C3 Inc., a Herndon-based computer company struggling under the debt incurred in a 1989 takeover, yesterday named a new president and chief executive officer and reached agreement on a plan to reduce its debt.

The new president and CEO is Anthony Craig, a 20-year industry veteran who has been with three companies in the past three years. His most recent post was president, chief executive and a director of Prime Computer, a Natick, Mass., maker of mid-size computers.

Craig is no stranger to takeover attempts. His nine-month tenure at Prime was spent fighting a hostile offer from MAI Basic Four, a Tustin, Calif.-based computer maker. Prime warded off MAI Basic Four by going private with the assistance of J.H. Whitney, a venture capital firm.

Before he came to Prime, Craig for two years was president and CEO of Rockville-based GE Information Services, which operates a private global telecommunications network. C3 Chairman Fred Knoll said Craig's reversal of GE Information Services's once-poor fortunes was a major factor in the decision to hire him.

"The turnaround with GE was specifically relevant to us," Knoll said. "We're looking for him to continue our penetration of the {computer} systems integration business and continue our growth process."

He said the "growth process" would be aided by the recapitalization, which is expected to reduce C3's debt by $38 million. Under the recapitalization, C3's common stockholders -- primarily Knoll -- will inject $3 million in cash in return for preferred stock. A significant amount of the company's subordinated debt will be converted into a new series of preferred stock with a face value of $40 million.

According to Daniel H. Abramowitz, portfolio manager for Sidney Brown, a well-known Washington developer who once held a large stake in C3 and now has only a small holding, that should improve C3's ability to raise the cash needed to pursue the government contracts that are essential to its existence.

"It was hard for them to compete in the shrinking government {contracts} market against companies that could afford to take a loss on a contract for three years," Abramowitz said. "This {recapitalization} will do wonders for their balance sheet. Their cash flow should rebound strongly. Now management can concentrate on getting business instead of keeping the company afloat."