise price is set at an exercise price equal to the lesser of:

    $8.10 per share;

    if we receive a valuation of our common stock for the purpose of valuing our common stock in connection with our Employee Stock Ownership Plan, which we refer to as the "ESOP," prior to the Settlement Date, or that relates to the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014), the value included in such valuation; and

    the value of our common stock set forth in a valuation conducted within two months of the Settlement Date, which valuation will reflect the closing of the Refinancing Transactions (subject to certain exceptions if the valuation is not timely performed).

    One of the Cash Warrants will be exercisable at any time following the first anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such first anniversary for the purpose of valuing our common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed); and

    One of the Cash Warrants will be exercisable at any time following the second anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such second anniversary for the purpose of valuing the common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed).

        As used herein, the "Settlement Date" means the settlement date of this Exchange Offer, which will occur promptly after the Expiration Date, but not in any event later than on the third business day following the Expiration Date.

        The Penny Warrants are exercisable in the aggregate for 12.5% of our common stock outstanding on the Settlement Date on a Fully Diluted Basis regardless of the principal amount of Old Notes accepted for exchange in the Exchange Offer. The Cash Warrants are exercisable in the aggregate for 15.0% of our common stock outstanding on the Settlement Date on a Fully Diluted Basis regardless of the principal amount of Old Notes accepted for exchange in the Exchange Offer. Each tranche of the Cash Warrants is exercisable in the aggregate for 5.0% of our common stock outstanding on the Settlement Date on a Fully Diluted Basis. We refer to the Penny Warrants and the Cash Warrants together as the "Warrants." We refer to the Third-Lien Notes and the Warrants together as the "New Securities." Subject to adjustment as provided in the Warrant Agreement and as described in the "Description of Warrants," we refer to on a "Fully Diluted Basis" as all of our outstanding common stock on a fully-diluted basis assuming the following:

    the exercise of all Warrants to be issued in the Exchange Offer and the related transactions;

ii


Table of Contents

    the exercise of our existing warrants that were issued in 2010;

    the purchase of shares of common stock by the ESOP using rollovers, transfers or participant elective deferrals for the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014) as if such purchases had been completed prior to the Settlement Date; and

    matching or profit sharing contributions of common stock to the ESOP for the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014) as if such contributions had been completed prior to the Settlement Date. We refer to the ESOP transactions in this bullet and the prior bullet as the "ESOP Transactions."

        Interest on the Third-Lien Notes will be payable partially in cash and partially in kind, or "PIK" and will accrue at the rates disclosed in the following table:

Months
  Cash Interest   PIK Interest   Total Interest  

1–12

    8 %   5.5 %   13.5 %

13–24

    8 %   6.5 %   14.5 %

25–30

    8 %   7.5 %   15.5 %

31–36

    10 %   5.5 %   15.5 %

37–48

    12 %   4.5 %   16.5 %

49–60

    12 %   5.5 %   17.5 %

61–66

    12 %   6.5 %   18.5 %

        See "Description of Third-Lien Notes."

        The aggregate number of shares issuable upon exercise of the Warrants is subject to increase if we issue additional shares of common stock prior to the Settlement Date or we issue additional shares pursuant to ESOP Transactions. We will not know the number of shares issuable pursuant to ESOP Transactions until after the valuation of our common stock in connection with the ESOP, which valuation will be performed following the Settlement Date. The number of shares issuable upon exercise of each of the Warrants issued per $1,000 principal amount of Old Notes is subject to increase if we issue additional shares of common stock prior to the Settlement Date, we issue additional shares pursuant to ESOP Transactions, that there is less than 100% participation in the Exchange Offer or the Cash Option is more than 50% subscribed.

        The New Securities Option will not be subject to proration.

Cash Option

        For each $1,000 principal amount of Old Notes accepted for exchange in the Exchange Offer, holders may elect to receive the following, which we refer to as the "Cash Option":

    $600 in cash. If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option subject to proration as described herein, with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of that holder's Old Notes.

        The Old Notes are not listed for trading on a national securities exchange. Since        , 2014, trading prices of the Old Notes, as reported on the Financial Industry Regulatory Authority, or "FINRA," TRACE reporting system, have ranged from approximately $          to approximately $          per $1,000 aggregate principal amount.

iii


Table of Contents

        In the case of both the New Securities Option and the Cash Option, for each $1,000 principal amount of Old Notes accepted for exchange in the Exchange Offer that are validly tendered (and not withdrawn) at or prior to the Early Tender Date, holders will receive an additional $15.00 in cash, which we refer to as the "Early Tender Payment."

        As of the date of this prospectus, holders of approximately 71.1% of the outstanding principal amount of the Old Notes, or the "Supporting Noteholders," have committed to tender their Old Notes and deliver related consents into the Exchange Offer and Consent Solicitation for the New Securities Option and agreed not to withdraw their tenders (or revoke related consents) pursuant to, and subject to conditions set forth in, a support agreement described in this prospectus. See "Description of Support Agreement."

        In order to participate in the Exchange Offer, you must tender all of your Old Notes in the Exchange Offer and Consent Solicitation. In addition, Old Notes may be tendered for payment only in principal amounts equal to minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

New Securities Plus Unit Offering Option

        For each $1,000 principal amount of Old Notes accepted for exchange in the Exchange Offer, holders may elect to receive the same securities offered in the New Securities Option plus purchase Units in the Unit Offering, which we refer to as the "New Securities Plus Unit Offering Option."

        Upon the terms and subject to the conditions described in this prospectus, depending on the principal amount of Old Notes held, holders of Old Notes may be able to purchase Units in the Unit Offering at a purchase price equal to $600 per Unit, or the "Unit Price." Each Unit consists of the same package of New Securities being offered pursuant to the New Securities Option in the Exchange Offer per $1,000 principal amount of Old Notes tendered. In order to purchase a Unit, a holder of Old Notes must:

    validly tender all (but not less than all) of the Old Notes held by it in to the New Securities Plus Unit Offering Option at or prior to the Early Tender Date (and not withdraw that tender);

    irrevocably agree to purchase the maximum number of Units as to which the holder is entitled to purchase (which assumes that the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is at least $10,000,200); and

    make a cash payment in the manner described in the Unit Purchase Form at the time of tender of the Old Notes in an amount equal to $600 times the maximum number of Units which the holder is entitled to purchase (as described below).

        We refer to holders of Old Notes who meet these conditions as "Participating Holders."

        The number of Units a Participating Holder will be required to purchase depends upon the aggregate principal amount of Old Notes validly tendered into the Exchange Offer for the New Securities Option by that Participating Holder. For each $1,000 principal amount of Old Notes tendered, a Participating Holder can purchase up to approximately 0.0709234 of a Unit. All Old Notes held by a Participating Holder will be aggregated for this purpose and the amount of Units a Participating Holder may purchase will in all cases be rounded down to the nearest whole Unit. Fractional Units cannot be purchased and will not be issued. For example, a Participating Holder who tenders $150,000 principal amount of Old Notes will be entitled to purchase 10 Units (150 × 0.0709234 = 10.638, rounded down to 10).

        Participating Holders may purchase the maximum amount of whole Units to which they are entitled only if the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is at least $10,000,200. All references in this section to the cash requirement to purchase Old Notes accepted for exchange pursuant to the Cash Option excludes accrued and unpaid interest and

iv


Table of Contents

the Early Tender Payment. To the extent that the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is less than $10,000,200, a Participating Holder would be entitled to purchase a lesser amount of a Unit per $1,000 principal amount of Old Notes tendered, which amount will be determined by multiplying 0.0709234 by a fraction, the numerator of which is the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option and the denominator of which is $10,000,200. In this event, all Units that a Participating Holder is entitled to purchase will be aggregated and will in all cases be rounded down to the nearest whole Unit. Fractional Units may not be purchased and will not be issued. Accordingly, Participating Holders may be required to own a larger principal amount of Old Notes in order to purchase one Unit.

        If the cash required to purchase all Old Notes accepted for exchange pursuant to Cash Option is less than $10,000,200, we will not issue the maximum number of Units that the Participating Holders are entitled to purchase and Participating Holders will receive a refund payment from us with respect to the Units not issued.

        As of the date of this prospectus, ASOF II Investment, LLC, one of the Supporting Noteholders who we refer to as "ASOF," holds approximately 46.7% of the outstanding principal amount of the Old Notes and is providing a back stop for the Unit Offering to ensure that we receive funds to pay up to the first $10,000,200 required to purchase Old Notes accepted for exchange pursuant to the Cash Option. Instead of purchasing its pro rata share of Units in the Unit Offering, on the Settlement Date, ASOF has agreed to purchase from us in a private placement at a Unit Price of $600 per Unit a number of Units that would result in proceeds to us of an amount equal to the difference between the cash required by us to purchase Old Notes accepted for exchange pursuant to the Cash Option (but in no event more than $10,000,200) and the proceeds we receive in the Unit Offering (net of any refund referred to above). We refer to the foregoing as the "ASOF Cash Funding."

        There is no minimum number of Units that must be sold for the Unit Offering to be successfully consummated. The maximum amount of gross proceeds that can be generated from the Unit Offering is $5,326,200 and the maximum amount of gross proceeds that can be generated from the Unit Offering and the ASOF Cash Funding on a combined basis is $10,000,200.

        Our board of directors believes that the completion of the Refinancing Transactions, of which the Exchange Offer, Consent Solicitation and Unit Offering are components, is critical to our continued viability. Accordingly, our board of directors believes that the Exchange Offer, Consent Solicitation and Unit Offering are in the best interests of our company. See "Risk Factors—Risks Relating to the Exchange Offer—If we are unable to complete the Exchange Offer, we will be unable to repay the Old Notes and Existing Senior Notes at their maturity, which will have a material adverse effect on our business, financial condition and operating results." However, neither we, our board of directors, the Dealer Manager and Solicitation Agent, the Information and Exchange Agent nor any other person is making any recommendation as to whether or not you should tender your Old Notes for exchange in the Exchange Offer and deliver Consents in the Consent Solicitation and whether, if applicable, you should purchase Units in the Unit Offering. You must make your own decision whether to tender Old Notes in the Exchange Offer and deliver Consents in the Consent Solicitation and whether to purchase Units in the Unit Offering.

        Neither Goldman, Sachs & Co. nor any other broker or dealer will participate in the offering of the Units in the Unit Offering.

Exchange Offer Consideration

        Upon the terms and subject to the conditions of this Exchange Offer, in exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange, participating holders of Old Notes will receive the consideration disclosed in the table below under "Total Consideration if Tendered at or Prior to the Early Tender Date," which we refer to as the "Total Consideration." The Total Consideration includes

v


Table of Contents

an additional payment equal to $15.00 in cash for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange, which we refer to as the "Early Tender Payment." Holders wishing to participate in the Exchange Offer must elect either the New Securities Option or, subject to proration, the Cash Option.

        In exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) after the Early Tender Date, but at or prior to the Expiration Date and accepted for exchange, participating holders of Old Notes will receive the consideration disclosed in the table below under "Exchange Consideration if Tendered After the Early Tender Date," which we refer to as the "Exchange Consideration." The Exchange Consideration does not include the Early Tender Payment. In order to be eligible to receive the Total Consideration, holders must tender their Old Notes at or prior to the Early Tender Date and not validly withdraw the tenders of Old Notes.

        The following table assumes that 100% of the Old Notes are tendered into the Exchange Offer, with the Cash Option being 50% or less subscribed. The aggregate number of shares issuable upon exercise of the Warrants will remain the same regardless of the aggregate principal amount of Old Notes accepted for exchange in the Exchange Offer. As discussed later in this prospectus, the number of shares issuable upon exercise of each of the Warrants issued per $1,000 principal amount of Old Notes is subject to increase if we issue additional shares of common stock prior to the Settlement Date, we issue additional shares pursuant to ESOP Transactions, there is less than 100% participation in the Exchange Offer or the Cash Option is more than 50% subscribed.

Total Consideration if Tendered at or
Prior to the Early Tender Date(1)
  Exchange Consideration if Tendered
After the Early Tender Date(1)
New Securities Option and New Securities Plus Unit Offering Option   Cash Option   New Securities Option and New Securities Plus Unit Offering Option   Cash Option

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.3880707 shares of common stock

One Penny Warrant to purchase no less than 5.9701768 shares of common stock

Early Tender Payment of $15.00 in cash

 

$615(2), which includes the Early Tender Payment of $15.00 in cash

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.3880707 shares of common stock

One Penny Warrant to purchase no less than 5.9701768 shares of common stock

 

$600(2)


(1)
Per $1,000 principal amount of Old Notes accepted for exchange. Does not include the payment of accrued and unpaid interest.

(2)
Assumes that the cash required to purchase all Old Notes accepted for exchange pursuant to Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) does not exceed $20,000,400. Subject to proration if more than $20,000,400 is required to purchase all Old Notes accepted for exchange pursuant to the Cash Option. If we are required to prorate, the proration factor will be determined so that the aggregate principal amount of Old Notes purchased for cash will be rounded down, if necessary, to the nearest whole multiple of $1,000 and holders will receive Third-Lien Notes in integral multiples of $1,000 and Warrants in exchange for Old Notes that were not exchanged for cash. See "Is there a maximum amount of cash that may be exchanged for Old Notes," below under "Questions and Answers About the Exchange Offer, the Consent Solicitation and the Unit Offering." See also "Acceptance of Old Notes; Acceptance of Consents; Accrual of Interest; Proration."

vi


Table of Contents

        If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option subject to proration as described herein, with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of that holder's Old Notes. On the other hand, the New Securities Option will not be subject to proration.

        We plan to pay the Total Consideration or the Exchange Consideration (as the case may be) for Old Notes accepted for exchange on the Settlement Date.

        Also, on the Settlement Date, we will pay accrued and unpaid interest up to, but not including, the Settlement Date, in cash, on Old Notes accepted for exchange. Based on the Expiration Date set forth on the cover page of this prospectus, assuming that the Settlement Date is the third business day following the Expiration Date, the amount of accrued and unpaid interest would equal $            per $1,000 aggregate principal amount of Old Notes accepted for exchange. The amount would increase by an additional $0.285 per $1,000 aggregate principal amount of Old Notes accepted for exchange for each additional day that the Settlement Date is extended.

Consent Solicitation

        In conjunction with the Exchange Offer and on the terms and subject to the conditions set forth in this prospectus, we are also soliciting consents in a consent solicitation, which we refer to as the "Consent Solicitation," from holders of Old Notes to amendments to the indenture governing the Old Notes, which we refer to as the "Proposed Amendments." We refer to the indenture governing the Old Notes as the "Old Notes Indenture." If you tender your Old Notes into the Exchange Offer, you will be deemed to have delivered your consents to the Proposed Amendments with respect to the Old Notes tendered. Holders of Old Notes may not deliver a consent with respect to any Old Notes without tendering the relevant Old Notes. The Proposed Amendments would eliminate substantially all of the restrictive covenants, eliminate certain events of default, eliminate the covenant restricting mergers and consolidations and modify certain provisions relating to defeasance contained in the Old Notes Indenture and the Old Notes. To be adopted, holders of a majority of the outstanding principal amount of the outstanding Old Notes must consent to the Proposed Amendments, which we refer to as the "Requisite Consents." The Supporting Noteholders, who hold approximately 71.1% of the outstanding principal amount of the Old Notes as of the date of this prospectus, have agreed, subject to certain conditions, to deliver their consent to the Proposed Amendment prior to the Early Tender Date. See "Proposed Amendments."

        We and the guarantors under the Old Notes Indenture, which we refer to as the "Old Notes Guarantors," expect to execute a Second Supplemental Indenture to the Old Notes Indenture with the trustee under the Old Notes Indenture providing for the Proposed Amendments, promptly after receipt of the Requisite Consents for the Proposed Amendments, but in any event, no earlier than the Withdrawal Deadline. Consents may only be revoked prior to the execution of the Second Supplemental Indenture. The Second Supplemental Indenture will be effective immediately upon execution thereof, but the provisions thereof will not be operative until all of the Old Notes that have been validly tendered prior to the date of such Second Supplemental Indenture have been accepted for exchange in accordance with the terms of the Exchange Offer.

        In addition to the foregoing, delivery of a consent will constitute an express waiver and release with respect to all claims against us arising out of any breach or default that may have occurred under the Old Notes Indenture or the Old Notes, other than claims for payment of interest or principal.

        Holders may only validly revoke consents by validly withdrawing the previously tendered related Old Notes prior to the execution of the Second Supplemental Indenture. If a holder withdraws its tendered Old Notes prior to the execution of the Second Supplemental Indenture, such holder will be

vii


Table of Contents

deemed to have revoked its consents to the Proposed Amendments, but it may not re-tender its Old Notes without delivering consents.

        The Exchange Offer and Consent Solicitation is conditioned on the satisfaction or waiver by us of the minimum tender condition, which requires that 95% of the outstanding aggregate principal amount of Old Notes be validly tendered (and not validly withdrawn) in the Exchange Offer. We refer to this minimum tender requirement as the "Minimum Tender Condition." The completion of the Exchange Offer and the Consent Solicitation are also subject to the satisfaction or waiver of a number of other conditions as set forth in this prospectus. These conditions are for our benefit and may be asserted by us or may be waived by us at any time and from time to time, in our discretion, without extending the Early Tender Date or the Expiration Date, except as required by law. However, the Supporting Noteholders must consent to any waiver of a condition to the Exchange Offer. See "Conditions of the Exchange Offer and the Consent Solicitation." We have the right to terminate or withdraw the Exchange Offer and the Consent Solicitation if any of the conditions described under "Conditions of the Exchange Offer and the Consent Solicitation" are not satisfied or waived by the Expiration Date. If the Exchange Offer expires or terminates without consummation, the executed Second Supplemental Indenture will not take effect and the provisions of the Old Notes Indenture which were to be eliminated will remain operative.


ABOUT THIS PROSPECTUS

        This prospectus is part of a registration statement we have filed with the SEC. We are submitting this prospectus to holders of Old Notes so that they can consider exchanging the Old Notes in the Exchange Offer and purchasing Units in the Unit Offering.

        You should rely only on the information contained in this prospectus or in the exhibits to the registration statement of which this prospectus is part. We have not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to make the Exchange Offer, Consent Solicitation and Unit Offering.


INDUSTRY AND MARKET DATA

        We obtained the industry, market and competitive position data used throughout this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified such data. Similarly, we believe our internal research is reliable but it has not been verified by any independent sources.


TRADEMARKS

        The following terms which may be used in this prospectus are our trademarks and/or trade names: Alion, Alion Science and Technology, and the Alion logo, and MOTISS. Other marks used in this prospectus are the property of their respective owners.


FORWARD-LOOKING STATEMENTS

        Information included in this prospectus may contain forward-looking statements that involve risks and uncertainties. These statements relate to future plans, objectives, expectations and intentions and are for illustrative purposes only. These statements may be identified by the use of words such as "believe," "expect," "intend," "plan," "anticipate," "likely," "will," "pro forma," "forecast," "projections," "could," "estimate," "may," "potential," "should," "would," and similar expressions.

viii


Table of Contents

        Factors that could cause actual results to differ materially from anticipated results include:

    Our ability to refinance our debt structure on satisfactory terms, or at all;

    Our ability to continue as a going concern;

    Material changes to our capital structure;

    Our ability to meet existing and future debt covenants;

    U.S. government debt ceiling limitations, sequestration, continuing resolutions, or other similar federal government budgetary or funding issues;

    Uncertainties related to U.S. government shutdowns and threatened shutdowns;

    Delays in payments from U.S. government customers;

    U.S. government decisions to reduce funding for projects we support;

    Failure to retain our existing government contracts, win new business and win re-competed contracts;

    Failure of government customers to exercise contract options;

    Limits on financial and operational flexibility given our substantial debt and debt covenants;

    Government contract bid protest and termination risks;

    Competitive factors such as pricing pressures and competition to hire and retain employees;

    Results of current and future legal proceedings and government agency proceedings which may arise from operations and attendant risks of fines, liabilities, penalties, suspension and debarment;

    Tax law changes that could affect tax liabilities or our effective tax rate;

    ERISA law changes related to the ESOP;

    Changes in SEC rules, and other corporate governance requirements;

    Undertaking acquisitions that increase costs or liabilities or are disruptive;

    Taking on additional debt for acquisitions;

    Failing to adequately integrate acquired businesses;

    Any future inability to maintain adequate internal control over financial reporting or covenant compliance measurement;

    Risks from private securities litigation, regulatory proceedings or government enforcement actions relating to prior covenant compliance disclosures;

    Material changes in laws or regulations affecting our businesses;

    General volatility in the debt and securities markets; and

    Other risks discussed elsewhere in this prospectus, including all risk factors described in the section entitled "Risk Factors."

        You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's view only as of the date of this prospectus. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectations or otherwise. This list of factors is not exhaustive, however, and these or other factors, many of which are outside of our control, could have a material adverse effect on us and our results of operations. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. You should carefully review the disclosures and the risk factors described in this prospectus. All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth herein.

ix


Table of Contents


WHERE YOU CAN FIND ADDITIONAL INFORMATION

        We file annual, quarterly and current reports and other information with the SEC. You may read and copy these reports and other information at the SEC's public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available without charge at the SEC's web site at http://www.sec.gov. However, these reports and other information are not part of this prospectus and should not be relied upon by holders of Old Notes in connection with making any decision with respect to the Exchange Offer, the Consent Solicitation and the Unit Offering.

        The form of the Third-Lien Notes, the indenture governing the Third-Lien Notes, the certificate of designation for our new Series A Preferred Stock, the Warrant Agreement and the Warrants have been filed as exhibits to the registration statement of which this prospectus is a part. We will provide you with a copy of these documents without charge. You may request copies of these documents by contacting us at:

Alion Science and Technology Corporation
1750 Tysons Boulevard, Suite 1300
McLean, Virginia 22102
(703) 918-4480
Attention: General Counsel

        THE EXCHANGE OFFER, CONSENT SOLICITATION AND UNIT OFFERING ARE NOT BEING MADE TO, NOR WILL WE ACCEPT TENDERS FOR EXCHANGE, DELIVERY OF CONSENTS OR THE PURCHASE OF UNITS FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR ACCEPTANCE OF THE EXCHANGE OFFER, CONSENT SOLICITATION OR UNIT OFFERING WOULD VIOLATE THE SECURITIES OR BLUE SKY LAWS OF THAT JURISDICTION.

        IN ORDER TO COMPLY WITH THE RESTRICTIONS UNDER THE BLUE SKY LAWS OF CERTAIN JURISDICTIONS, THE DEALER MANAGER AND SOLICITATION AGENT WILL SOLICIT TENDERS FOR EXCHANGE ONLY FROM HOLDERS OF OLD NOTES (I) WHO ARE "QUALIFIED INSTITUTIONAL BUYERS", OR QIBS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED), (II) WHO ARE INSTITUTIONAL "ACCREDITED INVESTORS" (WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED), OR (III) WHO ARE NON-U.S. PERSONS (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT) OUTSIDE THE UNITED STATES PROVIDED, IN EACH CASE, SUCH HOLDERS ALSO QUALIFY AS EXEMPT INSTITUTIONAL INVESTORS UNDER THE BLUE SKY LAWS OF EACH JURISDICTION.

        IF YOU HAVE ANY QUESTIONS OR NEED HELP IN TENDERING YOUR OLD NOTES, DELIVERING CONSENTS OR PURCHASING UNITS, PLEASE CONTACT THE INFORMATION AND EXCHANGE AGENT WHOSE ADDRESS AND TELEPHONE NUMBERS ARE LISTED ON THE BACK COVER OF THIS PROSPECTUS OR YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE THROUGH WHICH YOUR OLD NOTES ARE HELD.

x


Table of Contents


QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER, THE
CONSENT SOLICITATION AND THE UNIT OFFERING

        These answers to questions that you may have as a holder of Old Notes are highlights of selected information included elsewhere in this prospectus. To fully understand the Exchange Offer, the Consent Solicitation and the Unit Offering and the considerations that may be important to your decision about whether to participate in the Exchange Offer, the Consent Solicitation and the Unit Offering, you should carefully read this prospectus in its entirety, including the section entitled "Risk Factors."

Exchange Offer and Consent Solicitation

Why are you making the Exchange Offer?

        We are conducting the Exchange Offer as part of an overall transaction in which we are seeking to refinance our existing indebtedness. In addition to the Exchange Offer and Consent Solicitation, we are engaging in the following concurrent Refinancing Transactions:

    entering into a new $300.0 million first lien term loan facility having a term no less than five years, which we refer to as the "New First Lien Term Facility;"

    entering into a new $50.0 million second lien term loan facility having a term of five and one-half years, which we refer to as the "New Second Lien Term Facility," and together with New First Lien Term Facility, the "New Secured Term Debt," which ASOF has agreed to fund in full at our request in order to facilitate the implementation of the New First Lien Term Facility;

    redeeming all of our outstanding 12% Senior Secured Notes due 2014, which we refer to as the "Existing Secured Notes;" and

    replacing our $45.0 million revolving credit facility with a new $45.0 million revolving credit facility (subject, at our option, to increase to an amount not in excess of $65.0 million with the consent of the revolving credit lender), which we refer to as the "New Revolving Credit Facility," and receipt of borrowings thereunder on the Settlement Date in an amount no greater than permitted by the support agreement, or "Support Agreement," we signed with the Supporting Noteholders.

        Successful completion of the Refinancing Transactions is dependent upon each of these concurrent transactions being completed.

        Absent a refinancing transaction or series of transactions, we will be unable to pay the principal on our Existing Secured Notes and Old Notes when those instruments mature in November 2014 and February 2015, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

        See "Prospectus Summary—Recent Developments."

What securities are subject to the Exchange Offer?

        The securities subject to the Exchange Offer are our outstanding 10.25% Senior Notes due 2015, or the "Old Notes."

What aggregate principal amount of Old Notes is being sought in the Exchange Offer?

        Upon the terms and subject to the conditions of the Exchange Offer, we will accept for exchange all validly tendered (and not withdrawn) Old Notes. As of the date of this prospectus, $235.0 million in aggregate principal amount of Old Notes are outstanding.

1


Table of Contents

What will I receive in the Exchange Offer if my Old Notes are accepted for exchange?

        If you tender Old Notes (and do not validly withdraw them) at or prior to the Early Tender Date, and your Old Notes are accepted for exchange, you will receive the consideration disclosed below under "Total Consideration if Tendered at or Prior to the Early Tender Date" plus accrued and unpaid interest on your Old Notes accepted for exchange. The Total Consideration includes an Early Tender Payment equal to $15.00 in cash for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange.

        If you tender Old Notes (and do not validly withdraw them) after the Early Tender Date but at or prior to the Expiration Date, and your Old Notes are accepted for exchange, you will receive the consideration disclosed below under "Exchange Consideration if Tendered After the Early Tender Date" plus accrued and unpaid interest on your Old Notes accepted for exchange. The Exchange Consideration does not include the Early Tender Payment. In order to be eligible to receive the Total Consideration offered in the Exchange Offer, you must tender your Old Notes at or prior to the Early Tender Date.

        The following tables provide examples of what holders of Old Notes will receive in the Exchange Offer if different participation levels are achieved.

Participation Level
  Total Consideration if Tendered at or
Prior to the Early Tender Date(1)
  Exchange Consideration if Tendered
After the Early Tender Date(1)

Assuming the Cash Option is fully subscribed(2)

               

  New Securities Option and New Securities Plus Unit Offering Option   Cash Option   New Securities Option and New Securities Plus Unit Offering Option   Cash Option

100%

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

One Penny Warrant to purchase no less than 6.4259253 shares of common stock

Early Tender Payment of $15.00 in cash

 

$615, which includes an Early Tender Payment of $15.00 in cash

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

One Penny Warrant to purchase no less than 6.4259253 shares of common stock

 

$600

  

               

95%

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.7165673 shares of common stock

One Penny Warrant to purchase no less than 6.7914182 shares of common stock

Early Tender Payment of $15.00 in cash

 

$615, which includes an Early Tender Payment of $15.00 in cash

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.7165673 shares of common stock

One Penny Warrant to purchase no less than 6.7914182 shares of common stock

 

$600

2


Table of Contents


Participation Level
  Total Consideration if Tendered at or
Prior to the Early Tender Date(1)
  Exchange Consideration if Tendered
After the Early Tender Date(1)

Assuming 50% or less of the Cash Option is subscribed

               

  New Securities Option and New Securities Plus Unit Offering Option   Cash Option   New Securities Option and New Securities Plus Unit Offering Option   Cash Option

100%

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.3880707 shares of common stock

One Penny Warrant to purchase no less than 5.9701768 shares of common stock

Early Tender Payment of $15.00 in cash

 

$615, which includes an Early Tender Payment of $15.00 in cash

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.3880707 shares of common stock

One Penny Warrant to purchase no less than 5.9701768 shares of common stock

 

$600

  

               

95%

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.5137587 shares of common stock

One Penny Warrant to purchase no less than 6.2843966 shares of common stock

Early Tender Payment of $15.00 in cash

 

$615, which includes an Early Tender Payment of $15.00 in cash

 

$1,000 of Third-Lien Notes

Three Cash Warrants, each to purchase no less than 2.5137587 shares of common stock

One Penny Warrant to purchase no less than 6.2843966 shares of common stock

 

$600


(1)
Per $1,000 principal amount of Old Notes accepted for exchange. Does not include the payment of accrued and unpaid interest.

(2)
Assumes that the cash required to purchase all Old Notes accepted for exchange pursuant to Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) does not exceed $20,000,400. Subject to proration if more than $20,000,400 is required to purchase all Old Notes accepted for exchange pursuant to the Cash Option. If we are required to prorate, the proration factor will be determined so that the aggregate principal amount of Old Notes purchased for cash will be rounded down, if necessary, to the nearest whole multiple of $1,000 and holders will receive Third-Lien Notes in integral multiples of $1,000 and Warrants in exchange for Old Notes that were not exchanged for cash. See "Is there a maximum amount of cash that may be exchanged for Old Notes," below under "Questions and Answers About the Exchange Offer, the Consent Solicitation and the Unit Offering." See also "Acceptance of Old Notes; Acceptance of Consents; Accrual of Interest; Proration."

        If the Cash Option is more than 50% subscribed, we will provide the amount of funds necessary for the Cash Option in excess of $10,000,200 from cash on hand and borrowings under the New Revolving Credit Facility (and not from cash received by us from the issuance of Third-Lien Notes and Warrants in the Unit Offering or the ASOF Cash Funding). In this event, the maximum number of Third-Lien Notes and Warrants that we will issue in the Exchange Offer, the Unit Offering and the ASOF Cash Funding will decrease by the amount of Old Notes so purchased for the Cash Option in excess of $10,000,200 ($1,000 principal amount of Third-Lien Notes and four Warrants per $1,000 principal amount of Old Notes).

        Based on the number of outstanding shares on the date of this prospectus on a Fully Diluted Basis, the Warrants will (subject to anti-dilution adjustments described herein and increase if we issue additional shares prior to the Settlement Date or pursuant to ESOP Transactions) be exercisable into, in the aggregate, 3,086,583 shares of our common stock—1,402,992 shares on account of the Penny Warrants and 1,683,591 shares on account of the three tranches of Cash Warrants. In addition, the

3


Table of Contents

number of Warrants we will issue on the Settlement Date will vary based on the outcome of the Exchange Offer. Therefore the number of shares of our common stock into which each Warrant will be exercisable cannot be fixed at this time.

        As described herein, Warrants will only be issued for each $1,000 in principal amount of Third-Lien Notes to be issued in connection with the New Securities Option, the Unit Offering and the ASOF Cash Funding. The amount of Third-Lien Notes has not been fixed, and the total number of Warrants to be issued will vary with the amount of Third-Lien Notes issued to the extent that (i) holders of Old Notes fail or otherwise determine not to tender their Old Notes into the Exchange Offer and (ii) holders of Old Notes validly tender their Old Notes and elect the Cash Option in an amount that would require cash in excess of $10,000,200. For that reason, and due to potential issuances of shares of our common stock prior to the Settlement Date and pursuant to ESOP Transactions, the number of shares of our common stock underlying each Warrant will not be determined until after the Expiration Date. For purposes of this prospectus, we have included ranges of the minimum and maximum amounts of shares of our common stock per Warrant based on the terms of the Exchange Offer and related transactions and the number of outstanding shares on the date of this prospectus on a Fully Diluted Basis. The following table shows the total number of Warrants to be issued based on different levels of participation in the Exchange Offer and the Cash Option:

 
  100% Exchange Offer
Participation
  95% Exchange Offer
Participation

Cash Option is fully subscribed or over-subscribed

  873,332 (218,333 per tranche)   826,332 (206,583 per tranche)

Cash Option is 50% or less subscribed

  940,000 (235,000 per tranche)   893,000 (223,250 per tranche)

        Assuming no change to the aggregate participation level in the Exchange Offer and the number of outstanding shares on the date of this prospectus on a Fully Diluted Basis, the number of shares underlying each Warrant will not change if the Cash Option is 50% or less subscribed. In this event, we will issue less Third-Lien Notes and Warrants in the Exchange Offer with respect to holders electing the Cash Option, but we will issue additional Third-Lien Notes and Warrants in the ASOF Cash Funding and the Unit Offering, on a combined basis, equal to what we would have issued in the Exchange Offer.

        If the Cash Option is more than 50% subscribed, as discussed above, we will provide the funds required for the Cash Option above $10,000,200 from cash on hand and borrowings under the New Revolving Credit Facility, and not from the issuance of additional Third-Lien Notes and Warrants in the ASOF Cash Funding or the Unit Offering. As a result, assuming no change to the aggregate participation level in the Exchange Offer, we will issue fewer Third-Lien Notes and Warrants to the extent holders elect the Cash Option at a subscription level above 50%. Because of the total number of shares of common stock issuable upon the exercise of the Warrants to be issued in the Exchange Offer, the ASOF Cash Funding and the Unit Offering is fixed, in this event each Warrant will be exercisable for a higher number of shares of common stock. The following table shows the number of shares underlying each Warrant based on different levels of participation in the Cash Option and the Exchange Offer (calculated using the number of outstanding shares on the date of this prospectus on a

4


Table of Contents

Fully Diluted Basis and subject to increase if we issue additional shares prior to the Settlement Date or pursuant to ESOP Transactions):

 
  Shares of Common Stock Underlying Each Warrant
 
  100% Exchange
Offer Participation
  95% Exchange
Offer Participation
Cash Option Participation
  Penny
Warrants
  Cash
Warrants
  Penny
Warrants
  Cash
Warrants
100%   6.4259253   2.5703701   6.7914182   2.7165673
75%   6.1896732   2.4758693   6.5280774   2.6112310
50%   5.9701768   2.3880707   6.2843966   2.5137587
25%   5.9701768   2.3880707   6.2843966   2.5137587
0%   5.9701768   2.3880707   6.2843966   2.5137587

        As a result of the ASOF Cash Funding, the number of Units purchased in the Unit Offering does not have any impact on the tables set forth above.

What is the difference between the New Securities Option, the Cash Option and the New Securities Plus Unit Offering Option?

    If you elect the New Securities Option and your Old Notes are accepted for exchange, you will receive Third-Lien Notes and Warrants in exchange for your Old Notes.

    If you elect the Cash Option and your Old Notes are accepted for exchange, you will receive cash in exchange for your Old Notes. However, the Cash Option is subject to proration. If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option subject to proration as described herein, with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of Old Notes. See "Acceptance of Old Notes; Acceptance of Consents; Accrual of Interest; Proration;"

    If you elect the New Securities Plus Unit Offering, your Old Notes are accepted for exchange and you meet the offer conditions for purchasing Units in the Unit Offering, you will receive the same amount of Third-Lien Notes and Warrants you would have received had you elected the New Securities Option and you will be required to purchase Units in the Unit Offering, as discussed below. For more information regarding the Unit Offering, see the questions and answers below under "The Unit Offering."

What if I do not indicate an election with respect to the New Securities Option, the Cash Option or the New Securities Plus Unit Offering Option?

        If no election is made with respect to the New Securities Option, the Cash Option or the New Securities Plus Unit Offering Option, a holder will be deemed to have elected the New Securities Option with respect to all Old Notes tendered for exchange. See "General Terms of the Exchange Offer and Consent Solicitation."

Can I elect the New Securities Option for a portion of my Old Notes and the Cash Option for a portion of my Old Notes?

        Yes. You must indicate on the consent and letter of transmittal the principal amount of your Old Notes that you are exchanging for the New Securities Option and the amount you are exchanging for the Cash Option. However, in order to participate in the Exchange Offer, you must tender all of your Old Notes in the Exchange Offer and Consent Solicitation. See "May I tender only a portion of the Old Notes that I hold?" below. Additionally, you will not be eligible to participate in the Unit Offering

5


Table of Contents

if you elect the Cash Option for any portion of your Old Notes. See "Who may participate in the Unit Offering?" below.

What is the maximum aggregate principal amount of Third-Lien Notes that may be issued in the Exchange Offer?

        The maximum aggregate principal amount of Third-Lien Notes issuable in the Exchange Offer is $235.0 million. The New Securities Option will not be subject to proration.

Is there a maximum amount of cash that may be exchanged for Old Notes pursuant to the Cash Option?

        Yes. The maximum aggregate amount of cash payable pursuant to the Cash Option in the Exchange Offer is $20,000,400, excluding accrued and unpaid interest and the Early Tender Payment. If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option on a pro rata basis, (as described under "Acceptance of Old Notes; Acceptance of Consents; Accrual of Interest; Proration"), with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of Old Notes.

If the Cash Option is oversubscribed and a portion of my Old Notes must be exchanged for the New Securities Option, how much cash will I receive?

        The Cash Option will be oversubscribed if holders of more than $33,334,000 in aggregate principal amount of Old Notes elect the Cash Option. In this case, if you elected the Cash Option, you will receive your pro rata portion of the cash payable pursuant to the Cash Option in the Exchange Offer plus accrued and unpaid interest and the Early Tender Payment, if applicable, provided that the aggregate principal amount of your Old Notes that is purchased for cash will be rounded down, if necessary, to the nearest whole multiple of $1,000 and you will receive Third-Lien Notes in exchange for your Old Notes that were not exchanged for cash.

        In no event will more than $33,334,000 in aggregate principal amount of Old Notes be exchanged for the Cash Option. In the event that the amount of Old Notes validly tendered into the Cash Option exceeds $33,334,000, a prorated portion of each holder's Old Notes validly tendered into the Cash Option will be exchanged for the Cash Option (rounded down to the nearest whole multiple of $1,000), with the remaining portion of such holder's Old Notes being exchanged for the New Securities Option. For example, if the aggregate principal amount of Old Notes validly tendered by all holders into the Cash Option equals $100,002,000, the proration factor would be 0.33 (33,334,000 / 100,002,000). In that event, a holder that validly tendered $10,000 in aggregate principal amount of Old Notes into the Cash Option would have $3,000 in principal amount of its Old Notes exchanged for the Cash Option and $7,000 in principal amount of its Old Notes exchanged for the New Securities Option. The following table provides examples of what a holder that validly tendered $10,000 in aggregate principal amount of Old Notes would receive at various participation levels in the Cash Option (each assuming 100% participation in the Exchange Offer):

Aggregate Principal Amount of Old Notes electing the Cash Option
  Proration Factor   Total Consideration if
Tendered at or
Prior to the
Early Tender
Date
  Exchange Consideration
if Tendered
After the
Early Tender
Date

$33,334,000 or Less

  None ($10,000 in principal amount of Old Notes accepted for exchange in the Cash Option)   $6,150 of cash ($615 per $1,000 of Old Notes exchanged for the Cash Option)   $6,000 of cash ($600 per $1,000 of Old Notes exchanged for the Cash Option)

6


Table of Contents

Aggregate Principal Amount of Old Notes electing the Cash Option
  Proration Factor   Total Consideration if
Tendered at or
Prior to the
Early Tender
Date
  Exchange Consideration
if Tendered
After the
Early Tender
Date

$66,668,000

 

0.50 ($5,000 in principal amount of Old Notes accepted for exchange in the Cash Option and $5,000 in principal amount of Old Notes accepted for exchange in the New Securities Option)

 

$3,075 of cash ($615 per $1,000 of Old Notes exchanged for the Cash Option)

$5,000 of Third-Lien Notes

15 Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

5 Penny Warrants, each to purchase no less than 6.4259253 shares of common stock

 

$3,000 of cash ($600 per $1,000 of Old Notes exchanged for the Cash Option)

$5,000 of Third-Lien Notes

15 Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

5 Penny Warrants, each to purchase no less than 6.4259253 shares of common stock

$100,002,000

 

0.33 ($3,000 in principal amount of Old Notes accepted for exchange in the Cash Option and $7,000 in principal amount of Old Notes accepted for exchange in the New Securities Option)

 

$1,845 of cash ($615 per $1,000 of Old Notes exchanged for the Cash Option)

$7,000 of Third-Lien Notes

21 Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

7 Penny Warrants, each to purchase no less than 6.4259253 shares of common stock

 

$1,800 of cash ($600 per $1,000 of Old Notes exchanged for the Cash Option)

$7,000 of Third-Lien Notes

21 Cash Warrants, each to purchase no less than 2.5703701 shares of common stock

7 Penny Warrants, each to purchase no less than 6.4259253 shares of common stock

Will I receive any accrued and unpaid interest on my Old Notes tendered for exchange in the Exchange Offer?

        Yes. All holders whose Old Notes are exchanged in the Exchange Offer under either the Cash Option or the New Securities Option will receive an amount equal to accrued and unpaid interest on such Old Notes, in cash, from the last applicable interest payment date to, but not including, the Settlement Date. During the pendency of the Exchange Offer, holders of Old Notes as of the applicable record date for any interest payment will be entitled to receive that interest payment whether or not their Old Notes were tendered as of the applicable interest payment date.

What are the terms of the Warrants that I will receive in the Exchange Offer?

        The Penny Warrants are immediately exercisable and will entitle holders of the Penny Warrants to purchase in the aggregate 12.5% of our outstanding common stock on a Fully Diluted Basis on the Settlement Date, or 1,402,992 shares in the aggregate at an exercise price of $0.01 per share. The minimum and maximum number of shares issuable upon exercise of each Penny Warrant is 5.9701768

7


Table of Contents

(assuming the participation level is 100% and the Cash Option is 50% or less subscribed) and 6.7914182 (assuming the participation level is 95% and the Cash Option is fully subscribed), respectively. The number of shares underlying each Penny Warrant is computed by dividing 1,402,992 by the total number of Penny Warrants we issue in the Exchange Offer, the Unit Offering and the ASOF Cash Funding. The total number of Penny Warrants we will issue in the Exchange Offer, the Unit Offering and the ASOF Cash Funding will depend upon the number of Old Notes accepted for exchange and the subscription level for the Cash Option. This number will range from 206,583 Penny Warrants (assuming the participation level is 95% and the Cash Option is fully subscribed) to 235,000 Penny Warrants (assuming the participation level is 100% and the Cash Option is 50% or less subscribed).

        The Cash Warrants will entitle holders of the Cash Warrants to purchase in the aggregate 15% of our outstanding common stock on a Fully Diluted Basis on the Settlement Date, or 1,683,591 shares in the aggregate at an exercise price based on the underlying value of our common stock. Our Cash Warrants will be issued in three tranches. One tranche of the Cash Warrants is exercisable on the date on which their exercise price is set at an exercise price equal to the lesser of:

    $8.10 per share;

    if we receive a valuation of our common stock for the purpose of valuing our common stock in connection with our ESOP prior to the Settlement Date, or that relates to the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014), the value included in such valuation; and

    the value of our common stock set forth in a valuation conducted within two months of the Settlement Date, which valuation will reflect the closing of the Refinancing Transactions (subject to certain exceptions if the valuation is not timely performed).

        A second and third tranche become exercisable on each of the first and second anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such applicable anniversary for the purpose of valuing our common stock in connection with the ESOP (determined as described under "Description of Warrants"). The minimum and maximum amount of shares issuable upon exercise of each Cash Warrant is 2.3880707 (assuming the participation level is 100% and the Cash Option is 50% or less subscribed) and 2.7165673 (assuming the participation level is 95% and the Cash Option is fully subscribed), respectively. The number of shares underlying each Cash Warrant is computed by dividing 1,683,591 by the total number of Cash Warrants we issue in the Exchange Offer, the Unit Offering and the ASOF Cash Funding. The total number of Cash Warrants we will issue in the Exchange Offer, the Unit Offering and the ASOF Cash Funding will depend upon the number of Old Notes accepted for exchange and the subscription level for the Cash Option. This number will range from 619,749 Cash Warrants (assuming the participation level is 95% and the Cash Option is fully subscribed) to 705,000 Cash Warrants (assuming the participation level is 100% and the Cash Option is 50% or less subscribed).

        The aggregate number of shares of common stock issuable upon exercise of all Warrants to be issued in the Exchange Offer, the Unit Offering and the ASOF Cash Funding will be 3,086,583. The number of shares of common stock issuable on account of each Warrant you receive will depend on the principal amount of Old Notes exchanged in the Exchange Offer and the total principal amount of Old Notes exchanged in the Exchange Offer and not repurchased for cash in the Cash Option.

        The number of shares described above are based upon the number of shares of our common stock outstanding as of the date of this prospectus on a Fully Diluted Basis and will change if the number of shares outstanding as of the Settlement Date is different or if we issue additional shares pursuant to ESOP Transactions and is subject to certain adjustments as described in "Description of Warrants."

8


Table of Contents

Will I have any rights as a holder of Warrants in addition to the right to acquire shares of common stock?

        Yes. The Warrant Agent will hold of record the one share of Series A Preferred Stock that we will issue on the Settlement Date for the benefit of the holders of the Warrants. The Series A Preferred Stock has the right to vote together with the common stock as a single class on all items on which our common stockholders are entitled to vote with voting power equal to the number of shares of common stock and/or other securities issuable upon the exercise of all then outstanding Warrants (whether or not the Warrants are then exercisable). The Warrant Agent will exercise this voting power as a block in the manner directed by the holders of Warrants representing a majority of our common stock to be received upon the exercise of all outstanding Warrants (whether or not the Warrants are then exercisable) providing direction. Accordingly, holders of Warrants not providing direction as to voting will not be taken into account in determining how the Warrant Agent will vote.

        The Series A Preferred Stock also has additional rights, including the right to appoint two members to our board of directors (initially expected to be Lawrence A. First and Daniel H. Clare), consent rights on certain specified actions and, if we have not repaid in full the Third-Lien Notes on or before April 30, 2015, the right to instruct us to engage in a process to sell our company.

        In connection with the election of the Series A Directors and the exercise of consent rights, we may seek the direction from the requisite holders of Warrants within a time period specified by us to the Warrant Agent (such period to (i) be no shorter than fifteen days and (ii) expire not less than two business days before the date we set for the taking of such action). We refer to any such instruction to the Warrant Agent as a "Direction Instruction" and the time period established to obtain the Direction Instruction as the "Direction Period". In connection with these matters, the Warrant Agent will be required to vote the share of Series A Preferred Stock for the nominated Series A Directors or shall grant the requested action subject to the consent right only if instructed to do so by holders of Warrants representing 60% of the Warrants on an as exercised basis providing it with direction on these matters. Within ten days after the Settlement Date, the holders of the then outstanding Warrants representing at least 60% of the Warrants on an as exercised basis may by notice to the Warrant Agent reduce the 60% direction threshold to a percentage not less than 50%. Reference to Warrants on an as exercised basis shall mean our common stock issuable upon exercise of such Warrants.

        In lieu of us seeking the direction from the requisite Warrant holders to the Warrant Agent with respect to a Consent Right, a direction to grant the requested action may be provided to the Warrant Agent on the initiative of holders of Warrants representing in excess of 60% of the then outstanding Warrants on an as exercised basis (or such lesser threshold to which the direction threshold has been reduced as provided above).

        Alternative consent rights provisions will apply if:

    40% or more of the then outstanding Warrants on an as exercised basis are not owned in the aggregate by three or less holders that each own at least 5% of the then outstanding Warrants on an as exercised basis; or

    a direction to grant the requested action subject to the consent right is provided to the Warrant Agent on the initiative of holders of Warrants representing in excess of 40% of the then outstanding Warrants on an as exercised basis (but less than 60% or such lesser threshold to which the direction threshold has been reduced as provided above).

        In these cases, both Series A Directors may provide the requested consent to any proposed action that is subject to the consent rights but have the right to refrain from making a determination whether or not to consent. However, we acknowledge and agree that to the fullest extent permitted by applicable law it shall not be a breach of the fiduciary duties of either of the Series A Directors to, in lieu of making a decision whether or not to consent, instruct us to seek a direction from Warrant holders representing the direction threshold as provided above to the Warrant Agent. However, with respect to consent rights relating to our annual budget, capital expenditures or employee benefit plans, the Series A Directors may not provide a Direction Instruction and no consent rights shall be required to the extent the Series A Directors determine to refrain from making a decision whether to consent.

9


Table of Contents

        If we pay a cash dividend or other distribution in respect of shares of our common stock, we are required to pay such dividend or distribution to the holders of any outstanding Warrants on the same basis as cash dividends or distributions are made to holders of common stock based on the numbers of shares of common stock for which the Warrants are exercisable as if the Warrants had been exercised immediately prior to the record date for the dividend or other distribution (whether or not the Warrants are then exercisable).

        Our common stock is 100% owned by Alion Science Technology Corporation Employee Ownership, Savings and Investment Trust, which we refer to as the "ESOP Trust." On the Settlement Date, we and the ESOP Trust will enter into a stockholders' agreement, which we refer to as the "Stockholders' Agreement," which governs certain rights related to the ownership of our common stock. Upon the exercise of any of the Warrants, holders of the common stock issued upon exercise of the Warrants will be deemed to have entered into the Stockholders' Agreement and to have agreed to be bound by the terms of the Stockholders' Agreement. The Stockholders' Agreement establishes rights and obligations of holders of the common stock related to the ownership of our common stock. See "Description of Stockholders' Agreement."

Will the Supporting Noteholders be able to control the decisions of the Warrant Agent?

        After giving pro forma effect to the consummation of the Refinancing Transactions, including this Exchange Offer, the Supporting Noteholders will hold 71.1% of the Warrants, assuming the Exchange Offer is 100% subscribed and holders of the Old Notes do not elect the Cash Option. This percentage will increase to the extent that:

    the participation level in the Exchange Offer is less than 100%;

    the Cash Option is elected; or

    any of the Supporting Noteholders purchase additional Old Notes prior to the Expiration Date and exchange these additional Old Notes in the Exchange Offer as required by the Support Agreement.

        As a result of their significant ownership percentage, the Supporting Noteholders, acting together, initially will possess voting control over the Warrants under the Warrant Agreement. Accordingly, the Supporting Noteholders, acting together, will initially control the identity of the two board members (initially expected to be Lawrence A. First and Daniel H. Clare) to be appointed by the holder of the Series A Preferred Stock, will be able to direct the Warrant Agent with respect to decisions under the Series A Preferred Stock, including instructing the Warrant Agent to vote the share of Series A Preferred Stock as a block and deciding whether to grant certain approval rights and will be able to agree with us to amend or waive certain terms of the Warrants and the Series A Preferred Stock.

Will I receive any shares of Series A Preferred Stock in the Exchange Offer?

        No. The Warrant Agent will hold of record the one share of Series A Preferred Stock that we will issue on the Settlement Date for the benefit of the holders of the Warrants. Holders of Warrants will, however, have the right to direct the Warrant Agent on all items on which the Series A Preferred Stock has the right to vote upon or provide consent. See "Description of Series A Preferred Stock."

Why are you making the Consent Solicitation?

        The purpose of the Consent Solicitation is to adopt the Proposed Amendments.

What amendments to the Old Notes Indenture are the subject of the Consent Solicitation?

        The Proposed Amendments would eliminate substantially all of the affirmative and negative covenants, eliminate certain events of default, eliminate the covenant restricting mergers and

10


Table of Contents

consolidations and modify certain provisions relating to defeasance contained in the Old Notes Indenture and the Old Notes. See "Proposed Amendments."

Holders of what principal amount of Old Notes are required to validly deliver (and not validly revoke) Consents to the Proposed Amendments in order for the Proposed Amendments to be adopted?

        In order for the Proposed Amendments to be adopted, holders of at least a majority of the outstanding aggregate principal amount of the Old Notes must validly deliver (and not validly revoke) consents to the Proposed Amendments at or prior to the Expiration Date.

        Pursuant to the Support Agreement, holders of approximately 71.1% in the aggregate of the outstanding principal amount of the Old Notes as of the date of this prospectus, have, subject to certain conditions, committed to tender their Old Notes and deliver consents into the Exchange Offer and Consent Solicitation for the New Securities Option and agreed not to withdraw their tenders (or revoke related consents). As a result, it is expected that no additional consents from other holders of Old Notes will be needed to be validly delivered in the Consent Solicitation in order to obtain the Requisite Consents to adopt the Proposed Amendments.

What are the differences between the Old Notes and the Third-Lien Notes?

        There are important differences between the Old Notes and the Third-Lien Notes, including:

    the Third-Lien Notes will be secured by a third priority security interest on the collateral described later in this prospectus, while the Old Notes are not secured by any collateral;

    the interest on the Third-Lien Notes is payable in cash and payment in kind of additional Third-Lien Notes, or "PIK interest," and accrues at the rates disclosed in the following table, while the interest rate on the Old Notes is 10.25% per year payable in cash:


Interest Rates on Third-Lien Notes

Months
  Cash Interest   PIK Interest   Total Interest  

1–12

    8 %   5.5 %   13.5 %

13–24

    8 %   6.5 %   14.5 %

25–30

    8 %   7.5 %   15.5 %

31–36

    10 %   5.5 %   15.5 %

37–48

    12 %   4.5 %   16.5 %

49–60

    12 %   5.5 %   17.5 %

61–66

    12 %   6.5 %   18.5 %
    the maturity date of the Old Notes is February 1, 2015, while the maturity date of the Third-Lien Notes is not until 5.5 years after the Settlement Date; and

    the covenants contained in the indenture for the Third-Lien Notes are significantly different than the covenants in the Old Notes Indenture.

See "Prospectus Summary—Summary of Differences Between the Third-Lien Notes and the Old Notes" and "Description of Third-Lien Notes" for more information.

When is the Early Tender Date?

        The Early Tender Date for the Exchange Offer is 5:00 p.m., New York City time on            , 2014, unless extended by us with the prior written consent of the Supporting Noteholders.

11


Table of Contents

What is the importance of the Early Tender Date?

        Holders must have validly tendered (and not validly withdrawn) their Old Notes into the Exchange Offer at or prior to the Early Tender Date in order to be eligible to receive the Early Tender Payment.

When does the Exchange Offer and Consent Solicitation expire?

        The Exchange Offer and Consent Solicitation will expire at 9:00 a.m., New York City time, on            , 2014, unless extended by us with the prior written consent of the Supporting Noteholders.

Until when may I withdraw Old Notes previously tendered for exchange in the Exchange Offer?

        Tendered Old Notes may be withdrawn at any time at or prior to the Withdrawal Deadline of 5:00 p.m., New York City time on             , 2014, unless extended by us with the prior written consent of the Supporting Noteholders (but no consent may be revoked after execution of the Second Supplemental Indenture).

In what denominations will the Third-Lien Notes be issued?

        The Third-Lien Notes will be issued in the Exchange Offer and the Unit Offering in minimum denominations of $1,000 and integral multiples of $1.00 in excess thereof. PIK interest payments will be made by increasing the aggregate principal amount of the Third-Lien Notes or issuing additional Third-Lien Notes in denominations of $1.00 and any integral multiples of $1.00 in excess thereof.

In what denominations may Old Notes be tendered in the Exchange Offer?

        Old Notes may be tendered and accepted for payment only in principal amounts equal to minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. No alternative, conditional or contingent tenders will be accepted. In order to participate in the Exchange Offer and Consent Solicitation, you must tender all of your Old Notes in the Exchange Offer and Consent Solicitation.

Is the Exchange Offer and Consent Solicitation subject to a minimum condition?

        Yes. The Exchange Offer and Consent Solicitation are conditioned on satisfaction or waiver by us of the Minimum Tender Condition. This condition requires that at least 95% of the outstanding aggregate principal amount of Old Notes be validly tendered (and not validly withdrawn) at or prior to the Expiration Date. We reserve the right, but are not obligated, to change the Minimum Tender Condition with the prior written consent of the Supporting Noteholders. We also have the right to waive any condition precedent (other than receipt of the Requisite Consents) to the Exchange Offer and Consent Solicitation with the prior written consent of the Supporting Noteholders. See "Conditions of the Exchange Offer and Consent Solicitation."

Is the Exchange Offer and Consent Solicitation subject to any other conditions?

        Yes, the Exchange Offer and Consent Solicitation is also subject to the satisfaction or waiver of a number of other conditions set forth in this prospectus including the following:

    the satisfaction of the terms of the support agreement with the Supporting Noteholders, which we refer to as the "Support Agreement";

    the Support Agreement not being terminated;

    the receipt of $300.0 million in gross proceeds from the incurrence of the New First Lien Term Facility;

    the receipt of $50.0 million in gross proceeds from the incurrence of the New Second Lien Term Facility;

12


Table of Contents

    the redemption of the Existing Secured Notes; and

    the entry into the New Revolving Credit Facility and receipt of borrowings thereunder on the Settlement Date in an amount no greater than permitted by the Support Agreement.

        We have the right to terminate or withdraw the Exchange Offer and Consent Solicitation if any of the applicable conditions described under "Conditions of the Exchange Offer and the Consent Solicitation" are not satisfied or waived at or prior to the Expiration Date. In addition, under the Support Agreement, the Supporting Noteholders have the right to terminate the Support Agreement if the Refinancing Transactions have not closed on or before July 31, 2014 and we are obligated to terminate the Exchange Offer if the Support Agreement is terminated for any reason. See "Conditions of the Exchange Offer and Consent Solicitation."

Did any holders of Old Notes agree to participate in the Exchange Offer and the Consent Solicitation in advance of the commencement of the Exchange Offer and the Consent Solicitation?

        Yes. As discussed above, pursuant to the terms and subject to the conditions of the Support Agreement, holders of Old Notes representing approximately 71.1% of the aggregate principal amount of outstanding Old Notes as of the date of this prospectus have agreed to participate in the Exchange Offer and the Consent Solicitation for the New Securities Option and agreed not to withdraw their tenders (or revoke related consents).

May I tender only a portion of the Old Notes that I hold?

        No. You must tender all of your Old Notes in the Exchange Offer and Consent Solicitation.

If I want to tender my Old Notes, am I required to deliver the related Consents?

        Yes. Old Notes validly tendered pursuant to the Exchange Offer (and not validly withdrawn) are deemed to include consents to the Proposed Amendments. The completion, execution and delivery of a consent and letter of transmittal, or transmission of an Agent's Message, in connection with a valid tender of Old Notes pursuant to the Exchange Offer constitutes the delivery of consents with respect to such Old Notes. Holders cannot validly tender Old Notes in the Exchange Offer without delivering the related consents. Holders can only validly revoke consents by validly withdrawing the previously tendered related Old Notes at or prior to the execution of the Second Supplemental Indenture. In addition, delivery of any consent constitutes a waiver of all prior defaults and covenant breaches under the Old Notes Indenture, if any.

Will I receive an additional payment on the Settlement Date if I tender at or prior to the Early Tender Date?

        Yes. On the Settlement Date, we will pay to each holder, in respect of such holder's Old Notes which are validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange, an Early Tender Payment of $15.00 in cash per $1,000 principal amount of such Old Notes. Such Early Tender Payment is included in the Total Consideration that may be payable to a holder in respect of its Old Notes accepted for exchange. If all holders of Old Notes validly tendered (and did not validly withdraw) Old Notes at or prior to the Early Tender Date, the aggregate maximum amount of Early Tender Payments payable would be approximately $3.525 million. The Early Tender Payment will be made on the Settlement Date.

If the Exchange Offer and Consent Solicitation are successfully completed and I do not participate in the Exchange Offer, how will my rights and obligations under my remaining Old Notes be affected?

        If we successfully complete the Exchange Offer and Consent Solicitation, obligations with respect to any Old Notes that remain outstanding will not be secured by collateral and will therefore be effectively subordinated to the new $45.0 million revolving credit facility (subject, at our option, to

13


Table of Contents

increase to an amount not in excess of $65.0 million with the consent of the revolving credit lender), the new $300.0 million first-lien secured term loan and the new $50.0 million second-lien secured term loan that we expect to incur in concurrent financing transactions, as well as all of the Third-Lien Notes to be issued in the Exchange Offer, the Unit Offering and the ASOF Cash Funding, to the extent of the value of the collateral securing such debt.

        Further, holders of the Old Notes left outstanding following the successful completion of the Exchange Offer and Consent Solicitation will no longer be entitled to the benefits of the covenants, events of default and other provisions that are eliminated or modified pursuant to the Proposed Amendments.

        For a description of other consequences of failing to tender your Old Notes pursuant to the Exchange Offer, see "Risk Factors—Risks to Holders of Non-Tendered Old Notes."

How will the Exchange Offer and Consent Solicitation affect the trading market for the Old Notes that are not exchanged?

        To the extent the Exchange Offer and Consent Solicitation are successfully completed, the aggregate principal amount of outstanding Old Notes will be substantially reduced and an active trading market in the Old Notes may not exist. A reduction in the aggregate principal amount of outstanding Old Notes will materially and adversely affect the liquidity of the Old Notes that remain outstanding after successful completion of the Exchange Offer. An issue of securities with a small principal amount available for trading, or "float," could command a lower price than does a comparable issue of securities with a larger float. Therefore, the market price for any Old Notes that remain outstanding after successful completion of the Exchange Offer may be materially and adversely affected. A reduced float may also make the trading prices of Old Notes that are not exchanged more volatile.

What do you intend to do with the Old Notes that are accepted for exchange in the Exchange Offer?

        Any Old Notes exchanged in the Exchange Offer will be retired and cancelled.

Are you making a recommendation regarding whether I should participate in the Exchange Offer and Consent Solicitation?

        Our board of directors believes that the completion of the Refinancing Transactions, of which the Exchange Offer, Consent Solicitation and Unit Offering are components, is critical to our continued viability. Accordingly, our board of directors believes that the Exchange Offer, Consent Solicitation and Unit Offering are in the best interests of our company. See "Risk Factors—Risks Relating to the Exchange Offer—If we are unable to complete the Exchange Offer, we will be unable to repay the Old Notes and Existing Senior Notes at their maturity, which will have a material adverse effect on our business, financial condition and operating results." However, neither we, our board of directors, the Dealer Manager and Solicitation Agent, the Information and Exchange Agent nor any other person is making any recommendation as to whether or not you should tender your Old Notes for exchange in the Exchange Offer and deliver Consents in the Consent Solicitation and whether, if applicable, you should purchase Units in the Unit Offering. You must make your own decision whether to tender Old Notes in the Exchange Offer and deliver Consents in the Consent Solicitation and, whether to purchase Units pursuant to the Unit Offering.

When will I receive the consideration payable in the Exchange Offer for my Old Notes that are accepted for exchange pursuant to the Exchange Offer?

        The consideration payable in the Exchange Offer will be deposited on the Settlement Date with the Information and Exchange Agent (or, upon its instruction, The Depository Trust Company, or the "DTC"), which will act as your agent for purposes of receiving Third-Lien Notes, Warrants and any cash to be paid in connection with the Cash Option, accrued and unpaid interest and the Early Tender

14


Table of Contents

Payment. Subject to the terms and conditions of the Exchange Offer, we expect that the Settlement Date will be on or about the third business day following the Expiration Date.

Will the Third-Lien Notes and Warrants issued in the Exchange Offer and the shares of common stock issuable upon exercise of the Warrants be freely tradable?

        Third-Lien Notes and Warrants issued in the Exchange Offer generally will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, which we refer to as the "Securities Act," unless held by our affiliates. Any holder who is an affiliate of ours must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resales, unless such sale or transfer is exempt from the registration requirements under the Securities Act and the requirements under applicable state securities laws.

        Holders of Warrants will be able to exercise their Warrants for shares of our common stock only if a registration statement covering the issuance of the shares is effective and current, or the issuance is exempt from the registration requirements under the Securities Act and the requirements under applicable state securities laws. Shares of common stock issuable upon exercise of Warrants that have been registered will be freely tradeable unless held by our affiliates.

        We have agreed pursuant to the Support Agreement to register the resale of the Third-Lien Notes and Warrants held by our affiliates, to register the issuance of the shares upon exercise of the Warrants held by all holders, and to register the resale of such shares held by our affiliates. See "Description of Support Agreement."

        The Stockholders' Agreement restricts the transfer of shares of the common stock received upon exercise of the Warrants in certain situations. See "Description of Stockholders' Agreement."

Do you or any of your affiliates have any current plans to purchase any Old Notes that remain outstanding subsequent to the Expiration Date?

        No. Although we do not currently intend to do so, subject to the limitations set forth in our debt agreements and our liquidity, we may from time to time repurchase any Old Notes that remain outstanding after completion of the Exchange Offer through open market or privately negotiated transactions, one or more additional tender or exchange offers or otherwise, on terms that may or may not be equal to or greater than the Exchange Consideration or the Total Consideration. We also reserve the right to redeem or repay at maturity any Old Notes not tendered.

        If we decide to repurchase or repay Old Notes that are not tendered in the Exchange Offer on terms that are more favorable than the terms of the Exchange Offer, those holders who decided not to participate in the Exchange Offer could be better off than those that participated in the Exchange Offer.

Under what circumstances can the Exchange Offer and Consent Solicitation be extended, amended or terminated?

        We reserve the right, with the prior written consent of the Supporting Noteholders, to extend the period during which the Exchange Offer and Consent Solicitation are open by giving oral (to be confirmed in writing) or written notice of such extension to the Information and Exchange Agent and by making public disclosure by press release or other appropriate means of such extension to the extent required by law. During any extension of the Exchange Offer or Consent Solicitation, all Old Notes previously tendered and not validly withdrawn will remain subject to the Exchange Offer and all consents previously delivered and not revoked will remain subject to the Consent Solicitation and may, subject to the terms and conditions of the Exchange Offer and the Consent Solicitation, be accepted by us.

15


Table of Contents

        We may terminate or withdraw the Exchange Offer and Consent Solicitation if any applicable condition to the Exchange Offer and Consent Solicitation is not satisfied or waived by the Expiration Date. We reserve the right, subject to applicable law and with the prior written consent of the Supporting Noteholders, to:

    waive any and all of the conditions of the Exchange Offer and Consent Solicitation (other than receipt of the Requisite Consents) at or prior to the Expiration Date; and

    amend the terms of the Exchange Offer and Consent Solicitation.

        Pursuant to the Support Agreement, we may not waive any condition to the Exchange Offer and Consent Solicitation or amend the terms of the Exchange Offer and Consent Solicitation without the prior written consent of the Supporting Noteholders. In addition, under the Support Agreement, the Supporting Noteholders have the right to terminate the Support Agreement if the Refinancing Transactions have not closed on or before July 31, 2014 and we are obligated to terminate the Exchange Offer and Consent Solicitation if the Support Agreement is terminated for any reason. In the event that the Exchange Offer and Consent Solicitation is terminated, withdrawn or otherwise not successfully completed at or prior to the Expiration Date, no consideration will be paid or become payable to holders who have tendered their Old Notes pursuant to the Exchange Offer. In any of these events:

    Old Notes previously tendered pursuant to the Exchange Offer will be promptly returned to the tendering holders;

    the Second Supplemental Indenture will not be executed or, if the Second Supplemental Indenture had been executed prior to the Exchange Offer and Consent Solicitation being terminated, the Proposed Amendments in the executed Second Supplemental Indenture will not become operative; and

    we will refund any money submitted for the payment of Units in the Unit Offering, and no Units will be issued.

        See "General Terms of the Exchange Offer and Consent Solicitation—Extension, Termination or Amendment."

How will I be notified if the Exchange Offer and Consent Solicitation is extended, amended or terminated?

        Any extension, termination or amendment of the Exchange Offer and Consent Solicitation will be followed as promptly as practicable by announcement thereof. An announcement in the case of an extension will be issued no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Date. Without limiting the manner in which we may choose to make any public announcement and subject to applicable law, we will have no obligation to publish, advertise or otherwise communicate any public announcement other than by issuing a release to the Dow Jones News Service.

Will you receive any cash proceeds from the Exchange Offer or the Consent Solicitation?

        No. We will not receive any cash proceeds from the Exchange Offer or the Consent Solicitation. See "Use of Proceeds." However, we may receive cash proceeds in the Unit Offering. See "The Unit Offering."

16


Table of Contents

How do I tender my Old Notes for exchange in the Exchange Offer and deliver Consents in the Consent Solicitation?

        A holder who wishes to tender Old Notes pursuant to the Exchange Offer and to deliver consents pursuant to the Consent Solicitation must deliver a fully completed consent and letter of transmittal (or a facsimile thereof), or transmit an "Agent's Message," to the Information and Exchange Agent at the address or facsimile number set forth on the back cover of this prospectus at or prior to the Expiration Date (or the Early Tender Date, if the holder wishes to receive the Early Tender Payment). In addition, either (1) certificates representing the Old Notes must be received by the Information and Exchange Agent at such address, or (2) the Old Notes must be transferred pursuant to the procedures for book-entry transfer described below and a Book-Entry Confirmation must be received by the Information and Exchange Agent, in each case at or prior to the Expiration Date (or the Early Tender Date, if the holder wishes to receive the Early Tender Payment). Holders of Old Notes may not tender their Old Notes without delivering a consent with respect to the Old Notes tendered, and holders of Old Notes may not deliver a consent with respect to any Old Notes without tendering the relevant Old Notes.

        Custodial entities that are participants in DTC must tender Old Notes and deliver Consents through DTC's Automated Tender Offer Program, or "ATOP," by which the custodial entity and the beneficial owner on whose behalf the custodial entity is acting agree to be bound by the consent and letter of transmittal. A consent and letter of transmittal need not be completed and submitted in connection with tenders effected through ATOP.

How do I withdraw Old Notes previously tendered for exchange in the Exchange Offer and revoke Consents previously delivered in the Consent Solicitation?

        A holder may withdraw the tender of such holder's Old Notes at any time at or prior to the Withdrawal Deadline by complying with the procedures described under "Withdrawal of Tenders and Revocation of Consents," or, if the Old Notes were tendered through ATOP, by submitting a notice of withdrawal to the Exchange Agent using ATOP procedures.

        Holders may only validly revoke consents by validly withdrawing the previously tendered related Old Notes prior to the execution of the Second Supplemental Indenture, which will not occur prior to the Withdrawal Deadline. If a holder withdraws its tendered Old Notes prior to the execution of the Second Supplemental Indenture, such holder will be deemed to have revoked its consents to the Proposed Amendments, but it may not re-tender its Old Notes without re-delivering consents.

Will I have to pay any fees or commissions if I tender my Old Notes for exchange in the Exchange Offer?

        No. You will not be required to pay any fees or commissions to us or the Information and Exchange Agent in connection with the Exchange Offer. If your Old Notes are held through a broker, dealer, commercial bank, trust company or other nominee that tenders your Old Notes on your behalf, your broker or other nominee may charge you a commission for doing so. You should consult your broker or other nominee to determine whether any charges will apply.

Are there procedures for guaranteed delivery of Old Notes?

        No. The Exchange Offer will not provide for guaranteed delivery procedures with respect to any issue of Old Notes.

17


Table of Contents

What risks should I consider in deciding whether or not to tender my Old Notes in the Exchange Offer or deliver Consents in the Consent Solicitation?

        In deciding whether to participate in the Exchange Offer or Consent Solicitation, you should carefully consider the discussion of risks and uncertainties that are described in the section of this prospectus entitled "Risk Factors."

What are the material U.S. federal income tax considerations of my participating in the Exchange Offer and Consent Solicitation?

        Please see the section of this prospectus entitled "Material U.S. Federal Income Tax Considerations." The tax consequences to you of the Exchange Offer and the Consent Solicitation will depend on your individual circumstances. You should consult your own tax advisor for a full understanding of the tax considerations of participating in the Exchange Offer or Consent Solicitation.

Will I have appraisal rights in connection with the Exchange Offer and Consent Solicitation?

        No. You will not have any right to dissent and receive an appraisal of your Old Notes in connection with the Exchange Offer and Consent Solicitation.

With whom may I talk if I have questions about the Exchange Offer or Consent Solicitation?

        If you have any questions or need help in tendering your Old Notes, please contact the Information and Exchange Agent whose address and telephone numbers are listed on the back cover of this prospectus or your broker, dealer, commercial bank, trust company or other nominee through which your Old Notes are held.

The Unit Offering

Why are you conducting the Unit Offering?

        In order to preserve liquidity while attempting to reduce the amount of Old Notes that will remain outstanding after the successful consummation of the Exchange Offer, we are conducting the Unit Offering. All holders of Old Notes holding specified minimum principal amounts of Old Notes may purchase, on a pro rata basis, Units and the funds raised in the Unit Offering will be used by us to fund, in part, the Cash Option.

        Neither Goldman, Sachs & Co. nor any other broker or dealer will participate in the offering of the Units in the Unit Offering.

Why is ASOF providing funding for the Cash Option?

        ASOF is providing funding for the Cash Option to ensure that we receive funds to pay up to the first $10,000,200 required to purchase Old Notes accepted for exchange pursuant to the Cash Option. Instead of purchasing its pro rata share of Units in the Unit Offering, on the Settlement Date, ASOF has agreed to purchase from us in a private placement at a Unit Price of $600 per Unit a number of Units that would result in proceeds to us of an amount equal to the difference between the cash required by us to purchase Old Notes accepted for exchange pursuant to the Cash Option (but in no event more than $10,000,200) and the proceeds we receive in the Unit Offering (net of any refund referred to below). We refer to the foregoing as the "ASOF Cash Funding."

        We have agreed to pay ASOF a fee of $400,000 in consideration for its commitment to provide such funding, which is payable on the earlier of the commencement of the Exchange Offer or termination of the Support Agreement in accordance with its terms.

18


Table of Contents

What is the maximum amount of gross proceeds that we will receive in the Unit Offering and the ASOF Cash Funding on a combined basis?

        The maximum amount of gross proceeds that we will receive in the Unit Offering and the ASOF Cash Funding on a combined basis is an amount, which we refer to as the "Cash Option Funding Amount," equal to the lesser of:

    the amount of cash required to pay holders electing the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment); and

    $10,000,200.

For example, if we are required to pay only $5,000,400 to holders electing the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment), the Cash Option Funding Amount would be $5,000,400. Alternatively, if we are required to pay $18,000,000 to holders electing the Cash Option, the Cash Option Funding Amount would be $10,000,200.

How will we fund our portion of the funding for the Cash Option?

        The maximum amount of cash payable for the Cash Option is $20,000,400, plus accrued and unpaid interest and the Early Tender Payment. We will provide the amount of funds necessary for the Cash Option in excess of $10,000,200, as well as amounts payable for accrued and unpaid interest and the Early Tender Payment for Old Notes accepted for exchange in the Exchange Offer from cash on hand and borrowings under the New Revolving Credit Facility.

What is the Unit Price?

        The Unit Price is $600 for each Unit offered hereby.

Who may participate in the Unit Offering?

        Only Participating Holders holding specified minimum principal amounts of Old Notes may participate in the Unit Offering. Participating Holders are holders of Old Notes (other than ASOF) who:

    validly tender all (but not less than all) of the Old Notes held by it in the New Securities Plus Unit Offering Option at or prior to the Early Tender Date (and not withdraw that tender);

    irrevocably agree to purchase the maximum number of Units as to which the holder is entitled to purchase (which assumes that the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is at least $10,000,200); and

    make a cash payment in the manner described in the consent and letter of transmittal at the time of tender of the Old Notes in an amount equal to $600 times the maximum number of Units which the holder is entitled to purchase.

Can I purchase only a portion of the Units I am entitled to purchase?

        No. If you wish to purchase any Units, you must purchase all Units that you are entitled to purchase. A purchase of only a partial amount of the Units you are entitled to purchase will not be accepted.

What is the maximum amount of New Securities included in the Units that will be offered in the Unit Offering?

        The maximum number of Units being offered in the Unit Offering is 8,877. The maximum aggregate principal amount of Third-Lien Notes included in the Units is $8,877,000. The maximum

19


Table of Contents

aggregate number of Penny Warrants and Cash Warrants that make up components of the 8,877 Units that we are offering in the Unit Offering, and the maximum number of shares issuable upon exercise of the Penny Warrants and the Cash Warrants, is 8,877 Penny Warrants to purchase 60,287 shares of our common stock and 26,631 Cash Warrants to purchase 72,345 shares of our common stock, respectively.

        The number of shares issuable upon exercise of the Warrants discussed above is based upon the number of shares of our common stock outstanding as of the date of this prospectus on a Fully Diluted Basis and will change if the number of shares outstanding as of the Settlement Date is different or if we issue additional shares pursuant to ESOP Transactions.

What aggregate principal amount of Old Notes must I tender in order to purchase one Unit?

        As indicated in the table below, holders must validly tender at least $15,000 aggregate principal amount of Old Notes in the Exchange Offer and elect the New Securities Plus Unit Offering Option in order to purchase one Unit. This is the case since Units are only being offered in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. As described below, each $1,000 aggregate principal amount of Old Notes only entitles the holder thereof to purchase up to approximately 0.0709234 of a unit. Holders who tender less than $15,000 aggregate principal amount of Old Notes in the Exchange Offer, or who do not elect the New Securities Option, will not be able to purchase any Units. Further, if the Cash Option Funding Amount is less than $10,000,200, Participating Holders may be required to own a larger principal amount of Old Notes in order to purchase one Unit, as indicated in the table at the end of the next question.

What amount of Units can I purchase in the Unit Offering?

        The number of Units you can purchase depends upon the aggregate principal amount of Old Notes that you tender into the Exchange Offer for the New Securities Plus Unit Offering Option. For each $1,000 principal amount of Old Notes tendered into the Exchange Offer for the New Securities Plus Unit Offering Option, you can purchase up to approximately 0.0709234 of a Unit. The fraction is determined by dividing 16,667 (the total number of Units issuable in the Unit Offering and the ASOF Cash Funding) by 235,000 (the aggregate amount of Old Notes, in $1,000 increments, outstanding as of the date of this prospectus). The total number of Units issuable in the Unit Offering and the ASOF Cash Funding was determined by dividing $10,000,200 (the maximum amount of gross proceeds that can be generated from the Unit Offering and the ASOF Cash Funding) by $600 (the purchase price for each Unit). You must purchase all Units you are entitled to purchase if any are purchased. All Old Notes held by a holder will be aggregated for this purpose and the number of Units you will be required to purchase will in all cases be rounded down to the nearest whole Unit. Fractional Units cannot be purchased and will not be issued.

        For example: assuming the Cash Option Funding Amount is $10,000,200, if a person holds $100,000 principal amount of Old Notes and elects to exchange all $100,000 principal amount of such notes in the Exchange Offer for the New Securities Plus Unit Offering Option, that person will be able to purchase seven Units (calculated as follows: (i) $100,000 divided by $1,000 equals 100, (ii) 100 multiplied by 0.0709234 equals 7.09234, and (iii) as a result of rounding down to the nearest whole number, seven Units). However, if the Cash Option Funding Amount is $5,000,400, that person would only be able to purchase three Units or 50% of the Units (subject to rounding down) that such person would have been able to purchase had the Cash Option Funding Amount been $10,000,200 (calculated as follows: (i) 7.09234 multiplied by 50% equals 3.54617 and (ii) as a result of rounding down to the nearest whole number, three). Since we will not know the Cash Option Funding Amount until the successful completion of the Exchange Offer, in order to participate in the Unit Offering, a person will need to subscribe for Units as if the Cash Option Funding Amount is $10,000,200. The person in these examples cannot purchase fractional Units, and cannot purchase less than seven or three Units, respectively.

20


Table of Contents

        We will only issue Units in the Unit Offering if holders of Old Notes tender into the Exchange Offer and elect the Cash Option, and the maximum amount of Units issuable in the Unit Offering will be reduced if less than $16,667,000 in principal amount of Old Notes are tendered into the Cash Option.

        The following is an illustration of the amount of Units and Third-Lien Notes included in the Units you will be entitled to purchase in the Unit Offering based on the principal amount of Old Notes that you tender assuming the Cash Option Funding Amount is $5,000,400 and $10,000,200. The Units will also include the corresponding Penny Warrants and Cash Warrants.

 
  Cash Option Funding
Amount is $5,000,400(1)
  Cash Option Funding
Amount is $10,000,200
 
Principal Amount of Existing
Old Notes Tendered
  Aggregate
Unit Price
  Number of
Units to be
Purchased
  Principal
Amount of New
Third-Lien
Notes
  Aggregate
Unit Price
  Number of
Units to be
Purchased
  Principal
Amount of New
Third-Lien
Notes
 

Less than $15,000

  $ 0     0   $ 0   $ 0     0   $ 0  

$15,000

  $ 0     0   $ 0   $ 600     1   $ 1,000  

$29,020

  $ 600     1   $ 1,000   $ 1,200     2   $ 2,000  

$100,000

  $ 1,800     3   $ 3,000   $ 4,200     7   $ 7,000  

$250,000

  $ 4,800     8   $ 8,000   $ 10,200     17   $ 17,000  

$750,000

  $ 15,600     26   $ 26,000   $ 31,800     53   $ 53,000  

$1,000,000

  $ 21,000     35   $ 35,000   $ 42,000     70   $ 70,000  

$5,000,000

  $ 106,200     177   $ 177,000   $ 212,400     354   $ 354,000  

$10,000,000

  $ 212,400     354   $ 354,000   $ 425,400     709   $ 709,000  

$25,000,000

  $ 531,600     886   $ 886,000   $ 1,063,800     1,773   $ 1,773,000  

$75,000,000

  $ 1,595,400     2,659   $ 2,659,000   $ 3,191,400     5,319   $ 5,319,000  

(1)
In the event that the Cash Option Funding Amount is not equal to either of the amounts set forth above, the number of Units to be purchased cannot be determined on a linear basis as a result of the number of Units being purchased being rounded down to the nearest whole Unit.

Am I required to participate in the Unit Offering?

        No. Holders of Old Notes are not required to participate in the Unit Offering.

Is there a minimum number of Units that must be sold for the Unit Offering to be successfully consummated?

        No. There is no minimum number of Units that must be sold for the Unit Offering to be successfully consummated. However, we will only issue Units in the Unit Offering to the extent holders elect the Cash Option in the Exchange Offer. The maximum amount of Units issuable in the Unit Offering will be reduced if less than $16,667,000 in principal amount of Old Notes are tendered into the Cash Option.

How do I purchase Units in the Unit Offering?

        If you wish to participate in the Unit Offering, you must elect the New Securities Plus Unit Offering Option on the consent and letter of transmittal or the agent's message, as applicable, submitted to the Information and Exchange Agent in conjunction with the Exchange Offer. If your Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the Unit Offering, you should contact that registered holder promptly and instruct him, her or it to elect the New Securities Plus Unit Offering Option on your behalf in conjunction with the tender of the corresponding Old Notes in the Exchange Offer. See

21


Table of Contents

"Procedures for Tendering Old Notes and Delivering Consents" for more information about these procedures.

        You must also deliver at the time of your tender of Old Notes a completed Unit Purchase Form and full payment of the Unit Price of $600 per Unit to be purchased assuming the Cash Option Funding Amount is $10,000,200, in United States dollars and delivered by wire transfer of immediately available funds to the account maintained by Alion. For account information, please contact the Information and Exchange Agent at the telephone number set forth on the back cover page of this prospectus.

        If, following the expiration of the Unit Offering, we determine that the actual amount you are required to pay is less than the amount you paid because the Cash Option Funding Amount is less than $10,000,200, the number of Units you will purchase will be reduced and you will be refunded the difference between the amount you paid and the Unit Price for the number of Units you actually purchased promptly after the Settlement Date. For example, if no holders of Old Notes tendering into the Exchange Offer elect the Cash Option, the entire amount paid by Participating Holders in the Unit Offering will be repaid, without interest. Or, if the Cash Option Funding Amount is $8.0 million, approximately 20% of the amount paid by Participating Holders in the Unit Offering (subject to reduction to a lower percentage since purchases can only be made in $600 increments) will be repaid, without interest. If your Old Notes are not accepted for exchange in the Exchange Offer, or the Exchange Offer is terminated, you will be refunded the full amount you paid promptly after the Settlement Date or the date of the termination of the Exchange Offer, as the case may be.

        See "The Unit Offering—Procedures for Purchase of Units." For further information on how to purchase Units, contact the Information and Exchange Agent at the telephone number set forth on the back cover page of this prospectus.

Can I revoke my election to purchase Units in the Unit Offering?

        The election to purchase Units in the Unit Offering cannot be revoked except that a valid withdrawal of Old Notes in the Exchange Offer will be deemed to have revoked any election to purchase Units in the Unit Offering.

With whom may I talk if I have questions about the Unit Offering?

        If you have any questions or need help in purchasing Units in the Unit Offering, please contact the Information and Exchange Agent whose address and telephone numbers are listed on the back cover of this prospectus or your broker, dealer, commercial bank, trust company or other nominee through which your Old Notes are held.

22


 

Table of Contents


PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus, but is not complete and may not contain all of the information that is important to you or that you should consider in making a decision to exchange Old Notes in the Exchange Offer, provide your consent in the Consent Solicitation and to participate in the Unit Offering. To understand all of the terms of the Exchange Offer, Consent Solicitation and Unit Offering and to attain a more complete understanding of our business and financial situation, you should read the entire prospectus carefully, including the "Risk Factors" section and the financial statements and related notes contained elsewhere in this prospectus.

        In this prospectus, unless the context requires otherwise, "Alion," "we," "us" and "our" refer to Alion Science and Technology Corporation, a Delaware corporation, and its subsidiaries on a consolidated basis; however, references to "the Company" in the "Description of Third-Lien Notes" section of this prospectus and in other places in this prospectus specifically addressing the Third-Lien Notes, refer only to Alion Science and Technology Corporation. Our fiscal year ends on September 30.


The Company

        With a 75-year legacy, we are an experienced technology solutions company delivering scientific, research and development, engineering and technology expertise and operational support primarily to the U.S. Department of Defense; or the "DoD," and other U.S. government agencies, and commercial customers. Based in McLean, Virginia, we design, develop, integrate, deliver, maintain and upgrade science and technology solutions, products and tools for national defense, homeland security and other U.S. government programs and to a lesser degree, commercial customers. For example, we design and engineer complete naval vessels and components for naval vessels for the U.S. Navy; we manage and support the implementation of major U.S. Air Force programs by providing financial, procurement and logistics services; we develop and conduct battle simulations for the U.S. Army to prepare soldiers for combat environments; and we assist the DoD in managing the use of the wireless communications spectrum to optimize the efficient transmission of sensitive data. We also provide research and development and engineering support for the DoD and the U.S. Department of Energy and other power generators.

        We provide scientific, research and development, technical expertise, and operational support to a diverse group of U.S. government customers. We serve customers in all branches of the U.S. military, a number of Cabinet-level U.S. government agencies, the White House and, to a lesser degree, state and non-U.S. governments. As of December 31, 2013, we had approximately 229 distinct customers, including Cabinet-level government departments and agencies and state and foreign governments. As of December 31, 2013, we had approximately 333 DoD stand-alone contracts and delivery/task orders with the U.S. Navy, U.S. Army and U.S. Air Force, the Defense Information Systems Agency, the Defense Advanced Research Projects Agency and others representing approximately 92.9% of our revenue for fiscal 2013. Other federal civilian agencies and departments accounted for 3.7% of our revenue for fiscal 2013, including the National Institute of Environmental Health Sciences, the U.S. Department of Energy and the Environmental Protection Agency. Commercial, state and local governments and international customers accounted for the remaining 3.4% of our revenue for fiscal 2013.

        Approximately 96.6% of our revenue for fiscal 2013 came from U.S. government contracts, and approximately 92.9% of our revenue for fiscal 2013 came from DoD customers. The following branches of the DoD contributed to our revenue for fiscal 2013: the Navy (45.5%), the Air Force (23.9%), the Army (11%) and all other branches of the DoD (12.5%). As of December 31, 2013, we had a portfolio of 468 stand-alone contracts and delivery/task orders with a large portion of our stand-alone contracts and delivery/task orders (based on contract revenue) having cost-reimbursement pricing structures and a smaller portion (based on contract revenue) having fixed-price and time and materials pricing structures.

 

23


Table of Contents

        We deliver solutions in the following three core business areas:

    naval architecture and marine engineering;

    systems analysis, design and engineering; and

    modeling, simulation, training and analysis.

        The following charts show our revenue by core business area and contract type for fiscal 2013:

Revenue by Core Business Area

  Revenue by Contract Type

(Dollars in millions)

  (Dollars in millions)


GRAPHIC

 


GRAPHIC

        Our sophisticated technology solutions in all of our core business areas are supported by our skilled employee base, which includes engineers, scientists and former military personnel. As of December 31, 2013, approximately 78% of our employees had security clearances, with approximately 29% of our employees holding clearances at the Top Secret level or above, allowing us access to highly classified DoD information systems and networks. To enhance our technology solutions, we have approximately 108,039 square feet of laboratory facilities, which we use to conduct customer-funded research and development activities, and to a lesser degree, internally-funded research and development activities.

        Alion has a long operating history in providing a broad range of technology solutions. We have supported the Information Analysis Centers for the Defense Technical Information Center for over 44 years. We have been providing the U.S. Navy with naval architecture and marine engineering support for over 20 years. Examples of our technology solutions include:

    Enlisted Navy recruits must successfully pass Battle Stations 21 (BS-21), a training program where they are challenged with simulated floods, fires and mass casualty exercises in a DDG destroyer replica. To prepare and train these recruits, Alion, as a subcontractor to Raytheon BBN Technologies, developed the Damage Control Trainer (DCT), a 3D simulation game that helps prepare recruits for transition to the fleet.

    We believe that early detection of maritime threats is essential to protecting U.S. military vessels, but current sonar systems leave gaps in coverage. Our engineers are continuing to develop technology called Continuous Active Sonar that represents a paradigm shift in performance. We believe that at-sea testing has met or exceeded expectations, and the solution may ultimately lead to improved defenses for our ships and sailors.

    We believe that maintaining vehicles and other mechanical systems in a war zone is essential to troop safety and the success of the mission, but parts replacement can be challenging. An

 

24


Table of Contents

      Alion-led team developed a solution called the Mobile Parts Hospital, a transportable factory where metal parts can be machined and delivered in just a few hours near the point of need.

    Survivability is critical to naval vessels. We believe what happens after a ship is attacked can now be modeled accurately using MOTISS, a software tool we developed that shows the initial and resulting effects of a weapons strike against a ship or other structure. The system allows designers to evaluate the damage and determine design changes that can improve survivability. MOTISS allows the system designer, engineer or operator to locate and rank weaknesses in order to allow for corrective action before those weaknesses are exploited in a real world scenario.

        Our common stock is 100% owned by the ESOP Trust. There is no established public trading market for our common stock. Consistent with its fiduciary responsibilities, the trustee of the ESOP, which we refer to as the "ESOP Trustee," retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the ESOP Trustee may acquire or dispose of investments in our common stock. To assist the ESOP Trustee in determining the fair market value of our common stock, the ESOP Trustee considers such valuation report and its knowledge of our business and the market. The New Securities being offered in the Exchange Offer or the Unit Offering pursuant to this prospectus will not be listed on any exchange.

Fiscal 2013 and First Quarter 2014 Results

        For fiscal 2013, we generated $849 million in revenue, a $37 million net loss and $71 million in Consolidated EBITDA. Revenue grew 3.9% in fiscal 2013 compared to fiscal 2012. Despite a challenging defense market, we have been able to win new contracts and execute on our existing base of business.

        For the first quarter of fiscal 2014, we generated revenue of $185.4 million, a $18.5 million net loss and $15.3 million in Consolidated EBITDA. First quarter fiscal 2014 revenue decreased 9.3% over fiscal 2013 first quarter results. As with our decrease in overall revenue, our first quarter fiscal 2014 net loss increased and Consolidated EBITDA decreased as compared to fiscal 2013 first and increase in net loss quarter results. The decrease in first quarter fiscal 2014 revenue and Consolidated EBITDA is primarily attributable to the impact of sequestration, the Congressional continuing resolution and the U.S. federal government shutdown at the beginning of fiscal year 2014. These matters have affected funding to a number of our programs, caused delays in new awards and driven slower than anticipated ramp-up of new programs. As of December 31, 2013, our backlog was approximately $1.6 billion and approximately $364 million of this backlog was funded. See "—Summary Historical Condensed Consolidated Financial Data" for a reconciliation of our net loss to Consolidated EBITDA.

        Over the past five fiscal years our revenues grew organically at a 2.8% compound annual rate from $739.5 million in fiscal 2008 to $849.0 million in fiscal 2013. This growth has been accomplished through organic growth from existing contracts and from obtaining new contracts.

We are a Highly Leveraged Company

        We have had a net loss every year since our inception in December 2002. We expect to incur a net loss in at least our next four years of operation, fiscal 2014 through fiscal 2017. We are a highly leveraged company. Our historic cash interest expense and increasing principal indebtedness through PIK interest on existing debt and future deferred income tax expense are among the most significant factors contributing to our historic net losses and are projected to be among the most significant factors contributing to our estimated future net losses. As of December 31 2013, we owe our lenders and bondholders approximately $569.2 million: approximately $334.2 million in Existing Secured Note principal and accrued PIK interest that matures in 2014; $235 million in Old Note principal that matures in February 2015; and approximately $15.6 million in accrued cash interest on these

 

25


Table of Contents

indebtedness. Moody's lowered our corporate family credit rating from Caa1 to Caa2 in September 2012 and Standard & Poor's lowered our corporate credit rating to CC from CCC+ in March 2014.

        Management's cash flow projections indicate that absent a refinancing transaction or series of transactions, we will have insufficient cash flow from operations plus cash on hand to pay the principal and accumulated unpaid interest on the Existing Secured Notes and the Old Notes when those instruments mature in November 2014 and February 2015, respectively. Our auditors noted in connection with their audit opinion of our 2013 fiscal year financial statements that our history of continuing losses, our excess of liabilities over our assets and our substantial financing needs raise substantial doubt about our ability to continue as a going concern. We believe these factors could make refinancing our existing indebtedness more difficult and expensive. Management is actively engaged in the process of refinancing our existing indebtedness through the Exchange Offer and Consent Solicitation and the other Refinancing Transactions. We have entered into the Support Agreement with the Supporting Noteholders regarding the Refinancing Transactions. However, management can provide no assurance that we will be able to conclude the Refinancing Transactions. Additionally, even if we consummate the Refinancing Transactions, management projects that we will need to refinance the New Revolving Credit Facility, the New Secured Term Debt and the Third-Lien Notes at or prior to their applicable maturity dates.

Industry Overview

        President Obama indicated in January 2012 that the DoD is committed to ensuring that the U.S. military is agile, flexible and ready for a full range of contingencies. President Obama also indicated the DoD's strategy is to continue to invest in the capabilities critical to future success, including intelligence, surveillance, and reconnaissance, or "ISR;" counterterrorism; countering weapons of mass destruction; operating in anti-access environments; and prevailing in all domains, including cyberspace. We believe that the defense and homeland security markets continue to be excellent opportunities for us.

        Sustaining Defense and Homeland Security.    We believe that the current U.S. national defense strategy is driven by three realities:

    the winding down of a decade of war in Iraq and Afghanistan;

    a fiscal crisis demanding hundreds of billions of dollars in budget cuts; and

    threats from China, Iran and North Korea.

        As a result, we believe that the U.S. national defense strategy establishes three overarching priorities:

    cyberspace defense and offense;

    special operations forces; and

    ISR.

        We believe that each of the current U.S. military, defense and homeland security priorities is addressed by our key product and service offerings. As such, we expect that DoD's priorities will provide us with the opportunity to assist with situational decision support, expanded modeling, simulation and training, and increased agile manufacturing and prototyping projects needed to deter cyber terrorism, anti-access and area denial and countering weapons of mass destruction threats.

        Sequestration.    The sequestration cuts that took effect in early 2013 are expected to eliminate approximately $500 billion in government defense spending over the next decade.

        Additionally, despite sequestration, federal spending outlays remained higher than expected in fiscal year 2013 as the broader U.S. economy began to show improvement. We see agile engineering

 

26


Table of Contents

and prototyping as a multi-billion dollar market focused on the need for redesigning components, systems and sub-systems that did not perform as intended in conflicts. In addition, agile engineering is used to address capability gaps or design components for various platforms including Unmanned Aerial Vehicles. We have been successful in entering this market by offering our depth of engineering knowledge in materials and manufacturing, delivering innovative solutions, and by providing cost-effective solutions to our customers at the point of need. We currently provide these services for the Army's Rapid Equipping Force, Special Operations Command and the U.S. Army Tank Automotive Research, Development and Engineering Center, among others.

        We have responded to budgetary challenges posed by sequestration and changing customer priorities by reducing costs and employee headcount, lowering facilities costs and striving to position us to serve our customers more effectively and efficiently. While we believe our customers will continue to seek our high-end engineering and technical expertise and solutions so they can improve their operating efficiency and effectiveness, we are not unaffected by today's current market pressures and have experienced delays, funding reduction and delayed collections as a result of the government shutdown that occurred immediately after our fiscal 2013 year end. However we believe that, to date, funding for most of our contracts has not been materially and adversely affected by DoD budget reductions for specific programs, or by delays or reductions for other programs due to sequestration.

        Defense Options and Initiatives.    On July 31, 2013, Secretary of Defense Chuck Hagel announced the findings of the Strategic Choices and Management Review, or "SCMR," that appears to frame the basis to address reducing military headquarters and military end-strength, eliminating select major procurements and retiring aging systems as well as curtailing research and development outlays and consolidating information technology data centers/networks as near and far term choices. The SCMR took into account the projected nearly $500 billion in federal budget cuts over the next ten years (in addition to the $37 billion cut in fiscal 2013) and targeted programs, people, infrastructure and processes. In addition, as outlined in the current Better Buying Power 2.0, or "BBP 2.0," Initiative, the DoD's future plan includes focusing on efficiency and productivity via rapid technology development and early prototyping to achieve reduced acquisition time and cost.

        Consistent with this BBP 2.0 Initiative, we believe that our scientific information core business competencies have expanded across the military departments, services, defense agencies and combatant commands with objective engineering analysis and early manufacturing expertise support. As such, we believe we are able to assist them in avoiding the unwarranted duplication of research and development investment efforts via increased prototyping emphasis to sustain warfighter capability over our adversaries.

        Future Risks and Opportunities.    The DoD plans to spend approximately $23 billion from fiscal 2014 to 2018 on defensive and offensive cyber capabilities, including $9.3 billion for information assurance systems and $8.9 billion for cyber operations and to add an additional 4,000 cyber specialists over the next four years. With intrusions into the U.S. critical infrastructure increasing in recent years, cyber spending is also expected to remain strong across civilian federal agencies, despite broader budgetary pressures. We are currently engaged in the new DoD initiative for Joint Information Environment, an important part of which is a set of security protocols that would make it easier to detect intrusions and identify unauthorized "insiders" who might be accessing a network. The push for this integrated network comes from Chairman of the Joint Chiefs Army Gen. Martin Dempsey, who has made it a priority.

        Continuing Priorities.    We believe that unresolved consensus over the size of the DoD budget creates opportunities for fiscal 2014 and beyond. We believe that the continuing effects of sequestration, slow-down of customary spending rates, small program focus, and limited new-start major programs will yield significant opportunities associated with incorporating increased technology into existing platforms. In addition, we expect that the Obama Administration will continue to adhere to the

 

27


Table of Contents

priorities outlined in the President's January 2012 DoD Strategic Guidance. While both the SCMR and the legislatively mandated Quadrennial Defense Review of DoD strategy and priorities address how to cope with a more constrained budget reality, we do not believe there will be major changes in federal strategies or priorities. We believe that the focus of investment priorities and budget outlays will be for a few key capabilities, such as countering weapons of mass destruction threats, while protecting others at existing levels or making modest reductions, such as efforts to counter threats by unmanned systems, long-range strikes, undersea warfare, cyber and electronic warfare, ISR and missile defense. We believe that we are well positioned to continue to meet the changing needs and strategies of the U.S. military's defense and homeland security markets.


Competitive Strengths

        Our key competitive strengths include:

        Sophisticated science, engineering and technology solutions.    We offer sophisticated science, engineering and technology solutions in all of our core business areas, which we have developed over our 75-year operating legacy. Our sophisticated solutions are supported by our skilled employee base, which includes engineers, scientists and former military personnel. This allows us to combine engineering capabilities, scientific skills and domain expertise to provide solutions that incorporate current technologies with real-world understanding of and experience with DoD programs, systems and networks. As of December 31, 2013, approximately 78% of our employees had security clearances, with approximately 29% of our employees holding clearances at the Top Secret level or above, allowing us access to highly classified DoD systems and networks. To further enhance our technology solutions, we have approximately 108,039 square feet of laboratory facilities, which we use to conduct customer- and internally- funded technology and research and development activities.

        Strong reputation and long-term customer relationships.    As a result of our sophisticated technology solutions and long operating legacy, we have developed a strong reputation in our industry and with our customers for providing quality expertise in our core business areas. We have long-term relationships with many of our customers under various programs that are strategically important to the defense of the United States and the homeland defense needs of the federal government. For example, our relationships with Defense Technical Information Centers and many Navy programs span over decades.

        Diverse government customer base with multiple contract vehicles.    As of December 31, 2013, we perform services for a broad base of approximately 229 customers, including Cabinet-level government departments and agencies, and state and foreign governments. We earn revenue from our diverse customer base through a broad array of task orders that are issued under multiple contract vehicles awarded by U.S. government agencies and through other contracts we hold. We believe our multiple contract vehicles provide us with more flexibility to obtain tasking and associated funding from the U.S. government. For the past three fiscal years, over 96% of our revenue was from federal government contracts and more than 83% of our revenue came from U.S. government agency prime contracts. As of December 31, 2013, we had a portfolio of 468 stand-alone contracts and delivery/task orders. Our largest individual contract (stand-alone contract) accounted for approximately 8% of our revenues for fiscal 2013.

        Large contract backlog and strong revenue visibility.    As of December 31, 2013, our backlog was approximately $1.6 billion and approximately $364 million of this backlog was funded. We believe that the strength of our backlog provides us with longer-term visibility of our future revenue.

        Low capital intensive business.    We have a business model that generates strong free cash flow as a result of our modest capital expenditure requirements and moderate working capital needs. We also achieve stable cash flow due to the diversity of our revenue streams, long-term nature of our contracts and stable margins. We believe our business model allows us to better service our debt, fund internal

 

28


Table of Contents

research and development and pursue strategic acquisitions. We are primarily a U.S. government contractor, with the U.S. government contributing approximately 96.6% of our revenue for fiscal 2013, and as such, we have reliable cash flows from these government contracts. Historically, since the U.S. government has had a very strong credit rating, we have not been required to accrue significant reserves for bad debt, although it is possible that due to sequestration, U.S. government debt ceiling limitations, U.S. government shutdowns, or other similar federal government budgetary or funding issues, the U.S. government may delay payments, as we experienced in fiscal 2013.

        Strong management and highly experienced board of directors.    The six senior members of our management team have more than 100 years of combined experience in the defense and related industry sectors, and have significant experience in government contracting. Members of senior management hold equity stakes through investment in our common stock through the ESOP. Our management team is supported by a board of directors with diverse experience in the U.S. government and the U.S. Armed Forces at senior policy levels, including Edward C. Aldridge, former Secretary of the Air Force and former Under Secretary of Defense for Acquisition, Technology and Logistics; Admiral Harold W. Gehman, Jr. USN (Ret.), former NATO Supreme Allied Commander, Atlantic; General George A. Joulwan USA (Ret.), former NATO Supreme Allied Commander, Europe; and General Michael E. Ryan, USAF (Ret.), former Chief of Staff of the U.S. Air Force.


Business Strategy

        In fiscal 2013 we were able to deliver on our plan to grow organically. We plan to grow further by retaining our existing customers, increasing our work for them and seeking out new customers to use our services. We expect to do this through targeted business development efforts and by capitalizing on our skilled work force and our solutions competencies. We have several key strategies.

        Broaden existing core competencies.    We plan to expand our expertise to keep pace with technological developments. We hire skilled employees, engage in business development initiatives and invest in projects to expand our employees' skill sets. We work to extend our core capabilities to new markets and new customers and focus on enhancing our ability to serve existing customers. We increase our employees' technological and program management skills through training, internally funded projects and mentoring. We offer our employees non-degree programs in information technology, business, and desktop applications through our "Alion University" to maintain and enhance our employees' skills and advance our reputation in the commercial technology solutions markets.

        Expand market share by leveraging experience and reputation.    We perform a variety of services for a broad base of approximately 229 customers as of December 31, 2013, including Cabinet-level government departments and agencies, and state and foreign governments. We plan to use our advanced technological capabilities and our customer relationships to expand our market presence by offering a broader range of services to our existing customers and by delivering our solutions to new customers. We intend to use our customer relationships and our technology expertise to strategically expand our Department of Homeland Security, or DHS, customer base. For over the last five years, Washington Technology and Defense News has continued to rank us among the top professional services government contractors. Additionally for the past four years, Military Times EDGE has voted us a "Best for Vets Employer." Washington Business Journal continues to rank us in its top 20 technology government contractors and government contract awardees.

        Improve financial performance and increase sales.    Despite federal budget uncertainties and expected lower DoD spending levels, we remain focused on growing our business and striving to achieve operating efficiencies. We increased revenue 3.9% in fiscal 2013 and reduced operating expenses compared to fiscal 2012. Over the past five years our revenue grew organically at a 2.8% compound annual rate from $739.5 million in fiscal 2008 to $849.0 million in fiscal 2013. We intend to strengthen our financial performance by continuing to grow organically and controlling operating costs. We believe we can achieve an even more competitive cost structure than we currently have which will enhance our ability to win business and improve our operating results. We believe our size and expertise position us to continue to bid on larger government programs and broaden our customer base.

 

29


Table of Contents

 

        Refinancing of Debt.    We are engaged in efforts to refinance substantially all of our outstanding indebtedness prior to its respective maturity dates, including through the Exchange Offer and Consent Solicitation and the other Refinancing Transactions described below. See "Management's Discussion and Analysis—Liquidity and Capital Resources" for a summary description of our ongoing refinancing plans. If we are able to consummate a refinancing transaction or a series of Refinancing Transactions on acceptable terms, we plan to de-lever our capital structure including repurchasing our outstanding debt from time to time in open market or privately-negotiated transactions in order to optimize our liquidity and leverage and take advantage of market opportunities.


Recent Developments

Support Agreement

        We have entered into the Support Agreement with the Supporting Noteholders pursuant to which the Supporting Noteholders have agreed to participate in the Exchange Offer and Consent Solicitation. Pursuant to the terms and subject to the conditions of the Support Agreement, the Supporting Noteholders have agreed to, among other things:

    support the refinancing of our existing indebtedness by agreeing to tender (and not withdraw) all Old Notes beneficially owned by the Supporting Noteholders, which as of the date of this prospectus, was $167,092,000, representing approximately 71.1% of the outstanding aggregate principal amount of Old Notes, at or prior to the Early Tender Date;

    elect the Exchange Option in the Exchange Offer; and

    consent to the Proposed Amendments in the Consent Solicitation.

The exchange of such Old Notes is subject to the satisfaction or waiver by us with the prior written consent of the Supporting Noteholders of the conditions of the Exchange Offer and other conditions contained in the Support Agreement. The Support Agreement also contemplates our pursuing the Refinancing Transactions discussed below.

        After giving pro forma effect to the consummation of the Refinancing Transactions, including this Exchange Offer, the Supporting Noteholders will hold 71.1% of the Warrants, assuming the Exchange Offer is 100% subscribed and holders of the Old Notes do not elect the Cash Option. This percentage will increase to the extent that:

    the participation level in the Exchange Offer is less than 100%;

    the Cash Option is elected; or

    any of the Supporting Noteholders purchase additional Old Notes prior to the Expiration Date and exchange these additional Old Notes in the Exchange Offer as required by the Support Agreement.

        As a result of their significant ownership percentage, the Supporting Noteholders, acting together, initially will possess voting control over the Warrants under the Warrant Agreement. Accordingly, the Supporting Noteholders, acting together, will initially control the identity of the two board members (initially expected to be Lawrence A. First and Daniel H. Clare) to be appointed by the holder of the Series A Preferred Stock, will be able to direct the Warrant Agent with respect to decisions under the Series A Preferred Stock, including instructing the Warrant Agent to vote the share of Series A Preferred Stock as a block and deciding whether to grant certain approval rights and will be able to agree with us to amend or waive certain terms of the Warrants and the Series A Preferred Stock.

        As a result of the Support Agreement, it is expected that no additional consents would need to be validly delivered in the Consent Solicitation in order to obtain the Requisite Consents to adopt the Proposed Amendments.

 

30


Table of Contents

        The interests of the Supporting Noteholders may diverge from those of other holders of the New Securities. For example, immediately after the consummation of the Refinancing Transactions, ASOF will be the sole lender under the New Second Lien Term Loan.

        We have agreed to pay ASOF a commitment fee of $400,000 in connection with the ASOF Cash Funding, which is payable on the earlier of the commencement of the Exchange Offer or termination of the Support Agreement in accordance with its terms. As consideration for ASOF's commitment under the New Second Lien Term Facility, we paid ASOF $750,000 upon execution of the Support Agreement and we have agreed to pay ASOF $2,500,000, payable on the earlier of the closing of the Refinancing Transactions or the termination of the Support Agreement pursuant to its terms, other than because of a termination by us due to a breach by ASOF. However, if ASOF is the sole lender under the New Second Lien Term Facility, ASOF has agreed to waive the $2,500,000 commitment fee. Additionally, in consideration for its commitment to fund the New Second Lien Term Facility and pursuant to the terms of the Support Agreement, since the closing of the Refinancing Transactions did not occur by January 24, 2014 as contemplated by the Support Agreement as originally executed, we paid ASOF an additional $750,000 on January 24, 2014. As consideration for ASOF's agreement to extend its commitment to fund the New Second Lien Term Facility from March 21, 2014 through April 28, 2014 in connection with an amendment to the Support Agreement, we agreed to pay ASOF a $750,000 extension fee, payable on the closing of the Refinancing Transactions. As consideration for ASOF's agreement to further extend its commitment to fund the New Second Lien Term Facility from April 28, 2014 through July 31, 2014 in connection with the May 2, 2014 amended and restated Support Agreement, we agreed to pay ASOF an additional $3,000,000 payable as follows: (i) $1,000,000 on execution of the amendment to the Support Agreement on May 2, 2014, which was paid on May 2, 2014; (ii) $1,000,000 on June 1, 2014; and (iii) $1,000,000 on July 1, 2014. However, if the closing of the Refinancing Transactions occurs prior to any installment payment date, we must pay all unpaid installments at the closing of the Refinancing Transactions.

        The Supporting Noteholders have the right to terminate the Support Agreement upon the occurrence of certain events, including the following: (i) the Exchange Offer is terminated in accordance with its terms or expires, in each case without us having received valid tenders of at least 95% of principal amount of the Old Notes, or such lesser percentage as determined by the Supporting Noteholders; (ii) the closing of the Refinancing Transactions shall not have occurred on or before July 31, 2014; and (iii) the occurrence of a Material Adverse Change or a Material Market Change (as such terms are defined in the Support Agreement). If the Support Agreement is terminated in accordance with its terms, we have agreed to terminate the Exchange Offer and Consent Solicitation.

        The Support Agreement provides that two members of our board of directors will resign on the Settlement Date and the holder of the Series A Preferred Stock will elect two members of the board of directors to fill the vacancies. As a result of their significant ownership percentage after giving effect to the Refinancing Transactions, the Supporting Noteholders, acting together, will control the election of the two board members (initially expected to be Lawrence A First and Daniel H. Clare, both of whom are affiliated with ASOF).

        See "Description of Support Agreement" for more information on the terms and conditions of the Support Agreement.

Amendment to Revolving Credit Facility

        On May 2, 2014 we entered into an amendment to our revolving credit facility with Wells Fargo Bank, National Association, as administrative agent and sole lender, to replace, amend and restate it in its entirety. We refer to the prior revolving credit facility as the "Old Revolving Credit Facility" and the amended and restated credit facility that we entered into on May 2, 2014 as the "Amended and Restated Revolving Credit Facility." Simultaneously, the lenders under the Old Revolving Credit Facility assigned all of their interests under the Old Revolving Credit Facility to Wells Fargo Bank,

 

31


Table of Contents

National Association. Pursuant to the amendment: (i) the prior lenders under the Old Revolving Credit Facility were replaced with Wells Fargo Bank, National Association; (ii) the prior administrative agent was replaced with Wells Fargo Bank, National Association; (iii) the aggregate revolving credit commitment was increased from $35 million to $45 million, subject to borrowing base limitations; (iv) the maturity date was modified from August 22, 2014 to August 1, 2014; (v) the interest rate spread applicable to Eurodollar loans was reduced from 600 basis points to 475 basis points (interest will also include a daily one-month LIBOR floor); and (vi) certain conforming changes were made.


Refinancing Transactions

        We believe that the completion of the Refinancing Transactions, of which the Exchange Offer, Consent Solicitation and Unit Offering are components, is critical to our continued viability. The Existing Secured Notes and the Old Notes mature in November 2014 and February 2015, respectively. Absent consummation of the Refinancing Transactions or another refinancing transaction or series of transactions, we will be unable to repay the Existing Secured Notes and Old Notes at their maturity. The events of default resulting from our failure to repay the Existing Secured Notes and Old Notes will likely have a material adverse effect on our business, financial condition and operating results.

        Over an extended period of time we have explored various refinancing transactions. However, despite these efforts, we have been unable to refinance the Old Notes and Existing Secured Notes or identify other sources of cash to refinance or retire the Old Notes and Existing Secured Notes. In January 2013, we engaged Goldman, Sachs & Co. as our financial advisor to help us analyze potential refinancing structures available to us. During the first half of calendar year 2013, we explored a number of alternatives including a capital infusion, private equity investments, sales of all or a portion of our assets or our business, and refinancing our existing indebtedness. Despite efforts to find additional sources of equity, it became clear to us over this time that potential investors or acquirers did not value our business at levels sufficient for us to consider equity investments or the sale of all or a portion of our assets.

        We began to discuss with a number of holders of our Old Notes the potential terms of a refinancing of our Old Notes. Through secondary market transactions, the number of holders of our Old Notes holding a significant principal amount of our Old Notes diminished. In September 2013 the Supporting Noteholders identified themselves to us as a group holding collectively more than a majority of the outstanding Old Notes. We and our financial advisors believed that the percentage of Old Notes held by the Supporting Noteholders necessitated their role in our continued exploration of means to refinance our Old Notes.

        Beginning in September 2013, we discussed with the Supporting Noteholders, and their financial and legal advisors, the terms of a potential comprehensive refinancing and extension of maturity of the Old Notes. During the fourth calendar quarter of 2013, we met with the Supporting Noteholders on a number of occasions and negotiated with the Supporting Noteholders and their advisors the terms of refinancing transactions that the Supporting Noteholders would support in our effort to address the pending maturity of our Existing Secured Notes and our Existing Revolving Credit Facility. The Supporting Noteholders played an active role in structuring the terms and conditions of the Support Agreement, and, consequently the terms and conditions of the Exchange Offer. The Support Agreement and the Refinancing Transactions contain the terms and conditions on which the Supporting Noteholders are willing to exchange their Old Notes into new debt with a new maturity and certain other terms. Among other things, the Supporting Noteholders were willing to convert their Old Notes into new notes with a new maturity if the new notes were secured notes, and exchanging noteholders would obtain a voting minority stake in the equity of our company through the combination of the Warrants and the Series A Preferred Stock, and obtain significant approval and consent rights over fundamental corporate decision-making and certain operational decisions. At the same time, the ESOP

 

32


Table of Contents

expressed to us its view that it wanted to retain its voting control underlying our common stock held by the ESOP.

        On November 15, 2013, we announced that we had reached a preliminary understanding on the terms of a comprehensive refinancing, including an offer to exchange the Old Notes for new secured notes having a longer maturity and the refinancing of the Existing Secured Notes with a third-party financed $350.0 million senior secured term loan facility. In addition, we and the Supporting Noteholders concluded that minimizing the principal amount of our Old Notes that will remain outstanding after closing the Refinancing Transactions was in the best interests of our company. We examined records indicating that a significant portion of our Old Notes are held beneficially by investors other than financial institutions. After considering this with our financial advisor, we concluded that including a cash tender offer as a component of the Exchange Offer would provide an opportunity to those holding Old Notes who no longer wanted to remain a creditor of our company to liquidate their investments while reducing the likelihood that a significant portion of our Old Notes would remain outstanding after the Exchange Offer. When structuring the terms of the cash tender offer, we balanced the need to minimize the principal amount of Old Notes remaining outstanding against our desire to conserve cash. Accordingly, we structured the cash tender offer so that our maximum cash outlay would not exceed $10,000,200. The Supporting Noteholders and the Company agreed that the cash tender offer price should be $600 as that price reflected a reasonable discount for payment in cash immediately and would allow us to offer some form of cash liquidity to the greatest number of holders of Old Notes without diminishing our cash reserves below balances necessary for the proper functioning of our business.

        After reaching the preliminary understanding with the Supporting Noteholders and assessing the market for a new senior secured term loan facility and/or new senior secured notes with our financial advisors, we determined that it was necessary to divide this senior secured term loan facility into two tranches: a $300.0 million first lien term loan facility and a $50.0 million second lien term loan facility. In order to facilitate the implementation of the new first lien term loan facility, ASOF, one of the Supporting Noteholders, agreed to fund in full the $50.0 million second lien term loan facility. Without the new second lien term loan facility being provided by ASOF, we and our financial advisors did not believe that the new first lien term loan facility would have been achievable and, accordingly, the Refinancing Transactions would not be completed.

        When considering the cash tender offer at $600 per $1,000 principal amount of Old Notes, investors may also consider the trading history of our Old Notes. All pricing information which follows is based on an examination of trading history in our Old Notes on the TRACE system, a bond pricing tracking program offered by FINRA. Neither we nor FINRA can guaranty the accuracy of the trading prices reported on the TRACE system, and investors are encouraged to exercise the degree of due diligence they believe necessary to verify the trading history of our Old Notes. According to TRACE, our Old Notes have traded since 2007 and at times with volatility having traded as low as $15 per $100 face value on March 31, 2009 and as high as $103.01 per $100 face value on June 29, 2007. Over approximately the prior two years, a mid-point for trading in our Old Notes appeared to us to be near $61 per $100 face value according to TRACE. At the beginning of calendar 2013, our Old Notes traded on January 21, 2014 at a price as low as $56.57 per $100 face value. We also caution that while trading in our Old Notes occurs, our Old Notes are not listed on an exchange and lack a robust trading market. Consistent with our desire to conserve cash and after examining the long-term trading history of the Old Notes, we concluded that an offer of $600 per $1,000 bond, or $60 per $100 face value, was appropriate.

        On December 24, 2013, we entered into the Support Agreement with the Supporting Noteholders. On February 13, 2014 we entered into an amendment to the Support Agreement and on May 2, 2014 we entered into an amended and restated Support Agreement with the Supporting Noteholders to, among other things, extend the date by which the Refinancing Transactions must be completed.

 

33


Table of Contents

        The Support Agreement sets forth the general terms and conditions of the Exchange Offer which is being conducted as part of the refinancing of our indebtedness. The Support Agreement contemplates the transactions described below. No assurances can be given that we will in fact incur any of the indebtedness contemplated below on the terms or amounts described above or below or at all.

New Secured Term Debt

        Concurrently with the closing of the Exchange Offer, we currently intend to enter into the $300.0 million New First Lien Term Facility. Pursuant to the Support Agreement, the principal amount of the New First Lien Term Facility cannot exceed $300.0 million, the term of the New First Lien Term Facility must be no less than five years, the amortization of the principal amount of the New First Lien Term Facility must not exceed one percent per year and the other terms of the New First Lien Term Facility must be in form and substance reasonably acceptable to the Supporting Noteholders.

        Concurrently with the closing of the Exchange Offer, we also intend to enter into the five and one half-year $50.0 million New Second Lien Term Facility. The net proceeds of the New Second Lien Term Facility will be used to fund, together with the net proceeds from the New First Lien Term Facility, the redemption of the Existing Secured Notes. At our request, in order to facilitate the marketing and implementation of the New First Lien Term Facility, subject to the conditions of the Support Agreement, ASOF has agreed to provide the New Second Lien Term Facility to us on the terms set forth in the Support Agreement. ASOF has reserved the right to syndicate up to the entire principal amount of the New Second Lien Term Facility to other lenders with customary assistance to be provided by the Company if and when required.

        The New First Lien Term Facility and the New Second Lien Term Facility will be guaranteed by each of our subsidiaries that guarantee the Third-Lien Notes and will be secured by a first and second-priority security interest, respectively, in the collateral securing our New Revolving Credit Facility. The security interest of the New First Lien Term Facility will rank equal in priority with the security interest of the New Revolving Credit Facility. The security interest of the New Second Lien Term Facility will rank junior to the security interest of the New First Lien Term Facility but will rank senior in priority to the security interest of the Third-Lien Notes offered in the Exchange Offer.

        No assurances can be given that we will in fact incur the New Secured Term Debt on the terms or amounts described above or at all, the incurrence of which is a condition to the completion of the Exchange Offer. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy the New Secured Term Debt.

        See "Description of Other Indebtedness—New Secured Term Debt" for more information on the terms and provisions of the New Secured Term Debt.

Redemption of Existing Secured Notes

        Upon the incurrence of the New Secured Term Debt, we intend to redeem all of our Existing Secured Notes at a redemption price of $1,000 per $1,000 principal amount, plus accrued and unpaid interest to, but not including, the date of redemption, pursuant to the optional redemption feature of the indenture governing the Existing Secured Notes. As of December 31, 2013, the aggregate principal amount of our Existing Secured Notes was $334.2 million. See "Description of Other Indebtedness—Existing Secured Notes" for more information on the terms and provisions of the Existing Secured Notes.

New Revolving Credit Facility

        Concurrently with the closing of the Exchange Offer, we intend to enter into a new $45.0 million revolving credit facility (subject, at our option, to increase to an amount not in excess of $65.0 million with the consent of the revolving credit lender), which we refer to as the "New Revolving Credit Facility," to replace our Amended and Restated Revolving Credit Facility. The terms of the New

 

34


Table of Contents

Revolving Credit Facility have not been finalized and are subject to negotiation and documentation. However, we expect that the New Revolving Credit Facility will, subject to satisfying borrowing base requirements based on our eligible accounts receivable and maintaining minimum required levels of availability, allow for up to $45.0 million (subject, at our option, to increase to an amount not in excess of $65.0 million with the consent of the revolving credit lender) in outstanding borrowings at any time and include a $10.0 million letter of credit subfacility. Pursuant to the terms of the Support Agreement, the principal amount of the New Revolving Credit Facility cannot exceed $45.0 million (subject, at our option, to increase to an amount not in excess of $65.0 million with the consent of the revolving credit lender), the term of the New Revolving Credit Facility cannot exceed five years and the other terms of the New Revolving Credit Facility must be in form and substance reasonably acceptable to the Supporting Noteholders. See "Description of Other Indebtedness—New Revolving Credit Facility."

        The Amended and Restated Revolving Credit Facility matures on August 1, 2014. As of December 31, 2013, the Old Revolving Credit Facility had no borrowings outstanding, $4.0 million in letters of credit outstanding, and $31.0 million available for future borrowing. See "Description of Other Indebtedness—Amended and Restated Revolving Credit Facility."

ASOF Cash Funding

        In order to preserve liquidity while attempting to reduce the amount of Old Notes that will remain outstanding after consummation of the Exchange Offer, we requested that ASOF provide funding for the Cash Option. ASOF has agreed to fund up to $10,000,200 of the amount needed to fund the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) in the ASOF Cash Funding through the purchase of Units in a private placement at a cash price of $600 per Unit, less the amount paid by the Participating Holders for Units in the Unit Offering. We have agreed to pay ASOF a fee of $400,000 in consideration for their commitment to provide such funding, which is payable on the earlier of the commencement of the Exchange Offer or termination of the Support Agreement in accordance with its terms.

        As used in this prospectus, the term "Refinancing Transactions" refers collectively to (1) the entry into, and borrowings under, the New First Lien Term Facility, (2) the entry into the New Second Lien Term Facility, (3) the Exchange Offer and Consent Solicitation, (4) the redemption of the Existing Secured Notes, (5) the entry into the New Revolving Credit Facility and receipt of borrowings thereunder on the Settlement Date in an amount no greater than permitted by the Support Agreement, and (6) the ASOF Cash Funding and the Unit Offering.


Our History

        We were organized in October 2001 as a for-profit Delaware corporation to acquire substantially all the assets and liabilities of IITRI, a not-for-profit Illinois corporation. We were an S-corporation from our formation until March 2010 when we issued common stock warrants constituting a second class of stock and became a C-corporation. We are entirely owned by the ESOP. The Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust, the ESOP Trust, is the record holder of all of our issued and outstanding common stock. In December 2002, some eligible IITRI employees directed funds from qualifying retirement account balances into the ESOP. State Street Bank and Trust Company, the ESOP Trustee, used those proceeds to purchase our common stock. We used the ESOP proceeds, together with funds from bank loans and other debt to complete the IITRI purchase. Since then, we have acquired a number of businesses and groups of related contracts, and we have borrowed funds under credit facilities and issued debt securities to finance the acquisition of these companies and contracts.


Additional Information

        We are a Delaware corporation. Our executive offices are located at 1750 Tysons Boulevard, Suite 1300, McLean, VA 22102, and out telephone number is (703) 918-4480. Our corporate website address is www.alionscience.com. Our website and the information contained on our website are not part of the prospectus, and information contained therein should not be relied upon when deciding whether to tender Old Notes in the Exchange Offer and deliver Consents in the Consent Solicitation, and whether to purchase Units in the Unit Offering.

 

35


Table of Contents

 


Summary of the Terms of the Exchange Offer and the Consent Solicitation

        The summary below describes the principal terms of the Exchange Offer and the Consent Solicitation. Certain of the terms and conditions described below are subject to important limitations and exceptions. For a more complete understanding of the terms and conditions of the Exchange Offer and the Consent Solicitation, you should read this entire prospectus.

The Exchange Offer

  Upon the terms and subject to the conditions described in this prospectus and the related consent and letter of transmittal, we:

 

are offering to exchange in the Exchange Offer all of our outstanding 10.25% Senior Notes due 2015 for, at the election of the holders of the Old Notes, either the New Securities Option; subject to a $20,000,400 limit, the Cash Option; or the New Securities Plus Unit Offering Option; and

 

will apply the amount of cash equal to the proceeds generated from the Unit Offering to finance the purchase of a portion of the Old Notes accepted for exchange pursuant to the Cash Option, if any.

New Securities Option

 

Holders electing the News Securities Option will receive, in exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange, the Total Consideration, as disclosed in the table on page iv of this prospectus under "Total Consideration if Tendered at or Prior to the Early Tender Date." The Total Consideration includes the Early Tender Payment of $15.00 in cash per $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for exchange.

 

In exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) after the Early Tender Date, but at or prior to the Expiration Date and accepted for exchange, participating holders of Old Notes electing the New Securities Option will receive the Exchange Consideration disclosed in the table on page iv of this prospectus under "Exchange Consideration if Tendered After the Early Tender Date." The Exchange Consideration does not include the Early Tender Payment. In order to be eligible to receive the maximum amount of consideration offered in the Exchange Offer, holders must tender their Old Notes at or prior to the Early Tender Date.

 

The New Securities Option will not be subject to proration.

Cash Option

 

Holders electing the Cash Option will receive, in exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for purchase pursuant to the Cash Option, $615 plus accrued and unpaid interest on their Old Notes accepted for purchase, as disclosed in the table on page vi of this prospectus under "Total Consideration if Tendered at or Prior to the Early Tender Date." The Total Consideration includes the Early Tender Payment of $15.00 in cash per $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the Early Tender Date and accepted for purchase.

 

36


Table of Contents

 

In exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) after the Early Tender Date but at or prior to the Expiration Date and accepted for purchase pursuant to the Cash Option, participating holders of Old Notes electing the Cash Option will receive the Exchange Consideration of $600, plus accrued and unpaid interest on their Old Notes accepted for purchase, as disclosed in the table on page vi of this prospectus under "Exchange Consideration if Tendered After the Early Tender Date" under the heading "Cash Option." The Exchange Consideration does not include the Early Tender Payment. In order to be eligible to receive the maximum amount of consideration offered in the Exchange Offer pursuant to the Cash Option, holders must tender their Old Notes at or prior to the Early Tender Date.

 

The maximum amount of cash payable in the Exchange Offer is $20,000,400 (excluding accrued and unpaid interest and the Early Tender Payment). If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option on a pro rata basis, with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of that holder's Old Notes. The New Securities Option will not be subject to proration. If we are required to prorate, the proration factor will be determined so that the aggregate principal amount of Old Notes purchased for cash will be rounded down, if necessary, to the nearest whole multiple of $1,000 and holders will receive Third-Lien Notes in integral multiples of $1,000 and Warrants in exchange for Old Notes that were not exchanged for cash. See "Acceptance of Old Notes; Acceptance of Consents; Accrual of Interest; Proration."

 

As a result, if holders of more than approximately $33,334 million in aggregate principal amount of Old Notes validly tender (and do not validly withdraw) their Old Notes and elect the Cash Option, such holders will only have a pro rata portion of their Old Notes (rounded down to the nearest $1,000 in aggregate principal amount) accepted for exchange pursuant to the Cash Option, and they will have the balance of their Old Notes exchanged into New Securities as if the holders had elected the New Securities Option with respect to the balance of Old Notes.

New Securities Plus Unit Offering Option

 

Holders wishing to purchase Units in the Unit Offering must elect the New Securities Plus Unit Offering Option. If you elect the New Securities Plus Unit Offering, your Old Notes are accepted for exchange and you meet the conditions for purchasing Units in the Unit Offering, you will receive the same consideration offered in the New Securities Option and you will be required to purchase Units in the Unit Offering, as discussed under "-Summary of the Terms of the Unit Offering" and "Description of Unit Offering."

 

37


Table of Contents

Acceptance and Proration

 

Upon the terms and subject to the conditions of the Exchange Offer all Old Notes validly tendered (and not validly withdrawn) in the Exchange Offer will be accepted in the Exchange Offer.

 

If proration of validly tendered (and not validly withdrawn) Old Notes is required with respect to the Cash Option, we will determine the final proration promptly after the Expiration Date and will announce the results of the final proration by press release. To determine the principal amount accepted of each tender subject to proration, the principal amount of such tender will be multiplied by the proration rate. The New Securities Option will not be subject to proration. If we are required to prorate, the proration factor will be determined so that the aggregate principal amount of Old Notes purchased for cash will be rounded down, if necessary, to the nearest whole multiple of $1,000 and holders will receive Third-Lien Notes in integral multiples of $1,000 and Warrants in exchange for Old Notes that were not exchanged for cash. We will not be able to determine the final proration prior to the Expiration Date.

 

Tender of Old Notes pursuant to the Exchange Offer, as well as the delivery of consents with respect to the Old Notes pursuant to the Consent Solicitation, will be accepted only in minimum denominations of $2,000 and integrals of $1,000 thereafter.

The Proposed Amendments

 

The Proposed Amendments would eliminate substantially all of the affirmative and negative covenants, eliminate certain events of default, eliminate the covenant restricting mergers and consolidations and modify certain provisions relating to defeasance contained in the Old Notes Indenture and the Old Notes. In addition to the foregoing, delivery of a consent will constitute an express waiver and release with respect to all claims against us arising out of any breach or default that may have occurred under the Old Notes Indenture, other than claims for payment of interest or principal. For a detailed description of the Proposed Amendments to the Old Notes Indenture for which consents are being sought pursuant to the Consent Solicitation, see "Proposed Amendments."

Requisite Consents; Second Supplemental Indenture

 

In order to be adopted, the Proposed Amendments must be consented to by the holders of a majority of the outstanding principal amount of Old Notes then outstanding. Pursuant to the Support Agreement, holders of approximately 71.1% in the aggregate of the outstanding principal amount of the Old Notes outstanding as of the date of this prospectus, have, subject to certain conditions, agreed to consent to the Proposed Amendments. As a result, it is expected that no additional consents from holders of Old Notes will be needed to be validly delivered in the Consent Solicitation in order to obtain the Requisite Consents to adopt the Proposed Amendments.

 

38


Table of Contents

 

We and the Old Notes Guarantors expect to execute a Second Supplemental Indenture to the Old Notes Indenture with the trustee under the Old Notes Indenture providing for the Proposed Amendments, promptly after receipt of the Requisite Consents for the Proposed Amendments, but not prior to the Withdrawal Deadline. The Second Supplemental Indenture will be effective immediately upon execution thereof, but the provisions thereof will not be operative until all of the Old Notes that have been tendered prior to the date of such Second Supplemental Indenture have been accepted for exchange in accordance with the terms of the Exchange Offer.

Refinancing Transactions

 

We are conducting the Exchange Offer as part of the refinancing of our capital structure. The Refinancing Transactions include:

 

the receipt of $300.0 million in gross proceeds from the incurrence of the New First Lien Term Facility;

 

the receipt of $50.0 million in gross proceeds from the incurrence of the New Second Lien Term Facility;

 

the Exchange Offer and Consent Solicitation;

 

the redemption of the Existing Secured Notes;

 

the entry into the New Revolving Credit Facility and receipt of borrowings thereunder on the Settlement Date in an amount no greater than permitted by the Support Agreement; and

 

the completion of the Unit Offering and the ASOF Cash Funding.

Early Tender Date

 

5:00 p.m., New York City time, on                , 2014, unless extended by us (with the prior written consent of the Supporting Noteholders).

Withdrawal Deadline

 

5:00 p.m., New York City time, on                , 2014, unless extended by us (with the prior written consent of the Supporting Noteholders).

Expiration Date

 

9:00 a.m., New York City time, on                , 2014, unless extended by us (with the prior written consent of the Supporting Noteholders).

Settlement Date

 

Subject to the terms and conditions of the Exchange Offer, the Settlement Date for the Exchange Offer will occur promptly after the Expiration Date, but not, in any event, later than on the third business day following the Expiration Date.

Third-Lien Notes

 

For a description of the terms of the Third-Lien Notes, see "—Summary of Third-Lien Notes" and "Description of Third-Lien Notes."

Warrants

 

For a description of the terms of the Warrants, see "—Summary of Warrants" and "Description of Warrants."

 

39


Table of Contents

Commitments to Tender

 

Holders of approximately 71.1% of the outstanding principal amount of the Old Notes as of the date of this prospectus have committed to tender their Old Notes and deliver related consents into the Exchange Offer and Consent Solicitation for the New Securities Option and agreed not to withdraw their tenders (and revoke related consents) pursuant to, and subject to conditions set forth in, the Support Agreement. See "Description of the Support Agreement."

Accrued and Unpaid Interest

 

On the Settlement Date, we will pay accrued and unpaid interest up to, but not including, the Settlement Date, in cash, on Old Notes accepted for exchange. Based on the Expiration Date set forth on the cover page of this prospectus, assuming that the Settlement Date is the third business day following the Expiration Date, the amount of accrued and unpaid interest would equal $            per $1,000 aggregate principal amount of Old Notes accepted for exchange. This amount would increase by an additional $0.285 per $1,000 aggregate principal amount of Old Notes accepted for exchange for each additional day that the Settlement Date is extended.

Minimum Tender Condition

 

The Exchange Offer and Consent Solicitation are conditioned on satisfaction or waiver by us with the prior written consent of the Supporting Noteholders of the Minimum Tender Condition, which requires at least 95% of all outstanding Old Notes be validly tendered (and not validly withdrawn) into the Exchange Offer.

Conditions to the Exchange
Offer and Consent
Solicitation

 

The Exchange Offer and Consent Solicitation are conditioned on, among other things:

 

the Minimum Tender Condition;

 

the satisfaction of the terms of the Support Agreement;

 

the Support Agreement shall not have been terminated;

 

the receipt of $300.0 million in gross proceeds from the incurrence of the New First Lien Term Facility;

 

the receipt of $50.0 million in gross proceeds from the incurrence of the New Second Lien Term Facility;

 

the redemption of the Existing Secured Notes;

 

the entry into the New Revolving Credit Facility and receipt of borrowings thereunder on the Settlement Date in an amount no greater than permitted by the Support Agreement; and

 

the receipt of the Requisite Consents to the Proposed Amendments.

 

Subject to applicable law, we have the right to waive any condition precedent (other than receipt of the Requisite Consents) to the Exchange Offer and Consent Solicitation with the prior written consent of the Supporting Noteholders.

 

40


Table of Contents

 

We have the right to terminate or withdraw the Exchange Offer and the Consent Solicitation at any time if any of the other conditions described under "Conditions of the Exchange Offer and the Consent Solicitation" are not satisfied without being waived with the prior written consent of the Supporting Noteholders. We have the obligation to terminate the Exchange Offer and Consent Solicitation if the Support Agreement is terminated for any reason.

Procedure for Tenders and Delivery of Consents

 

A holder who wishes to tender Old Notes pursuant to the Exchange Offer and to deliver consents pursuant to the Consent Solicitation must deliver a fully completed consent and letter of transmittal (or a facsimile thereof), or transmit an "Agent's Message," to the Information and Exchange Agent at the address or facsimile number set forth on the back cover of this prospectus at or prior to the Expiration Date (or the Early Tender Date, if the holder wishes to receive the Early Tender Payment). In addition, either (1) certificates representing the Old Notes must be received by the Information and Exchange Agent at such address, or (2) the Old Notes must be transferred pursuant to the procedures for book-entry transfer described below and a Book-Entry Confirmation must be received by the Information and Exchange Agent, in each case at or prior to the Expiration Date (or the Early Tender Date, if the holder wishes to receive the Early Tender Payment).

 

If a holder wishes to participate in the Exchange Offer and Consent Solicitation and that holder's Old Notes are held by a custodial entity such as a bank, broker, dealer, trust company or other nominee, the holder must instruct the custodial entity (pursuant to the procedures of the custodial entity) to tender the Old Notes and deliver the related consents on such holder's behalf. Custodial entities that are participants in DTC must tender Old Notes and deliver the related consents through DTC's Automated Tender Offer Program, known as "ATOP," by which the custodial entity and the beneficial owner on whose behalf the custodial entity is acting agree to be bound by the consent and letter of transmittal. A consent and letter of transmittal need not accompany tenders effected through ATOP. For further information, see "Procedures for Tendering Old Notes and Delivering Consents" and the consent and letter of transmittal.

Withdrawal and Revocation Rights

 

Tenders may only be withdrawn at or prior to the Withdrawal Deadline. Procedures for withdrawal of tenders and revocation of consents are described under "Withdrawal of Tenders and Revocation of Consents."

 

41


Table of Contents

 

Holders may only validly revoke consents by validly withdrawing the previously tendered related Old Notes prior to the execution of the Second Supplemental Indenture, which shall not occur prior to the Withdrawal Deadline. If a holder withdraws its tendered Old Notes prior to the execution of the Second Supplemental Indenture, such holder will be deemed to have revoked its consents to the Proposed Amendments, but it may not re-tender its Old Notes without delivering consents.

Consequences of Failure to Tender

 

If the Proposed Amendments become operative, holders of Old Notes left outstanding following the successful consummation of the Exchange Offer will no longer be entitled to the benefits of the covenants, events of default and other provisions that are eliminated pursuant to the Proposed Amendments.

 

Our and the Old Notes Guarantors' obligations with respect to any Old Notes remaining outstanding following the successful completion of the Exchange Offer will be effectively subordinated to our and the guarantors' obligations under the New Secured Term Debt, the New Revolving Credit Facility and the Third-Lien Notes, in each case, to the extent of the value of the collateral securing such obligations.

 

For a description of the consequences of failing to tender your Old Notes pursuant to the Exchange Offer, see "Risk Factors—Risks to Holders of Non-Tendered Old Notes."

Amendment; Waiver and Termination

  We have the right to terminate or withdraw the Exchange Offer and the Consent Solicitation if the conditions to the Exchange Offer and the Consent Solicitation are not met by the Expiration Date and are not waived with the prior written consent of the Supporting Noteholders. We reserve the right, subject to applicable law and with the prior written consent of the Supporting Noteholders, (i) to waive any and all of the conditions (other than receipt of the Requisite Consents) of the Exchange Offer and the Consent Solicitation at or prior to the Expiration Date and (ii) to amend the terms of the Exchange Offer and the Consent Solicitation. The Supporting Noteholders have the right to terminate the Support Agreement if the Refinancing Transactions have not closed on or before July 31, 2014 and we are obligated to terminate the Exchange Offer if the Support Agreement is terminated for any reason. In the event that the Exchange Offer and the Consent Solicitation are terminated, withdrawn or otherwise not consummated at or prior to the Expiration Date, no consideration will be paid or become payable to holders who have validly tendered their Old Notes pursuant to the Exchange Offer. In any such event, the Old Notes previously tendered pursuant to the Exchange Offer will be promptly returned to the tendering holders and any executed Second Supplemental Indenture will not become operative with respect to the Old Notes and the related consents will be deemed voided. See "General Terms of the Exchange Offer and the Consent Solicitation—Extension, Termination or Amendment."

 

42


Table of Contents

Fees and Expenses of the Refinancing Transactions

  We estimate that our total fees and expenses for the Refinancing Transactions, of which the Exchange Offer and Consent Solicitation are components, will be approximately $40.0 million, which we will pay with cash on hand or borrowings under the New Revolving Credit Facility.

Use of Proceeds

  We will not receive any cash proceeds from the Exchange Offer and the Consent Solicitation. We will receive up to $10,000,200 from the gross proceeds of the Unit Offering and the ASOF Cash Funding on a combined basis, which proceeds will be used solely to purchase a portion of the Old Notes from holders electing the Cash Option in the Exchange Offer, excluding accrued and unpaid interest and the Early Tender Payment.

Taxation

  For a discussion of certain U.S. federal income tax consequences of the Exchange Offer and of the ownership and disposition of the Third-Lien Notes and Warrants, see "Material U.S. Federal Income Tax Considerations."

Dealer Manager and Solicitation Agent

  Goldman, Sachs & Co., which we refer to as the "Dealer Manager and Solicitation Agent."

Information and Exchange Agent

  Global Bondholder Services Corporation, which we refer to as the "Information and Exchange Agent."

Risk Factors

  See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to participate in the Exchange Offer and delivering your consent.

 

43


Table of Contents

 


Summary of the Terms of the Unit Offering

        The summary below describes the principal terms of the Unit Offering. Certain of the terms and conditions described below are subject to important limitations and exceptions. For a more complete understanding of the terms and conditions of the Unit Offering, you should read this entire prospectus.

The Unit Offering

 

For every $1,000 principal amount of outstanding Old Notes validly tendered into the Exchange Offer for the New Securities Option, a holder of Old Notes holding specified minimum principal amounts of Old Notes may purchase up to approximately 0.0709234 of a Unit. All Old Notes held by a Participating Holder will be aggregated and the amount of Units a Participating Holder may purchase will in all cases be rounded down to the nearest whole Unit. Each Unit consists of one Third-Lien Note with a principal amount of $1,000, one Penny Warrant to purchase no less than 5.9701768 shares of our common stock and three Cash Warrants, each to purchase no less than 2.3880707 shares of our common stock.

 

Only Participating Holders holding specified minimum principal amounts of Old Notes may participate in the Unit Offering. Participating Holders are holders of Old Notes (other than ASOF) who:

 

validly tender all (but not less than all) of the Old Notes held by it in the New Securities Plus Unit Offering Option at or prior to the Early Tender Date (and not withdraw that tender);

 

irrevocably agree to purchase the maximum number of Units as to which the holder is entitled to purchase (which assumes that the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is at least $10,000,200); and

 

make a cash payment in the manner described in the consent and letter of transmittal at the time of tender of the Old Notes in an amount equal to $600 times the maximum number of Units which the holder is entitled to purchase.

 

If the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is less than $10,000,200, a Participating Holder would be entitled to purchase a lesser amount of a Unit per $1,000 principal amount of Old Notes tendered, which amount will be determined by multiplying 0.0709234 by a fraction, the numerator of which is the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option and the denominator of which is $10,000,200. In this event, all Units that a Participating Holder is entitled to purchase will be aggregated and will be rounded down to the nearest whole Unit. Fractional Units may not be purchased.

Unit Price

 

$600 per Unit.

 

44


Table of Contents

Issuance Date of New Securities

 

No Unit certificates will be issued. The Third-Lien Notes and Warrants underlying the Units will be issued on the Settlement Date.

ASOF Cash Funding

 

Pursuant to the terms of the Support Agreement, ASOF has agreed not to purchase Units in the Unit Offering. Instead, ASOF has agreed to purchase in a private placement its pro rata share of Units as well as any Units not purchased in the Unit Offering at the same price as holders may purchase Units in the Unit Offering.

Expiration Date

 

5:00 p.m., New York City time on      , 2014, unless extended by us with the prior written consent of the Supporting Noteholders.

Conditions to the Unit Offering

 

The Unit Offering is conditioned on any holder electing the Cash Option in the Exchange Offer. We have the right to terminate the Unit Offering if, among other things, the Unit Offering violates applicable law, any applicable interpretation of the staff of the SEC or any order of any governmental agency or court of competent jurisdiction. In addition, the Unit Offering will not be consummated if the Exchange Offer is terminated. See "The Unit Offering—Conditions to the Unit Offering."

Procedures for Participation

 

If you wish to participate in the Unit Offering, you must elect the New Securities Plus Unit Offering Option on the consent and letter of transmittal, or the agent's message, as applicable, submitted to the Information and Exchange Agent in conjunction with the Exchange Offer. If your Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the Unit Offering, you should contact that registered holder promptly and instruct him, her or it to elect to participate in the Unit Offering on your behalf in conjunction with the tender of the corresponding Old Notes in the Exchange Offer. See "Procedures for Tendering Old Notes and Delivering Consents" for more information about these procedures.

 

You must also deliver at the time of your tender of Old Notes a completed Unit Purchase Form and full payment of the Unit Price of $600 per Unit to be purchased assuming the Cash Funding Amount is at least $10,000,200. If, following the expiration of the Unit Offering, we determine that the actual amount you are required to pay is less than the amount you paid because the Cash Funding Amount is less than $10,000,200, the number of Units you will purchase will be reduced and you will be refunded the difference between the amount you paid and the Unit Price for the number of Units you actually purchased promptly after the Settlement Date.

 

45


Table of Contents

 

We will only issue Units in the Unit Offering if holders of Old Notes tender into the Exchange Offer and elect the Cash Option, and the maximum amount of Units issuable in the Unit Offering will be reduced if less than $16,667,000 in principal amount of Old Notes are tendered into the Cash Option.

 

See "The Unit Offering—Procedures for Purchase of Units." For further information on how to purchase Units in the Unit Offering, contact the Information and Exchange Agent at the telephone number set forth on the back cover page of this prospectus.

Revocation of Unit Purchase

 

The election to purchase Units may not be revoked except that a valid withdrawal of Old Notes in the Exchange Offer will be deemed to have revoked your election to purchase Units. If you withdraw your tender of Old Notes from the Exchange Offer, you can re-tender such Old Notes for exchange at or prior to the Expiration Date. However, to purchase Units you must re-tender your Old Notes for exchange at or prior to the Early Tender Date.

Fees and Expenses of the Refinancing Transactions

 

We estimate that our total fees and expenses for the Refinancing Transactions, of which the Unit Offering is a component, will be approximately $40.0 million, which we will pay with cash on hand or borrowings under the New Revolving Credit Facility.

Use of Proceeds

 

We will receive up to $10,000,200 from the proceeds of the Unit Offering and the ASOF Cash Funding on a combined basis, which proceeds will be used solely to purchase Old Notes from holders electing the Cash Option in the Exchange Offer, excluding accrued and unpaid interest and the Early Tender Payment. Of these combined proceeds, up to $5,326,200 will be received from the Unit Offering, representing approximately 53.3% of the combined proceeds (which is the approximate percentage of Old Notes not held by ASOF). If the cash required to purchase all Old Notes accepted for exchange pursuant to the Cash Option is at least $10,000,200, then a minimum of $4,674,000 will be received from the ASOF Cash Funding, representing ASOF's percentage ownership of the outstanding Old Notes of approximately 46.7%.

Taxation

 

For a discussion of certain U.S. federal income tax consequences of the Unit Offering and of the ownership and disposition of the Third-Lien Notes and Warrants, see "Material U.S. Federal Income Tax Considerations."

Information and Exchange Agent

 

Global Bondholder Services Corporation, which we refer to as the "Information and Exchange Agent."

Risk Factors

 

See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to participate in the Unit Offering.

 

46


Table of Contents

 


Summary of Third-Lien Notes

        The summary below describes the principal terms of the Third-Lien Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The "Description of Third-Lien Notes" section of this prospectus contains a more detailed description of the terms and conditions of the Third-Lien Notes. You are urged to read the "Description of Third-Lien Notes" section of this prospectus and the corresponding Third-Lien Notes Indenture carefully and in their entirety. The summary below is qualified in its entirety by the text of the Third-Lien Notes Indenture.

Issuer

 

Alion Science and Technology Corporation, a Delaware corporation.

Guarantees

 

The Third-Lien Notes will be fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by each direct and indirect restricted subsidiary that guarantees our obligations under the Amended and Restated Revolving Credit Facility, the New Secured Term Debt or any of our indebtedness or the indebtedness of any other guarantor. All guarantees will be of payment and not of collection only. See "Description of Third-Lien Notes—Guarantees."

Notes Offered

 

Up to $235,000,000 aggregate principal amount of third-lien senior secured notes due 2019.

Interest

 

Interest on the Third-Lien Notes will be payable partially in cash and partially in PIK and will accrue at the rates disclosed in the following table:

 
 
Months
  Cash Interest   PIK Interest   Total Interest

  1–12   8%   5.5%   13.5%

  13–24   8%   6.5%   14.5%

  25–30   8%   7.5%   15.5%

  31–36   10%   5.5%   15.5%

  37–48   12%   4.5%   16.5%

  49–60   12%   5.5%   17.5%

  61–66   12%   6.5%   18.5%

 

Cash payments with respect to PIK interest will be payable at maturity. Interest will accrue from the date of the issuance of the Third-Lien Notes pursuant to the Exchange Offer.

Maturity

 

5.5 years after the Settlement Date.

Form

 

The Third-Lien Notes will be issued in the Exchange Offer only in fully registered form, without coupons, in minimum denominations of $1,000 and integral multiples of $1.00, PIK interest payments will be made by increasing the aggregate principal amount of the Third-Lien Notes or issuing additional Third-Lien Notes in denominations of $1.00 and any integral multiples of $1.00 in excess thereof.

Ranking

 

The Third-Lien Notes:

 

will be our senior secured obligations;

 

47


Table of Contents

 

will rank equal in right of payment with all of our existing and future senior indebtedness, including the New Secured Term Debt, any Old Notes that remain outstanding after consummation of the Exchange Offer and any indebtedness which may be incurred under the New Revolving Credit Facility;

 

will rank senior in priority to any of our future subordinated indebtedness, if any;

 

will be effectively senior to our obligations under the Old Notes to the extent of the value of the collateral;

 

will be effectively junior to our obligations under the New Secured Term Debt and the New Revolving Credit Facility to the extent of the value of the collateral; and

 

will be structurally subordinated to all existing and future liabilities of our subsidiaries that are not guarantors and to claims of holders of preferred stock, if any, of our subsidiaries that are not guarantors.

 

The guarantee of the Third-Lien Notes of each guarantor:

 

will be a senior secured obligation of such guarantor;

 

will rank equal in right of payment with all existing and future senior indebtedness of such guarantor;

 

will be effectively senior to our obligations under the Old Notes to the extent of the value of the collateral; and

 

will be structurally subordinated to all existing and future liabilities of our subsidiaries that are not guarantors and to claims of holders of preferred stock, if any, of our subsidiaries that are not guarantors.

 

As of December 31, 2013, on a pro forma basis giving effect to the consummation of the Refinancing Transactions (assuming 95% of the aggregate principal amount of outstanding Old Notes are tendered in the Exchange Offer at or prior to the Early Tender Date and the Cash Option is 50% subscribed), the face amount of our indebtedness would have been approximately $631.1 million, consisting of:

 

48


Table of Contents

 

$46.1 million of indebtedness (excluding outstanding letters of credit) under the New Revolving Credit Facility, all of which will be effectively senior to our obligations under the Third-Lien Notes to the extent of the value of the collateral, (with the capacity to borrow up to an additional $14.9 million (including outstanding letters of credit), subject to satisfying borrowing base limitations based on the eligibility of our accounts receivable and requirements to maintain minimum levels of availability under our New Revolving Credit Facility and subject to the consent of the New Revolving Credit Facility lender to increase the amount of the New Revolving Credit Facility from $45 million to $65 million). See footnote (c) to "Unaudited Pro Forma Condensed Consolidated Financial Statements."

 

$350.0 million of indebtedness in respect of the New Secured Term Debt, all of which will be effectively senior to our obligations under the Third-Lien Notes to the extent of the value of the collateral,

 

$223.25 million of indebtedness in respect of the Third-Lien Notes and

 

$11.75 million of indebtedness in respect of the Old Notes.

 

See "Description of Third-Lien Notes—Ranking."

Collateral

 

The security interests in the Collateral (as defined under "Description of Third-Lien Notes—Certain Definitions") that secure the Third-Lien Notes and related guarantees will rank junior to those securing the New Secured Term Debt, the New Revolving Credit Facility and related guarantees.

Intercreditor Agreement

 

The liens securing the Third-Lien Notes will be subject to intercreditor arrangements that will provide for the priority of such liens relative to the liens on the same collateral that secure other obligations of the issuer and the guarantors. In addition, such intercreditor arrangements will generally impose significant limitations on the ability of holders of the Third-Lien Notes or the collateral agent to take enforcement actions with respect to such Liens until all obligations that are secured by senior-ranking Liens are discharged.

 

See "Description of Third-Lien Notes—Intercreditor Agreement."

Optional Redemption

 

We will be entitled at our option to redeem all or a portion of the Third-Lien Notes from time to time at the applicable redemption prices described under "Description of Third-Lien Notes—Optional Redemption" plus the accrued and unpaid interest through the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

 

49


Table of Contents

Change of Control Offer

 

Upon the occurrence of a change of control (as defined under "Description of Third-Lien Notes—Change of Control"), each holder shall have the right to require that we repurchase such holder's Third-Lien Notes at a purchase price in cash equal to 101.0% of the principal amount thereof on the date of purchase plus the accrued and unpaid interest through the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

 

See "Description of Third-Lien Notes—Change of Control."

Asset Sale Offer

 

Upon the occurrence of an asset disposition that requires the purchase of the Third-Lien Notes (and other senior indebtedness), each holder shall have the right to require that we repurchase such holder's Third-Lien Notes at a purchase price in cash equal to 100.0% of the principal amount thereof on the date of purchase plus the accrued and unpaid interest through the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

 

See "Description of Third-Lien Notes—Limitation on Sales of Assets and Subsidiary Stock."

Certain Covenants

 

The indenture that will govern the Third-Lien Notes will contain certain financial covenants and covenants that limit our ability and the ability of our subsidiaries to, among other things:

 

incur additional indebtedness;

 

pay dividends or make other distributions or repurchase or redeem our capital stock or make other restricted payments;

 

enter into agreements restricting our subsidiaries' ability to pay dividends;

 

sell certain assets;

 

make certain investments;

 

incur certain liens;

 

engage in certain sale-leaseback transactions;

 

enter into certain transactions with affiliates; and

 

consolidate, merge or sell all or substantially all of our assets.

 

These covenants are subject to important exceptions and qualifications, which are described under "Description of Third-Lien Notes."

 

50


Table of Contents

Original Issue Discount

 

The Third-Lien Notes will be issued with original issue discount for U.S. federal income tax purposes, which we refer to as "OID." As a result, a holder subject to U.S. federal income taxation will be required to include the OID in gross income (as ordinary income) as it accrues (on a constant yield to maturity basis), in advance of the receipt of the corresponding cash payments, regardless of such holder's method of accounting for U.S. federal income tax purposes. See "Material U.S. Federal Income Tax Considerations."

No Prior Market

 

The Third-Lien Notes will be new securities for which there is currently no market. We cannot assure you that a broker-dealer will make a market in the Third-Lien Notes and any market-maker may discontinue market making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the Third-Lien Notes will develop or be maintained.

Amendments

 

The indenture governing the Third-Lien Notes may be amended as described under "Description of Third-Lien Notes—Amendments and Waivers." After giving pro forma effect to the consummation of the Refinancing Transactions, including this Exchange Offer, the Supporting Noteholders will hold 71.1% of the Warrants, assuming the Exchange Offer is 100% subscribed and holders of the Old Notes do not elect the Cash Option. This percentage will increase to the extent that:

 

the participation level in the Exchange Offer is less than 100%;

 

the Cash Option is elected; or

 

any of the Supporting Noteholders purchase additional Old Notes prior to the Expiration Date and exchange these additional Old Notes in the Exchange Offer as required by the Support Agreement.

 

As a result of their percentage ownership of Third-Lien Notes, subject to certain limitations, the Supporting Noteholders, acting together, will initially possess voting control over the Third-Lien Notes, including the ability to agree with the Company to amend the indenture governing the Third-Lien Notes.

 

51


Table of Contents

 


Summary of Warrants

        The summary below describes the principal terms of the Warrants. Certain of the terms and conditions described below are subject to important limitations and exceptions. The "Description of Warrants" section of this prospectus contains a more detailed description of the terms and conditions of the Warrants. You are urged to read the "Description of Warrants" section of this prospectus and the corresponding Warrants carefully and in their entirety. The summary below is qualified in its entirety by the terms of the Warrants.

Warrants Offered

 

Penny Warrants to purchase an aggregate of 1,402,992 shares of our common stock, or 12.5% of our outstanding common stock, and Cash Warrants to purchase an aggregate of 1,683,591 shares of our common stock, or 15% of our outstanding common stock, each on a Fully Diluted Basis as of the Settlement Date. The number of shares issuable upon exercise of the Warrants discussed above is based upon the number of shares of our common stock outstanding as of the date of this prospectus on a Fully Diluted Basis and will change if the number of shares outstanding as of the Settlement Date is different or if we issue additional shares pursuant to ESOP Transactions. The Warrants will be issued on the Settlement Date. See "Description of Warrants."

Exercisability

 

The Penny Warrants may be exercised in whole or in part at any time following the Settlement Date at an exercise price of $0.01.

 

The Cash Warrants are exercisable as follows:

 

One-third of the Cash Warrants (i.e., Cash Warrants exercisable for five percent of our common stock on a Fully Diluted Basis as of the Settlement Date) will be exercisable on the date on which its exercise price is set at an exercise price equal to the lesser of:

 

$8.10 per share;

 

if we receive a valuation of our common stock for the purpose of valuing our common stock in connection with our ESOP prior to the Settlement Date, or that relates to the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014), the value included in such valuation; and

 

the value of our common stock set forth in a valuation conducted within two months of the Settlement Date, which valuation will reflect the closing of the Refinancing Transactions (subject to certain exceptions if the valuation is not timely performed).

 

52


Table of Contents

 

One-third of the Cash Warrants (i.e., Cash Warrants exercisable for five percent of our common stock on a Fully Diluted Basis as of the Settlement Date) will be exercisable at any time following the first anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such first anniversary for the purpose of valuing the common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed); and

 

One-third of the Cash Warrants (i.e., Cash Warrants exercisable for five percent of our common stock on a Fully Diluted Basis as of the Settlement Date) will be exercisable at any time following the second anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such second anniversary for the purpose of valuing the common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed).

Expiration

 

Ten years after issuance.

Voting Rights

 

The Warrant Agent will hold of record the one share of Series A Preferred Stock that we will issue on the Settlement Date for the benefit of the holders of the Warrants. The Series A Preferred Stock has the right to vote together with the common stock as a single class on all items on which our common stockholders are entitled to vote with voting power equal to the number of shares of common stock and/or other securities issuable upon the exercise of all then outstanding Warrants (whether or not the Warrants are then exercisable). The Warrant Agent will exercise this voting power as a block in the manner directed by the holders of Warrants representing a majority of our common stock to be received upon the exercise of all outstanding Warrants providing direction. Accordingly, holders of Warrants not providing direction as to voting will not be taken into account in determining how the Warrant Agent will vote.

 

The Series A Preferred Stock also has additional rights, including the right to appoint two members to our board of directors, consent rights on certain specified actions and a right to instruct us to undertake a sale process starting on or before April 30, 2015.

 

53


Table of Contents

 

In connection with the election of the Series A Directors and the exercise of consent rights, we may seek the direction from the requisite holders of Warrants within a time period specified by us to the Warrant Agent (such period to (i) be no shorter than fifteen days and (ii) expire not less than two business days before the date we set for the taking of such action). In connection with these matters, the Warrant Agent will be required to vote the share of Series A Preferred Stock for the nominated Series A Directors or shall grant the requested action subject to the consent right only if instructed to do so by holders of Warrants representing 60% of the Warrants on an as exercised basis providing it with direction on these matters. Within ten days after the Settlement Date, the holders of the then outstanding Warrants representing at least 60% of the Warrants on an as exercised basis may by notice to the Warrant Agent reduce the 60% direction threshold to a percentage not less than 50%. Reference to Warrants on an as exercised basis shall mean our common stock issuable upon exercise of such Warrants.

 

In lieu of us seeking the direction from the requisite Warrant holders to the Warrant Agent with respect to a consent right, a direction to grant the requested action may be provided to the Warrant Agent on the initiative of holders of Warrants representing in excess of 60% of the then outstanding Warrants on an as exercised basis (or such lesser threshold to which the direction threshold has been reduced as provided above).

 

Alternative Consent Rights provisions will apply if:

 

40% or more of the then outstanding Warrants on an as exercised basis are not owned in the aggregate by three or less holders that each own at least 5% of the then outstanding Warrants on an as exercised basis; or

 

a direction to grant the requested action subject to the consent right is provided to the Warrant Agent on the initiative of holders of Warrants representing in excess of 40% of the then outstanding Warrants on an as exercised basis (but less than 60% or such lesser threshold to which the direction threshold has been reduced as provided above).

 

54


Table of Contents

 

In these cases, both Series A Directors may provide the requested consent to any proposed action that is subject to the consent rights but have the right to refrain from making a determination whether or not to consent. However, we acknowledge and agree that to the fullest extent permitted by applicable law it shall not be a breach of the fiduciary duties of either of the Series A Directors to, in lieu of making a decision whether or not to consent, instruct us to seek a direction from Warrant holders representing the direction threshold as provided above to the Warrant Agent. However, with respect to consent rights relating to our annual budget, capital expenditures or employee benefit plans, the Series A Directors may not provide a Direction Instruction and no consent rights shall be required to the extent the Series A Directors determine to refrain from making a decision whether to consent.

 

After giving pro forma effect to the consummation of the Refinancing Transactions, including this Exchange Offer, the Supporting Noteholders will hold 71.1% of the Warrants, assuming the Exchange Offer is 100% subscribed and holders of the Old Notes do not elect the Cash Option. This percentage will increase to the extent that:

 

the participation level in the Exchange Offer is less than 100%;

 

the Cash Option is elected; or

 

any of the Supporting Noteholders purchase additional Old Notes prior to the Expiration Date and exchange these additional Old Notes in the Exchange Offer as required by the Support Agreement.

 

As a result of their significant ownership percentage, the Supporting Noteholders, acting together, initially will possess voting control over the Warrants under the Warrant Agreement. Accordingly, the Supporting Noteholders, acting together, will initially control the identity of the two board members (initially expected to be Lawrence A. First and Daniel H. Clare) to be appointed by the holder of the Series A Preferred Stock, will be able to direct the Warrant Agent with respect to decisions under the Series A Preferred Stock, including instructing the Warrant Agent to vote the share of Series A Preferred Stock as a block and deciding whether to grant certain approval rights and will be able to agree with us to amend or waive certain terms of the Warrants and the Series A Preferred Stock.

Dividends

 

If we pay a cash dividend or distribution in respect of shares of our common stock, we are required to pay such dividend or distribution to the holders of any outstanding Warrants on the same basis as cash dividends or distributions are made to holders of common stock based on the numbers of shares of common stock for which the Warrants are exercisable as if the Warrants had been exercised immediately prior to the record date for the dividend or other distribution (whether or not the Warrants are then exercisable).

 

55


Table of Contents

Right of First Offer

 

Prior to selling any shares of our common stock to a third party, a stockholder must first offer the shares to persons holding 5% or more of our common stock, including holders of Warrants as if all then outstanding Warrants had been exercised (whether or not the Warrants are then exercisable), and if they decline to purchase all or a portion of the shares, the shares must be offered to us. If we decline to purchase all or a portion of the shares, then the selling stockholder may offer the remaining shares for sale to third parties at a price not less than what was offered in connection with the right of first offer.

Tag-Along Rights

 

If any stockholder proposes to sell at least 30% of our common stock to a third party, then all holders of our common stock, including holders of the then outstanding Warrants (whether or not the Warrants are then exercisable), will have the right to require the purchaser of such shares to also purchase a pro rata portion of their shares on the same terms and conditions as the transaction with the selling stockholder, treating any Warrants on an as exercised basis (whether or not the Warrants are then exercisable).

Drag-Along Rights

 

If the ESOP Trust proposes to sell for cash all of the outstanding shares of our common stock that it owns to us or a third party, the ESOP Trust will be entitled to require the holders of all of the then outstanding Warrants (whether or not the Warrants are then exercisable), the holders of any of our common stock issued as a result of a prior exercise of the Warrants and anyone else who becomes a party to the Stockholders' Agreement to engage in the same transaction on the same terms as the ESOP Trust.

Anti-Dilution

 

The exercise price and number of shares of common stock underlying the Warrants will have anti-dilution adjustments. See "Description of the Warrants—Adjustments."

Transfer Restrictions

 

The Warrants will be subject to certain transfer restrictions, including if:

 

the transfer would violate the securities laws or cause us to be required to register our common stock under the Securities Exchange Act of 1934, as amended;

 

the transfer would limit, impair or eliminate our net operating losses either upon transfer or exercise of the warrant;

 

our board of directors determines that the transferee is a competitor, customer or supplier of our company and the transfer would be adverse to our company; and

 

the transferee would create an issue under regulations regarding foreign ownership, control or influence of government contractors.

Stockholders' Agreement

 

Each Warrant holder will be deemed to be bound to the terms of the Stockholders' Agreement upon exercise of the Warrants by that holder.

 

56


Table of Contents

Registration Rights

 

We have agreed that within 15 business days of consummation of the Exchange Offer, we will file a shelf registration statement covering the resale of the Third-Lien Notes and Warrants held by our affiliates, the issuance of the shares of our common stock upon exercise of the Warrants held by all holders, and the resale of such shares held by our affiliates. We have further agreed to use our reasonable best efforts to cause such registration statement to be declared effective, subject to certain exceptions, on or before 60 days after the issuance of the Warrants and to remain effective, subject to certain exceptions, following the consummation of the Exchange Offer.

Information

 

We will provide to holders of Warrants our audited and unaudited financial reports on a consolidated basis within 90 days after the end of each fiscal year with respect to annual financial reports and within 45 days after the end of each fiscal quarter with respect to quarterly reports. This obligation to provide financial reports will not apply to the extent that we file these audited and unaudited financial reports with the SEC on a timely basis. In addition, upon the request of a Warrant holder, we will provide to that Warrant holder all information provided to our lenders under any of our credit facilities, indentures or other similar debt agreements. To the extent the information constitutes material non-public information, we will advise the requesting Warrant holder that the requested information is material non-public information and ask the requesting Warrant holder to confirm whether it still wishes to receive the information. To the extent the requesting Warrant holder determines to receive the material nonpublic information, the requesting Warrant holder will first enter into a confidentiality agreement reasonably acceptable to us. In addition, we will, and will cause each of our subsidiaries to, provide access and inspection rights to any holder of Warrants that holds our common stock and Warrants exercisable into our common stock representing, taken together, at least 5% of our then outstanding common stock on a Fully Diluted Basis at reasonable times so long as the access does not materially interfere with the operation of our business or that of any of our subsidiaries.

 

57


Table of Contents

 


Summary of Units

        The summary below describes the principal terms of the Units. The "Description of Units" section of this prospectus contains a more detailed description of the terms and conditions of the Units. The "Description of Third-Lien Notes" and "Description of Warrants" contains a more detailed description of the terms and conditions of the Third-Lien Notes and Warrants. You are urged to read the "Description of Units," "Description of Third-Lien Notes" and "Description of Warrants" sections of this prospectus in their entirety.

Units Offered

  Up to 8,877 Units may be purchased pursuant to the Unit Offering.

Components of Units

  Each Unit consists of the following:

 

$1,000 principal amount of Third-Lien Notes;

 

one immediately exercisable Penny Warrant to purchase no less than 5.9701768 shares of our common stock on a Fully Diluted Basis at an exercise price of $0.01 per share;

 

one Cash Warrant to purchase no less than 2.3880707 shares of our common stock on a Fully Diluted Basis that will be exercisable on the date on which its exercise price is set at an exercise price equal to the lesser of:

 

$8.10 per share;

 

if we receive a valuation of our common stock for the purpose of valuing our common stock in connection with our ESOP prior to the Settlement Date, or that relates to the period ended March 31, 2014 (or as of the end of any period that includes any portion of our fiscal six-month period ended March 31, 2014), the value included in such valuation; and

 

the value of our common stock set forth in a valuation conducted within two months of the Settlement Date, which valuation will reflect the closing of the Refinancing Transactions (subject to certain exceptions if the valuation is not timely performed).

 

one Cash Warrant to purchase no less than 2.3880707 shares of our common stock on a Fully Diluted Basis that will be exercisable at any time following the first anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such first anniversary for the purpose of valuing the common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed); and

 

one Cash Warrant to purchase no less than 2.3880707 shares of our common stock on a Fully Diluted Basis that will be exercisable at any time following the second anniversary of the Settlement Date at an exercise price equal to the per share valuation existing at the time of such second anniversary for the purpose of valuing the common stock in connection with the ESOP (subject to certain exceptions if the valuation is not timely performed).

  The components of the Units will be immediately separable upon issuance, without any action by us or the holder. Participating Holders who purchase Units will receive Third-Lien Notes and Warrants, each in book-entry form and represented by one or more global certificates deposited with a custodian for, and registered in the name of a nominee of, DTC.

 

58


Table of Contents


Summary of Differences Between the Third-Lien Notes and the Old Notes

        The following is a summary of certain differences between the terms of the current Old Notes and the Third-Lien Notes to be received in the Exchange Offer. This summary should be read in conjunction with "Description of Other Indebtedness" and "Description of Third-Lien Notes."

 
  Old Notes   Third-Lien Notes

Issuer

  Alion Science and Technology Corporation.   Alion Science and Technology Corporation.

Aggregate Principal Amount

 

$235.0 million aggregate principal amount.

 

Up to $235.0 million aggregate principal amount. The aggregate principal amount will be determined based on the aggregate principal amount of Old Notes validly tendered (and not validly withdrawn) and accepted in the Exchange Offer and the amount of Units purchased in the Unit Offering and the ASOF Cash Funding.

Maturity

 

February 1, 2015.

 

5.5 years after the Settlement Date.

Interest Rates

 

10.25% per annum, payable in cash.

 

Interest on the Third-Lien Notes will be payable partially in cash and partially in PIK and will accrue at the rates disclosed in the following table:

 
 
Months
  Cash Interest   PIK Interest   Total Interest

  1–12   8%   5.5%   13.5%

  13–24   8%   6.5%   14.5%

  25–30   8%   7.5%   15.5%

  31–36   10%   5.5%   15.5%

  37–48   12%   4.5%   16.5%

  49–60   12%   5.5%   17.5%

  61–66   12%   6.5%   18.5%

Cash Interest Payment Dates

 

Semi-annually on February 1 and August 1.

 

Semi-annually.

Security

 

None.

 

The Third-Lien Notes and guarantees in respect thereof will be secured by third-priority liens, subject to permitted liens, on certain of our assets and the assets of the subsidiary guarantors that will secure our New Secured Term Debt and the New Revolving Credit Facility.

 

59


Table of Contents

 
  Old Notes   Third-Lien Notes

Ranking

  The Old Notes rank:   The Third-Lien Notes will rank:

 

effectively junior to all existing and future secured debt to the value of the collateral securing such indebtedness; and

equally in right of payment with all of our existing and future senior indebtedness.

 

effectively senior to the Old Notes that remain outstanding following the Exchange Offer and Consent Solicitation to the extent of the collateral securing the Third-Lien Notes (after giving effect to any senior lien on the collateral);

 

After consummation of the Refinancing Transactions, any Old Notes that remain outstanding will be effectively junior to the Third-Lien Notes to the extent of the collateral securing the Third-Lien Notes (after giving effect to any senior lien on the collateral).

 

effectively junior to the indebtedness under the New Secured Term Debt and the New Revolving Credit Facility to the extent of the collateral securing such indebtedness; and

equally in right of payment with all of our existing and future senior indebtedness.

Optional Redemption

 

We may redeem all, or a portion of the Old Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date.)

 

We will be entitled at our option to redeem all or a portion of the Third-Lien Notes from time to time at the applicable redemption prices described under "Description of Third-Lien Notes—Optional Redemption" plus the accrued and unpaid interest to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

 

60


Table of Contents

 
  Old Notes   Third-Lien Notes

Certain Restrictive Covenants

  The Old Notes Indenture contains covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

incur or guarantee additional indebtedness or issue certain preferred stock;

pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

transfer or sell assets outside the ordinary course of business;

make certain investments;

incur certain liens

engage in certain sale-leaseback transactions;

enter into certain transactions with affiliates; and

merge or consolidate with other companies or transfer all or substantially all of our assets.

  The indenture governing the Third Lien Secured Notes will contain certain financial covenants and covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

incur or guarantee additional indebtedness or issue certain preferred stock;

pay dividends or make other distributions or repurchase or redeem our capital stock or make other restricted payments;

enter into agreements restricting our subsidiaries' ability to pay dividends;

sell certain assets;

make certain investments;

incur certain liens;

engage in certain sale-leaseback transactions;

enter into certain transactions with affiliates; and

consolidate, merge or sell all or substantially all of our assets.

Trustee

 

Wilmington Trust Company.

 

Wilmington Trust, National Association.

Collateral Agent

 

None.

 

Wilmington Trust, National Association.

Governing Law

 

New York.

 

New York.

 

61


Table of Contents

 


SUMMARY HISTORICAL CONDENSED
CONSOLIDATED FINANCIAL DATA

        The following tables present summary historical condensed consolidated financial data for each of our last three years ended September 30, 2013, 2012 and 2011, for the three months ended December 31, 2013 and 2012 and as of September 30, 2013 and 2012 and December 31, 2013. The summary historical condensed consolidated financial data for the years ended, September 30, 2013, 2012 and 2011 and as of September 30, 2013 and 2012 have been derived from our audited financial statements which are included elsewhere in this prospectus. The following tables also present certain financial data as of and for the twelve months ended December 31, 2013 which was calculated by adding amounts from our financial statements for the year ended September 30, 2013 to amounts from our unaudited financial statements for the three months ended December 31, 2013 and subtracting amounts from our unaudited financial statements for the three months ended December 31, 2012. The summary historical condensed consolidated financial data as of, and for the three months ended, December 31, 2013 and 2012 and December 31, 2013 has been derived from our unaudited condensed consolidated interim financial statements which are included elsewhere in this prospectus. In management's opinion, the unaudited condensed consolidated financial statements reflect all adjustments and reclassifications that are necessary for a fair presentation of the periods presented.

        The results presented below are not necessarily indicative of results that may be expected for any future period. The following information should be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and our audited annual and unaudited interim financial statements and notes included elsewhere in this prospectus.

 
  Three Months Ended
December 31,
  Year Ended September 30,  
 
  2013   2012   2013   2012   2011  
 
  (In thousands)
 

Consolidated Statement of Operations:

                               

Contract revenue

  $ 185,380   $ 204,329   $ 848,972   $ 817,204   $ 787,314  

Direct contract expense

    145,275     160,635     669,504     632,831     603,481  
                       

Gross profit

    40,105     43,694     179,468     184,373     183,833  

Operating expenses

    18,864     22,250     84,128     91,494     83,035  

General and administrative

    18,993     11,804     53,139     52,441     65,305  
                       

Operating income

    2,248     9,640     42,201     40,438     35,493  

Other income (expense)

                               

Interest income

    11     17     55     78     45  

Interest expense

    (18,948 )   (18,919 )   (75,700 )   (74,934 )   (73,919 )

Other

    (28 )   (15 )   (84 )   (55 )   32  

Gain on debt extinguishment

            3,913         939  
                       

Total other expense

    18,965     18,917     (71,816 )   (74,911 )   (72,903 )

Loss before taxes

    (16,717 )   (9,277 )   (29,615 )   (34,473 )   (37,410 )

Income tax expense

    (1,745 )   (1,744 )   (6,977 )   (6,974 )   (6,974 )
                       

Net loss

  $ (18,462 ) $ (11,021 ) $ (36,592 ) $ (41,447 ) $ (44,384 )
                       
                       

 

62


Table of Contents

 
   
  Year Ended September 30,  
 
  Twelve Months
Ended
December 31, 2013
 
 
  2013   2012   2011  
 
  (In thousands)
 

Other Financial Data:

                         

Capital expenditures

  $ 1,539   $ 1,869   $ 2,731   $ 6,305  

EBITDA(a)

    44,840     53,433     52,178     47,865  

Consolidated EBITDA(a)

    69,541     71,000     71,754     63,203  

Consolidated interest expense payable in cash

    59,042     58,460     57,755     57,301  

 

 
   
  At September 30,  
 
  At
December 31,
2013
 
 
  2013   2012  
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 4,687   $ 25,613   $ 27,227  

Working capital

    (295,345 )   42,569     51,594  

Total assets

    599,392     624,626     635,296  

Total debt(b)

    569,197     556,118     549,425  

(a)
We have included certain non-GAAP financial measures in this prospectus, including earnings before interest, income taxes, depreciation and amortization, which we refer to as "EBITDA," and Consolidated EBITDA, which is defined in our Amended and Restated Revolving Credit Facility. We believe that the presentation of EBITDA and Consolidated EBITDA enhances an investor's understanding of our financial performance. We believe EBITDA is useful in assessing operating performance and in comparing our performance to other companies in the same industry. EBITDA is a common financial metric in the government contracting industry, in part because it excludes from performance the effects of a company's capital structure, in particular taxes and interest. In addition, we believe Consolidated EBITDA can be useful in evaluating our ability to meet our debt covenants. Consolidated EBITDA information for the trailing twelve months is used by management and is important to our security holders as our Old Revolving Credit Facility required that we achieve minimum trailing twelve month Consolidated EBITDA levels and the Amended and Restated Revolving Credit Facility requires that at the end of each quarter, our trailing twelve month Consolidated EBITDA equals or exceeds our fixed charges. Consolidated EBITDA excludes certain non-cash expenses and includes other add-back items allowed by our Amended and Restated Revolving Credit Facility. EBITDA and Consolidated EBITDA are not measures under U.S. GAAP and our use of the terms EBITDA and Consolidated EBITDA varies from others in our industry. EBITDA and Consolidated EBITDA should not be considered as alternatives to net income (loss), operating income or any other performance measures derived in accordance with U.S. GAAP, as measures of operating performance or operating cash flows or as measures of liquidity.

EBITDA and Consolidated EBITDA have material limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. For example, EBITDA and Consolidated EBITDA:

do not reflect any cash capital expenditure requirements for assets being depreciated and amortized that may have to be replaced in the future;

do not reflect changes in, or cash requirements for, our working capital needs; and

do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

 

63


Table of Contents

    The following table provides a reconciliation of our net loss to EBITDA and Consolidated EBITDA for the periods presented:

 
  Twelve Months
Ended
December 31,
2013
  September 30,  
 
  2013   2012   2011  
 
  (In thousands)
 

Net loss

  $ (44,032 ) $ (36,592 ) $ (41,447 ) $ (44,384 )

Interest expense

    75,728     75,700     74,934     73,919  

Income tax expense

    6,978     6,977     6,974     6,974  

Depreciation and amortization

    6,166     7,348     11,717     11,356  
                   

EBITDA

  $ 44,840   $ 53,433   $ 52,178   $ 47,865  
                   
                   

Gain on asset sales

    (157 )   (157 )   (104 )   (147 )

Debt extinguishment gain

    (3,913 )   (3,913 )       (939 )

Non-cash stock-based compensation expense (credit)

    (228 )   (219 )   (90 )   (142 )

Non-cash LTIP expense (credit)

    2,343     2,281     1,400     2,797  

Non-cash ESOP and 401(k) contributions

    14,023     13,844     13,735     10,987  

Employee salary deferrals used to purchase Alion common stock

    1,834     1,968     2,427     3,133  

Cash paid for ESOP obligations

    (1,515 )   (1,636 )   (857 )   (796 )

Cash paid for stock-based compensation

                (133 )

Cash paid for LTIP grants

    (1,816 )   (1,843 )   (1,869 )   (2,962 )

Non-recurring expenses

    14,130     7,242     4,934     3,540  
                   

Consolidated EBITDA

  $ 69,541   $ 71,000   $ 71,754   $ 63,203  
                   
                   

Consolidated EBITDA margin

    8.4 %   8.4 %   8.8 %   8.0 %

    The Old Revolving Credit Facility required us to have a minimum $63.0 million in Consolidated EBITDA for the twelve months ended September 30, 2013. We had approximately $71.0 million in Consolidated EBITDA for the twelve months ended September 30, 2013, and exceeded the requirement by approximately $8.0 million. The Existing Revolving Credit Facility required us to have a minimum $65.5 million in Consolidated EBITDA for the twelve months ended December 31, 2013. We had approximately $69.5 million in Consolidated EBITDA for the twelve months ended December 31, 2013, and exceeded the requirement by approximately $4.0 million.

(b)
Total debt consists of our Old Revolving Credit Facility, Existing Secured Notes and Old Notes as well as accrued PIK interest and is net of unamortized debt issue costs and original issue discount.

 

64


Table of Contents



UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA

        The following unaudited pro forma condensed consolidated financial data as of December 31, 2013 and for the fiscal year ended September 30, 2013 and the three months ended December 31, 2013 have been derived by the application of pro forma adjustments to our historical financial statements included elsewhere in this prospectus. The unaudited pro forma condensed consolidated balance sheet data as December 31, 2013 gives effect to the Refinancing Transactions as if they occurred on December 31, 2013. The unaudited pro forma condensed consolidated statement of operations data for the year ended September 30, 2013 and the three months ended December 31, 2013 gives effect to the Refinancing Transactions as if they had occurred on October 1, 2012.

        The unaudited pro forma condensed consolidated financial data are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that actually would have been reported had the Refinancing Transactions been completed, nor are they indicative of our future financial position or results of operations.

        The unaudited pro forma condensed consolidated financial data are unaudited, are based on assumptions that we believe are reasonable and should be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "General Terms of the Exchange Offer and the Consent Solicitation," "Conditions of the Exchange Offer and Consent Solicitation," and our audited financial statements and related notes included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial data gives pro forma effect to the following Refinancing Transactions occurring concurrently:

    (a)
    The completion of the Exchange Offer (assuming 95% of the aggregate principal amount of outstanding Old Notes are tendered in the Exchange Offer at or prior to the Early Tender Date and assuming the Cash Option is 50% subscribed).

    (b)
    The completion of the Unit Offering and the ASOF Cash Funding.

    (c)
    The entering into the New Revolving Credit Facility with $46.1 million being drawn (excluding letters of credit), together with cash on hand, to pay for fees and expenses of $40.0 million related to the Refinancing Transactions, (which includes the Early Tender Payment of $3.3 million), and accrued and unpaid interest on the Old Notes of $15.1 million. While the pro forma information indicates that we will need to draw $46.1 million under the New Revolving Credit Facility, the pro forma information is as of December 31, 2013 and is not indicative of actual results. For example, as discussed in note (f) below, at the time of the completion of the Refinancing Transactions, the redemption price on the Existing Secured Notes will be 100%. As a result, we will not be required to pay $10.0 million in cash as a redemption premium, which will reduce the amount we are required to draw on the New Revolving Credit Facility by $10.0 million. To the extent that following the closing of the Refinancing Transactions we need to draw an amount in excess of the $45.0 million available under the New Revolving Credit Facility, we will seek to increase the amount available thereunder to up to $65.0 million, which increase is subject to the consent of the revolving credit lender and our ability to satisfy borrowing base limitations based on the eligibility of our accounts receivable.

    (d)
    The repayment of the Amended and Restated Revolving Credit Facility, although as of December 31, 2013, no amounts were drawn under the Old Revolving Credit Facility, although we had outstanding and undrawn letters of credit of $4 million under the Old Revolving Credit Facility as of that date.

    (e)
    The borrowing of $300.0 million under the New First Lien Term Loan Facility and $50.0 million under the New Second Lien Term Loan Facility.

    (f)
    The redemption of $334.2 million of Existing Secured Notes at 103% of the principal amount thereof plus accrued and unpaid cash interest of $5.6 million, assuming the redemption occurred on December 31, 2013. At the time of the closing of the Refinancing Transactions, the redemption price will be 100%.

    (g)
    The New First Lien Term Facility, the New Second Lien Term Facility, the Third-Lien Notes and the New Revolving Credit Facility are incurred with an aggregate original issue discount of $7.3 million and aggregate debt issuance costs of $40.0 million. The Third-Lien Notes are recorded at a discount related to the fair value of the Warrants of $20.2 million. The New First Lien Term Facility, the New Second Lien Term Facility, the Third-Lien Notes and the New Revolving Credit Facility are shown net of these amounts in the following tables.

 

65


Table of Contents

        The following tables set forth unaudited pro forma condensed consolidated financial data as of December 31, 2013, and for the year ended September 30, 2013 and the three months ended December 31, 2013. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial data.

Condensed Consolidated Statement of Operations:
  For the fiscal
year ended
September 30,
2013
(historical)
  Pro Forma
Adjustments
  For the fiscal
year ended
September 30,
2013
(pro forma)
 
 
  (In thousands, except share and
per share information)

 

Contract revenue

  $ 848,972       $ 848,972  

Direct contract expense

    669,504         669,504  
               

Gross profit

    179,468         179,468  

Operating expenses

    84,128         84,128  

General and administrative

    53,139         53,139  
               

Operating income

    42,201         42,201  

Other income (expense)

             

Interest income

    55         55  

Interest expense

    (75,700 )   1,336 (a)   (74,364 )

Other

    (84 )       (84 )

Gain (loss) on debt extinguishment

    3,913     (b)   3,913  
               

Total other expense

    (71,816 )   1,336     (70,480 )

Loss before taxes

    (29,615 )   1,336     (28,279 )

Income tax expense

    (6,977 )       (6,977 )
               

Net loss

  $ (36,592 ) $ 1,336   $ (35,256 )

Basic and diluted loss per share

  $ (5.39 ) $ 0.20   $ (5.19 )

Shares

    6,787,660     6,787,660     6,787,660  

 

Condensed Consolidated Statement of Operations:
  For the three
months ended
December 31,
2013
(historical)
  Pro Forma
Adjustments
  For the three
months ended
December 31,
2013
(pro forma)
 
 
  (In thousands, except share and
per share information)

 

Contract revenue

  $ 185,380       $ 185,380  

Direct contract expense

    145,275         145,275  
               

Gross profit

    40,105         40,105  

Operating expenses

    18,864         18,864  

General and administrative

    18,993     (6,402 )(c)   12,591  
               

Operating income

    2,248     (6,402 )   8,650  

Other income (expense)

             

Interest income

    11         11  

Interest expense

    (18,948 )   413 (a)   (18,535 )

Other

    (28 )       (28 )

Gain (loss) on debt extinguishment

             
               

Total other expense

    (18,965 )   413     (18,552 )

Loss before taxes

    (16,717 )   6,816     (9,901 )

Income tax expense

    (1,745 )       (1,745 )
               

Net loss

  $ (18,462 ) $ 6,816   $ (11,646 )

Basic and diluted loss per share

  $ (2.41 ) $ 0.89   $ (1.52 )

Shares

    7,659,817     7,659,817     7,659,817  

 

66


Table of Contents

Condensed Consolidated Balance Sheet:
  As of
December 31,
2013
(historical)
  Pro Forma
Adjustments
  As of
December 31,
2013
(pro forma)
 
 
  (In thousands, except share
and per share information)

 

Current assets:

                   

Cash and cash equivalents

  $ 4,687   $ (4,687 )(d) $  

Accounts receivable, net

    168,963         168,963  

Receivable due from ESOP Trust

             

Prepaid expenses and other current assets

    5,648     (1,466 )(e)   4,182  
               

Total current assets

    179,298     (6,153 )   173,145  

Property, plant and equipment, net

    9,070         9,070  

Intangible assets, net

    1,735         1,735  

Goodwill

    398,921         398,921  

Other assets

    10,368         10,368  
               

Total assets

  $ 599,392   $ (6,153 ) $ 593,239  
               
               

Current liabilities:

                   

Interest payable

  $ 15,590   $ (15,086 )(f) $ 504  

Existing Secured Notes

    326,313     (326,313 )(g)    

Trade accounts payable

    59,536         59,536  

Accrued liabilities

    36,909     (2,047 )(h)   34,862  

Accrued payroll and related liabilities

    31,733         31,733  

Billings in excess of revenue earned

    4,562         4,562  
               

Total current liabilities

    474,643     (343,446 )   131,197  

Old Notes

    234,038     (222,336 )(i)   11,702  

New First Lien Term Facility

        274,563 (j)   274,563  

New Second Lien Term Facility

        43,760 (k)   43,760  

Third-Lien Notes

        187,489 (l)   187,489  

New Revolving Credit Facility

        46,058 (m)   46,058  

Accrued compensation and benefits, excluding current portion

    5,998         5,998  

Non-current portion of lease obligations

    12,540         12,540  

Deferred income taxes

    59,873         59,873  

Commitments and contingencies

             

Other liabilities

             

Redeemable common stock, $0.01 par value, 20,000,000 shares authorized, 7,641,493 issued and outstanding at December 31, 2013

    61,896         61,896  

Common stock warrants

    20,785     20,180 (n)   40,965  

Accumulated other comprehensive loss

    130         130  

Accumulated deficit

    270,511     12,421 (o)   282,932  
               

Total liabilities, redeemable common stock and stockholder's deficit

  $ 599,392   $ (6,153 ) $ 593,239  
               
               

 

67


Table of Contents

    (a)
    Pro forma interest expense adjustment was calculated as follows (in thousands):

 
  For the three
months ended
December 31, 2013
(pro forma)
  For the
fiscal year ended
September 30, 2013
(pro forma)
 

Subtract Existing Secured Notes interest expense

  $ (12,327 ) $ (48,545 )

Subtract Old Notes interest expense

    (6,228 )   (25,713 )

Add New First Lien Term Facility interest expense

    5,625     22,416  

Add New First Lien Term Facility amortization expense

    1,083     4,439  

Add New Second Lien Term Facility interest expense

    1,208     5,039  

Add New Second Lien Term Facility amortization expense

    180     740  

Add Third-Lien Notes interest expense

    7,679     31,137  

Add Third-Lien Notes amortization expense

    806     3,303  

Add Third-Lien Notes warrant amortization expense

    888     3,641  

Subtract Old Revolving Credit Facility interest expense

    (378 )   (1,373 )

Add New Revolving Credit Facility fee

    59     235  

Add New Revolving Credit Facility amortization costs

    72     288  

Add New Revolving Credit Facility adjusted interest

    14     57  

Add New Revolving Credit Facility interest expense

    576     1,681  

Add New Revolving Credit Facility unused line fee

    18     71  

Add remaining Old Notes interest expense

    301     1,204  

Add remaining Old Notes amortization expense

    10     43  
           

Total

  $ 413   $ 1,336  
           
           

    Each 1%, or $2.35 million, increase (decrease) in the aggregate principal amount of Old Notes that is exchanged in the Exchange Offer from the 95% level assumed (but assuming the Cash Option remains 50% subscribed) will result in a $92 thousand increase (decrease) in pro forma consolidated interest expense for fiscal 2013 and a $23 thousand increase (decrease) in pro forma consolidated interest expense for the three months ended December 31, 2013. Each 1% increase in the Cash Option percentage from the 50% level assumed would result in a $12.1 thousand decrease in pro forma consolidated interest expense for fiscal 2013 and a $3 thousand decrease in pro forma consolidated interest expense for the three months ended December 31, 2013. Each 1% decrease in the Cash Option percentage from the 50% level assumed would result in a $5.3 thousand decrease in pro forma consolidated interest expense for fiscal 2013 and a $1.3 thousand decrease in pro forma consolidated interest expense for the three months ended December 31, 2013. In the case of the New First Lien Term Facility, the New Second Lien Term Facility, the Third-Lien Notes and the New Revolving Credit Facility, we have assumed that they bear interest at an annual interest rate of 7.5%, 15.5% (of which 11.17% is PIK) in year one, 13.5% (of which 5.5% is PIK) in year one and 5.0%, respectively. A 1/8% increase (decrease) in the interest rates we have assumed for each of the New First Lien Term Facility, New Second Lien Term Facility and New Revolving Credit Facility would increase (decrease) our pro forma consolidated interest expense payable by

 

68


Table of Contents

      $495 thousand and $124 thousand for fiscal 2013 and the three months ended December 31, 2013, respectively.


    Interest expense was calculated as follows for the New First Lien Term Facility, the New Second Lien Term Facility and the Third-Lien Notes:

 
  For the three months ended
December 31, 2013
 
 
  New First Lien
Term Facility
  New Second Lien
Term Facility
  Third-Lien
Notes
 

Cash interest

  $ 5,625   $ 542   $ 4,465  

PIK interest

        667     3,214  

Amortization

    1,083     180     806  

Warrant amortization

            888  
               

Total Interest Expense

  $ 6,708   $ 1,389   $ 9,373  

 

 
  For the fiscal year ended
September 30, 2013
 
 
  New First Lien
Term Loan
  New Second Lien
Term Loan
  Third-Lien
Notes
 

Cash interest

  $ 22,416   $ 2,238   $ 26,890  

PIK interest

        1,530     8,425  

Amortization

    4,439     740     3,303  

Warrant amortization

            3,641  
               

Total Interest Expense

  $ 26,855   $ 4,508   $ 42,261  

    Interest expense was calculated as follows for the Existing Secured Notes and the Old Notes:

 
  For the three months ended
December 31, 2013
 
 
  Existing
Secured Notes
  Old Notes  

Cash interest

  $ 8,300   $ 6,022  

PIK

    1,660     0  

Amortization

    2,367     206  
           

Total Interest Expense

  $ 12,327   $ 6,228  

 

 
  For the fiscal year ended
September 30, 2013
 
 
  Existing
Secured Notes
  Old Notes  

Cash interest

  $ 32,761   $ 24,861  

PIK

    6,551     0  

Amortization

    9,233     852  
           

Total Interest Expense

  $ 48,545   $ 25,713  
           

 

69


Table of Contents

    (b)
    The following non-recurring charges that we expect to incur in connection with the Refinancing Transactions are not included in the pro forma adjustments to the statement of operations (in thousands):

 
  For the three
months ended
December 31, 2013
(pro forma)
  For the
fiscal year ended
September 30, 2013
(pro forma)
 

Existing Secured Notes Call Premium

  $ 10,026   $ 16,627  

Existing Secured Notes Unamortized Interest Expense

    7,884     10,250  

Old Notes Unamortized Interest Expense

    962     1,168  
           

Loss on Debt Extinguishment

  $ 18,872   $ 28,045  

    Had the Company effected the transaction on October 1, 2012, the Company would have recorded a $28 million loss on extinguishment. Had the Company effected the transaction on October 1, 2013, the Company would have recorded a loss on extinguishment of $18.9 million.

    (c)
    Adjustment reflects the decrease in expenses for removal of non-recurring refinance related expenses, including legal, accounting and advisor fees and expenses and commitment fees related to the Refinancing Transactions, that were not capitalized.

    (d)
    Adjustment reflects the following (in thousands):

Redemption of Existing Senior Secured Notes (face value)

  $ (334,197 )

Payment of Existing Secured Notes Call Premium

    (10,026 )

Payment of Existing Secured Notes Interest Payable

    (5,552 )

Add back previously paid refinancing costs

    4,355  

Add back prepaid refinancing costs

    1,466  

Payment of Old Notes Interest Payable

    (10,036 )

Proceeds from First Lien Term Loan Facility

    300,000  

First Lien Term Loan Facility Original Issuance Discount

    (4,500 )

First Lien Term Loan Facility Debt Issuance Costs

    (20,937 )

Proceeds from Second Lien Term Loan Facility

    50,000  

Second Lien Term Loan Original Issuance Discount

    (2,750 )

Second Lien Term Loan Facility Debt Issuance Costs

    (3,490 )

Third-Lien Notes Debt Issuance Costs

    (15,581 )

Add back Interest Payable on remaining Old Notes

    502  

Proceeds from New Revolving Credit Facility

    46,058  
       

Net Cash Adjustment

  $ (4,687 )
    (e)
    Adjustment reflects amounts prepaid to ASOF pursuant to the terms of the Support Agreement that will be amortized as debt issuance costs.

    (f)
    Adjustment reflects the reduction of interest payable of $5.6 million due to the redemption of the Existing Secured Notes and $9.5 million due to the exchange of the Old Notes for the New Securities.

    (g)
    Adjustment reflects the redemption of the Existing Secured Notes, which are shown net of outstanding amortization costs.

    The following reconciles the net amounts presented in the historical balance sheet as of December 31, 2013 to the principal amount of the Existing Secured Notes:

Existing Secured Notes:

       

Principal Amount

  $ 334,197  

Unamortized Debt Issuance Costs

    7,883  
       

Net Amount

  $ 326,313  
    (h)
    Adjustment reflects the amortization of the debt issuance costs incurred in connection with the exchange of the Old Notes for the New Securities and the redemption of the Existing Secured Notes.

 

70


Table of Contents

    (i)
    Adjustment reflects the exchange of $222.3 million of Old Notes for the New Securities, net of remaining amortization costs. On a pro forma basis, each 1%, or $2.35 million, increase (decrease) in the aggregate principal amount of Old Notes that is exchanged in the Exchange Offer from the 95% participation level assumed (but assuming the Cash Option remains 50% subscribed) will result in a $2.35 million decrease (increase) in the aggregate principal amount of Old Notes, and a $2.35 million increase (decrease) in the aggregate principal amount of Third-Lien Notes. Additionally, if the Cash Option is 100% subscribed (but assuming the aggregate principal amount of Old Notes that is exchanged in the Exchange Offer remains at 95%), pro forma borrowings under the New Revolving Credit Facility will increase by approximately $10 million and the aggregate principal amount of Third-Lien Notes outstanding on a pro forma basis will decrease by approximately $16.67 million.


    The following reconciles the net amounts presented in the historical balance sheet as of December 31, 2013 to the principal amount of the Old Notes.

Old Notes:

   
 
 

Principal Amount

  $ 235,000  

Unamortized Debt Issuance Costs

    962  
       

Net Amount

  $ 234,038  
    (j)
    Adjustment reflects (in thousands):

Borrowings under the New First Lien Term Facility

  $ 300,000  

Debt Issuance Costs

    20,937  

Original Issue Discount

    4,500  
       

Net Amount

  $ 279,208  
    (k)
    Adjustment reflects (in thousands):

Borrowings under the New Second Lien Term Facility

  $ 50,000  

Debt Issuance Costs

    3,490  

Original Issue Discount

    2,750  
       

Net Amount

  $ 43,760  
    (l)
    Adjustment reflects (in thousands):

Principal Amount of Third-Lien Notes

  $ 223,250  

Debt Issuance Costs

    15,581  

Warrant Amortization

    20,180  
       

Net Amount

  $ 187,489  
    (m)
    Adjustment reflects borrowings under the New Revolving Credit Facility of $46.1 million.

    (n)
    The relative fair value of the Warrants of $20.2 million was calculated using the Black-Scholes valuation model.

    (o)
    Adjustment reflects:

Existing Secured Notes Unamortized Debt Issuance Costs

  $ (7,884 )

Call Premium of 3% on Existing Secured Notes

    (10,026 )

Debt Issuance Costs moved from expense to amortization

    6,402  

Old Notes Unamortized Debt Issuance Costs

    (962 )

Debt Issuance Costs from remaining Old Notes added back

    48  
       

Total Accumulated Deficit

  $ (12,421 )

 

71


Table of Contents


Summary of Ratio of Earnings to Fixed Charges

        The following table contains our consolidated ratio of earnings to fixed charges for each of the periods indicated. Earnings included in the calculation of this ratio consists of pre-tax earnings from operations, adjusted for fixed charges. Fixed charges included in the calculation of this ratio consist of cash interest paid and amortization of capitalized expenses related to indebtedness.


Alion Science and Technology
Computation of Ratio of Earnings to Fixed Charges

 
  2009   2010   2011   2012   2013   Three Months
Ended
December 31,
2012
  Three Months
Ended
December 31,
2013
 

Fixed Charges

                                           

Cash interest expense

  $ 52,358   $ 57,318   $ 57,476   $ 58,090   $ 58,578   $ 14,637   $ 14,594  

Paid in kind interest expense           

    4,917     3,263     6,300     6,423     6,551     1,626     1,660  

Amortization of capitalized expenses related to indebtedness

    5,067     7,192     10,143     10,421     10,571     2,656     2,694  
                               

Total fixed charges

  $ 62,342   $ 67,773   $ 73,919   $ 74,934   $ 75,700   $ 18,919   $ 18,948  

Earnings

                                           

Pre-tax earnings (loss)

  $ (17,193 ) $ 21,933   $ (37,410 ) $ (34,473 ) $ (29,615 ) $ (9,277 ) $ (16,717 )

Fixed charges

    62,342     67,773     73,919     74,934     75,700     18,919     18,948  
                               

Earnings before fixed charges           

  $ 45,149   $ 89,706   $ 36,509   $ 40,461   $ 46,085   $ 9,642   $ 2,231  

Ratio of earnings to fixed charges

    0.72     1.32     0.49     0.54     0.61     0.51     0.12  

Deficit of fixed charges over pre-tax earnings (loss)

  $ 17,193   $   $ 37,410   $ 34,473   $ 29,615   $ 9,277   $ 16,717  

 

72


Table of Contents


RISK FACTORS

        In addition to the other information set forth in this prospectus, you should carefully consider the following risk factors before deciding whether or not to participate in the Exchange Offer, provide your consent in the Consent Solicitation or participate in the Unit Offering.


Risks Relating to the Exchange Offer

We are not making a recommendation as to whether you should participate in the Exchange Offer, and we have not obtained a third-party determination that the Exchange Offer is fair to holders.

        Our board of directors believes that the completion of the Refinancing Transactions, of which the Exchange Offer and Consent Solicitation are components is critical to our continued viability. However, neither we, our board of directors, the Dealer Manager and Solicitation Agent, the Information and Exchange Agent nor any other person is making any recommendation as to whether or not you should tender your Old Notes for exchange in the Exchange Offer and Consent Solicitation. Further, we have not authorized anyone to make any recommendation. We have not obtained a third-party determination that the Exchange Offer is fair to the holders of the Old Notes, nor do we intend to do so.

If we are unable to complete the Exchange Offer, we will be unable to repay the Old Notes and Existing Senior Notes at their maturity, which will have a material adverse effect on our business, financial condition and operating results.

        We believe that the completion of the Refinancing Transactions, of which the Exchange Offer is one component, is critical to our continued viability. The Existing Secured Notes and the Old Notes mature in November 2014 and February 2015, respectively. Absent the completion of the Refinancing Transactions, we will be unable to repay the Old Notes and Existing Secured Notes at their maturity. The events of default resulting from our failure to repay the Old Notes and Existing Secured Notes could have a material adverse effect on our business, financial condition and operating results. If creditors were to exercise their rights, including the right to commence foreclosure proceeding against substantially all of our assets, we will likely need to invoke insolvency proceedings including a voluntary case under the U.S. Bankruptcy Code.

        The completion of the Exchange Offer is subject to the satisfaction, or in certain cases, waiver of specified conditions including that holders of 95% of the Old Notes tender their Old Notes into the Exchange Offer. Pursuant to the terms and subject to the conditions of the Support Agreement, the Supporting Noteholders who as of the date of this prospectus hold approximately 71.1% of the outstanding principal amount of the Old Notes, have committed to tender their Old Notes and deliver related consents into the Exchange Offer and Consent Solicitation for the New Securities Option and agreed not to withdraw their tenders (or revoke related consents). However, we still must obtain a significant amount of tenders of Old Notes from the remaining holders of Old Notes in order to satisfy the 95% Minimum Tender Condition. If the Minimum Tender Condition, as well as the other conditions to the Exchange Offer and Consent Solicitation are not satisfied or, if permitted, waived, the Exchange Offer may not be completed.

To the extent that a holder of Old Notes exchanges Old Notes for New Securities, such holder will be subject to the risk that we will be unable to repay or refinance the Third-Lien Notes at or prior to the time they mature.

        Holders of Old Notes are being offered New Securities, which include Third-Lien Notes that have a later maturity than the Old Notes they presently hold. Holders whose Old Notes are accepted for exchange will be exposed to the risk of nonpayment on the Third-Lien Notes for a longer period of time than non- tendering holders of the Old Notes. For instance, following the maturity date of the Old Notes, but prior to the maturity date of the Third-Lien Notes, we will have a substantial amount of indebtedness maturing and we may become subject to bankruptcy or similar proceedings. If so, holders

73


Table of Contents

of Old Notes who opted not to participate in the Exchange Offer may have been paid in full, and there is a risk that the holders of Old Notes who did opt to participate in the Exchange Offer and received New Securities would not be paid in full.

The Exchange Offer and the Consent Solicitation may be cancelled, amended or delayed.

        We have the right to terminate or withdraw at our sole discretion the Exchange Offer or the Consent Solicitation at any time if any condition to the Exchange Offer or the Consent Solicitation is not satisfied or waived. Subject to applicable law, we also have the right to amend the terms of the Exchange Offer or the Consent Solicitation. Even if the Exchange Offer and Consent Solicitation are consummated, they may not be consummated on the schedule described in this prospectus. Accordingly, after the Withdrawal Deadline, holders will not be able to effect transfers or sales of their Old Notes tendered pursuant to the Exchange Offer or their New Securities until the termination of the Exchange Offer or the Settlement Date.

You may not receive consideration in the Exchange Offer if the procedures for the Exchange Offer are not followed.

        Subject to the terms and conditions of the Exchange Offer, we will issue the New Securities, if you elect the New Securities Option or the New Securities Plus Unit Offering Option, or cash, if you elect the Cash Option, in exchange for your Old Notes only if you validly tender all of your Old Notes and deliver a properly completed and duly executed consent and letter of transmittal, or an Agent's Message in lieu thereof, and other required documents at or prior to the Expiration Date. You should allow sufficient time to ensure timely delivery of the necessary documents. Neither we nor the Information and Exchange Agent is under any duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange or delivery of your consent. If you are the beneficial owner of Old Notes that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee, and you wish to tender in the Exchange Offer, you should promptly contact the person in whose name your Old Notes are registered and instruct that person to tender your Old Notes and deliver your consent on your behalf.

Due to proration, you may not receive cash for all of your Old Notes tendered into the Cash Option.

        If the cash required to purchase all Old Notes validly tendered pursuant to the Cash Option (excluding accrued and unpaid interest and the Early Tender Payment) exceeds $20,000,400, each holder who elected the Cash Option will have the amount of Old Notes it validly tendered for cash accepted for exchange into the Cash Option on a pro rata basis, with the balance of Old Notes validly tendered by that holder being exchanged into New Securities as if that holder elected the New Securities Option with respect to the balance of that holder's Old Notes. As a result, due to proration, even if you validly tender Old Notes for the Cash Option, you may receive cash for only a portion of the Old Notes you tendered. If proration is required with respect to the Cash Option, we will not be able to determine the final proration prior to the Expiration Date.

Recent bid prices of the Old Notes have generally been higher than the $600 offered pursuant to the Cash Option.

        The Old Notes are not listed for trading on an exchange. Since        , 2014, trading prices of the Old Notes, as reported on FINRA's TRACE reporting system, have ranged from approximately $        to approximately $        per $1,000 aggregate principal amount. Accordingly, the cash you receive in the Exchange Offer may be lower than the price at which you could sell the Old Notes in the market.

74


Table of Contents

The exchange ratio for the Exchange Offer and the terms of the New Securities do not reflect any independent valuation of the Old Notes or the New Securities. We may purchase or repay any Old Notes not tendered in the Exchange Offer on terms that could be more favorable to holders of Old Notes than the terms of the Exchange Offer.

        We have not obtained or requested a fairness opinion from any banking or other firm as to the fairness of the exchange ratios or the absolute or relative values of Old Notes and New Securities. While the Old Notes are not traded on an exchange, we understand that the bid price for Old Notes as of a recent date was above the Total Consideration offered for the Old Notes in the Cash Option pursuant to this Exchange Offer. We may, at any time to the extent permitted by applicable law and the agreements governing our indebtedness, purchase Old Notes in the open market, in privately negotiated transactions, through subsequent tender or exchange offers or otherwise. Any future purchases may be made on the same terms or on terms which are more or less favorable to holders than the terms of the Exchange Offer. We may also exercise any of our rights under the indenture governing such Old Notes (including redemption or defeasance rights), and the Old Notes mature in February 2015, at which time we are required to repay the full principal amount thereof, plus accrued and unpaid interest thereon. If we repurchase or repay Old Notes that are not tendered in the Exchange Offer on terms that are more favorable than the terms of the Exchange Offer, holders who decided not to participate in the Exchange Offer could receive greater consideration for their Old Notes than those that participated in the Exchange Offer.

We may recognize a significant amount of cancellation of indebtedness, which we refer to as "COD" income, as a result of the transactions contemplated by the Exchange Offer and the Refinancing Transactions.

        The exchange of Old Notes for Third-Lien Notes pursuant to the Exchange Offer and, subject to the discussion below in "Material U.S. Federal Income Tax Considerations—Tax Consequences to Non-Participating Holders," the adoption of the Proposed Amendments, may result in COD income to us for United States federal income tax purposes. Because the amount of COD income to be recognized by us depends in part on the fair market value (and, thus, the issue price) of instruments to be issued on the date of the exchange (or deemed exchange), the precise amount of COD income, if any, resulting from the exchange (or deemed exchange) of Old Notes cannot be determined prior to the date of the exchange (or deemed exchange). However, we generally anticipate that any COD income that we recognize in the Exchange Offer will be offset, at least in part, by our existing net operating losses, or "NOLs", and certain other tax attributes. To the extent that our existing NOLs and other tax attributes are not sufficient to offset fully any COD income, we may incur a cash tax liability from such COD income.

The interests of the Supporting Noteholders may diverge from those of other holders of the Old Notes.

        The interests of the Supporting Noteholders may diverge from those of other holders of the Old Notes. For example, immediately after the consummation of the Refinancing Transactions, ASOF will be the sole lender under the New Second Lien Term Facility and has received fees related to providing the New Second Lien Term Facility and ASOF Cash Funding as described under "Description of the Support Agreement" and may receive additional fees in the future as the sole lender under the New Second Lien Term Facility.

        The Supporting Noteholders have the right to terminate the Support Agreement upon the occurrence of certain events, including the following: (i) the Exchange Offer is terminated in accordance with its terms or expires, in each case without us having received valid tenders of at least 95% of principal amount of the Old Notes, or such lesser percentage as determined by the Supporting Noteholders; (ii) the closing of the Refinancing Transactions shall not have occurred on or before July 31, 2014; and (iii) the occurrence of a Material Adverse Change or a Material Market Change (as

75


Table of Contents

such terms are defined in the Support Agreement). If the Support Agreement is terminated in accordance with its terms, we have agreed to terminate the Exchange Offer and Consent Solicitation.

        The Support Agreement provides that two members of our board of directors will resign on the Expiration Date and the holder of the Series A Preferred Stock will elect two members of the board of directors to fill the vacancies. As a result of their significant ownership percentage after giving effect to the Refinancing Transactions, the Supporting Noteholders, acting together, will control the election of the two board members (initially expected to be Lawrence A. First and Daniel H. Clare, both of whom are affiliated with ASOF).


Risks to Holders of Non-Tendered Old Notes

If we consummate the Exchange Offer, claims with respect to any Old Notes that remain outstanding will be effectively subordinated to claims with respect to the Third-Lien Notes and the related guarantees (as well as our and the Old Notes Guarantors' other secured indebtedness under the New Secured Term Debt and the New Revolving Credit Facility), and will remain outstanding and subject to our ability to repay them at maturity. In addition, in the event of a bankruptcy, liquidation or insolvency, there would be fewer assets remaining from which the claims of any Old Notes that remain outstanding could be satisfied.

        The unsecured nature of the claims of the non-tendered Old Notes following the completion of the Exchange Offer could materially and adversely affect the value of a holder's non-tendered or not accepted Old Notes and, in the event of our bankruptcy, liquidation or insolvency, the extent of such holder's recovery because Old Notes would only be repaid after all secured obligations are repaid with proceeds from collateral. Any Old Notes not tendered into the Exchange Offer will be our and the Old Notes Guarantors' unsecured indebtedness, which will rank equal in priority with all of our and the Old Notes Guarantors' other unsecured and unsubordinated obligations (including trade credit). Any Old Notes not tendered by holders or not accepted for exchange or otherwise left outstanding following the consummation of the Exchange Offer will be effectively subordinated to indebtedness under the Third-Lien Notes, the New Secured Term Debt and the New Revolving Credit Facility to the extent of the value of the collateral securing such obligations. In the event of our bankruptcy, liquidation or insolvency, the proceeds from any collateral sales will be applied first to satisfy our obligations under our New Revolving Credit Facility, the New Secured Term Debt, and the Third-Lien Notes, and there would be fewer assets remaining from which the claims of the Old Notes could be satisfied. The market prices for the non-tendered or not accepted Old Notes may also be negatively affected by this effective subordination.

        While the Old Notes Guarantors will continue to guarantee any Old Notes that are not tendered in the Exchange Offer, if the Proposed Amendments become operative, the provision of the Old Notes Indenture that requires our future restricted subsidiaries to guarantee the Old Notes will be eliminated, so the Old Notes will be structurally subordinated to the indebtedness of any such future restricted subsidiaries that do not guarantee the Old Notes.

        In addition, our ability to repay or refinance any Old Notes that remain outstanding after the Refinancing Transactions will be subject to our liquidity and, if necessary, our ability to access the capital markets. To the extent they are not previously repurchased or redeemed, each 1% of Old Notes that remains outstanding after consummation of this Exchange Offer will require $2.3 million of cash, plus accrued and unpaid interest thereon, to be paid by us on their maturity date, February 1, 2015. There can be no assurance that we will have sufficient liquidity to repay, or be able to refinance, any Old Notes not exchanged.

76


Table of Contents

Upon consummation of the Exchange Offer, liquidity of the market for outstanding Old Notes will likely be reduced, and market prices for outstanding Old Notes may decline as a result.

        If the Exchange Offer is consummated, the aggregate principal amount of outstanding Old Notes will be reduced substantially. A reduction in the amount of outstanding Old Notes would likely adversely affect the liquidity of the non- tendered Old Notes. An issue of securities with a small outstanding principal amount available for trading, or float, generally commands a lower price than does a comparable issue of securities with a greater float. Therefore, the market price for an Old Note that is not tendered may be adversely affected. A reduced float may also make the trading prices of Old Notes that are not exchanged more volatile.

If we consummate the Consent Solicitation and the Proposed Amendments become operative, holders of Old Notes will no longer benefit from the protections provided by substantially all of the existing restrictive covenants, certain events of default and other provisions.

        If the Proposed Amendments become operative, Old Notes that are not tendered and accepted pursuant to the Exchange Offer will remain outstanding immediately following the completion of the Exchange Offer and will be subject to the terms of the Old Notes Indenture as modified by the Second Supplemental Indenture. Among other things, as a result of the Proposed Amendments, substantially all of the affirmative and negative covenants contained in the Old Notes Indenture and the Old Notes will be eliminated or waived and certain events of default, the covenant restricting mergers and consolidations and certain provisions relating to defeasance contained in the Old Notes Indenture and the Old Notes will be eliminated or modified. Following the adoption and implementation of the Proposed Amendments, holders of Old Notes not tendered or not accepted for exchange in the Exchange Offer will no longer be entitled to the benefits of such covenants, events of default and other provisions. Subject to the terms of our other indebtedness, the elimination of these protections will permit us and our subsidiaries to take certain actions previously prohibited that could increase our credit risks, as well as adversely affect the market price and credit rating of the remaining Old Notes. See "Proposed Amendments."

Existing rating agency ratings for the Old Notes may not be maintained.

        As a result of the Exchange Offer and the Consent Solicitation or otherwise, one or more rating agencies, including S&P or Moody's, may take action to downgrade or negatively comment upon their respective ratings on the Old Notes. Any downgrade or negative comment could adversely affect the market price of the Old Notes.

We may purchase Old Notes in the future at different prices.

        Subject to the limitations set forth in our debt agreements and our liquidity, we may from time to time repurchase any Old Notes that remain outstanding after completion of the Exchange Offer through open market or privately negotiated transactions, one or more additional tender or exchange offers or otherwise, at purchase prices that may be greater than the Exchange Consideration or the Total Consideration.

The IRS could assert that the Proposed Amendments will constitute a significant modification of the terms of such Old Notes and a non-tendering holder will be treated as having exchanged its "original" Old Notes for "modified" Old Notes, for U.S. federal income tax purposes, which may cause gain or loss to be recognized.

        In the case of the adoption of the Proposed Amendments to the Old Notes Indenture, although the issue is not free from doubt, we intend to take the position that the adoption of such Proposed Amendments will not constitute a "significant modification" of the terms of the Old Notes for U.S. federal income tax purposes. If such Proposed Amendments were treated as a significant modification

77


Table of Contents

of the terms of such Old Notes, a non-tendering holder would be treated as having exchanged its "original" Old Notes, for "modified" Old Notes, for U.S. federal income tax purposes, in which case, unless the exchange is treated as a tax-free exchange, gain or loss may be recognized. For a discussion of certain U.S. federal income tax consequences of the Exchange Offer and of the adoption of the Proposed Amendments to the Old Notes Indenture, see "Material U.S. Federal Income Tax Considerations".


Risks Relating to the Third-Lien Notes

The Third-Lien Notes may trade at a discount to their principal amount or the trading value, redemption price or principal amount of the Old Notes.

        The Old Notes are currently trading at a discount to their principal amount. While the market, if any, for the Third-Lien Notes will depend upon many factors, including prevailing interest rates, the market for similar securities, general economic conditions and our financial condition, performance and prospects, the Third-Lien Notes may trade at a discount to their principal amount and any such discount may be significant. There can be no assurance that the Third-Lien Notes will trade at or above their principal amount, or at or above the current or future trading price of the Old Notes.

The issuance of Third-Lien Notes and guarantees and/or the grant of liens securing the Third-Lien Notes and guarantees could be wholly or partially voided as preferential transfer by a bankruptcy court.

        If we become the subject of a bankruptcy proceeding within 90 days after we consummate the Exchange Offer (or, with respect to any insiders specified in bankruptcy law who are holders of Third-Lien Notes, within one year after consummation of the Exchange Offer), and the court determines that we were insolvent at the time of the Exchange Offer (under the preference laws, we would be presumed to have been insolvent on and during the 90 days immediately preceding the date of filing of any bankruptcy petition), the court could find that the issuance of the Third-Lien Notes and guarantees and/or the grant of liens securing the Third-Lien Notes involved a preferential transfer. If the court determined that the Exchange Offer was therefore a preferential transfer which did not qualify for a defense under the bankruptcy laws, and avoided the Third-Lien Notes or the guarantees or the amounts owing under the Third-Lien Notes issued in exchange for the Old Notes or the liens securing the Third-Lien Notes and guarantees, then (i) the value of any consideration holders received with respect to such Third-Lien Notes or guarantees or collateral for such Third-Lien Notes or guarantees could be recovered from such holders and possibly from subsequent transferees and the liens securing the Third-Lien Notes and guarantees could be avoided, or (ii) holders might be returned to the same position they held as holders of such Old Notes.

Federal and state fraudulent transfer laws permit a court to void the Third-Lien Notes and guarantees and/or the liens securing the Third-Lien Notes and guarantees, and, if that occurs, you may not receive any payments on the Third-Lien Notes and you may lose the benefit of the liens securing the Third-Lien Notes and guarantees.

        The issuance of the Third-Lien Notes and the related guarantees and the grant of liens securing the Third-Lien Notes and guarantees may be subject to review under federal and state fraudulent transfer and conveyance statutes if a bankruptcy, liquidation or reorganization case or a lawsuit, including under circumstances in which bankruptcy is not involved, were commenced at some future date by us, by the guarantors or on behalf of our unpaid creditors or the unpaid creditors of a guarantor. While the relevant laws may vary from state to state, a court may void, subordinate or otherwise decline to enforce the Third-Lien Notes, the guarantees or the liens securing the Third-Lien Notes and the guarantees, if it found that when the Third-Lien Notes and the guarantees were issued or the liens securing the Third-Lien Notes and guarantees were granted, or in some states when

78


Table of Contents

payments became due under the Third-Lien Notes, we or the guarantors received less than reasonably equivalent value or fair consideration and either:

    were insolvent or rendered insolvent by reason of such incurrence;

    were left with inadequate capital to conduct its business; or

    believed or reasonably should have believed that we or the guarantors would incur debts beyond our or the guarantors' ability to pay.

        The court might also void an issuance of Third-Lien Notes or a related guarantee by a guarantor, or the liens securing such Third-Lien Notes or such guarantee, without regard to the above factors, if the court found that we issued the Third-Lien Notes and granted the liens securing same, or the applicable guarantor made its guarantee and granted the liens securing same, with actual intent to hinder, delay or defraud its creditors.

        A court would likely find that we or a guarantor did not receive reasonably equivalent value or fair consideration for the Third-Lien Notes or its guarantee of the Third-Lien Notes or for the liens granted by us or such guarantor as security for the Third-Lien Notes or its guarantee, if we or such guarantor did not substantially benefit directly or indirectly from the issuance of the Third-Lien Notes, particularly in the case where the Third-Lien Notes are being exchanged for Old Notes. If a court were to void the liens, you would no longer have any secured claim against us or the applicable guarantor. Sufficient funds to repay the Third-Lien Notes may not be available from other sources, including the remaining obligors, if any. In addition, the court might direct you to repay any amounts that you already received from us or a guarantor.

        The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

    the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or

    if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

    it could not pay its debts as they become due.

        We cannot assure you, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

If a bankruptcy petition were filed by or against us or the guarantors, holders of the Third-Lien Notes issued in exchange for the Old Notes may have their claims allowed in a lesser amount than the face amount of their claims under the indenture governing the Third-Lien Notes.

        If a bankruptcy petition were filed by or against us under the U.S. Bankruptcy Code after the consummation of the Exchange Offer with respect to the Old Notes and the issuance of the Third-Lien Notes in exchange therefor, the allowed claim of any holder of the Third-Lien Notes issued in exchange for the Old Notes for the principal amount of the Third-Lien Notes may be limited to an amount equal to the sum of:

    the original issue price for the Third-Lien Notes; and

    that portion of the original issue discount that does not constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code.

79


Table of Contents

        Bankruptcy courts have not developed a uniform method for determining the original issue price of new debt securities issued in an exchange offer. Rather, the facts and circumstances of the particular issuance appear to dictate how the original issue price of new debt securities is determined. Measures of the original issue price of new securities in an exchange offer have included the fair market value of the notes being exchanged (i.e., the Old Notes) at the time of the exchange and the selling price of the new debt securities (i.e., the Third-Lien Notes) on their first day of trading. Additionally, a bankruptcy court would likely consider the value of the Warrants being issued in the Exchange Offer in its determination of the original issue price of the Third-Lien Notes.

        Any original issue discount that was not amortized as of the date of the bankruptcy filing would likely constitute unmatured interest. Accordingly, holders of the Third-Lien Notes under these circumstances may have their claims allowed in a lesser amount than the face amount of their claims would be under the terms of the indenture governing the Third-Lien Notes, even if sufficient funds are available to pay such holders the unamortized portion of any original issue discount as of the bankruptcy filing.

In the event of a bankruptcy of us or any of the subsidiary guarantors, holders of the Third-Lien Notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the Third-Lien Notes exceed the fair market value of the collateral securing the Third-Lien Notes.

        In any bankruptcy case with respect to us or any of the subsidiary guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the collateral with respect to the Third-Lien Notes on the date of the bankruptcy filing was less than the then current principal amount of the Third-Lien Notes. Upon a finding by the bankruptcy court that the Third-Lien Notes are under-collateralized, the claims in the bankruptcy case with respect to the Third-Lien Notes would be bifurcated between a secured claim and an unsecured claim, and the unsecured claim would not be entitled to the benefits of security in the collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of the Third-Lien Notes to receive postpetition interest, fees and expenses and a lack of entitlement on the part of the unsecured portion of the Third-Lien Notes to receive "adequate protection" under federal bankruptcy laws. In addition, if any payments of post-petition interest, fees and expenses had been made at any time prior to such a finding of under-collateralization, those payments would be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the Third-Lien Notes.

The value of the collateral securing the Third-Lien Notes may not be sufficient to secure post-petition interest, fees and expenses.

        In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of the Third-Lien Notes will only be entitled to post-petition interest, fees and expenses under the United States Bankruptcy Code to the extent that the value of their security interest in the collateral is greater than their prebankruptcy claim. Holders of the Third-Lien Notes that have a security interest in collateral with a value equal or less than their pre-bankruptcy claim will not be entitled to post-petition interest, fees and expenses under the United States Bankruptcy Code. No appraisal of the fair market value of the collateral has been prepared in connection with the Exchange Offer and we therefore cannot assure you that the value of the holders' interest in the collateral equals or exceeds the principal amount of the Third-Lien Notes.

The Third-Lien Notes will be secured only to the extent of the value of the assets that have been granted as security for the Third-Lien Notes.

        No appraisal of the value of the collateral has been made in connection with the Exchange Offer, and the fair market value of the collateral is subject to fluctuations based on factors that include,

80


Table of Contents

among others, general economic conditions and similar factors. The amount to be received upon a sale of the collateral would be dependent on numerous factors, including the actual fair market value of the collateral at such time, the timing and the manner of the sale and the availability of buyers. By its nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, the collateral may not be sold in a timely or orderly manner, and, particularly after application to other indebtedness secured by a priority claim on such collateral, the net proceeds from any sale or liquidation of this collateral may not be sufficient to pay our obligations under the Third-Lien Notes.

The IRS could assert that the exchange of Old Notes is a taxable transaction.

        Although we intend to take the position that the exchange of Old Notes for New Securities in the Exchange Offer will not be a taxable transaction (except with respect to amounts received in respect of accrued but unpaid interest and any cash received), the rules are unclear, and the IRS could assert that the exchange is a taxable transaction for federal income tax purposes. You should review the section entitled "Material U.S. Federal Income Tax Considerations", which describes the tax consequences if the exchange of Old Notes for New Securities in the Exchange Offer qualifies as a tax-free exchange or if it is instead taxable in full or in part. You should also consult your own tax advisor regarding the tax consequences of exchanging Old Notes for New Securities in the Exchange Offer.

The Third-Lien Notes will mature after or concurrently with all of our other indebtedness.

        The Third-Lien Notes and the New Second Lien Term Facility will mature on the same date in 2019. Our New Revolving Credit Facility, our New First Lien Term Facility, and any Old Notes that remain outstanding after the successful completion of the Exchange Offer will mature prior to the Third-Lien Notes and the New Second Lien Term Facility. Therefore, we will be required to repay a substantially majority of our other creditors before we are required to repay a portion of the interest due on, and the principal of, the Third-Lien Notes. We may not be able to repay or refinance any of the debt that matures prior to the maturity date of the Third-Lien Notes, which could lead to insolvency proceedings or debt restructurings prior to that maturity date, which could negatively affect our ability to make all required principal and interest payments on the Third-Lien Notes. Furthermore, by virtue of the intercreditor agreement, the liens that secure our New Second Lien Term Facility will be higher in priority than those that secure the Third-Lien Notes.

        In order to address the earlier maturity of this debt, we expect that we will need to opportunistically repurchase this debt or refinance it through issuance of new debt, which may, subject to the covenants contained in the New Revolving Credit Facility, the New Secured Term Debt and the indenture governing the Third-Lien Notes, be secured by liens that are senior in priority to those that will secure the Third-Lien Notes.

The Third-Lien Notes and related guarantees will be secured by liens on the collateral that will be junior in priority to those that will secure our and the guarantors' obligations under the New Secured Term Debt and the New Revolving Credit Facility, and guarantees in respect of any of the foregoing.

        The Third-Lien Notes and related guarantees will be secured by liens on the collateral that will be junior in priority to those that will secure our and the guarantors' obligations under the New Secured Term Debt and the New Revolving Credit Facility and guarantees in respect of any of the foregoing (the "First Lien Obligations"). As a result, the Third-Lien Notes and related guarantees will be effectively junior to our and the guarantors' obligations under the New Secured Term Debt and the New Revolving Credit Facility and guarantees in respect of any of the foregoing.

81


Table of Contents

        The holders of obligations secured by higher-priority security interests in the collateral will be entitled to receive proceeds from any realization of such collateral to repay their obligations in full before the holders of Third-Lien Notes will be entitled to any recovery from the collateral. In the event of a foreclosure, the proceeds from the sale of all of such collateral may not be sufficient to satisfy the amounts outstanding under the Third-Lien Notes and other obligations secured by liens on the collateral of equal priority to those securing the Third-Lien Notes, if any, after payment in full of all obligations secured by higher-priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the Third-Lien Notes, then holders of Third-Lien Notes (to the extent not repaid from the proceeds of the sale of the collateral) would only have an unsecured claim against our remaining assets, which claim will rank equal in priority to the unsecured and unsubordinated claims with respect to any unsatisfied portion of the obligations secured by higher-priority liens and our other unsecured seni