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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 20, 1998
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SM&A CORPORATION
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(Exact name of registrant a specified in its Charter)
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California 0-23585 33-0080929
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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4695 MacArthur Court, Eighth Floor, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 975-1550
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Steven Myers & Associates, Inc.
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 20, 1998, SM&A Corporation (formerly, Steven Myers &
Associates, Inc.) ("SM&A") acquired Decision-Science Applications, Inc. ("DSA"),
a Virginia corporation, in a forward-triangular merger (the "Acquisition"). The
Acquisition was achieved pursuant to an Agreement and Plan of Reorganization and
Merger (the "Merger Agreement"), dated July 22, 1998, by and among SM&A, DSA,
DSA Acquisition, Inc. ("Sub"), a California corporation, a wholly-owned
subsidiary of SM&A, and certain individual shareholders named therein. Pursuant
to the Merger Agreement, Sub was merged with and into Sub, with Sub surviving as
a wholly-owned subsidiary of SM&A. In connection with the Acquisition, the
shareholders of DSA received an aggregate of 714,839 shares of SM&A Common Stock
and $14,035,419 in cash on a pro rata basis as set forth in the Merger
Agreement. In determining the aggregate purchase price for DSA, SM&A took into
account the value of companies of similar industry and size to DSA, comparable
transactions, and the market for such companies generally.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of DSA. Financial statements of DSA and
required to be filed pursuant to this section are not available at this time.
Such financial statements will be filed by SM&A as soon as practicable by an
amended Current Report on Form 8-K which will be filed within sixty (60) days
after the required filing date of this Current Report on Form 8-K.
(b) Pro Forma Financial Information. The pro forma financial statements
of SM&A required to be filed pursuant to this section are not available at this
time. Such pro forma financial information will be filed by SM&A as soon as
practicable by an amended Current Report on Form 8-K which will be filed within
sixty (60) days after the required filing date of this Current Report on Form
8-K.
(c) Exhibits.
2.1 Agreement and Plan of Reorganization and Merger, dated July 22,
1998, by and among Steven Myers & Associates, Inc.,
Decision-Science Applications, Inc. and certain individual
shareholders named therein and certain exhibits.
10.1 Registration Rights Agreement dated August 20, 1998 by and among
Registrant and certain shareholders set forth therein.
10.2 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Guy A. Ackerson.
10.3 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Guy L. Lucas
10.4 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Dana R. Raucher
10.5 Escrow Agreement dated August 20, 1998 by and among Registrant,
Decision-Science Applications, Inc., First American Trust
Company and certain shareholders identified therein.
99.1 Text of Press Releases dated July 22, 1998.
99.2 Text of Press Release dated August 21, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 21, 1998 SM&A CORPORATION
(formerly Steven Myers & Associates, Inc.)
By: /S/ RONALD A. HUNN
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Ronald A. Hunn, Chief Financial Officer
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INDEX TO EXHIBITS
2.1 Agreement and Plan of Reorganization and Merger, dated July 22, 1998, by
and among Steven Myers & Associates, Inc., DSA Acquisition, Inc.,
Decision-Science Applications, Inc., and certain individual shareholders
named therein, and certain exhibits.
10.1 Registration Rights Agreement dated August 20, 1998 by and among
Registrant and certain shareholders set forth therein.
10.2 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Guy A. Ackerson.
10.3 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Guy L. Lucas
10.4 Employment Agreement dated August 20, 1998 by and between
Decision-Science Applications, Inc. and Dana R. Raucher
10.5 Escrow Agreement dated August 20, 1998 by and among Registrant,
Decision-Science Applications, Inc., First American Trust Company and
certain shareholders identified therein.
99.1 Text of Press Release dated July 22, 1998.
99.2 Text of Press Release dated August 21, 1998.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER
among
STEVEN MYERS & ASSOCIATES, INC.,
DECISION-SCIENCE APPLICATIONS, INC.
DSA ACQUISITION, INC.
and
GUY A. ACKERSON
AND
GARY LUCAS
Dated as of July 22, 1998
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1. THE MERGER......................................................................... 1
1.1 Merger...................................................................... 1
1.2 Effective Time of Merger.................................................... 2
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
Corporation................................................................. 2
1.4 Effect of Merger............................................................ 2
1.5 Reorganization.............................................................. 3
2. CONVERSION AND EXCHANGE OF STOCK................................................... 3
2.1 Merger Consideration........................................................ 3
2.2 Conversion of Capital Stock of the Company.................................. 3
2.3 Capital Stock of Newco...................................................... 3
2.4 Options..................................................................... 3
2.5 Dissenting Shares........................................................... 3
2.6 Fractional Shares........................................................... 4
2.7 Escrow of Shares............................................................ 4
2.8 Exchange of Certificates.................................................... 4
3. CLOSING............................................................................ 5
3.1 Closing..................................................................... 5
3.2 Closing Deliveries.......................................................... 5
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................... 7
4.1 Due Organization............................................................ 7
4.2 Authorization; No Conflicts................................................. 7
4.3 Capital Stock............................................................... 8
4.4 Transactions in Capital Stock and Spin-offs................................. 8
4.5 No Bonus Shares............................................................. 8
4.6 Subsidiaries................................................................ 8
4.7 SM&A Stock Ownership........................................................ 9
4.8 Financial Statements........................................................ 9
4.9 Liabilities and Obligations................................................. 9
4.10 Approvals................................................................... 9
4.11 Accounts and Notes Receivable............................................... 9
4.12 Intellectual Property....................................................... 10
4.13 Permits..................................................................... 10
4.14 Real and Personal Property.................................................. 10
4.15 Material Contracts and Commitments.......................................... 11
4.16 Insurance................................................................... 12
4.17 Employees, Consultants, Etc................................................. 12
4.18 Benefit Plans; ERISA Compliance............................................. 13
4.19 Conformity with Law; Pending or Threatened Claims........................... 17
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4.20 Taxes....................................................................... 17
4.21 Government Contracts........................................................ 18
4.22 Absence of Changes.......................................................... 18
4.23 Deposit Accounts; Powers of Attorney........................................ 20
4.24 Relations with Governments.................................................. 20
4.25 Conflicts of Interest....................................................... 20
4.26 Environmental Matters....................................................... 21
4.27 Future Plans and Commitments................................................ 21
4.28 The Private Placement Memorandum............................................ 21
4.29 Disclosure.................................................................. 21
5. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS....................... 22
5.1 Authorization; No Conflicts................................................. 22
5.2 Title to Company Stock...................................................... 22
6. REPRESENTATIONS AND WARRANTIES OF SM&A............................................. 22
6.1 Organization and Standing................................................... 22
6.2 Authorization and Binding Obligation........................................ 22
6.3 No Conflicts................................................................ 23
6.4 Approvals................................................................... 23
6.5 Litigation and Administrative Proceedings................................... 23
6.6 SM&A Stock Issued in Merger................................................. 23
6.7 NASDAQ National Market Listing.............................................. 24
6.8 Taxes....................................................................... 24
6.9 SEC Documents............................................................... 24
6.10 Subsidiaries................................................................ 25
6.11 Financial Statements........................................................ 25
6.12 Permits..................................................................... 25
6.13 Conformity with Law; Pending or Threatened Claims........................... 25
7. COVENANTS.......................................................................... 26
7.1 Access and Cooperation...................................................... 26
7.2 Conduct of Business Pending Closing......................................... 26
7.3 Prohibited Activities....................................................... 27
7.4 [Reserved].................................................................. 28
7.5 Release by Principal Shareholders........................................... 28
7.6 No Shop..................................................................... 28
7.7 Options..................................................................... 28
7.8 Conduct of Regulation D Offering............................................ 28
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE PRINCIPAL SHAREHOLDERS......................................................... 28
8.1 Representations and Warranties; Performance of Obligations.................. 29
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8.2 Counsel Approval............................................................ 29
8.3 No Litigation............................................................... 29
8.4 No Material Adverse Change.................................................. 29
8.5 Opinion of Counsel.......................................................... 29
8.6 Consents and Approvals...................................................... 29
8.8 Additional Contracts........................................................ 30
8.9 Good Standing Certificates.................................................. 30
8.10 Securities Compliance....................................................... 30
8.11 Tax Opinion................................................................. 30
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SM&A AND NEWCO.............................. 30
9.1 Representations and Warranties; Performance of Obligations.................. 30
9.2 No Litigation............................................................... 30
9.3 Examination of Financial Statements......................................... 30
9.4 No Material Adverse Change.................................................. 31
9.5 Review...................................................................... 31
9.6 Counsel Approval............................................................ 31
9.7 Opinion of Counsel.......................................................... 31
9.8 Consents and Approvals...................................................... 31
9.9 Additional Liabilities and Obligations...................................... 31
9.10 Additional Contracts........................................................ 31
9.11 Good Standing Certificates.................................................. 32
9.12 Securities Compliance....................................................... 32
9.13 Termination of the Company Stock Option Plan................................ 32
9.14 Options..................................................................... 32
9.15 Dissenters' Rights.......................................................... 32
9.16 Compliance With Regulation D and Rule 144................................... 32
10. INDEMNIFICATION.................................................................... 32
10.1 Survival.................................................................... 32
10.2 Indemnification by Shareholders............................................. 33
10.3 Indemnification by SM&A..................................................... 33
10.4 Indemnification Procedures.................................................. 33
11. NONCOMPETITION..................................................................... 35
11.1 Prohibited Activities of the Principal Shareholders......................... 35
11.2 Prohibited Activities of SM&A and Newco..................................... 35
11.3 Acknowledgments............................................................. 35
11.4 Independent Covenant........................................................ 36
12. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
SM&A STOCK; REGISTRATION RIGHTS.................................................... 36
12.1 Regulation D................................................................ 36
12.2 Registration Rights Agreement; Registration Efforts......................... 36
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12.3 Form 8-K.................................................................... 36
12.4 Legend...................................................................... 37
13. CERTAIN DEFINITIONS................................................................ 37
13.1 "Affiliate"................................................................. 37
13.2 "Average Closing Price for the Base Period"................................. 37
13.3 "Cash Consideration"........................................................ 37
13.4 "Cash Exchange Amount"...................................................... 37
13.5 "Cash Out".................................................................. 37
13.6 "Cash Out Amount"........................................................... 37
13.7 "Company Options"........................................................... 37
13.8 "Company Stock"............................................................. 37
13.9 "Dissenters' Rights"........................................................ 37
13.10 "Encumbrances".............................................................. 38
13.11 "Exchange Act".............................................................. 38
13.12 "GAAP"...................................................................... 38
13.13 "Government Authority"...................................................... 38
13.14 "Knowledge"................................................................. 38
13.15 "Legal Requirement"......................................................... 38
13.16 "Material Adverse Effect"................................................... 38
13.17 "Outstanding Common Shares"................................................. 38
13.18 "Person".................................................................... 38
13.19 "Private Placement Memorandum".............................................. 39
13.20 "Purchase Price Adjustment Amount".......................................... 39
13.21 "Regulation D".............................................................. 39
13.22 "SEC"....................................................................... 39
13.23 "Securities Act"............................................................ 39
13.24 "Share Consideration"....................................................... 39
13.25 "Share Exchange Ratio"...................................................... 39
13.26 "SM&A Stock"................................................................ 39
13.27 "Technology"................................................................ 39
14. TERMINATION........................................................................ 39
14.1 Circumstances of Termination................................................ 39
14.2 Termination Fee............................................................. 40
14.3 Effect of Termination....................................................... 41
15. GENERAL............................................................................ 41
15.1 Cooperation................................................................. 41
15.2 Successors and Assigns...................................................... 41
15.3 Entire Agreement............................................................ 41
15.4 Counterparts................................................................ 41
15.5 Brokers and Agents.......................................................... 41
15.6 Payment of Expenses......................................................... 42
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15.7 Attorney's Fees, Prevailing Party........................................... 42
15.8 Notices..................................................................... 42
15.9 Governing Law............................................................... 43
15.10 Exercise of Rights and Remedies............................................. 43
15.11 Reformation and Severability................................................ 43
15.12 General Terms............................................................... 43
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement")
is made as of the 22nd day of July, 1998, among STEVEN MYERS & ASSOCIATES, INC.,
a California corporation ("SM&A"); DECISION-SCIENCE APPLICATIONS, INC., a
Virginia corporation (the "Company"); DSA ACQUISITION, INC., a California
corporation ("Newco"); and GUY A. ACKERSON and GARY L. LUCAS (each a "Principal
Shareholder" and collectively the "Principal Shareholders").
WHEREAS, Newco has been duly organized and is currently existing under
the laws of the State of California, having been incorporated solely for the
purpose of completing the transactions contemplated hereby, and is a
wholly-owned subsidiary of SM&A; and
WHEREAS, the Principal Shareholders are the record owners of an
aggregate of 37,373 shares of common stock of the Company; and
WHEREAS, the Company owns all the issued and outstanding capital stock
of DSA Systems, Inc., a Virginia corporation (the "Subsidiary"); and
WHEREAS, the respective Boards of Directors of SM&A, Newco and the
Company (all of which companies are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of each
of the Constituent Corporations and their respective stockholders that the
Company merge with and into Newco (the "Merger") pursuant to the applicable
provisions of the laws of the State of California and of the Commonwealth of
Virginia (the "Corporate Statutes"), and on the terms and subject to the
conditions set forth in this Agreement, the Agreement of Merger attached hereto
as Exhibit 0.1 and the Articles of Merger attached hereto as Exhibit 0.2; and
WHEREAS, the Board of Directors of each of the Constituent Corporations
has approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. THE MERGER.
1.1 Merger. In accordance with the terms and subject to the conditions
of this Agreement, the Agreement of Merger and the Articles of Merger, and
pursuant to the Corporate Statutes, at the Effective Time (as defined in Section
1.2 below), the Company shall be merged with and into Newco (herein referred to
as the "Surviving Corporation" whenever reference is made to it at or after the
Effective Time), all outstanding shares of the capital stock of the Company
shall be converted into and become a right to receive shares of the capital
stock of the
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SM&A and other consideration in accordance with Article 2 below, and the
separate existence of the Company shall cease in accordance with Section 1.4
below.
1.2 Effective Time of Merger. At or before the Closing Date (as defined
in Section 3.1), Newco and the Company shall execute the Agreement of Merger and
Articles of Merger in substantially the form attached hereto as Exhibit 0.1 and
Exhibit 0.2, respectively, which shall be filed with the Secretary of State of
the State of California and the State Corporation Commission of the Commonwealth
of Virginia on the Closing Date. The Merger shall become effective upon the
filing and recordation of the Agreement of Merger with the Secretary of State of
California and the filing and recordation of the Articles of Merger with the
State Corporation Commission of the Commonwealth of Virginia (the "Effective
Time").
1.3 Articles of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time:
(a) The Articles of Incorporation of Newco shall be amended and
restated to read as set forth in Exhibit 1.3 hereto, and such Articles
of Incorporation, as amended and restated, shall be the Articles of
Incorporation of the Surviving Corporation.
(b) The Bylaws of Newco shall be the Bylaws of the Surviving
Corporation.
(c) Kenneth W. Colbaugh, the sole director of Newco, shall be the
sole director of the Surviving Corporation. Such director shall hold
office subject to the laws of the State of California and the provisions
of the Articles of Incorporation and Bylaws of the Surviving
Corporation.
(d) The officers of the Surviving Corporation shall be as
follows: President -Kenneth W. Colbaugh; Chief Financial Officer and
Secretary - Ronald A. Hunn.
1.4 Effect of Merger. The Merger shall have the effects set forth in
this Agreement, the Agreement of Merger, the Articles of Merger and the
Corporate Statutes. Except as specifically set forth to the contrary in the
Corporate Statutes, the Agreement of Merger, the Articles of Merger or in this
Agreement, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of Newco shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
the Company shall be merged into Newco, and Newco, as the Surviving Corporation,
shall be fully vested therewith; at the Effective Time, the separate existence
of the Company shall cease and, in accordance with and subject to the terms of
this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private
nature; and all property and all debts due on whatever account, including
subscriptions to shares and all and every other interest of or belonging to or
due to Newco or the Company shall be allocated to, and vested in, the Surviving
Corporation without further act or deed and without any transfer or assignment
having occurred; and all property, rights, privileges, powers, licenses and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Company and Newco;
and the title to any real estate, or interest therein, whether by deed or
otherwise, under the laws of the State of California and the Commonwealth of
Virginia,
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shall not revert or be in any way impaired by reason of the Merger. The
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the Company and Newco and any claim existing, or
action or proceeding pending, by or against the Company or Newco may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger, and
all debts, liabilities and duties of the Company and Newco shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
said debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
1.5 Reorganization. The parties intend to adopt this Agreement as a plan
of reorganization and to consummate the Merger in accordance with Section 368(a)
of the Code.
2. CONVERSION AND EXCHANGE OF STOCK.
2.1 Merger Consideration. The aggregate consideration to be paid in the
Merger (the "Merger Consideration") shall equal the sum of (i) the Share
Consideration and (ii) the Cash Consideration.
2.2 Conversion of Capital Stock of the Company. At the Effective Time,
by virtue of the Merger and without any action on the part of SM&A, the Company
or any holder of shares of Company Stock:
(a) each Outstanding Company Share, other than Dissenting Shares
(as hereinafter defined), shall automatically be converted into and
become a right to receive (i) that number of shares of SM&A Stock equal
to the Share Exchange Ratio and (ii) cash in an amount equal to the Cash
Exchange Amount;
(b) all shares of Company Stock held immediately prior to the
Effective Time by the Company as treasury stock or by a subsidiary of
the Company shall be cancelled and no Merger Consideration shall be paid
with respect thereto; and
(c) all Dissenting Shares shall be treated in accordance with
Section 2.5 below.
2.3 Capital Stock of Newco. Each share of capital stock of Newco issued
and outstanding as of the Effective Time shall be unaffected by the Merger.
2.4 Options. Each Company Option shall be exercised or cancelled prior
to the Closing (as hereinafter defined). Some of the holders of Company Options
will participate in the Cash Out and their Company Options will be cancelled in
exchange for a portion of the Cash Out Amount. Those Company Options that are
not cancelled in the Cash Out will vest upon consummation of the Merger and the
holders thereof will receive a portion of the Merger Consideration for those
shares of Common Stock issuable pursuant to such Company Options less the
aggregate exercise price of such Company Options.
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2.5 Dissenting Shares.
(a) Shares of Company Stock held by a shareholder who has
properly exercised dissenters' rights with respect thereto
(collectively, the "Dissenting Shares") in accordance with Section
13.1-729, et seq. of the Virginia Code, or any successor provision (the
"Dissenters Law"), shall not have a right to receive any Merger
Consideration with respect thereto. At the Effective Time, any holder of
Dissenting Shares shall cease to have any rights with respect thereto,
except the rights provided in the Dissenters Law.
(b) The Company shall give SM&A (i) prompt notice of any written
demands under the Dissenters Law with respect to any shares of Company
Stock, any withdrawal of any such demands and any other instruments
served pursuant to the Dissenters Law and received by the Company, and
(ii) the right to participate in all negotiations and proceedings with
respect to any demands under the Dissenters Law with respect to any
shares of Company Stock. The Company shall cooperate with SM&A
concerning, and shall not, except with the prior written consent of
SM&A, voluntarily make any payment with respect to, or offer to settle
or settle, any such demands; provided, however, that SM&A shall in no
way hinder or prevent the Company from complying with the Company's
obligations under the Dissenters Law.
2.6 Fractional Shares. Notwithstanding anything herein, with respect to
each holder of Company Stock, if the aggregate number of shares of SM&A Stock
collectively issuable to such holder for conversion of all of such holder's
Company Stock pursuant to Section 2.2 includes a fractional share, such
fractional share shall be rounded to the nearest whole number.
2.7 Escrow of Shares. At the Effective Time, SM&A shall deposit
twenty-five percent (25%) of the shares of SM&A Stock otherwise issuable to the
holders of Company Stock pursuant to Section 2.2(a) (the "Escrow Shares") in
escrow for a period of two (2) years (the "Escrow Period") as the source of
payment for the indemnification obligations of the shareholders of the Company
pursuant to Article 10 below. The Escrow Shares shall be held and disbursed
pursuant to the terms of this Agreement and an escrow agreement in substantially
the form attached hereto as Exhibit 2.7 (the "Escrow Agreement"). The Escrow
Shares shall be determined pro rata based on the SM&A Stock allocable to each
former holder of Company Stock. Notwithstanding anything in this Section 2.7 to
the contrary and as shall be provided in the Escrow Agreement, in the event
that, during the Escrow Period, the average of the closing prices of SM&A Stock
on the NASDAQ National Market (or such other national stock exchange on which
SM&A Stock is listed) for any twenty (20) consecutive trading days is $5.00
below the Average Closing Price for the Base Period, the Escrow Shares may be
sold for cash (subject to the requirements of federal and state securities
laws), and the cash proceeds from any such sale shall be substituted for such
Escrow Shares as and when sold and placed into escrow.
2.8 Exchange of Certificates.
(a) The conversion of shares of Company Stock into the right to
receive the Merger Consideration, as provided for by this Agreement,
shall occur automatically at the Effective Time without further action
by the holders thereof. SM&A or its transfer agent
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shall, within fifteen (15) business days after the Effective Time, mail
to all former holders of record of shares of Company Stock instructions
for surrendering their certificates representing such shares of Company
Stock in exchange for a certificate representing shares of SM&A Stock as
part of the Merger Consideration. Within fifteen (15) business days
following such surrender, SM&A or its transfer agent shall mail to each
such holder in exchange therefor (subject to the escrow deposit required
by Section 2.7) a certificate representing the shares of SM&A Stock into
which such shares have been converted as part of the Merger
Consideration pursuant to the provisions of this Agreement. Until
surrendered, each certificate that prior to the Effective Time
represented shares of Company Stock will be deemed to evidence the right
to receive the number of shares of SM&A Stock into which such shares of
Company Stock has been converted in accordance with Section 2.2.
(b) The shares of SM&A Stock into which shares of Company Stock
shall be converted in the Merger as part of the Merger Consideration
shall be deemed to have been issued at the Effective Time. If any
certificate for shares of SM&A Stock is to be issued in a name other
than that in which the certificate for shares of Company Stock
surrendered is registered, it shall be a condition of such exchange that
the person requesting such exchange shall deliver to SM&A's transfer
agent all documents necessary to evidence and effect such transfer and
shall pay to the transfer agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of SM&A Stock in
a name other than that of the registered holder of the certificates
surrendered or to establish to the reasonable satisfaction of the
transfer agent that such tax has been paid or is not applicable.
3. CLOSING.
3.1 Closing. The closing of the Merger (the "Closing") shall take place
at the offices of Rutan & Tucker, LLP, 611 Anton Boulevard, Suite 1400, Costa
Mesa, California, before the close of business on the later of (a) the day after
all of the conditions to the Closing set forth in Articles 8 and 9 have been
satisfied or waived in writing, or (b) September 15, 1998, or at such other
place, time and date as the parties hereto mutually may agree (the "Closing
Date").
3.2 Closing Deliveries. At the Closing, the parties shall have delivered
to each other the following closing documents and agreements, and taken the
following actions:
(a) Documents and agreements delivered by or on behalf of each
Principal Shareholder and/or the Company, as the case may be, to SM&A:
(i) a duly executed copy of the Escrow Agreement;
(ii) a duly executed copy of the Agreement of Merger;
(iii) a duly executed copy of the Articles of Merger;
(iv) a duly executed copy of the Registration Rights
Agreement (as hereinafter defined);
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(v) such certificates of the Company and/or the
Principal Shareholders as required by Article 9;
(vi) an opinion of counsel for the Company,
substantially in the form attached hereto as Exhibit 3.2(a)(vi);
(vii) duly executed copies of Employment Agreements,
including noncompetition provisions, between the Surviving
Corporation and Guy A. Ackerson, James E. Fucillo, David H.
Kellogg, Gary L. Lucas and Dana R. Rauscher, substantially in
the form attached hereto as Exhibit 3.2(a)(vii) (each an
"Employment Agreement");
(viii) certificates of Good Standing and Existence of
the Company and the Subsidiary issued by the State Corporation
Commission of the Commonwealth of Virginia and for each other
jurisdiction where the Company and the Subsidiary are qualified
to do business;
(ix) a power of attorney duly executed by each Company
shareholder who has authorized a person to execute the Escrow
Agreement and Registration Rights Agreement on his behalf; and
(x) such other documents that may be reasonably
requested by SM&A.
(b) Documents and agreements delivered by or on behalf of SM&A
and/or Newco, as the case may be, to the Company and/or the Principal
Shareholders, as the case may be:
(i) a duly executed copy of the Escrow Agreement;
(ii) a duly executed copy of the Agreement of Merger;
(iii) a duly executed copy of the Articles of Merger;
(iv) a duly executed copy of the Registration Rights
Agreement;
(v) such certificates of SM&A and Newco as required by
Article 8;
(vi) an opinion of counsel for SM&A, substantially in
the form attached hereto as Exhibit 3.2(b)(vi);
(vii) duly executed copies of the Employment Agreements;
(viii) certificates of Good Standing and Existence of
SM&A and Newco issued by the Secretary of State of the State of
California; and
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<PAGE> 13
(ix) such other documents that may be reasonably
requested by the Company.
(c) SM&A shall deliver to each shareholder of the Company the
Cash Consideration to which each shareholder is entitled pursuant to
Article 2 hereof, provided that each such shareholder delivers to SM&A
at the Closing a certificate or certificates representing shares of
Common Stock held by each such shareholder immediately prior to the
Effective Time, along with such instruments of transfer satisfactory to
SM&A.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants that all of the following
representations and warranties are true as of the date of this Agreement and
shall be true on the Closing Date:
4.1 Due Organization. Each of the Company and the Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia, and is duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances and orders of Government
Authorities to own its properties and assets and to carry on its business in the
places and in the manner as it is now conducted, except (a) as disclosed on
Schedule 4.1-1 or (b) where the failure to be so authorized, qualified or
licensed would not, individually or in the aggregate, have a Material Adverse
Effect on the Company or the Subsidiary. True and correct copies of the Articles
of Incorporation (certified by the State Corporation Commission of the
Commonwealth of Virginia) and Bylaws (certified by the Secretary of the
Company), as each is amended, of each of the Company and the Subsidiary are
attached to Schedule 4.1-2. The stock records and minute books of the Company
and the Subsidiary, as heretofore made available to SM&A, are correct and
complete (in the case of the minute books, in all material respects).
4.2 Authorization; No Conflicts. The Company has the full legal right,
power and authority to enter into this Agreement, the Agreement of Merger, the
Articles of Merger and the Escrow Agreement, and to perform the transactions
contemplated herein and therein. The execution, delivery and performance of this
Agreement, the Agreement of Merger, the Articles of Merger, and the Escrow
Agreement, and the consummation of the transactions contemplated hereby and
thereby do not and will not (a) violate or conflict with any provision of each
of the Company's and Subsidiary's Articles of Incorporation or Bylaws, (b)
violate or conflict with any provision of, or be an event that is (or with the
passage of time will result in) a default or violation of, or result in the
modification, cancellation or acceleration of (whether after the giving of
notice or lapse of time or both) any obligation under, or result in the
imposition or creation of any Encumbrances upon any of the assets of each of the
Company and the Subsidiary pursuant to, any Contract (as defined in Section
4.15) to which the Company or the Subsidiary is a party or by which the Company
or the Subsidiary is bound, (c) violate or conflict with any Legal Requirement
applicable to either the Company or the Subsidiary or any of its properties or
assets or any other material restriction of any kind or character to which it is
subject, or (d) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any Government
Authority, except as set forth on Schedule 4.10. The Company has received, or
will receive prior to the Closing, all necessary approvals from its Board of
Directors and shareholders to consummate the Merger. This Agreement has been
duly executed and delivered by the
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<PAGE> 14
Company, and at the Closing the Agreement of Merger, the Articles of Merger, and
the Escrow Agreement, will be duly executed and delivered by the Company, and,
assuming the due execution and delivery hereof and thereof by SM&A and Newco,
respectively, this Agreement constitutes, and the Agreement of Merger, the
Articles of Merger, and the Escrow Agreement, will constitute, the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
their terms, except as enforceability hereof and thereof may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally and by the exercise of judicial discretion in
accordance with equitable principles.
4.3 Capital Stock. The authorized capital stock of the Company consists
solely of 1,000,000 shares of voting common stock, $.01 par value per share, of
which 107,589 shares are issued and outstanding and held of record by the
persons and in the amounts set forth on Schedule 4.3. The authorized capital
stock of the Subsidiary consists solely of 1,000 shares of voting capital stock,
of which 100 shares are issued and outstanding and all of which are owned by the
Company. All of the issued and outstanding shares of capital stock of the
Subsidiary are owned by the Company free and clear of Encumbrances. The issued
and outstanding shares of Company Stock and the issued and outstanding shares of
capital stock of the Subsidiary have been duly authorized and validly issued,
are fully paid and nonassessable, and such shares were offered, issued, sold and
delivered by the Company or the Subsidiary, as the case may be, in compliance
with all applicable state and federal securities laws except as set forth on
Schedule 4.3. Neither shares of the Company Stock nor shares of the Subsidiary
capital stock were issued in violation of the preemptive rights, if any, of any
past or present shareholder.
4.4 Transactions in Capital Stock and Spin-offs. Except as set forth on
Schedule 4.4, no right of first refusal, option, warrant, call, conversion right
or commitment of any kind exists with respect to any outstanding or authorized
but unissued capital stock of each of the Company and the Subsidiary. In
addition, except as set forth on Schedule 4.4 there are no (a) outstanding
securities or obligations that are convertible into or exchangeable for any
shares of the capital stock or other equity securities of each of the Company or
the Subsidiary, or (b) contracts, arrangements or commitments, written or
otherwise, under which the Company or the Subsidiary is or may become bound to
sell or otherwise issue any shares of its capital stock or any other equity
securities. Without limiting the generality of the foregoing, the Company has
done nothing to the Company's Knowledge which would form the basis upon which
any person (other than any shareholder identified as a record owner of Company
Stock on the Company's stock books, or spouse of a principal of a trust that is
such a shareholder) may claim to be in any way the record or beneficial owner
of, or to be entitled to acquire (of record or beneficially), any shares of the
capital stock or other equity securities of the Company or the Subsidiary. In
addition, neither the Company nor the Subsidiary has any obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof, and there has been no transaction or action
taken with respect to the equity ownership of the Company or Subsidiary in
contemplation of the transaction described in this Agreement, except as set
forth on Schedule 4.4. Except as set forth on Schedule 4.4, since January 31,
1998 there has not been any (a) issuance, sale, repurchase, redemption or other
transfer of or transaction in the Company Stock or the Subsidiary capital stock
or (b) any sale or spin-off of significant assets of the Company or Subsidiary,
in each case other than in the ordinary course of business.
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<PAGE> 15
4.5 No Bonus Shares. Except as set forth on Schedule 4.5, none of the
shares of the Company Stock or the Subsidiary capital stock was issued for any
consideration other than cash.
4.6 Subsidiaries. Except for the Subsidiary and except as set forth on
Schedule 4.6, the Company does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity. Except as set forth on Schedule 4.6, each of the Company and
the Subsidiary is not, directly or indirectly, a participant in any joint
venture, partnership or other noncorporate entity.
4.7 SM&A Stock Ownership. Since January 29, 1998, the effective date of
SM&A's registration statement in respect of its initial public offering, neither
the Company, nor the Subsidiary has ever owned any shares of SM&A Stock.
4.8 Financial Statements. Copies of the following consolidated financial
statements (the "Financial Statements") of the Company are attached hereto as
Schedule 4.8:
(a) The Company's audited consolidated balance sheet as of
January 31, 1998 and for the two (2) prior years, and audited
consolidated statements of earnings, cash flows and stockholders' equity
for the year then ended and for the two (2) prior years; and
(b) The Company's unaudited consolidated balance sheet as of June
30, 1998 (hereinafter referred to as the "Balance Sheet Date") and
unaudited consolidated statements of earnings, cash flows and
stockholders' equity for the five-month period then ended.
The Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated. Such balance sheets present
fairly the financial condition of each of the Company and the Subsidiary as of
the dates indicated thereon, on a consolidated basis, and such statements of
earnings, cash flows and stockholders' equity present fairly the results of its
operations for the periods indicated thereon.
4.9 Liabilities and Obligations. Except as set forth on Schedule 4.4,
Schedule 4.8 and Schedule 4.9, each of the Company and the Subsidiary has no
liabilities or obligations of any nature (whether known or unknown, due or to
become due, absolute, accrued, contingent or otherwise, and whether or not
determined or determinable) and there is no existing condition, situation or set
of circumstances which could result in such a liability or obligation, except
for liabilities or obligations under any Contract disclosed on Schedule 4.15
hereto. For each such liability for which the amount is not fixed or is
contested, the Company has provided on Schedule 4.9 a summary description of the
liability. The Company's deferred Tax (as defined in Section 4.20) liability
immediately prior to the Effective Time shall not exceed $4,100,000.
4.10 Approvals. Except as set forth on Schedule 4.10, no authorization,
consent or approval of, or registration or filing with, any governmental
authority or any other person is or was required to be, and has not been,
obtained or made by the Company or the Subsidiary in connection with the
execution, delivery or performance of this Agreement.
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<PAGE> 16
4.11 Accounts and Notes Receivable. Schedule 4.11 sets forth an accurate
list of the accounts and notes receivable of each of the Company and the
Subsidiary as of the Balance Sheet Date, including receivables from and advances
to the Subsidiary and the Company's employees and shareholders. Such list
includes an aging of all accounts and notes receivable as of the Balance Sheet
Date showing amounts due in thirty (30) day aging categories. Except as set
forth on Schedule 4.11, and subject to approximately $600,000 in U.S. government
hold-backs pending government contract audits, at least ninety percent (90%) of
the amount of all accounts receivable, unbilled invoices and other debts due or
recorded in the records and books of account of each of the Company and the
Subsidiary as being due to either the Company or the Subsidiary (as the case may
be) as at the date of this Agreement will be good, payable and collectible in
full in the ordinary course of business within one hundred fifty (150) days
after the Closing, net of applicable reserves as recorded on the Company's or
the Subsidiary's books on the date hereof; no contest with respect to the amount
or validity of any amount is pending; and none of such accounts receivable or
other debts is or will at the Closing be subject to any counterclaim or set-off.
The values at which accounts receivable are carried reflect the accounts
receivable valuation policy of the Company and the Subsidiary which is
consistent with GAAP applied on a consistent basis.
4.12 Intellectual Property. To the best Knowledge of the Company, the
Company and the Subsidiary owns or has valid, binding and enforceable rights to
use all patents, trademarks, trade names, service marks, service names,
copyrights, applications for any of the foregoing, and licenses or other rights
in respect of any of the foregoing ("Intellectual Property"), used or held for
use in connection with its business, without any conflict with the rights of
others. Neither the Company nor the Subsidiary has received any notice from any
other person pertaining to or challenging the right of the Company or the
Subsidiary to use any Intellectual Property or Technology owned or used by or
licensed to the Company or the Subsidiary. Other than in the ordinary course of
business, neither the Company nor the Subsidiary has granted any outstanding
licenses or other rights, and has no obligation to grant any licenses or other
rights, under, and the Shareholders of the Company and the employees of each of
the Company and the Subsidiary have no rights in or to, any of the Intellectual
Property or Technology owned or used by or licensed to the Company or the
Subsidiary. No claims have been made by each of the Company or the Subsidiary of
any violation or infringement by others of the rights of the Company or the
Subsidiary with respect to any Intellectual Property or Technology of the
Company or the Subsidiary, and the Company knows of no basis for the making of
any such claim.
The Company has delivered to SM&A on Schedule 4.12 a complete and
correct list and/or summary description of all material Intellectual Property
and Technology owned by, used by or licensed by each of the Company and the
Subsidiary.
4.13 Permits. Each of the Company and the Subsidiary owns or possesses
all franchises, licenses, permits, consents, approvals and authorizations
(collectively herein referred to as "Permits"), of any Government Authority
which are necessary for the conduct of its business as currently conducted. Each
of the foregoing is in full force and effect, and each of the Company and the
Subsidiary is in material compliance with all of its obligations with respect
thereto, and no event has occurred which permits, or upon the giving of notice
or lapse of time or otherwise would permit, revocation or termination of any of
the foregoing which would have a Material Adverse Effect upon the Company or the
Subsidiary.
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<PAGE> 17
The Company has delivered to SM&A on Schedule 4.13 a complete and
correct list and/or summary description of all Permits held by each of the
Company and the Subsidiary.
4.14 Real and Personal Property.
(a) Schedule 4.14(a) contains an accurate list and/or
description of all real property leased by the Company and the
Subsidiary. Neither the Company nor Subsidiary owns, nor has it ever
owned, any real property.
(b) Schedule 4.14(b) contains an accurate list of all material
items of tangible personal property of every kind or description owned
or held by each of the Company and the Subsidiary, and leases or
licenses or other rights to possession thereof, and includes an
indication as to which assets were formerly or are currently owned by
business or personal affiliates of each of the Company and the
Subsidiary. All tangible personal property of each of the Company and
Subsidiary is in good operating condition and repair, ordinary wear and
tear excepted.
(c) Each of the Company and the Subsidiary has good and
marketable title to, or holds by valid lease or license (which lease or
license is in full force and effect and, to the best of the Company's
Knowledge, binding upon the parties (and their successors) thereto in
accordance with their respective terms), the property listed on Schedule
4.14(a) and Schedule 4.14(b), free and clear of all Encumbrances.
4.15 Material Contracts and Commitments. Schedule 4.15 sets forth a
list, complete and correct in all material respects, of the following material
oral, and an accurate list of the following material written contracts,
commitments and other agreements to which each of the Company and the Subsidiary
is a party or by which it or any of its properties is bound (herein collectively
referred to as the "Contracts"):
(a) agreements involving payments, individually or in the
aggregate, in excess of $50,000;
(b) joint venture or partnership agreements or limited liability
company agreements;
(c) loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements (without regard
to dollar amount involved);
(d) leases, licenses, options to purchase real or personal
property involving future obligations on the part of the Company which
aggregate in excess of $50,000, other than as set forth on Schedule
4.14(a);
(e) agreements relating to the purchase or acquisition, by
merger or otherwise, of a signification portion of the business assets
or securities of the Company or the Subsidiary by any other person or of
any other person by the Company or the Subsidiary (other than as
contemplated by this Agreement);
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<PAGE> 18
(f) contracts upon which the Company or the Subsidiary is
substantially dependent or which are otherwise material to the Company
or the Subsidiary;
(g) agreements that limit or restrict the ability of the Company
or the Subsidiary to compete or otherwise to conduct its business in any
manner or place, or that contain covenants of any other person not to
compete with the Company or the Subsidiary;
(h) any agreement with any holder of securities of the Company or
the Subsidiary as such (including, without limitation, any agreement
containing an obligation to register any of such securities under any
federal or state securities laws);
(i) agreements with any labor union or association representing
any employee of the Company or the Subsidiary;
(j) agreements with or for the benefit of any affiliates,
shareholders, employees, consultants, officers or directors of the
Company or the Subsidiary providing for compensation or benefits
individually in excess of $60,000 annually, other than those set forth
on Schedule 4.17(a) and Schedule 4.17(b);
(k) agreements that require the Company or the Subsidiary to buy
or sell goods or services with respect to which there will be material
losses or will be costs and expenses materially in excess of expected
receipts;
(l) agreements not made in the ordinary course of business; and
(m) any other agreements, whether or not made in the ordinary
course of business, that are material to the Company or the Subsidiary.
The Company has delivered or made available for review by SM&A or its
representatives true and complete copies of the written Contracts. Each of the
Company and the Subsidiary has complied in all material respects with all
commitments and obligations pertaining to any such Contract, and is not in
material default under any such Contract and no notice of default has been
received, nor to the best of the Company's Knowledge is there any default on the
part of any other party to such Contract, or any intent of any such party to
attempt to terminate or amend any such Contract.
4.16 Insurance. Schedule 4.16 sets forth an accurate list of all
insurance policies carried by each of the Company and the Subsidiary, and the
Company has delivered to SM&A on Schedule 4.16 an accurate list of all insurance
loss runs or worker's compensation claims received during the past three (3)
policy years. Such insurance policies are currently in full force and effect and
shall remain in full force and effect through the Closing Date.
4.17 Employees, Consultants, Etc.
(a) Schedule 4.17(a) sets forth (i) an accurate and complete list
of (A) all officers and directors of each of the Company and the
Subsidiary, (B) all employees of the
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<PAGE> 19
Company and the Subsidiary and (C) all consultants currently performing
services for the Company or the Subsidiary, and (ii) an accurate and
complete list of all independent contractors and other agents currently
performing services for each of the Company and the Subsidiary, setting
forth in each case the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
the director, officer, employee, consultant, independent contractor and
agent.
(b) Schedule 4.17(b) sets forth a schedule, accurate and
complete, showing all employment agreements and any other agreements to
which each of the Company and the Subsidiary is a party or by which it
is bound, containing terms providing for (i) compensation or other
benefits or consequences upon the happening of a change of control of
each of the Company and the Subsidiary and (ii) deferred compensation;
together in each case with copies of such plans, agreements and any
trusts related thereto, and classifications of employees covered
thereby.
(c) Each of the Company and the Subsidiary has complied with the
verification requirements and the record keeping requirements of the
Immigration Reform and Control Act of 1986 ("IRCA") in all material
respects; to the best of the Company's Knowledge, the information and
documents on which each of the Company and the Subsidiary relied in
complying with IRCA are true and correct; and there have not been any
discrimination complaints filed against the Company or the Subsidiary
pursuant to IRCA.
(d) No employees of the Company or the Subsidiary are
represented by any labor union or covered by any collective bargaining
agreement nor, to the best of the Company's Knowledge, is any campaign
to establish such representation in progress.
(e) Neither the Company nor the Subsidiary has received or been
notified of any discrimination complaint filed by any employee,
applicant, union, or other party with any Government Authority.
(f) Each of the Company and the Subsidiary has filed all
required reports and information that were due prior to the Closing Date
and otherwise has complied with all material applicable regulatory
requirements within the jurisdiction of the United States Equal
Employment Opportunity Commission, United States Department of Labor and
state and local human rights and/or civil rights agencies.
(g) Neither the Company nor the Subsidiary has received written
notice of any intention by any of its employees to terminate his or her
employment or to seek a modification in the terms of his or her
employment, individually or collectively with other employees.
(h) Neither the Company nor the Subsidiary is aware that any
employee, officer or director is in violation of any obligation of
confidentiality to the Company or the Subsidiary.
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4.18 Benefit Plans; ERISA Compliance.
(a) Schedule 4.18 contains a list of all "employee pension
benefit plans" (as defined in Section 3(2) of Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to in
this Section 4.18 as "Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) (sometimes referred to in this
Section 4.18 as "Welfare Plans") and all other Benefit Plans, as defined
below, currently maintained in whole or in part, contributed to, or
required to be contributed to by each of the Company and the Subsidiary
for the benefit of any present or former officer, employee or director
of each of the Company and the Subsidiary. For purposes of this
Agreement, the term "Benefit Plan" shall mean any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, dependent care, cafeteria, employee
assistance, scholarship or other plan, program, arrangement or
understanding (whether or not legally binding) maintained in whole or in
part, contributed to, or required to be contributed to by each of the
Company and the Subsidiary for the benefit of any present or former
officer, employee or director of each of the Company or the Subsidiary
which is not a Pension Plan or Welfare Plan. Each of the Company and the
Subsidiary has delivered to SM&A true, complete and correct copies of
(i) each Pension Plan, Welfare Plan and Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof) and all amendments
(none of which amendments will materially increase to costs of the
amended plan), (ii) the three annual reports on Form 5500 most recently
filed with the Internal Revenue Service (the "IRS") with respect to each
Pension Plan or Welfare Plan (if any such report was required), (iii)
the most recent IRS determination letter request for each Pension Plan
intended to be qualified under Section 401(a) of the Code and all
rulings or determinations concerning such Pension Plan requested of the
IRS subsequent to the date of that letter, (iv) the most recent
actuarial report for each Pension Plan and Welfare Plan for which an
actuarial report is required by ERISA, (v) the most recent summary plan
description for each Pension Plan and Welfare Plan for which such
summary plan description is required by ERISA and each summary of
material modifications prepared, as required by ERISA, after the last
summary plan description, (vi) each trust agreement and/or group annuity
contract relating to any Benefit Plan, and (vii) all other information
reasonably requested by SM&A.
(b) Each Pension Plan maintained and each pension plan formerly
maintained that is or was intended to be qualified under Section 401(a)
of the Code has been the subject of a determination letter from the IRS
to the effect that such plan is qualified under Section 401(a) of the
Code or can still be submitted in a timely manner to the IRS for such a
letter, and no such determination letter has been revoked nor has
revocation of any such letter been threatened, nor has any such plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs, and nothing has occurred
or failed to occur which would cause the loss of such qualification, and
all amendments required to be adopted before the Effective Time for any
such Pension Plan to continue to be so qualified have been or will be
duly and timely adopted; provided however, that to the extent that this
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<PAGE> 21
representation applies to terminated pension plans, this representation
refers to the qualified status of any such plan through the time of its
termination. To the best Knowledge of the Company and the Subsidiary,
each of the Company and the Subsidiary has paid all premiums (including
any applicable interest, charges and penalties for late payment) due the
Pension Benefit Guaranty Corporation (the "PBGC") with respect to each
such Pension Plan for which premiums to the PBGC are required and no
such Pension Plan in whole or in part maintained by each of the Company
and the Subsidiary has been terminated or partially terminated under
circumstances which would result in liability to the PBGC.
(c) To the best Knowledge of the Company and the Subsidiary,
except as set forth on Schedule 4.18, each of the Pension Plan, Welfare
Plan and Benefit Plans sponsored by, and each of the benefit plans
formerly sponsored by, each of the Company and the Subsidiary: (i) has
been in substantial compliance with all reporting and disclosure
requirements of (x) Part 1 or Subtitle B of Title I of ERISA, if
applicable, or (y) other applicable law, (ii) has had the appropriate
required Form 5500 (or equivalent annual report) filed timely with the
appropriate governmental entity for each year of its existence, (iii)
has at all times complied with the bonding requirements of (x) Section
412 of ERISA, if applicable, or (y) other applicable law, (iv) has no
issue pending (other than the payment of benefits in the normal course)
nor any issue resolved adversely to the Company or the Subsidiary which
may subject the Company or the Subsidiary to the payment of penalty,
interest, tax or other obligation that can be expected to have a
Material Adverse Effect on the Company or the Subsidiary, nor is there
any basis for any imposition of any such liability, and (v) has been
maintained in all respects in compliance with the applicable
requirements of ERISA, the Code and other applicable law not otherwise
covered hereunder so as not to have any Material Adverse Effect on the
Company or the Subsidiary.
(d) All voluntary employee benefit associations maintained by
each of the Company and the Subsidiary and intended to be exempt from
federal income tax under Section 501(c)(9) of the Code have been
submitted to and approved as exempt from federal income tax under
Section 501(c)(9) of the Code by the IRS, and, to the best Knowledge of
the Company and the Subsidiary, nothing has occurred or failed to occur
which would cause the loss of such exemption.
(e) To the best Knowledge of the Company and the Subsidiary, the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement will not give rise to any, or trigger
any, change of control, severance or other similar provisions in any
Pension Plan, Welfare Plan or Benefit Plan. The consummation of any
transaction contemplated by this Agreement will not result in any (i)
payment (whether of severance pay or otherwise) becoming due from the
Company or the Subsidiary to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement; (ii) benefit under any Benefit Plan of the Company or the
Subsidiary being established or becoming accelerated, vested or payable;
or (iii) payment or series of payments by the Company or the Subsidiary,
directly or indirectly, to any
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<PAGE> 22
person that would constitute a "parachute payment" within the meaning of
Section 280G of the Code.
(f) Each of the Company and the Subsidiary provides no material
post-retirement medical, health, disability or death protection coverage
or contributes to or maintains any employee welfare benefit plan which
provides for medical, health, disability or death benefit coverage
following termination of employment by any officer, director or employee
except as is required by Section 4980B(f) of the Code or other
applicable statute, nor has it made any representations, agreements,
covenants or commitments to provide that coverage.
(g) No Pension Plan or pension plan subject to Tile IV of ERISA
(i) that each of the Company and the Subsidiary maintains or maintained,
or (ii) to which each of the Company and the Subsidiary is or was
obligated to contribute, other than any such plan that is or was a
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA) had, as of its most recent annual valuation date, an "unfunded
benefit liability" (as such term is defined in Section 4001(a)(18) of
ERISA), based on actuarial assumptions which have been furnished to
SM&A. To the best Knowledge of the Company and the Subsidiary, none of
such plans subject to Section 302 of ERISA has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA), whether
or not waived. None of the Company, the Subsidiary, any officer of the
Company or the Subsidiary, or any of the Pension Plan or Welfare Plans
(including the Pension Plans and prior pension plans) which are subject
to ERISA, or any trusts created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406, 407 or 408 of ERISA or Section 4975
of the Code) or any other breach of fiduciary responsibility that could
subject each of the Company and the Subsidiary or any officer of each of
the Company and the Subsidiary to the tax or penalty on prohibited
transactions imposed by such Section 4975 of the Code or to any
liability under ERISA which would have a Material Adverse Effect on the
Company or the Subsidiary. To the best Knowledge of the Company and the
Subsidiary, no "reportable event" (as that term is defined in Section
4043 of ERISA) with respect to which the thirty (30)-day notice
requirement has not been waived has occurred and is continuing with
respect to any such Pension Plan, other than as may arise as a result of
the consummation of the Merger. Neither the Company nor the Subsidiary
has suffered a "complete withdrawal" or a "partial withdrawal" (as such
terms are defined in Section 4203 and Section 4205, respectively, of
ERISA) since the effective date of such Sections 4203 and 4205 for which
each of the Company and the Subsidiary has any liability outstanding
that can be expected to have a Material Adverse Effect on the Company or
the Subsidiary.
(h) To the best Knowledge of the Company and the Subsidiary, with
respect to any Welfare Plan, (i) each such Welfare Plan that is a group
health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with any applicable requirements of
Part 6 of Title I of ERISA and Section 4980B(f) of the Code and (ii)
each such Welfare Plan (including any such plan covering retirees or
other former employees) may be amended or terminated with respect to
health benefits without having
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<PAGE> 23
a Material Adverse Effect on the Company or the Subsidiary on or at any
time after the Consummation Date.
(i) All contributions required by law or by a collective
bargaining or other agreement to be made under the Pension Plan, Welfare
Plan or Benefit Plans with respect to all periods through the Effective
Date of the Merger, including a pro rata share of contributions due for
the current plan year, will have been made by such date or provided for
by adequate reserves by each of the Company and the Subsidiary. No
changes in contribution rates or benefit levels have been implemented or
negotiated (but not yet implemented), with respect to any Pension Plan,
Welfare Plan or Benefit Plan since the date on which the information
provided in the attached schedule has been provided, and no such changes
are scheduled to occur.
(j) To the best Knowledge of the Company and the Subsidiary,
each of the Company and the Subsidiary has not and will not have any
liability or obligation for taxes, penalties, contributions, losses,
claims, damages, judgments, settlement costs, expenses, costs, or any
other liability or liabilities of any nature whatsoever arising out of
or in any manner relating to any Pension Plan, Welfare Plan or Benefit
Plan (including but not limited to employee benefit plans such as
foreign plans which are not subject to ERISA), that has been, or is,
contributed to by any entity, whether or not incorporated, which is
deemed to be under common control (as defined in Section 414 of the
Code), with the Company or the Subsidiary that can be expected to have a
Material Adverse Effect on the Company and the Subsidiary, except to the
extent they relate to benefits payable in the ordinary course.
(k) To the best Knowledge of the Company and the Subsidiary, each
of the Company and the Subsidiary has not violated any of the health
care continuation coverage requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") applicable to its employees
prior to the Effective Time of the Merger.
4.19 Conformity with Law; Pending or Threatened Claims. Each of the
Company and the Subsidiary has complied with, and each of the Company and the
Subsidiary is not in material default under, any law, rule, ordinance, ruling,
directive, or regulation or under any order, award, judgment or decree of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over each of the
Company and the Subsidiary or any of its assets or its business, except where
the failure to so comply or the default thereunder would not have a Material
Adverse Effect on the Company or the Subsidiary. There are no claims, actions,
suits or proceedings, pending or, to the Knowledge of the Company threatened,
against or affecting the Company or the Subsidiary, at law or in equity, in any
court, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over each of the Company and the Subsidiary or its business and no
notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received.
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<PAGE> 24
4.20 Taxes.
(a) Each of the Company and the Subsidiary has timely filed all
federal and other Tax Returns which are required to be filed; and except
as set forth in Schedule 4.20-1, there are no waivers or extensions of
the statute of limitations, audits or examinations in progress, judicial
proceedings, or claims against each of the Company and the Subsidiary
for Taxes (including penalties and interest) for any period or periods
prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for Taxes has been received and
not paid. Each of the Company and the Subsidiary is not a party to any
Tax allocation or sharing agreement (i.e., any agreement or arrangement
for the payment of Tax liabilities or payment for Tax benefits with
respect to a consolidated, combined or unitary Tax Return which includes
the Company and the Subsidiary); there are no requests for rulings in
respect of any Tax pending by each of the Company and the Subsidiary
with any tax authority; and no penalty or deficiency in respect of any
Taxes which has been assessed against the Company or the Subsidiary
remains unpaid. The amounts shown as accruals for Taxes on the financial
statements of the Company or the Subsidiary as of the Balance Sheet Date
delivered to SM&A as a part of Schedule 4.9 are sufficient for the
payment of all Taxes of all kinds (including penalties and interest) for
any time or arising or incurred in connection with periods on or before
the Closing Date and the Company has reserved an amount sufficient to
pay all such Taxes. Copies of Tax Returns and franchise tax returns of
each of the Company and the Subsidiary for its last three (3) fiscal
years, or such shorter period of time as it has existed, are attached
hereto as Schedule 4.20-2. For purposes of this Section 4.20, "Tax"
shall mean any United States or other federal, state, provincial, local
or foreign income, gross receipts, property, sales, goods and services
use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or penalty,
imposed by any governmental authority, except that the term "Tax" is
specifically defined to exclude any Tax incurred by the Company directly
or indirectly as a result of the Merger failing to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. "Tax
Return" shall mean any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund,
amended return and declaration of estimated Tax.
(b) No shareholder of the Company is a foreign person subject to
withholding under Section 1445 of the Code and the regulations
promulgated thereunder, and certification to that effect will be
delivered to SM&A at the Closing.
(c) Each of the Company and the Subsidiary has complied in all
material respects with all applicable laws, rules and regulations
relating to information reporting with respect to payments made to third
parties and the withholding of and payment of withheld Taxes and has
timely withheld from employee wages and other payments and paid over to
the proper taxing authorities all amounts required to be so withheld and
paid over for all periods under all applicable laws or it has finally
resolved and fully satisfied any liability for any failure to comply
with any such matters.
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<PAGE> 25
(d) There is no pending claim by any taxing authority in any
jurisdiction in which each of the Company and the Subsidiary does not
pay Taxes or file Tax Returns that the Company or the Subsidiary is
required to pay Taxes or file Tax Returns.
(e) Neither the Company nor the Subsidiary has made an election
under Section 341(f) of the Code.
(f) Neither the Company nor the Subsidiary has agreed nor is
required to make any adjustment under Section 481(a) of the Code.
4.21 Government Contracts. Each of the Company and the Subsidiary is not
now and in the last two (2) years has not been a party to any governmental
contracts subject to price redetermination or renegotiation, except as set forth
on Schedule 4.21.
4.22 Absence of Changes. Except as set forth on Schedule 4.22, since the
Balance Sheet Date, there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
each of the Company and the Subsidiary;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
each of the Company and the Subsidiary;
(c) any change in the authorized capital of each of the Company
and the Subsidiary or its securities outstanding or any grant by each of
the Company and the Subsidiary of any options, warrants, calls,
conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of each of the
Company and the Subsidiary, except as contemplated by this Agreement;
(e) any increase in the compensation, bonus, sales commissions,
fringe benefits or fee arrangement payable or to become payable by each
of the Company and the Subsidiary to any of its officers, directors,
shareholders, employees, consultants or agents, other than in the
ordinary course of business and consistent with past practice, or any
change in the method by which sales commissions are calculated and paid;
(f) any work interruptions, labor grievances or claims filed
materially adversely affecting the business or future prospects of each
of the Company and the Subsidiary;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of each of the Company and the
Subsidiary to any person, other than in the ordinary course of business
including, without limitation, the Principal Shareholders and their
respective affiliates;
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<PAGE> 26
(h) any cancellation, or agreement to cancel, any material
indebtedness or other obligation owing to each of the Company and the
Subsidiary, including without limitation any indebtedness or obligation
of the Principal Shareholders or any affiliate thereof;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of each of the Company and the Subsidiary or
requiring consent of any party to the transfer and assignment of any
such assets, property or rights other than rights of SM&A;
(j) any purchase or acquisition, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets,
other than in the ordinary course of business and consistent with past
practice;
(k) any waiver of any material rights or claims of each of the
Company and the Subsidiary, other than in the ordinary course of
business and consistent with past practice and for fair value;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit or other right to which each of the
Company and the Subsidiary is a party;
(m) any transaction by each of the Company and the Subsidiary
outside the ordinary course of its business; or
(n) any authorization, approval, agreement or commitment to do
any of the foregoing.
4.23 Deposit Accounts; Powers of Attorney. Schedule 4.23 contains an
accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which each of the
Company and the Subsidiary has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
Schedule 4.23 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from each of the
Company and the Subsidiary and a description of the terms of such power. Each
such power, if any, has been or will be canceled from and after the Closing
Date.
4.24 Relations with Governments. Neither the Company, the Subsidiary
nor, to the best of the Company's Knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or the Subsidiary, has
used any Company or the Subsidiary funds for
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<PAGE> 27
improper or unlawful contributions, payments, gifts or entertainment, made any
improper or unlawful expenditures relating to political activity to domestic or
foreign government officials or others or accepted or received any unlawful
contributions, payments, gifts or expenditures.
4.25 Conflicts of Interest. Except as disclosed in Schedule 4.25, during
the preceding two-year period, neither (a) any past or present officer or
director of the Company or the Subsidiary, nor (b) to the best of the Company's
Knowledge, any relative of any past or present officer or director of the
Company or the Subsidiary, nor (c) to the best of the Company's Knowledge, any
corporation, partnership, trust or other entity of which any such past or
present officer or director of the Company or the Subsidiary has a direct or
indirect interest or is a director, officer, shareholder, partner or trustee, is
or has ever been a party, directly or indirectly, to any transaction with the
Company or the Subsidiary, including without limitation any agreement or other
arrangement providing for the furnishing of services by or to the Company or the
Subsidiary or the rental of any property from or to the Company or the
Subsidiary, or otherwise requiring or contemplating any payments by or to the
Company or the Subsidiary. Except as disclosed in Schedule 4.25, neither any
present officer or director, nor, to the best of the Company's Knowledge, any
relative of any such officer or director, owns directly or indirectly any
interest in any corporation, firm, partnership, trust or other entity or
business which is a competitor, potential competitor, customer, client or
supplier of each of the Company and the Subsidiary or any related business.
4.26 Environmental Matters. Each of the Company and the Subsidiary and
all of its assets are in compliance with, and are not subject to any liability
under, applicable federal, state and local environmental and public or
occupational health or safety laws, regulations or codes or requirements
relating to manufacture, storage, transport, generation, use, treatment,
disposal or handling of pollutants, contaminants, hazardous or toxic wastes,
substances, or materials, except where the failure to so comply or the liability
thereunder would not have a Material Adverse Effect on the Company or the
Subsidiary.
4.27 Future Plans and Commitments. Schedule 4.27 contains a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real or personal
property or existing business, to which each of the Company and the Subsidiary
has committed any material funds in the two (2) year period prior to the date of
this Agreement, which if pursued by the Company or the Subsidiary would require
additional expenditures of significant efforts or capital.
4.28 The Private Placement Memorandum. The information supplied by each
of the Company and the Subsidiary for inclusion in the Private Placement
Memorandum relating to the Merger to be sent to shareholders of the Company will
not, on the date the Private Placement Memorandum (or any amendment thereof or
supplement thereto) is first mailed to shareholders of the Company, or at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material fact necessary in
order to make the statement made therein not false or misleading. If at any time
prior to the Effective Time any event relating to each of the Company, the
Subsidiary or any of its respective affiliates, officers or directors should be
discovered by the Company which should be set forth in an amendment to the
Private
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<PAGE> 28
Placement Memorandum or a supplement to the Private Placement Memorandum, the
Company shall promptly inform SM&A and Newco.
4.29 Disclosure. This Agreement and the Schedules hereto and all other
documents included on, attached to or delivered with the Schedules hereto or
which were otherwise delivered to SM&A pursuant to the provisions of this
Agreement do not and will not include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading. If the Company or any Principal Shareholder becomes aware prior to
the Closing of any fact or circumstance which would change a representation or
warranty of the Company or the Principal Shareholders contained in this
Agreement, such person shall immediately give written notice of such fact or
circumstance to SM&A. However, such notification shall not relieve any person of
its or his respective obligations under this Agreement (including, without
limitation, under Article 4 or 5, as the case may be), and at the sole option of
SM&A, the truth and accuracy of any and all warranties and representations of
the Company and each Principal Shareholder at the date of this Agreement and at
the Closing, shall be a precondition to the consummation of this transaction.
5. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS.
Each Principal Shareholder, severally, but not jointly, represents and
warrants to SM&A and Newco that all of the following representations and
warranties are true as of the date of this Agreement and shall be true on the
Closing Date:
5.1 Authorization; No Conflicts. Such Principal Shareholder has the full
legal right, power and authority to enter into this Agreement, the Registration
Rights Agreement, the Escrow Agreement and the Employment Agreement and to
perform the transactions contemplated herein and therein. The execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the Escrow Agreement and the Employment Agreement, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (a) violate or
conflict with any Legal Requirement applicable to such Principal Shareholder, or
(b) require any authorization, consent, order, permit or approval of, or notice
to, or filing, registration or qualification with, any Government Authority,
except as set forth on Schedule 4.10. This Agreement has been duly executed and
delivered by such Principal Shareholder, and at the Closing the Registration
Rights Agreement, the Escrow Agreement and the Employment Agreement will be duly
executed and delivered by such Principal Shareholder, and, assuming the due
execution and delivery hereof and thereof by SM&A, Newco and/or the Surviving
Corporation, as the case may be, this Agreement constitutes, and the
Registration Rights Agreement, the Escrow Agreement and the Employment Agreement
will constitute, the legal, valid and binding obligation of such Principal
Shareholder, enforceable against such Principal Shareholder in accordance with
their terms, except as enforceability hereof and thereof may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally and by the exercise of judicial discretion in
accordance with equitable principles.
5.2 Title to Company Stock. Such Principal Shareholder has good and
marketable title to the number of shares of Company Stock set forth opposite
such Principal Shareholder's name on Schedule 4.3, free and clear of
Encumbrances.
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<PAGE> 29
6. REPRESENTATIONS AND WARRANTIES OF SM&A.
SM&A and Newco, jointly and severally, represent and warrant to the
Company and the Principal Shareholders that all of the following representations
and warranties are true as of the date of this Agreement and shall be true on
the Closing Date:
6.1 Organization and Standing. SM&A and Newco are each corporations duly
organized, validly existing and in good standing under the laws of the State of
California and SM&A and Newco are each duly authorized, qualified and licensed
under all applicable laws, regulations, and ordinances of and orders of
Government Authorities to own its properties and assets and to carry on its
business in the places and in the manner as it is now conducted except for where
the failure to be so authorized, qualified or licensed would not have a Material
Adverse Effect on its business. True and correct copies of the Articles of
Incorporation (certified by the Secretary of State of California) and Bylaws
(certified by the Secretary of SM&A), as each is amended, of each of SM&A and
Newco are attached to Schedule 6.1.
6.2 Authorization and Binding Obligation. Each of SM&A and Newco has
full corporate power and authority to enter into and perform this Agreement and
the Agreement of Merger, the Articles of Merger, and the Escrow Agreement, and
the transactions contemplated herein and therein. The execution, delivery and
performance of this Agreement and the Agreement of Merger, the Articles of
Merger, and the Escrow Agreement by SM&A and Newco have been duly and validly
authorized by all necessary action on their respective parts. This Agreement,
the Agreement of Merger, the Articles of Merger, and the Escrow Agreement have
been duly executed and delivered by each of SM&A and Newco and constitutes the
legal, valid and binding obligations of SM&A and Newco, enforceable against SM&A
and Newco in accordance with their terms, except as enforceability thereof may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally and by the exercise of judicial discretion
in accordance with equitable principles.
6.3 No Conflicts. The execution, delivery and performance of this
Agreement, the Agreement of Merger, the Articles of Merger, the Escrow
Agreement, and the agreements to be executed and delivered at the Closing, and
the consummation of the transactions contemplated hereby and thereby do not and
will not (a) violate or conflict with any provision of each of SM&A's and
Newco's Articles of Incorporation or Bylaws, (b) violate or conflict with any
provision of, or be an event that is (or with the passage of time will result
in) a default or violation of, or result in the modification, cancellation or
acceleration of (whether after the giving of notice or lapse of time or both)
any obligation under, or result in the imposition or creation of any
Encumbrances upon any of the assets of each of SM&A and Newco pursuant to, any
material contract, mortgage, lien, lease, agreement or instrument to which SM&A
or Newco is a party or by which each of SM&A and Newco is bound, (c) violate or
conflict with any Legal Requirement applicable to each of SM&A and Newco or any
of its properties or assets or any other material restriction of any kind or
character to which it is subject, or (d) require any authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any Government Authority.
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<PAGE> 30
6.4 Approvals. Except as set forth on Schedule 6.4, the execution,
delivery and performance of this Agreement by SM&A and Newco and the issuance
and delivery of the shares of SM&A Stock to be received by the shareholders in
the Merger do not require (a) the consent, approval or authorization of any
governmental or regulatory authority having jurisdiction over SM&A or Newco or
of any third party that have not been obtained, including the SEC and The Nasdaq
Stock Market, or (b) the submission or filing of any notice, report or other
filing with any governmental or regulatory authority having jurisdiction over
SM&A or Newco, including the SEC and The Nasdaq Stock Market.
6.5 Litigation and Administrative Proceedings. There is no litigation,
proceeding or investigation pending or, to the best knowledge of SM&A,
threatened against SM&A or Newco in any federal, state or local court, or before
any administrative agency, that seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken pursuant to or in
connection with this Agreement.
6.6 SM&A Stock Issued in Merger. SM&A has taken all necessary action to
permit it to issue the number of shares of SM&A Stock required to be issued by
it pursuant to this Agreement. The shares of SM&A Stock to be issued in the
Merger will, when issued and delivered to the shareholders of the Company as a
result of the Merger and pursuant to the terms of this Agreement, be duly and
validly issued, fully paid, nonassessable and free of preemptive rights or other
restrictions other than those imposed pursuant to securities laws.
6.7 NASDAQ National Market Listing. SM&A's Stock is duly listed on the
NASDAQ National Market and no inquiry or proceeding has been initiated or, to
SM&A's best knowledge, threatened for the purpose of causing such listing to be
terminated or restricted.
6.8 Taxes.
(a) Prior to the Merger, SM&A will be in control of Newco within
the meaning of Section 368(c) of the Code. SM&A shall not cause or
permit Newco to issue additional shares of its stock that would result
in SM&A losing control of Newco within the meaning of Section 368(c) of
the Code. No stock of Newco will be issued in the Merger.
(b) During its corporate existence, Newco has owned no assets,
and prior to the Merger shall not own any assets other than the SM&A
Stock to be distributed in the Merger.
(c) As of the date hereof and as of the Effective Time, SM&A has
no plan or intention to reacquire any of its stock issued in the Merger.
(d) SM&A shall not: liquidate Newco, merge Newco with or into
another corporation, or sell or otherwise dispose of the stock of Newco,
in any transaction other than the Merger, nor cause Newco to sell or
otherwise dispose of any of the assets of the Company acquired in the
Merger, except for dispositions made in the ordinary course of business
transfers described in Section 368(a) of the Code, or other
liquidations, dispositions or transfers which may be made without
disqualifying the Merger as a tax-free
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<PAGE> 31
reorganization under the Code. Following the Merger, SM&A will cause the
Surviving Corporation to continue the historic business of the Company
or to use a significant portion of the Company's business assets in a
business.
(e) Both SM&A and the Surviving Corporation shall at all times
consistently report on any Tax Return (as defined in Section 4.20) or
other filing made with any federal, state or local tax authority that
the Merger qualifies as a "reorganization" within the meaning of Section
368(a) of the Code, unless so reporting would subject either SM&A or the
Surviving Corporation to penalties pursuant to the Code.
(f) There is no intercorporate indebtedness existing between the
Company and SM&A nor between the Company and Newco that was issued,
acquired, or will be settled at a discount. SM&A is not an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
6.9 SEC Documents. SM&A has furnished, or within ten (10) days of the
date hereof shall furnish, the Company and each Company shareholder with a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement, if any, filed by SM&A with the SEC on or after
January 29, 1998 (the "SEC Documents"), which are all the documents that SM&A
was required to file with the SEC under the Exchange Act since that date. The
SEC Documents as of their respective dates complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC thereunder, applicable to such SEC Documents, and none of the SEC Documents
as of the date thereof contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The financial statements of SM&A
included in the SEC Documents as of their respective dates complied as to form
in all material respects with applicable accounting requirements and the rules
and regulations of the SEC with respect thereto and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q and
subject to normally recurring audit adjustments.
6.10 Subsidiaries. Except for Space Applications Corporation (and its
subsidiary entities Staminet, Inc. and Savant Corporation), SM&A does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity. SM&A is not,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.11 Financial Statements. Copies of the financial statements of SM&A in
compliance with GAAP shall be provided as part of the Private Placement
Memorandum.
6.12 Permits. SM&A owns or possesses all Permits of any public or other
Government Authority which are necessary for the conduct of its business as
currently conducted. Each of the foregoing is in full force and effect, and each
of SM&A and Newco is in compliance with all of its obligations with respect
thereto, and no event has occurred which permits, or upon giving the
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<PAGE> 32
notice or lapse of time or otherwise would permit, revocation or termination of
any of the foregoing.
6.13 Conformity with Law; Pending or Threatened Claims. Each of SM&A and
Newco has complied with, and each of SM&A and Newco is not in material default
under, any law, rule, ordinance, ruling, directive, or regulation or under any
order, award, judgment or decree of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over each of SM&A and Newco or any of its
assets or its business except where the failure to so comply or default
thereunder would not have a Material Adverse Effect on SM&A or Newco; and there
are no claims, actions, suits or proceedings, pending or, to the Knowledge of
SM&A or Newco threatened, against or affecting SM&A or Newco, at law or in
equity, in any court, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over each of SM&A and Newco or its business and no notice of
any such claim, action, suit or proceeding, whether pending or threatened, has
been received. Each of SM&A and Newco has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statues, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including,
without limitation, all such laws, rules, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, currency exchange, environmental protection, equal employment
opportunity, health and occupational safety, pension and employee benefit
matters, securities and investor protection matters, labor and employment
matters, and trading-with-the-enemy matters. Neither SM&A nor Newco has received
any notification of any asserted present or past unremedied failure by SM&A or
Newco to comply with any of such laws, rules, ordinances, decrees or orders.
7. COVENANTS.
7.1 Access and Cooperation. Between the date of this Agreement and the
Closing Date, each of the Company and SM&A will afford to the officers and
authorized representatives of the other party access to all of its and its
subsidiaries' sites, properties, books and records and will furnish the other
party with such additional financial and operating data and other information as
to the business and properties of it and its subsidiaries as the other party may
from time to time reasonably request subject to regulatory requirements
concerning public reporting entities under the Securities Exchange Act of 1934,
as amended. Each of the Company and SM&A and its subsidiaries will cooperate
with the other party, its representatives, engineers, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by any governmental agency.
Each of the Company and SM&A will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential. The confidentiality agreement(s) heretofore signed by the Company
and SM&A listed on Schedule 7.1 shall remain in full force and effect until the
Closing.
7.2 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, each of the Company and the Subsidiary shall:
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(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to
or affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships with suppliers, customers and others having business
relations with it; provided, however, subject to the representations and
warranties contained herein and the terms and conditions of the
Employment Agreements to the contrary, that (X) neither the Company nor
the Subsidiary shall have any liability with respect to the
determination of any of their employees to terminate their employment at
any time, either before or after the Effective Time, and neither SM&A
nor Newco shall be entitled to any adjustment in the Merger
Consideration for any such terminations; and (Y) neither the Company nor
the Subsidiary, shall have any liability with respect to the
determination of any of their customers or suppliers to cease doing
business with the Company, or the Subsidiary, as the case may be, either
before or after the Effective Time, and neither SM&A nor Newco shall be
entitled to any adjustment in the Merger Consideration for any such
event;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and similar governmental approvals;
(g) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments, without the knowledge and
consent of SM&A; and
(h) use commercially reasonable efforts (such efforts not to
require a rescision offer) to correct any prior failure to comply with
applicable federal and state securities laws in connection with the
prior issuance of its securities.
7.3 Prohibited Activities. Between the date hereof and the Effective
Time, each of the Company and the Subsidiary will not, without the prior written
consent of SM&A:
(a) make any change in its Articles of Incorporation or Bylaws;
(b) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
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(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in excess of
$10,000, other than in the ordinary course of business and consistent
with past practice;
(e) increase any fringe benefit or the compensation payable or to
become payable to any officer, director, shareholder, employee or agent,
or make any bonus or management fee payment to any such person, other
than in the ordinary course of business and consistent with past
practice;
(f) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired; provided, however, that in the event that
the Cash Out Amount exceeds $2,200,000 the Company may do any of the
foregoing in connection with entering into a loan or other agreement to
borrow funds necessary for the Cash Out;
(g) sell, assign, lease or otherwise transfer or dispose of any
material property or equipment, other than in the ordinary course of
business and consistent with past practice;
(h) negotiate for the acquisition of any business or the
start-up of any new business;
(i) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(j) waive any of its material rights or claims, other than the
ordinary course of business and consistent with past practice and for
fair value;
(k) breach or permit a breach, amend or terminate any material
agreement or any of its permits, licenses or other rights;
(l) in the case of the Company, permit its deferred Tax (as
defined in Section 4.20) liability to exceed $4,100,000; or
(m) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 [Reserved].
7.5 Release by Principal Shareholders. EACH PRINCIPAL SHAREHOLDER HEREBY
AGREES AND CONFIRMS THAT EFFECTIVE AS OF THE CLOSING THE PRINCIPAL SHAREHOLDER
HEREBY FULLY RELEASES, ACQUITS AND FOREVER
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DISCHARGES EACH OF THE COMPANY AND THE SUBSIDIARY, TOGETHER WITH ITS SUCCESSORS,
ASSIGNS, AFFILIATES, ANY PARENT AND RELATED PARTIES, FROM ANY AND ALL LIABILITY,
CLAIM, DAMAGE, SUIT, COST, EXPENSE OR OBLIGATION OF ANY NATURE WHATSOEVER
WHETHER KNOWN OR UNKNOWN, ARISING IN RESPECT OF OR IN CONNECTION WITH ANY TIME
OR PERIOD OF TIME ON OR PRIOR TO THE DATE HEREOF, EXCEPT FOR COMPENSATION
PAYABLE TO SUCH PRINCIPAL SHAREHOLDER BY THE COMPANY OR THE SUBSIDIARY BASED
UPON THE COMPANY'S OR THE SUBSIDIARY'S STANDARD PRACTICES WHICH HAS NOT BEEN
PAID, PLUS THE REASONABLE REIMBURSABLE EXPENSES BASED UPON THE PAST PRACTICES OF
THE PRINCIPAL SHAREHOLDER THAT HAVE NOT BEEN PAID, AND EXCEPT FOR ANY CLAIMS
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY.
7.6 No Shop. Between the date of this Agreement and the earlier of (i)
the Closing Date or (ii) September 15, 1998, each of the Company, the Subsidiary
and the Principal Shareholders shall not, directly or indirectly, in any way
solicit, initiate contact with, or enter into or conduct any discussions or
negotiations, or enter into any agreements, whether written or oral, with any
other firm, entity or individual, with respect to the sale of the stock or
assets or the merger or other business combination of each of the Company and
the Subsidiary with any other entity (an "Acquisition Transaction"). Each of the
Company and the Subsidiary and each Principal Shareholder, shall, if it or he is
the recipient of such an offer, immediately notify SM&A of such event and the
details of such offer. Any provision of this Agreement to the contrary
notwithstanding, the parties hereto acknowledge that each of the Company and the
Subsidiary and each Principal Shareholder is bound by its fiduciary obligations
and that they each must act in accordance with those obligations.
7.7 Options. Prior to, or contemporaneous with, the Closing, the Company
Options shall be exercised or cancelled.
7.8 Conduct of Regulation D Offering. SM&A shall conduct the offering of
the SM&A Stock issuable pursuant to the Merger in compliance with Regulation D
and any applicable state securities laws. SM&A shall not offer SM&A Stock to
more than thirty-five (35) persons who are not "accredited investors" (as
defined in Rule 501(a) of Regulation D).
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDERS.
The obligations of the Company and each of the Principal Shareholders to
close the transactions set forth in this Agreement are subject to the following
conditions. Upon Closing, all conditions not satisfied are deemed to be waived:
8.1 Representations and Warranties; Performance of Obligations. The
representations and warranties of SM&A and Newco contained in Article 6 shall be
accurate as of the Closing Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and conditions of
this Agreement to be complied with and performed by SM&A and
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Newco on or before the Closing Date shall have been duly complied with and
performed; and the Company shall have received a certificate from a duly
authorized officer of SM&A to such effect.
8.2 Counsel Approval. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall have been approved by counsel to the Company.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by SM&A of the Company Stock or the payment by SM&A
of any Merger Consideration; and no governmental agency or body shall have taken
any other action or made any request of the Company as a result of which the
management of the Company deems it inadvisable to proceed with the transactions
hereunder.
8.4 No Material Adverse Change. No material adverse change in the
results of operations, financial condition or business of each of SM&A and Newco
shall have occurred, and each of SM&A and Newco shall not have suffered any
material loss or damage to any of its properties or assets, whether or not
covered by insurance, since the date hereof, which change, loss or damage
materially affects or impairs the ability of each of SM&A and Newco to conduct
its business; and the Company shall have received a certificate from a duly
authorized officer of SM&A to such effect.
8.5 Opinion of Counsel. The Company shall have received an opinion from
Rutan & Tucker, counsel to SM&A, dated the Closing Date, in the form attached
hereto as Exhibit 3.2(b)(vi).
8.6 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency or any third party relating to the
consummation of the transactions contemplated herein shall have been obtained or
made, as applicable, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit the Company's performance of its obligations
hereunder, and no governmental agency or body shall have taken any other action
or made any request of the Company as a result of which of the Company deems it
inadvisable to proceed with the transactions hereunder.
8.7 Additional Liabilities and Obligations. SM&A shall have delivered to
the Company a list, dated the Closing Date, setting forth all material
liabilities and obligations of SM&A and Newco arising since the date of this
Agreement.
8.8 Additional Contracts. SM&A shall have delivered to the Company a
list, dated the Closing Date, showing all material contracts and agreements,
together with copies thereof, entered into by each of SM&A and Newco since the
date of this Agreement.
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8.9 Good Standing Certificates. SM&A shall have delivered to the Company
a certificate, dated as of a date no longer than five (5) business days prior to
the Closing Date, duly issued by the Secretary of State of the State of
California, showing that each of SM&A and Newco is in good standing and
authorized to do business and that all state franchise and/or income tax returns
have been filed and taxes paid for each of SM&A and Newco for all period prior
to the Closing.
8.10 Securities Compliance. The issuance of the SM&A Stock to the
Company's shareholders shall qualify for an exemption from registration pursuant
to Regulation D.
8.11 Tax Opinion. The Company shall have received an opinion from
Deloitte & Touche, LLP, dated the Closing Date, stating that the Merger, if
completed pursuant to the provisions of this Agreement, will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SM&A AND NEWCO.
The obligation of SM&A and Newco to close the transactions set forth in
this Agreement are subject to the satisfaction, on or prior to the Closing Date,
of the following conditions. Upon Closing, all conditions not satisfied are
deemed to be waived.
9.1 Representations and Warranties; Performance of Obligations. The
representations and warranties of the Company and the Principal Shareholders
contained in Article 4 and Article 5, respectively, shall be accurate as of the
Closing Date as though such representations and warranties had been made as of
that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by the Company and the Principal Shareholders on or
before the Closing Date shall have been duly complied with and performed; and a
certificate to the foregoing effect dated as of the Closing Date and signed by
each Principal Shareholder with respect to such Principal Shareholder's
representations, warranties and obligations and a certificate to the foregoing
effect dated as of the Closing Date and signed by a duly authorized officer of
the Company with respect to the Company's representations, warranties and
obligations, shall have been delivered to SM&A.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by SM&A of the Company Stock or the payment by SM&A
of any Merger Consideration; and no governmental agency or body shall have taken
any other action or made any request of SM&A as a result of which the management
of SM&A deems it inadvisable to proceed with the transactions hereunder.
9.3 Examination of Financial Statements. Prior to the Closing Date, SM&A
shall have had sufficient time to review the unaudited consolidated balance
sheets of the Company as of the end of the month immediately preceding the
Closing Date, and the unaudited consolidated statements of income, cash flow and
shareholders' equity of the Company for the period then ended, disclosing no
material adverse change in the financial condition of each of the Company
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and the Subsidiary or the results of its operations from the financial
statements originally furnished by the Company, as of January 31, 1998 and the
twelve (12)-month period so ended; and showing $2.2 million in cash on hand
(less the Cash Out Amount).
9.4 No Material Adverse Change. No material adverse change in the
results of operations, financial condition or business of each of the Company
and the Subsidiary shall have occurred, and each of the Company and the
Subsidiary shall not have suffered any material loss or damage to any of its
properties or assets, whether or not covered by insurance, since the Balance
Sheet Date, which change, loss or damage materially affects or impairs the
ability of the Company or the Subsidiary to conduct its business; and SM&A shall
have received a certificate signed by a duly authorized officer of the Company
dated the Closing Date to such effect.
9.5 Review. SM&A, through its authorized representatives, must have
completed a satisfactory review of the practices and procedures of each of the
Company and the Subsidiary including, but not limited to, compliance with
contracts and federal, state and local laws and regulations governing the
operations of each of the Company and the Subsidiary, disclosing no actual or
probable violations, compliance problems, required capital expenditures, out of
the ordinary course of business, or other substantive concerns.
9.6 Counsel Approval. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall have been approved by counsel to SM&A.
9.7 Opinion of Counsel. SM&A shall have received an opinion from Shaw
Pittman Potts & Trowbridge, counsel to the Company, dated the Closing Date,
substantially in the form attached hereto as Exhibit 3.2(a)(vii).
9.8 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency or any third party relating to the
consummation of the transactions contemplated herein shall have been obtained or
made, as applicable, and no action or proceeding shall have been instituted or
threatened to restrain or prohibit SM&A's or Newco's performance of its
obligations hereunder, including the acquisition of the Company Stock and
payment of the Merger Consideration, and no governmental agency or body shall
have taken any other action or made any request of SM&A or Newco as a result of
which SM&A or Newco deems it inadvisable to proceed with the transactions
hereunder.
9.9 Additional Liabilities and Obligations. The Company shall have
delivered to SM&A a list, dated the Closing Date, setting forth all material
liabilities and obligations of each of the Company and the Subsidiary arising
since the Balance Sheet Date.
9.10 Additional Contracts. The Company shall have delivered to SM&A a
list, dated the Closing Date, showing all material contracts and agreements,
together with copies thereof, entered into by each of the Company and the
Subsidiary since the date of this Agreement.
9.11 Good Standing Certificates. The Company shall have delivered to
SM&A a certificate, dated as of a date no longer than five (5) business days
prior to the Closing Date, duly
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issued by the State Corporation Commission of the Commonwealth of Virginia,
showing that the Company is in good standing and authorized to do business and
that all state franchise and/or income tax returns have been filed and taxes
paid for each of the Company and the Subsidiary for all periods prior to the
Closing.
9.12 Securities Compliance. The issuance of the SM&A Stock to the
Company's shareholders shall qualify for an exemption from registration pursuant
to Regulation D.
9.13 Termination of the Company Stock Option Plan. The Company's Board
of Directors shall have voted to terminate the Company's Stock Option Plan as of
the Effective Time.
9.14 Options. All outstanding rights, options, warrants and convertible
securities of each of the Company and the Subsidiary shall have been terminated
to the reasonable satisfaction of SM&A. All existing registration rights of
holders of securities in the Company shall have been terminated, and SM&A shall
have received a certificate to such effect, signed on behalf of the Company by a
duly authorized officer of the Company.
9.15 Dissenters' Rights. At the Closing, the Company's shareholders
holding in the aggregate less than five percent (5%) of the Company Stock, shall
have perfected their Dissenters' Rights.
9.16 Compliance With Regulation D and Rule 144. All shareholders of the
Company at the Closing Date shall have executed and delivered to SM&A
appropriate documentation concerning the status and eligibility to receive SM&A
Stock pursuant to Regulation D including an agreement in form and substance
reasonably satisfactory to SM&A providing that such persons will not sell or
otherwise dispose of any securities of SM&A received pursuant to the Merger
without registration under the Securities Act and any applicable state
securities laws, absent an available exemption therefrom.
10. INDEMNIFICATION.
10.1 Survival. The representations, warranties, covenants and agreements
of the parties made in this Agreement shall survive (and not be affected in any
respect by) the Closing and any examination or investigation conducted by or on
behalf of the parties hereto and any information which any party may receive
pursuant to the Schedules hereto or otherwise. Notwithstanding the foregoing,
the right of indemnification or other claim with respect to each representation
and warranty contained in this Agreement shall terminate on the date (the
"Survival Date") occurring on the second anniversary of the Closing Date.
provided, however, the right to indemnification with respect to such
representations and warranties, and the liability of any party with respect
thereto, shall not terminate with respect to any claim, whether or not fixed as
to liability or liquidated as to amount, with respect to which such party has
been given written notice prior to the Survival Date.
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10.2 Indemnification by Shareholders.
(a) The holders of Outstanding Company Shares shall indemnify,
defend, protect and hold harmless SM&A and the Company, each of their
respective successors and assigns and each of their directors, officers,
employees, agents and affiliates (each an "SM&A Indemnified Person"), at
all times from and after the date of this Agreement (subject to any
limitation on the survival of representations and warranties set forth
in Section 10.1), against all losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses
("Losses") (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation ("Legal Expenses")) based
upon, resulting from or arising out of (i) any inaccuracy or breach of
any representation, or warranty of the Company contained in this
Agreement, and (ii) the breach by the Company of, or the failure by the
Company to observe, any of its covenants or other agreements contained
in this Agreement.
(b) Each of the Principal Shareholders shall indemnify, defend,
protect and hold harmless each SM&A Indemnified Person, at all times
from and after the date of this Agreement (subject to any limitation on
the survival of representations and warranties set forth in Section
10.1) against all Losses (including specifically, but without
limitation, Legal Expenses) based upon, resulting from or arising out of
(i) any inaccuracy or breach of any representation, or warranty of such
Principal Shareholder contained in this Agreement, and (ii) the breach
by such Principal Shareholder of, or the failure by the Principal
Shareholder to observe, any of such Principal Shareholder's covenants or
other agreements contained in this Agreement.
(c) The liability of each holder of Outstanding Company Shares,
other than a Principal Shareholder, under this Section 10.2 shall be
limited to his pro rata interest in the Escrow Shares. The liability of
each Principal Shareholder shall be limited to the aggregate Merger
Consideration received by such Principal Shareholder.
10.3 Indemnification by SM&A. SM&A covenants and agrees that it will
indemnify, defend, protect and hold harmless each holder of Outstanding Company
Shares, his successors and heirs (each a "Shareholder Indemnified Person") at
all times from and after the date of this Agreement (subject to any limitation
on the survival of representations and warranties set forth in Section 10.1)
against all Losses (including specifically, but without limitation, Legal
Expenses) based upon, resulting from or arising out of (a) any inaccuracy or
breach of any representation or warranty of SM&A or Newco contained in this
Agreement, and (b) the breach by SM&A or Newco of, or the failure by SM&A or
Newco to observe, any of its covenants or other agreements contained in or made
pursuant to this Agreement.
10.4 Indemnification Procedures.
(a) Promptly after receipt by any person entitled to
indemnification under Section 10.2 or 10.3 (an "indemnified party") of
notice of the commencement of any action, suit or proceeding by a person
not a party to this Agreement in respect of which the indemnified party
will seek indemnification hereunder (a "Third Party Action"), the
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indemnified party shall notify the person that is obligated to provide
such indemnification (the "indemnifying party") thereof in writing, but
any failure to so notify the indemnifying party shall not relieve it
from any liability that it may have to the indemnified party under
Section 10.2 or 10.3, except to the extent that the indemnifying party
is prejudiced by the failure to give such notice. The indemnifying party
shall be entitled to participate in the defense of such Third Party
Action and to assume control of such defense (including settlement of
such Third Party Action) with counsel reasonably satisfactory to such
indemnified party; provided, however, that:
(i) the indemnified party shall be entitled to
participate in the defense of such Third Party Action and to
employ counsel at its own expense (which shall not constitute
Legal Expenses for purposes of this Agreement) to assist in the
handling of such Third Party Action;
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any
settlement of such Third Party Action or ceasing to defend
against such Third Party Action, if pursuant to or as a result of
such settlement or cessation, injunctive or other equitable
relief would be imposed against the indemnified party or the
indemnified party would be adversely affected thereby;
(iii) no indemnifying party shall consent to the entry of
any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by each claimant or
plaintiff to each indemnified party of a release from all
liability in respect of such Third Party Action; and
(iv) the indemnifying party shall not be entitled to
control the defense of any Third Party Action unless the
indemnifying party confirms in writing its assumption of such
defense and continues to pursue the defense reasonably and in
good faith. After written notice by the indemnifying party to the
indemnified party of its election to assume control of the
defense of any such Third Party Action in accordance with the
foregoing, (i) the indemnifying party shall not be liable to such
indemnified party hereunder for any Legal Expenses subsequently
incurred by such indemnified party attributable to defending
against such Third Party Action, and (ii) as long as the
indemnifying party is reasonably contesting such Third Party
Action in good faith, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge the
claim underlying, such Third Party Action without the
indemnifying party's prior written consent. If the indemnifying
party does not assume control of the defense of such Third Party
Action in accordance with this Section 10.4, the indemnified
party shall have the right to defend and/or settle such Third
Party Action in such manner as it may deem appropriate at the
cost and expense of the indemnifying party, and the indemnifying
party will promptly reimburse the indemnified party therefor in
accordance with this Section 10.4. The reimbursement of fees,
costs and expenses required by this Section 10.4 shall be made by
periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred.
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(b) If an indemnified party has actual knowledge of any facts or
circumstances other than the commencement of a Third Party Action which
cause in good faith it to believe that it is entitled to indemnification
under this Article 10 then such indemnified party shall promptly give
the indemnifying party notice thereof in writing, but any failure to so
notify the indemnifying party shall not relieve it from any liability
that it may have to the indemnified party under Section 10.2 or 10.3, as
the case may be, except to the extent that the indemnifying party is
prejudiced by the failure to give such notice.
11. NONCOMPETITION.
11.1 Prohibited Activities of the Principal Shareholders. Each Principal
Shareholder hereby covenants and agrees as follows:
(a) For a period of three (3) years after the Closing Date
(except as set forth in the following paragraph), each Principal
Shareholder shall not for any reason whatsoever, directly or indirectly,
for himself or on behalf of or in conjunction with any other Person,
engage, as an officer, director, shareholder, owner, partner, joint
venturer, lender or in any capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
business selling any products or services in direct or indirect
competition with the Company, the Subsidiary or SM&A on the Closing
Date;
Notwithstanding the foregoing provisions of this paragraph (a)
each Principal Shareholder may (i) be a passive investor owning no more
than five percent (5%) of the outstanding equity securities of any
corporation the equity securities of which are listed on a national
securities exchange or traded on the NASDAQ National Market System and
with which such Principal Shareholder has no other connection whatsoever
or (ii) invest in or act as an employee, consultant or other position
for SM&A, or any of its Affiliates; or
(b) For a period of three (3) years after the Closing Date, each
Principal Shareholder shall not, directly or indirectly, offer to employ
any person who is, at that time, or who has been within one (1) year
prior to that time, an employee of SM&A, the Company or the Subsidiary.
For the purposes of this Section 11.1 general advertising concerning
available employment opportunities through newspapers or trade journals
shall not constitute solicitation.
11.2 Prohibited Activities of SM&A and Newco. In the event the Closing
does not occur for any reason, for a period of one (1) year after the date of
this Agreement, each of SM&A and Newco shall not for any reason whatsoever,
solicit the employment of any person who is, at that time, or who has been
within one (1) year prior to that date, an employee of the Company or the
Subsidiary. For the purposes of this Section 11.2 general advertising concerning
available employment opportunities through newspapers or trade journals shall
not constitute solicitation.
11.3 Acknowledgments.
(a) The parties hereto agree and acknowledge that the damages
that would be suffered by a nonbreaching party as a result of any breach
of the provisions of this
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Article 11 may not be calculable and that an award of a monetary
judgment for such a breach would be an inadequate remedy. Consequently,
a nonbreaching party shall have the right, in addition to any other
rights it may have, to obtain, in any court of competent jurisdiction,
injunctive relief to restrain any breach or threatened breach of any
provision of this Article 11 or otherwise to specifically enforce any of
the provisions hereof, and a nonbreaching party shall not be obligated
to post a bond or other security in seeking such relief. This remedy is
in addition to damages directly or indirectly suffered by a nonbreaching
party and reasonable attorneys' fees; and
(b) The parties hereto agree that the restraint, duration and
area for which the covenants in this Article 11 are to be effective are
reasonable in light of the business and activities of the parties
hereto. In the event that any court finally determines that the time
period or the geographic scope of any such covenant is unreasonable or
excessive and any covenant is to that extent made unenforceable, the
parties agree that the restrictions in this Article 11 shall remain in
full force and effect for the greatest time period and within the
greatest geographic area that would not render it unenforceable. The
parties intend that each of the covenants in Article 11 shall be deemed
to be a separate covenant.
11.4 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of a nonbreaching
party against a breaching party, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by any party of
such covenants.
12. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON SM&A STOCK;
REGISTRATION RIGHTS.
12.1 Regulation D. The SM&A Stock issuable in connection with the Merger
has not, and as of the Closing will not, be registered under the Securities Act.
Such SM&A Stock will be issued pursuant to an exemption from registration under
Rule 506 of Regulation D promulgated under the Securities Act. Consequently, the
SM&A Stock issued in connection with the Merger may not be sold or otherwise
transferred unless a registration statement under the Securities Act is in
effect with respect to such securities, or in the alternative, an exemption from
registration under the Securities Act is found to be available to the reasonable
satisfaction of SM&A.
12.2 Registration Rights Agreement; Registration Efforts. On the Closing
Date, SM&A and the recipients of SM&A Stock in connection with the Merger shall
each execute a Registration Rights Agreement (the "Registration Rights
Agreement") in substantially the form of Exhibit 12.2 attached hereto which
shall provide that the SM&A Stock issuable pursuant to the Merger shall be
registered, pursuant to a registration statement to be filed with the SEC.
12.3 Form 8-K. The Principal Shareholders shall cooperate with and
assist the Company and SM&A, to the extent reasonably requested by the Company
or SM&A, in providing information for the preparation of the Report on Form 8-K
to be filed by SM&A in connection with the Merger.
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12.4 Legend. All SM&A Stock issued in connection with the Merger shall
bear substantially the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT
SUCH REGISTRATION IS NOT REQUIRED."
13. CERTAIN DEFINITIONS.
13.1 "Affiliate" (whether or not capitalized) shall mean, with respect
to any person, any other person that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with
such first person. As used in this definition, "control" shall mean possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or other ownership
interest, by contract or otherwise).
13.2 "Average Closing Price for the Base Period" means the average of
the closing prices of SM&A Stock on the NASDAQ National Market for the twenty
(20) trading days immediately preceding the date of this Agreement.
13.3 "Cash Consideration" means the amount equal to $12,300,000 less the
Purchase Price Adjustment Amount, if any, and further (i) decreased by fifty
percent (50%) of the amount by which the Cash Out Amount exceeds $6,000,000 or
(ii) increased by fifty percent (50%) of the amount by which the Cash Out Amount
is less than $6,000,000, as the case may be.
13.4 "Cash Exchange Amount" shall mean the Cash Consideration divided by
the Outstanding Company Shares.
13.5 "Cash Out" means the payment of cash by the Company to reduce the
aggregate number of its shareholders and optionholders, who are not "accredited
investors" as defined in Rule 501(a) of Regulation D, to thirty-five (35) or
less.
13.6 "Cash Out Amount" means the amount expended by the Company in the
Cash Out.
13.7 "Company Options" mean all options and warrants, whether vested or
not, to purchase shares of Company Stock.
13.8 "Company Stock" means the common stock, $.01 par value per share,
of the Company.
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13.9 "Dissenters' Rights" shall mean the rights of shareholders of the
Company to dissent from corporate action and receive payment of the fair value
of their shares of Company Stock under the Dissenters Law.
13.10 "Encumbrances" shall mean mortgages, liens, pledges, encumbrances
(legal or equitable), claims, charges, security interests, covenants,
conditions, voting and other restrictions, rights-of-way, easements, options,
encroachments, rights of others and any other matters affecting title, except,
in the case of the Company Stock and the SM&A Stock, for restrictions on the
sale or other disposition thereof imposed by federal or state securities laws.
13.11 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
13.12 "GAAP" shall mean generally accepted accounting principles.
13.13 "Government Authority" shall mean any government or state (or any
subdivision thereof), whether domestic, foreign or multinational, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any government court or tribunal.
13.14 "Knowledge" with respect to the Company or the Subsidiary shall
mean all facts and conditions which are actually known by any of the executive
officers or directors of the Company or the Subsidiary, as the case may be, or
which should have been known by prudent managers holding such positions with
access to the books and records of the Company or the Subsidiary, as the case
may be; and "Knowledge" with respect to SM&A or Newco shall mean all facts and
conditions which are actually known by any of the executive officers or
directors of SM&A or Newco, as the case may be, or which should have been known
by prudent managers holding such positions with access to the books and records
of SM&A or Newco, as the case may be.
13.15 "Legal Requirement" shall mean any law, statute, ordinance, code,
rule, regulation, standard, judgment, decree, writ, ruling, arbitration award,
injunction, order or other requirement of any Government Authority.
13.16 "Material Adverse Effect" shall mean any material adverse change
in or effect on, or any change that may reasonably be expected to have a
material adverse effect on, (i) the business, operations, assets, liabilities,
condition (financial or otherwise), results of operations, or prospects of each
of the Company and the Subsidiary or each of SM&A and Newco, as the context
requires, (ii) the ability of any of the parties hereto to consummate the
transactions contemplated by this Agreement or any related agreement to which
any such party is a party.
13.17 "Outstanding Common Shares" shall mean the number of shares of
Company Stock outstanding immediately prior to the Effective Time, and any of
such shares. For the avoidance of doubt, Outstanding Company Shares do not
include shares held by the Company, whether as treasury stock or otherwise, or
held by a subsidiary of the Company.
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13.18 "Person" (whether or not capitalized) shall mean and include an
individual, corporation, company, limited liability company, limited liability
partnership, partnership, joint venture, association, trust, and other
unincorporated organization or entity and a governmental entity or any
department or agency thereof.
13.19 "Private Placement Memorandum" means the Private Placement
Memorandum and related disclosure documents furnished to the Company's
shareholders relating to the Merger pursuant to the requirements of Regulation D
under the Securities Act.
13.20 "Purchase Price Adjustment Amount" shall mean any professional
fees (including, without limitation, any legal, accounting and investment
banker/advisor fees) of the Company paid or payable on or before the Closing
Date in respect of the Merger in excess of an aggregate of $485,000 (including
an amount, not to exceed $35,000, payable by the Company to Deloitte & Touche,
LLP for its fees for preparing and delivering a tax opinion that the
transactions contemplated hereby shall be treated as a tax-free reorganization
under Section 368(a) of the Code).
13.21 "Regulation D" shall mean Regulation D of the Securities Act.
13.22 "SEC" shall mean the Securities and Exchange Commission.
13.23 "Securities Act" shall mean the Securities Act of 1933, as
amended.
13.24 "Share Consideration" means the number of shares of SM&A Stock
obtained by dividing $12,600,000 by the Average Closing Price for the Base
Period, and either (i) increased by the number of shares of SM&A Stock obtained
by dividing (A) the amount of which is fifty percent (50%) of the amount by
which the Cash Out Amount is less than $6,000,000, by (B) the Average Closing
Price for the Base Period, or (ii) decreased by the number of shares of SM&A
Stock obtained by dividing (A) the amount which is fifty percent (50%) of the
amount by which the Cash Out Amount exceeds $6,000,000, by (B) the Average
Closing Price for the Base Period, as the case may be.
13.25 "Share Exchange Ratio" is equal to (i) the Share Consideration
divided by (ii) the Outstanding Company Shares.
13.26 "SM&A Stock" means the common stock, no par value of SM&A.
13.27 "Technology" shall mean all trade secrets, proprietary
information, software and computer programs and source code data relating
thereto (including all current and historical data bases) research records, test
information, market surveys, marketing know-how, inventories, know-how,
processes and procedures owned, used by or licensed to each of the Company and
the Subsidiary.
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14. TERMINATION.
14.1 Circumstances of Termination. This Agreement may be terminated
(notwithstanding approval by the shareholders of any party hereto):
(a) By the mutual consent in writing of the Boards of Directors
of the Company and SM&A;
(b) By the Board of Directors of the Company if any condition
provided in Article 8 hereof has not been satisfied or waived on or
before the Closing Date;
(c) By the Board of Directors of SM&A if any condition provided
in Article 9 hereof has not been satisfied or waived on or before the
Closing Date;
(d) By the Board of Directors of either the Company or SM&A if
the Effective Time has not occurred by September 15, 1998;
(e) By SM&A if the Company or any Principal Shareholder has
breached in any material respect any of the representations or
warranties contained in Article 4 or Article 5, respectively;
(f) By the Company if SM&A or Newco has breached in any material
respect any of the representations or warranties contained in Article 6;
(g) By SM&A if (i) the Company's Board of Directors (A) fails to
include a recommendation that the Company's shareholders vote in favor
of the adoption of this Agreement, (B) withdraws its recommendation that
shareholders vote in favor of the Merger, or (C) promulgates a favorable
recommendation regarding an Acquisition Transaction, or (ii) less than
two-thirds (2/3) of the Company's shareholders vote in favor of this
Agreement on or before September 15, 1998; and
14.2 Termination Fee.
(a) In order to induce SM&A to enter into this Agreement and to
reimburse SM&A for its costs and expenses related to entering into this
Agreement and consummating the transactions contemplated by this
Agreement, the Company will make a cash payment to SM&A in the amount of
SM&A's reasonable out-of-pocket expenses in connection with this
Agreement and the transactions contemplated hereby up to a maximum of
$350,000 if:
(i) SM&A has terminated this Agreement pursuant to
Section 14.1(e) because of a breach of any of the Company's or
Principal Shareholders' representations and warranties contained
in Article 4 or Article 5, respectively; or
(ii) SM&A has terminated this Agreement pursuant to
Section 14.1(g)(i).
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(b) The Company will make a cash payment to SM&A of $1,000,000
if within twelve (12) months following the termination of this
Agreement, (i) any of the Company, the Subsidiary and the Principal
Shareholders shall, directly or indirectly, in any way solicit, initiate
contact with, or enter into or conduct any discussions or negotiations,
or enter into any agreements, whether written or oral, with any other
firm, entity or individual, with respect to the sale of the stock or
assets or the merger or other business combination of each of the
Company and the Subsidiary with any other entity, and (ii) the Company
is acquired in an Acquisition Transaction for consideration greater than
$24,900,000, it being agreed that the foregoing represents a reasonable
estimate of SM&A's damages, costs and expenses and is not intended as a
penalty.
(c) Any payment required under this Section 14.2 will be payable
by the Company to SM&A (by wire transfer of immediately available funds)
to an account designated by SM&A within thirty (30) business days after
demand by SM&A.
14.3 Effect of Termination. Except as provided in Section 14.2, in the
event of a termination of this Agreement pursuant to Section 14.1 hereof, each
party shall pay the costs and expenses incurred by it in connection with this
Agreement, and no party (or any of its officers, directors, and shareholders)
shall be liable to any other party for any costs, expenses, damages, or loss of
anticipated profits hereunder.
15. GENERAL.
15.1 Cooperation. The Company, the Principal Shareholders and SM&A shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each Principal Shareholder will cooperate and use his best
efforts to have the present officers, directors and employees of the Company
cooperate with SM&A on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
15.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned except by operation of law or the prior
written consent of the other parties, and shall be binding upon and shall inure
to the benefit of the parties hereto, the successors of the Company and SM&A,
and the heirs and legal representatives of the Principal Shareholders.
15.3 Entire Agreement. This Agreement (including the Exhibits attached
hereto and the Schedules delivered pursuant hereto) and the other writings
specifically identified herein or contemplated hereby contain the entire
agreement and understanding between the parties hereto with respect to the
transactions contemplated herein and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement
may be modified or amended only by a written instrument executed by the Company,
the Principal Shareholders, Newco and SM&A.
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15.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.5 Brokers and Agents. Each party represents and warrants that it
employed no broker or agent in connection with this transaction, and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party, except as follows. SM&A and Newco
acknowledge and agree that the Company has engaged the services of Ferris, Baker
Watts, Incorporated ("FBW") and that, in the event that the Merger and related
transactions are consummated, FBW will receive a commission of one percent (1%)
of the value of any Merger Consideration received by the shareholders of the
Company. The FBW commission shall be included within the $485,000 amount set
forth in Sections 13.20 and 15.6.
15.6 Payment of Expenses. Each of the parties hereto shall pay all its
own costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that SM&A shall pay up to
$485,000 to the Company at the Closing for costs and expenses of professionals
retained by the Company in connection with the Merger and related transactions
(including, without limitation, any legal, accounting and investment advisory
fees and including an amount, not to exceed $35,000, payable by the Company to
Deloitte & Touche, LLP for its fees for preparing and delivering a tax opinion
that the transactions contemplated hereby shall be treated as a tax-free
reorganization under Section 368(a) of the Code).
15.7 Attorney's Fees, Prevailing Party. Should any proceeding be
commenced between the parties to this Agreement seeking to enforce any of its
provisions the prevailing party in such proceeding shall be entitled, in
addition to such other relief as may be granted, to a reasonable sum for
attorneys' fees and all legal expenses and fees incurred on appeal and all
interest thereon. For the purposes of this provision, "prevailing party" shall
include a party which dismisses an action for recovery hereunder in exchange for
payment of the sum allegedly due, performance of covenants allegedly breached,
or consideration substantially equal to the relief sought in the action or
proceeding.
15.8 Notices. All notices or communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to SM&A or Newco, addressed to them at:
Steven Myers & Associates, Inc.
4695 MacArthur Court, Eight Floor
Newport Beach, California 92660
Attn: Chief Operations Officer
Telephone: (714) 975-1550
Fax: (714) 975-1342
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<PAGE> 50
with a copy (which shall not constitute notice) to:
Rutan & Tucker
611 Anton Blvd., Suite 1400
Costa Mesa, CA 92626-1998
Attn: Thomas J. Crane, Esq.
Telephone: (714) 641-5100
Fax: (714) 546-9035
(b) If to the Principal Shareholders, addressed to:
Decision-Science Applications, Inc.
1110 N. Glebe Road
Arlington, Virginia 22201
Attn: Mr. Guy A. Ackerson
(c) If to the Company, addressed to it at:
Decision-Science Applications, Inc.
1110 N. Glebe Road
Arlington, Virginia 22201
Attn: Mr. Guy A. Ackerson
Telephone: (703) 243-2500
Facsimile: (703) 875-9231
(d) with a copy (which shall not constitute notice) to:
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attn: Barbara M. Rossotti, Esq.
Telephone: (202) 663-8066
Facsimile: (202) 663-8007
15.9 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of California.
15.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
15.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such a manner as
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to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
15.12 General Terms. As used in this Agreement, the terms "herein,"
"herewith," and "hereof" are references to this Agreement, taken as a whole; the
term "includes" or "including" shall mean "including, without limitations," and
references to a "Section," "subsection," "clause," "Article," "Exhibit,"
"Appendix," or "Schedule" shall mean a Section, subsection, clause, Article,
Exhibit, Appendix or Schedule of this Agreement, as the case may be, unless in
any such case the context requires otherwise. All references to a given
agreement, instrument or other document shall be a reference to that agreement,
instrument or other document as modified, amended, supplemented and restated
through the date as of which such reference is made, and reference to a law
includes any amendment or modification thereof. The singular shall include the
plural, and the masculine shall include the feminine and neuter, and vice versa.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SM&A" STEVEN MYERS & ASSOCIATES, INC.,
a California corporation
By: /s/ KENNETH W. COLBAUGH
--------------------------------
Name: KENNETH W. COLBAUGH
Title: COO/Executive Vice President
"COMPANY": DECISION-SCIENCE-APPLICATIONS, INC.,
a Virginia corporation
By: /s/ GUY A. ACKERSON
--------------------------------
Name: GUY A. ACKERSON
TITLE: CEO/Chairman of the Board
"NEWCO": DSA ACQUISITION, INC.,
a California corporation
By: /s/ KENNETH W. COLBAUGH
--------------------------------
Name: KENNETH W. COLBAUGH
Title: President
"PRINCIPAL SHAREHOLDERS": /s/ GUY A. ACKERSON
-------------------------------------
GUY A. ACKERSON
/s/ GARY L. LUCAS
-------------------------------------
GARY L. LUCAS
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EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the
20th day of August, 1998, by and among STEVEN MYERS & ASSOCIATES, INC., a
California corporation ("SM&A"), and Guy A. Ackerson individually and as
attorney for all other shareholders of Decision-Science Applications, Inc., a
Virginia corporation, listed on Schedule 1.0 attached hereto (collectively, the
"DSA Shareholders").
R E C I T A L S:
A. SM&A, Decision-Science Applications, Inc. ("DSA") and DSA
Acquisition, Inc. ("Subsidiary"), a wholly owned subsidiary of SM&A, Guy A.
Ackerson and Gary L. Lucas, entered into that certain Agreement and Plan of
Reorganization and Merger dated July 22, 1998 (the "Merger Agreement") pursuant
to which DSA will merge with and into Subsidiary (the "Merger"). Pursuant to the
Merger, SM&A will issue shares of Common Stock of SM&A (the "SM&A Stock") to the
DSA Shareholders.
B. SM&A and the DSA Shareholders desire to set forth in a single
agreement the registration rights to be granted to the DSA Shareholders, and the
covenants to be made in connection therewith, with respect to the shares of SM&A
Stock issued to the DSA Shareholders pursuant to the Merger.
NOW, THEREFORE, for good and valuable consideration, the DSA
Shareholders and SM&A agree as follows:
1. Definitions.
For purposes of this Agreement:
(a) The term "register," "registered," and "registration" refer to a
registration of the Registrable Securities effected by preparing and filing a
registration statement with the Securities and Exchange Commission (the "SEC")
in compliance with the Securities Act of 1933, as amended (the "Act"), and the
declaration or ordering of effectiveness by the SEC of such registration
statement;
(b) The term "Registrable Securities" means (i) shares of SM&A Stock
issued to the DSA Shareholders in the Merger, and (ii) any SM&A Stock issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution (including a stock
split, stock dividend, recapitalization or similar event) with respect to, or in
exchange for or in replacement of, SM&A Stock referred to in (i) above,
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Agreement are not assigned;
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(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of SM&A Stock outstanding which are
Registrable Securities, and the number of shares of SM&A Stock issuable pursuant
to then exercisable or convertible securities which would be Registrable
Securities upon issuance;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 12 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by SM&A with the SEC.
2. Request for Registration.
(a) If SM&A shall receive at any time after February 1, 1999 a written
request from the Holders of at least thirty-five percent (35%) of the
Registrable Securities then outstanding that SM&A file a registration statement
on Form S-3 under the Act covering the registration of at least thirty-five
percent (35%) of the Registrable Securities then outstanding (or without regard
to percent if the aggregate offering price would exceed $2,000,000), then SM&A
shall, within ten (10) days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations of Section 2(b),
use its best efforts to effect, at the earliest possible date, but in any event
within forty-five (45) days of the date of the original written request from the
Holders, file with the SEC a registration statement on Form S-3 covering all
Registrable Securities which the Holders thereof request to be registered, which
such requests have been received by SM&A within twenty (20) days of the mailing
of such notice to the Holders by SM&A in accordance with Section 18 below.
(b) If the Holders initiating the registration request under this
Section 2 ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriter, the Initiating Holders
shall so advise SM&A as a part of their request made pursuant to this Section 2
and SM&A shall include such information in the written notice referred to in
Section 2(a). The underwriter with respect to such Form S-3 registration will be
selected by a majority in interest of the Initiating Holders and shall be
reasonably acceptable to SM&A. The right of any Holder to include his
Registrable Securities in the underwritten offering shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwritten offering shall (together with
SM&A as provided in Section 4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting in the manner set forth above, it being understood that each Holder
shall be required to make only those representations (if any) as would be
customary for a holder of a similar percentage of similar securities.
Notwithstanding any other provision of this Section 2, if the managing
underwriter
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advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be included in the underwritten offering pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
underwritten offering shall be allocated equally among all Holders thereof,
including the Initiating Holders, on a percentage basis (as nearly as
practicable) equal to the percentage of SM&A Stock requesting registration and
permitted by such underwriters to be sold by SM&A shareholders. To the extent
Registrable Securities requested to be registered are excluded from the offering
pursuant to the immediately preceding sentence, the Holders of such Registrable
Securities shall have the right to one additional demand registration pursuant
to this Section 2.
SM&A may include in the registration under this Section 2(b) any other
shares of SM&A Stock (including issued and outstanding shares of SM&A Stock as
to which the holders thereof have contracted with SM&A for "piggyback"
registration rights) so long as the inclusion in such registration of such
shares (i) will not, in the opinion of the managing underwriter, interfere with
the successful marketing in accordance with the intended method of sale or other
disposition of all the shares of Registrable Securities sought to be registered
by the Holder or Holders of Registrable Securities pursuant to this Section 2
and (ii) will not result in the exclusion from such registration of any
Registrable Securities. If it is determined as provided above that there will be
such interference, the other shares of SM&A Stock sought to be included shall be
excluded to the extent deemed appropriate by the managing underwriter.
(c) SM&A is obligated to effect only two (2) registrations pursuant to
this Section 2 except as provided in Section 2(b).
(d) Notwithstanding the foregoing, if SM&A shall furnish to Holders
requesting a registration statement pursuant to this Section 2 a certificate
signed by the President of SM&A stating that in the good faith judgment of the
Board of Directors of SM&A, it would be seriously detrimental to SM&A and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, SM&A shall have
the right to defer taking action with respect to such filing for a period of not
more than ninety (90) days after receipt of the request of the Initiating
Holders; provided, however, that SM&A may not utilize this right more than once
in any twelve (12) month period. The certificate provided by SM&A shall briefly
explain the reasoning of the Board of Directors in making such determination.
(e) SM&A shall not be required to prepare and file a registration
statement pursuant to this Section 2 which would become effective within one
hundred eighty (180) days following the effective date of a registration
statement filed by SM&A with the SEC pertaining to an underwritten public
offering of securities for cash for the account of SM&A if the Initiating
Holders' request for registration is received by SM&A subsequent to such time as
SM&A in good faith gives written notice to the holders of Registrable Stock that
(i) SM&A is commencing to prepare a registration statement, (ii) SM&A is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective, and (iii) that the underwriters of
the offering made pursuant to such registration statement reasonably object to
the registration of the Registrable Securities.
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A registration requested pursuant to this Section 2 shall not be deemed
to have been effected until such time as a registration statement with respect
thereto has become effective in compliance with the provisions of the Act.
3. SM&A Registration.
If (but without any obligation to do so) SM&A proposes to register
(including for this purpose a demand registration effected by SM&A any of its
common stock under the Act in connection with the public offering of such common
stock solely for cash (other than a registration relating solely to the sale of
securities on Form S-8, Form S-4 or any successor form thereto), then SM&A
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by SM&A in accordance with Section 18, SM&A
shall, subject to the provisions of Section 8, cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered subject to the terms, conditions and contractual obligations of such
underwritten offering. SM&A reserves the right to withdraw any proposed
registration in which Holders have requested to participate pursuant to this
Section 3.
4. Obligations of SM&A.
Whenever required under this Agreement to effect the registration of any
Registrable Securities, SM&A shall, as soon as reasonably practicable:
(a) prepare and (using its best efforts to do so, but in any event
within forty-five (45) days of the date of a written request) file with the SEC
a registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one
(1) year;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement;
(c) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the SM&A Stock covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders, provided
that SM&A shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions and use its best efforts to cause
all Registrable
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<PAGE> 5
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to SM&A and counsel to the Holder or
Holders of Registrable Securities to enable the Holder or Holders thereof to
consummate the disposition of such Registrable Securities;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the underwriters of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any such Holder promptly prepare and furnish to it a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made;
(g) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Agreement, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing SM&A for the purposes of such registration, in form and substance
as is customarily given to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of SM&A, in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities;
(h) use its best efforts (a) to list all Registrable Securities covered
by such registration statement on such national securities exchange on which
Registrable Securities of the same class and, if applicable, series covered by
such registration statement are then listed, if any, or on the National
Association of Securities Dealers Automated Quotation System, Inc. ("NASDAQ") if
the Registrable Securities are quoted on NASDAQ; and
(i) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its securities holders, as
soon as reasonably practicable and if required by law, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
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<PAGE> 6
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder, and
promptly furnish to each such Holder of Registrable Securities a copy of any
amendment or supplement to such registration statement or prospectus.
5. Furnish Information.
It shall be a condition precedent to the obligations of SM&A to take any
action pursuant to this Agreement with respect to the Registrable Securities of
any Holder that such Holder requesting registration shall furnish to SM&A such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
6. Expenses of Demand Registration.
All expenses other than underwriting discounts and commissions incurred
in connection with registrations, filings or qualifications pursuant to Section
2, including, without limitation, all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for SM&A,
and the reasonable fees and disbursements of one counsel for the selling Holders
(as selected by a majority in interest of the selling Holders) shall be borne by
SM&A; provided, however, that SM&A shall not be required to pay for any expenses
of any registration proceeding begun pursuant to Section 2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all Holders
participating in such registration shall bear such expenses), unless the Holders
of a majority of the Registrable Securities agree to forfeit one of their demand
registration rights provided under Section 2. Notwithstanding the foregoing,
however, if at the time of the withdrawal, the Holders of the Registrable
Securities have learned of a material adverse change in the condition, business
or prospects of SM&A from that known to the Holders of the Registrable
Securities at the time of their request, of which SM&A had knowledge at the time
of the request, the Holders of such Registrable Securities shall not be required
to pay any of said expenses or to forfeit the right to one demand registration.
7. Expenses of SM&A Registration.
SM&A shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities with respect to
the registrations pursuant to Section 3 for each Holder (which right may be
assigned as provided in Section 12), including, without limitation, all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders selected by a majority in interest of the
selling Holders, but excluding underwriting discounts and commissions relating
to Registrable Securities.
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<PAGE> 7
8. Underwriting Requirements.
In connection with any underwritten offering of SM&A Stock, SM&A shall
not be required under Section 3 to include any of the Holders' Registrable
Securities in such underwritten offering unless the Holders accept the terms of
the transaction as agreed upon between SM&A and the underwriters selected by it
(or by other persons entitled to select the underwriters) (provided, however,
that each Holder shall be required to make only those representations (if any)
as would be customary for a holder of a similar percentage of similar
securities), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by SM&A.
If the total amount of securities, including Registrable Securities, requested
to be included in such offering exceeds the amount of securities sold other than
by SM&A that the underwriters determine in their sole discretion is compatible
with the success of the offering, then SM&A shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (provided such participation is, on a percentage
basis, equal to the proportion of SM&A Stock held by SM&A shareholders which is
included in such underwriting to that which such SM&A shareholders requested to
be included in such underwriting).
9. Delay of Registration.
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
10. Indemnification.
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) To the extent permitted by law, SM&A will indemnify and hold
harmless each Holder, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), and their respective directors, officers, partners, shareholders,
employees, agents, representatives and affiliates, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by SM&A of the
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<PAGE> 8
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law; and SM&A
will pay to each such Holder, underwriter or controlling person, and his
respective directors, officers, partners, shareholders, employees, agents,
representatives and affiliates, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 10(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of SM&A (which consent shall not be
unreasonably withheld), nor shall SM&A be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless SM&A, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls SM&A within
the meaning of the Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling person of any such underwriter
or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 10(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld. In no event shall any indemnity under this Section
10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 10
of notice of the commencement of any action (including any governmental action)
for which indemnification may be requested, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding or if the indemnifying party
shall fail to assume
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<PAGE> 9
responsibility for such defense. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if actually prejudicial to the indemnifying party's ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 10. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
a term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) If the indemnification provided for in this Section 10 shall for any
reason be held by a court of competent jurisdiction to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating and
defending the same), (i) in such proportion as is appropriate to reflect the
relative fault of SM&A and the Holders of Registrable Securities covered by the
registration statement in connection with the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations (the relative fault of
SM&A and such Holders to be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by SM&A or such Holders and the parties' relative intent, knowledge
access to information and opportunity to correct or prevent such statement or
omission) or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by SM&A and such Holders from the
offering of the securities covered by such registration statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Such Holders' obligations to contribute as
provided in this subparagraph (d) are several in proportion to the relative
value of their respective Registrable Securities covered by such registration
statement and not joint. In addition, no person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such person's consent, which consent shall not be unreasonably
withheld or delayed.
(e) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Section 10 (with appropriate modifications) shall
be given by SM&A and each Holder of Registrable Securities with respect to any
required registration or other qualification of securities under any federal or
state law, rule or regulation of any governmental authority other than the Act.
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<PAGE> 10
(f) The indemnification and contribution required by this Section 10
shall be made by prompt periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(g) The obligations of SM&A and Holders under this Section 10 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
11. Reports Under Securities Exchange Act of 1934.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of SM&A to the public without
registration or pursuant to a registration on Form S-3, SM&A agrees to:
(a) make and keep adequate public information available, as those terms
are understood and defined in Rule 144 under the Act ("Rule 144"), at all times;
(b) take such action as is necessary to enable SM&A to utilize Form S-3
to register the Holders' Registrable Securities, such action to be taken as soon
as ordinarily required after the end of the fiscal year in which the first
registration statement filed by SM&A for the offering of its Common Stock to the
general public is declared effective;
(c) file with the SEC in a timely manner all reports and other documents
required of SM&A under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by SM&A that it has
complied with the reporting requirements of Rule 144, the Act and the 1934 Act,
or that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of SM&A and such other reports and documents so filed
by SM&A, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
12. Assignment of Registration Rights.
The rights to cause SM&A to register Registrable Securities pursuant to
this Agreement may be transferred or assigned (but only with all related
obligations) by a Holder, provided SM&A is, within a reasonable time after such
transfer or assignment, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned or transferred; and provided, further,
that such
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<PAGE> 11
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
13. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of SM&A and the
holders of a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and SM&A.
14. Termination of Registration Rights.
No Holder shall be entitled to exercise any right provided for in this
Agreement after such time as the Holder would be able to dispose of all its
Registrable Securities pursuant to Rule 144.
15. Governing Law.
This Agreement shall be governed by and construed under the laws of the
State of California as applied to agreements among California residents entered
into and to be performed entirely within California without giving effect to
conflict of laws principles.
16. Entire Agreement.
This Agreement represents the entire agreement between and among the DSA
Shareholders and SM&A with respect to the subject matter hereof and supersedes
any prior oral or written agreements concerning the same.
17. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
18. Notices.
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified upon delivery by overnight express
courier, or upon deposit with the United States Post
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<PAGE> 12
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.
19. Successors and Assigns.
Subject to the limitations set forth in Section 12 hereof, this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
SM&A: STEVEN MYERS & ASSOCIATES, INC.
By: /s/ KENNETH W. COLBAUGH
--------------------------------
Its: Chief Operating Officer
Address:
4695 MacArthur Court, Eighth Floor
Newport Beach, CA 92660
DSA SHAREHOLDERS: /s/ GUY A. ACKERSON
-----------------------------------
Guy A. Ackerson, as attorney-in-
fact for the Shareholders identified
on Schedule 1.0 hereto
Address:
1110 North Glebe Road, Suite 400
Arlington, VA 22201
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 20, 1998, between
DECISION-SCIENCE APPLICATIONS, INC., a California corporation (the "Company"),
and GUY A. ACKERSON, an individual residing at 512 Beaver Lane, Mt. Jackson,
Virginia 22842 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of Steven Myers &
Associates, Inc., a California corporation (the "Parent");
WHEREAS, the Parent, the Company, Decision-Science Applications,
Inc., a Virginia corporation ("DSA"), and certain of its shareholders have
entered into an Agreement and Plan of Reorganization and Merger, dated as of
July 22, 1998 (the "Merger Agreement"), pursuant to which DSA will merge with
and into the Company, with the Company being the surviving entity to continue to
carry on its existing business (the "Business");
WHEREAS, the Employee is currently employed by DSA as its President
and Chief Executive Officer and, as such, possesses unique and valuable
technical, financial and other knowledge, experience and ability;
WHEREAS, the Company desires to retain the services of the Employee,
has offered to engage him on the terms and conditions hereinafter set forth and
would not have otherwise entered into the Merger Agreement without the Employee
agreeing to be bound hereby;
WHEREAS, the Employee is willing to accept such employment upon the
terms and conditions hereinafter set forth; and
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Merger Agreement that the Company and Employee enter into
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Employee agree as follows (capitalized
terms used in this Agreement not otherwise defined herein shall have the
meanings given to them in the Merger Agreement):
Section 1. Term of Employment.
Subject to the provisions set forth in Sections 2 and 7 hereof, the
Company hereby employs the Employee as its Chief Technical Officer and the
Employee agrees to be employed by the Company, on the terms and conditions
contained herein, for a period commencing on the date hereof and terminating on
the third (3rd) anniversary of the date hereof (the "Employment Term").
<PAGE> 2
Section 2. Duties.
(a) Office. The Employee is hereby appointed to serve as Chief
Technical Officer of the Company, and shall have responsibility for managing the
Company and performing such services and duties for the Company as now or
hereafter existing, as are customarily performed by an employee in that
position.
The Employee shall report directly to the President, and shall have
responsibility for the management of the Company's Business, operations and
affairs. All subordinate officers and employees shall report to the Employee or
his designee.
It is understood that the respective Boards of Directors of the
Company and of the Parent will have general supervisory authority over the
financial condition and operating activities of the Company, budgets, long-term
plans, acquisitions and divestitures and other strategic alternatives and will
seek input from the Employee as and when needed.
The parties hereto agree that the Employee cannot, on behalf of the
Company, enter into any agreement except as permitted by Company policy.
(b) Full-Time Position. The Employee shall devote his entire time,
attention, abilities, energy and skill during regular business hours to carrying
out his duties hereunder, and shall faithfully, efficiently and diligently
perform such duties to promote the business and affairs of the Company and its
subsidiaries and affiliated companies. During the Employment Term, the
Employee's services shall be exclusive to the Company. The Employee shall not
directly or indirectly engage in any activity competitive with or adverse to the
Company's business or welfare or services of a business, professional or
commercial nature to any other person or firm, whether for compensation or
otherwise.
Section 3. Compensation.
(a) Base Salary. For services rendered by the Employee under this
Agreement, the Company shall pay the Employee or cause to be paid to the
Employee during the Employment Term a base salary (the "Base Salary") at a rate
equal to $144,515 per year. The Base Salary shall be earned and shall be payable
at such intervals and otherwise in such manner as is consistent with the normal
payroll practices of the Company for remuneration of its employees. The Company
shall review the Base Salary at least annually to determine whether an increase
is warranted in accordance with the Company's normal policies and procedures.
(b) Withholding. The Company shall be entitled to withhold amounts
from any compensation or other form of remuneration or benefit payable by the
Company to the Employee that the Company reasonably believes it is required to
withhold under any federal, state, local or foreign tax law to which the Company
is subject.
2
<PAGE> 3
Section 4. Other Benefits.
During the Employment Term, except as may be otherwise provided
herein, the Employee shall be entitled to medical benefits, holiday, vacation or
similar rights and such other benefits, perquisites and privileges as are from
time to time provided by the Company, the Parent and their subsidiaries and
affiliated companies to their full-time employees in comparable positions, as
the same may change from time to time and communicated to the Employee.
Section 5. Expenses.
The Company shall, during the Employment Term, reimburse the Employee
for all reasonable documented business expenses actually and necessarily
incurred by him in the course of, and in connection with, his employment by the
Company. The Employee shall keep detailed and accurate records of expenses
incurred in connection with his employment by the Company, and reimbursement
therefor shall be made in accordance with policies and procedures established by
the Company's management from time to time.
Section 6. Representations and Covenants of the Employee.
(a) The Employee represents and warrants to the Company that he is
not a party to or bound by any presently effective agreement or contract,
whether of employment or otherwise, with any third person or entity that would
in any way restrict or prohibit the Employee from undertaking or performing his
obligations on the terms and conditions set forth in this Agreement.
(b) The Employee covenants with the Company that he shall not, during
the Employment Term, enter into any such agreement, contract or understanding
described in Section 6(a) above so as to cause the Company, or any of its
subsidiaries or affiliated companies, to be liable in connection therewith.
Section 7. Termination.
The Employment Term shall terminate upon any of the following
occurrences:
(a) By Reason of Death. If the Employee shall die during the
Employment Term, this Agreement shall terminate except that the Employee's
estate shall be entitled to receive the Base Salary provided in Section 3(a) to
the last day of the month in which his death occurs. Such termination shall not
affect any vested rights which the Employee may have at the time of his death
pursuant to any insurance or other death benefit plans or arrangements of the
Company or any affiliate of the Company.
(b) Termination For Cause; Resignation Without Good Reason.
(i) Payments. If, prior to the expiration of the
Employment Term, the Employee's employment is terminated by the
Company for Cause, as defined in Section 7(c) hereof, or if the
Employee resigns from his employment hereunder other than for Good
Reason, as defined in Section 7(e) hereof, the Employee shall be
entitled to payment of his
3
<PAGE> 4
Base Salary accrued through and including the date of such
termination or resignation, plus any other accrued but unpaid
benefits or compensation, but shall not be entitled to any other
compensation or benefits under this Agreement.
(ii) Notice of Termination. Termination of the
Employee's employment for Cause shall be communicated by delivery to
the Employee of a copy of a resolution duly adopted by the Company's
Board of Directors (a "Notice of Termination"). The Notice of
Termination shall specify the effective date of the termination of
the Employee's employment and the Board of Directors' reason for such
termination, including the specific provisions of this Agreement
pursuant to which termination for Cause is being undertaken and the
factual basis on which such termination is predicated.
(iii) Date of Termination. The date of a termination
for Cause shall be the date specified in the Notice of Termination
provided for in this Section 7(b). The date of a resignation by the
Employee without Good Reason shall be the date specified in a written
notice of resignation from the Employee to the Company. The Employee
shall provide at least sixty (60) days' advance written notice of the
date of his resignation without Good Reason.
(c) Definition of Cause. For the purposes of this Agreement, "Cause"
shall mean (i) the failure or inability of the Employee to cure, within thirty
(30) days of receipt of written notice on behalf of the Company's Board of
Directors, the Employee's failure to substantially perform the primary duties of
his employment hereunder resulting in a material adverse impact upon the
Company, its reputation or its business operations; (ii) the conviction of the
Employee of a felony under state or federal criminal laws;; (iii) the commission
by the Employee of any act of fraud or willful misconduct against the Company or
any of its subsidiaries or affiliated companies; (iv) the commission by the
Employee of any act of gross negligence or malfeasance, resulting in a material
adverse impact upon the Company, its reputation or its business operations; or
(v) the violation by the Employee of his covenants contained in Sections 6 and 8
hereof.
(d) Termination Upon Disability. If, during the Employment Term, the
Employee shall become incapable of fulfilling his obligations hereunder because
of injury or physical or mental illness, and such incapacity shall exist or
reasonably may be expected to continue to exist, upon the competent medical
opinion of a doctor chosen by the Company and Employee, for a period exceeding
sixty (60) consecutive days or one hundred twenty (120) non-consecutive days
within a six-month period, the Company shall nevertheless continue to pay the
Employee his Base Salary through the last day of the sixtieth (60th) day of
disability or, if applicable, the date upon which the shorter periods of
disability shall have aggregated more than one hundred twenty (120) days within
the six-month period (in either event, the "Disability Date") plus any other
benefits or compensation accrued through, but unpaid as of, the Disability Date;
provided, however, that nothing in this Agreement shall operate to deprive the
Employee of any rights he may have pursuant to the Family and Medical Leave Act,
the Americans with Disabilities Act or any analogous state statutes. The Company
may, at any time on or after the Disability Date, terminate this Agreement and
all further rights and obligations of the parties under this Agreement, other
than the obligations of the Employee under Section 8 hereof, which obligations
shall continue in effect for the periods therein stated.
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(e) Termination Without Cause; Resignation for Good Reason.
(i) Liquidated Damages Paid by Company. If, prior
to the expiration of the Employment Term, the Employee's employment
is terminated by the Company without Cause, or if the Employee
resigns from his employment hereunder for Good Reason, the Company
shall pay to the Employee his Base Salary accrued up to and including
the date of such termination or resignation plus any other accrued
but unpaid benefits or compensation.
In addition, for the period commencing immediately
following the date of such termination or resignation and ending on
the last day of the Employment Term (the "Offset Period"), the
Company shall pay to the Employee as liquidated damages (the "Company
Paid Liquidated Damages") his Base Salary, as in effect on the date
of such termination.
The Company Paid Liquidated Damages shall be payable in
accordance with the Company's then effective payroll practices and at
such intervals as Base Salary would have been paid if the Employee
had remained in the active service of the Company; provided, however,
that payments of Base Salary during the Offset Period shall be made
not less frequently than monthly.
(ii) Other Benefits. In the event of the Employee's
termination or resignation as provided in this Section 7(e), the
Employee shall continue to participate on the same terms and
conditions as in effect immediately prior to such termination or
resignation in each pension, welfare, life insurance, health,
disability and other fringe benefit plan or program (including
automobile allowances) provided to the Employee at the time of such
termination or resignation until the earlier to occur of:
(A) the end of the Offset Period; or
(B) such time as the Employee is otherwise
covered by similar programs.
Anything herein to the contrary notwithstanding, the
Company shall have no obligation to continue to maintain during the
Offset Period any plan or program solely as a result of the
provisions of this Agreement. If, during the Offset Period, the
Employee is precluded from participating in a plan or program by its
terms or applicable law or if the Company elects not to maintain such
plan or program, the Company shall provide the Employee with
compensation the aggregate value of which is sufficient to purchase a
similar benefit program.
(iii) Death During Offset Period. If the Employee
dies during the Offset Period, the balance of the Company Paid
Liquidated Damages will be paid to his Beneficiary. "Beneficiary"
shall mean the person or persons designated by the Employee in
writing to the Company to receive payments under this Agreement or,
if no such person or persons are designated, the Employee's estate.
(iv) No Other Benefits. Except as expressly provided
in this Section 7(e), in the event the Employee's employment is
terminated by the Company without Cause or the
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<PAGE> 6
Employee resigns his employment with the Company for Good Reason, the
Employee shall not be entitled to any other compensation, benefits or
damages under, or related to, this Agreement with respect to the year
of his termination or resignation or any subsequent year.
(v) Date of Termination. The date of termination of
employment without Cause shall be the date specified in a written
notice of termination to the Employee. The date of resignation for
Good Reason shall be the date specified in a written notice of
resignation from the Employee to the Company, provided, however, that
no such written notice shall be effective unless the cure period
specified in Section 7(f) has expired without the Company having
corrected, to the reasonable satisfaction of the Employee, the event
or events subject to cure. The Employee shall provide at least thirty
(30) days advance written notice of resignation.
(f) Definition of Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any one or more of the following events:
(i) a material reduction in, or the assignment to
the Employee of duties which would be inconsistent with, the
Employee's positions or responsibilities as described in Section
2(a), including the Employee's ceasing to report directly to the
Board; or
(ii) a material reduction in the Employee's Base
Salary as then in effect or failure of the Company to pay any amount
owing to the Employee hereunder when due; or
(iii) failure by the Company to obtain the specific
assumption of this Agreement by any successor of the Company, as
contemplated in Section 10 hereof; or
(iv) the relocation of the Employee to a site that
is more than fifty (50) miles from the site of his current work
location.
Unless the Employee provides written notification of an event described in
clauses (i) through (iii) of the preceding sentence to the Parent within
forty-five (45) days, after the Employee knows or has reason to know of the
occurrence of any such event, the Employee shall be deemed to have consented
thereto and such event shall no longer constitute Good Reason for purposes of
this Agreement. If the Employee provided such written notice to the Parent, the
Parent or the Company shall have thirty (30) days from the date of receipt of
such notice to effect a cure of the event described therein and, upon cure
thereof by the Parent or the Company, as the case may be, to the reasonable
satisfaction of the Employee, such event shall no longer constitute Good Reason
for purposes of this Agreement.
Section 8. Proprietary Information and Inventions.
(a) Employee Acknowledgments. The Employee recognizes that the
Company is engaged in a continuous program of research, development, design and
production respecting its business, present and future, and understands that as
part of his employment by the Company or any of its subsidiaries or affiliates,
he is, or may be expected, to make new contributions and inventions of value to
the Company or any of its subsidiaries or affiliates. The Employee understands
that his
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<PAGE> 7
employment by the Company or any of its subsidiaries or affiliates creates in
him a duty of trust and confidentiality to the Company or any of its
subsidiaries or affiliates with respect to any information (i) related,
applicable or useful to the business of the Company or any of its subsidiaries
or affiliates, including the Company's or any of its subsidiaries' or
affiliates' anticipated research and development; (ii) resulting from tasks
assigned to the Employee by the Company or any of its subsidiaries or
affiliates; (iii) resulting from the use of equipment, supplies or facilities
owned, leased or contracted for by the Company or any of its subsidiaries or
affiliates; or (iv) related, applicable or useful to the business of any client
or customer of (A) the Company or (B) any of the Company's subsidiaries or
affiliates, which may be made known to him by the Company or any of the
Company's subsidiaries or affiliates, or by any client or customer of (A) the
Company or (B) any of the Company's subsidiaries or affiliates, or learned by
him during the Employment Term.
(b) Assignment of Proprietary Information and Inventions to the
Company. The Employee agrees that all Proprietary Information (as defined on
Exhibit A hereto) and Inventions (as defined on Exhibit A hereto) shall be the
sole property of the Company and its assigns, and the Company and its assigns
shall be the sole owner of all patents, trademarks, service marks, copyrights
and other rights (collectively referred to herein as "Rights") pertaining to
Proprietary Information and Inventions in any part of the world. The Employee
hereby assigns to the Company any rights he may have or acquire in Proprietary
Information or Inventions or Rights pertaining to Proprietary Information or
Inventions or Rights. The Employee further agrees as to all Proprietary
Information or Inventions to assist the Company or any person designated by it
in every proper way to obtain and from time to time enforce Rights relating to
said Proprietary Information or Inventions in any and all countries. The
Employee shall execute all documents for use in applying for, obtaining and
enforcing such Rights on such Proprietary Information or Inventions as the
Company may desire, together with any assignments thereof to the Company or
persons designated by it. The Employee's obligation to assist the Company or any
person designated by it in obtaining and enforcing Rights relating to
Proprietary Information or Inventions shall continue beyond the date of the
termination of the Employment Term (the "Termination Date"), but the Company
shall compensate the Employee at a reasonable rate after the Termination Date
for time actually spent by the Employee upon the Company's request for such
assistance. In the event the Company is unable, after reasonable effort, to
secure the Employee's signature on any document or documents needed to apply for
or to enforce any Right relating to Proprietary Information or to an Invention,
whether because of the Employee's physical or mental incapacity or for any other
reason whatsoever, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act on his behalf and in his stead in the execution and
filing of any such application and in furthering the application for and
enforcement of Rights with the same legal force and effect as if such acts were
performed by the Employee. The Employee hereby acknowledges that all original
works of authorship which are made by the Employee (solely or jointly with
others) within the scope of his employment and which are protectable by
copyright are "works for hire" as that term is defined in the United States
Copyright Act (17 USCA, Section 101).
(c) Disclosure of Discoveries, Etc. to the Company. The Employee will
promptly and from time to time disclose in writing to the Company, and the
Company hereby agrees to receive such disclosures in confidence, all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes, or
reduced to
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<PAGE> 8
practice, made, conceived or learned by the Employee, either alone or jointly
with others during the Employment Term, for the purpose of permitting the
Company to determine whether they constitute Inventions. In order to facilitate
the complete and accurate disclosures described above, the Employee agrees to
maintain complete written records of all Inventions, and of all work, study and
investigation done by him during the Employment Term, which records shall be the
property of the Company.
(d) Employee Acts. The Employee shall not knowingly do anything to
imperil the validity of any such patent, design or protection or any application
therefor and shall, at the reasonable cost of the Company, render all possible
assistance to the Company both in obtaining and maintaining such patent, design
or other protection, and the Employee shall not, either during the Employment
Term or thereafter, exploit or make public or disclose any such Invention or
give any information in respect thereof except to the Company or as it may
direct.
(e) Confidentiality. During the Employment Term, and for a period
ending three (3) years after the date of this Agreement whether the Employee is
terminated voluntarily or involuntarily, for cause or without cause, or by
disability, the Employee will keep all Proprietary Information, Inventions and
Rights in the strictest confidence and trust, and the Employee will not
disclose, use or induce or assist in the use or disclosure of any Proprietary
Information, Inventions or Rights pertaining to Proprietary Information, or
anything related thereto, without the prior express written consent of the
Company, except as may be necessary in the ordinary course of performing his
duties as an employee of the Company or as may be required by law. The Employee
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. The Employee agrees that he owes the
Company and such third parties, during the Employment Term and for a period of
three (3) years after the date of this Agreement, a duty to hold all such
confidential or proprietary information in the strictest confidence, and he
shall not disclose, use or induce or assist in the use or disclosure of any such
confidential or proprietary information without the prior express written
consent of the Company, except as may be necessary in the ordinary course of
performing his duties as an employee of the Company consistent with the
Company's agreement with such third party or as required by law.
(f) Noncompetition; Nonsolicitation.
(i) During the Employment Term, the Employee shall
not (A) directly or indirectly engage in any activity which the
Company shall determine in good faith to be in competition with the
Company, or (B) plan or otherwise take any preliminary steps, either
alone or in concert with others, to set up or engage in any business
enterprise that would be in competition with the Company.
(ii) During the Employment Term and for a period
ending three (3) years after the date of this Agreement, the Employee
shall not, either directly or indirectly, either alone or in concert
with others, (x) solicit or entice any employee of or consultant to
the Company to leave the Company or to work for anyone other than the
Company, or (y) solicit, entice or in any way divert any (1) customer
or (2) supplier with whom the Employee has conducted
8
<PAGE> 9
business or assisted the Company in providing business, to do
business with any business entity in competition with the Company.
(iii) Upon the termination of the Employment Term,
the Employee shall not, directly or indirectly through affiliates, a
partnership, a joint venture or otherwise, (A) enter into, engage in,
conduct or carry on any business which competes with the business
conducted by the Company at the end of the Employment Term,
(including developments and products of the Company toward which the
Employee has contributed or will, during the Employment Term,
contribute)(collectively referred to herein as a "Competitive
Business") or (B) participate in the management of any person, firm,
enterprise or corporation if such person, firm, enterprise or
corporation engages or proposes to engage in a Competitive Business,
in the geographic areas where the Company conducts business at the
end of the Employment Term for a period ending three (3) years after
the date of this Agreement.
(iv) If any of the covenants contained in this
Section 8(f) is determined to be unenforceable because of the
duration of such covenants or the area covered thereby, or the scope
of such prohibited activities, then the court making the
determination shall have the power to reduce the duration of such
covenant, area covered and/or the scope of prohibited activities
covered thereby, and such covenants, in their reduced form shall be
enforceable. If any of the covenants contained in this Section 8(f)
is determined to be wholly unenforceable by the courts of any
domestic or foreign jurisdiction, such covenant shall be deemed
severable into independent covenants and shall be enforceable as so
severed to the extent permitted by such court.
(g) Delivery of Materials to the Company. Upon the termination of the
Employment Term, the Employee shall deliver to the Company all devices, records,
sketches, reports, proposals, lists, correspondence, equipment, documents,
photographs, photostats, negatives, undeveloped film, notes, drawings,
specifications, tape recordings or other electronic recordings, programs, data
and other materials or property of any nature belonging to the Company or
pertaining to the Employee's work with the Company. The Employee shall not take
with him any of the foregoing or any reproduction of any of the foregoing.
(h) Prior Inventions of the Employee. Listed in Item 1 of Exhibit B
attached hereto are all inventions or improvements relevant to the subject
matter of the Employee's employment which have been made, conceived of or first
reduced to practice by the Employee alone or jointly with others prior to the
Employment Term and which the Employee desires to remove from the operation of
this Agreement. The Employee represents and warrants that such list is complete.
If there is no such list in Item 1 of Exhibit B, the Employee represents and
warrants that he has made no such inventions or improvements prior to the
Employment Term.
(i) Prior Confidentiality Agreements. The Employee represents and
warrants that his performance of all of the terms and provisions of this
Agreement as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information acquired by the Employee
in confidence or in trust prior to his employment by the Company. The Employee
also represents and warrants that he has not entered into, and covenants that he
will not enter into, any agreement, either written or oral, in conflict
herewith.
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<PAGE> 10
(j) Materials or Documents of a Former Employer. The Employee
represents and warrants to and covenants with the Company that he has not
brought and will not bring with him to the Company, or use in his employment
with the Company, any materials or documents of a former employer (which term,
for purposes of this Section 8, shall also include persons, firms, corporations
and other entities for which the Employee has acted as an independent contractor
or consultant), other than materials and documents of DSA relating to its
business and acquired by the Company under the Merger Agreement, which are not
generally available to the public, unless he has obtained express written
authorization from any such former employer for their possession and use. The
materials or documents of a former employer (other than DSA) which are not
generally available to the public but which he will bring to the Company for use
in his employment are identified in Item 2 of Exhibit B attached hereto. As to
each such item, the Employee represents and warrants that he has obtained prior
to the effective date of his employment hereunder express written authorization
for their possession and use in his service to the Company. The Employee also
understands that, in his service to the Company, he is not to breach any
obligation of confidentiality that he has to former employers, and he shall
fulfill all such obligations during his employment hereunder.
(k) Services Provided as a Consultant; Delivery of the Termination
Certificate by the Employee. The terms and conditions of this Section 8 shall
apply to any period, if any, during which the Employee performs services for the
Company as a consultant or independent contractor, as well as any time during
which he is employed directly by the Company. Upon the termination of the
Employment Term, the Employee agrees to sign and deliver the "Termination
Certificate" attached hereto as Exhibit C. The Employee's failure to sign such
Termination Certificate, however, shall not affect his obligations under this
Agreement.
Section 9. Remedies; Liquidated Damages Paid by Employee.
If the Employee commits a breach, or threatens to commit a breach, of
any of the provisions of Section 8 hereof, the Company shall have (i) the right
to have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company, and (ii) the right
to require the Employee to account for and pay over to the Company all
compensation or profits derived or received by the Employee as a result of any
breach of any of the provisions of such Section 8, and the Employee hereby
agrees to account for and pay over such compensation or profits to the Company.
The invalidity or unenforceability of all or any portion of Section 8 shall not
affect the validity or enforceability of any other provision or portion hereof
or thereof, and if any provision or portion of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable or
otherwise invalid as written, then each such provision or portion shall be
enforced and validated to the full extent permitted by law.
Section 10. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Company and its respective successors and assigns and shall be binding upon and
inure to the benefit of the Employee and his executors and administrators. This
Agreement, and the Employee's rights and obligations hereunder, may not be
assigned by the Employee. The Company will require any successor (whether
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<PAGE> 11
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
Section 11. Waiver of Breach.
The waiver by the Company or the Employee of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any subsequent breach of the same provision or of any other provision
of this Agreement.
Section 12. Notices.
All notices, requests, demands and other communications submitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by express service or if mailed by first-class registered
mail, return receipt requested, postage and registry fees prepaid, and
addressed: if to the Employee, to the address set forth in the first paragraph
hereof; and if to the Company, to:
Decision-Science Applications, Inc.
c/o Steven Myers & Associates, Inc.
4695 MacArthur Court, Suite 800
Newport Beach, California 92660
Attention: President
with a copy to:
Thomas J. Crane, Esq.
Rutan & Tucker, LLP
611 Anton Blvd., Suite 1400
Costa Mesa, California 92626
or at such other address as either party shall furnish to the other.
Section 13. Miscellaneous.
This Agreement shall be governed by, and construed in accordance
with, the laws of Virginia without regard to its conflict of laws statutes, as
if this Agreement were executed and performed entirely within Virginia. This
Agreement incorporates the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements,
arrangements and understandings, whether written or oral, relating to such
subject matter. The invalidity of any section, provision or portion of this
Agreement shall not affect the validity of any other section, provision or
portion of this Agreement, and each such section, provision or portion shall be
enforced to the full extent permitted by law. This Agreement may not be modified
or amended, or any term or provision hereof waived or discharged, except by a
written instrument signed by the party against which such amendment,
modification, waiver or discharge is sought to be enforced. The headings
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<PAGE> 12
of this Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 14. Indemnification.
The Company and the Parent will indemnify the Employee in the same
manner and to the same extent to which they indemnify their other senior
executives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
COMPANY: DECISION-SCIENCE APPLICATIONS, INC.
By: /S/ KENNETH W. COLBAUGH
--------------------------------------
Title: Chief Operating Officer
EMPLOYEE: /S/ GUY A. ACKERSON
--------------------------------------
Guy A. Ackerson
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EXHIBIT A
"Proprietary Information" Defined:
For purposes of this Agreement, "Proprietary Information" shall mean
information that has been created, discovered, developed or otherwise become
known to the Employee or the Company or in which property rights have been
assigned or otherwise conveyed to the Employee or the Company, which the
Employee may have learned or discovered, or may make, learn of or discover while
in employment of the Company, whether before the commencement of this Agreement
or during the term hereof, which information has material economic value or
potential material economic value to the business in which the Company is or
will be engaged. Proprietary Information shall include, but not be limited to,
trade secrets, processes, formulas, data, know-how, negative know-how,
improvements, discoveries, developments, designs, ideas, Inventions, techniques,
all technical data, customer and supplier lists, and any modifications or
enhancements thereto, programs and information (whether or not in writing) which
have actual or potential economic value to the Company, together with any
copyright or patent therein. For purposes of this Agreement, Proprietary
Information shall not include information that has become public knowledge
through legal means without fault by the Employee, or is already public
knowledge prior to disclosure of the same by the Company and/or its subsidiaries
or affiliates to the Employee.
"Inventions" Defined:
For purposes of this Agreement, "Inventions" shall mean all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes,
that are related to or useful in the business or future business of the Company
or result from use of premises or other property owned, leased or contracted for
by the Company. Without limiting the generality of the foregoing, Inventions
shall also include anything that derives actual or potential economic value from
not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use.
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<PAGE> 14
EXHIBIT B
Item 1:
The following is a complete list of all inventions or improvements
relevant to the subject matter of the Employee's employment by the Company that
have been made or conceived of or first reduced to practice by the Employee
alone or jointly with others prior to his employment by the Company:
NONE
Item 2:
The following is a complete list of all materials and documents of a
former employer that are not generally available to the public that the Employee
will bring or have brought to the Company or have used or will use in his
employment by the Company:
NONE
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EXHIBIT C
Termination Certification
I certify as follows:
1. When I signed the attached Employment Agreement (the "Agreement"),
I read and understood the terms of the Agreement.
2. I hereby acknowledge that I have fully complied with the terms of
the Agreement, including, without limitation, the disclosure and assignment to
Decision-Science Applications, Inc. (or its successors or assigns) (the
"Company") of any Inventions covered by that Agreement, and the return of any
documents and other materials of any nature relating to my employment with the
Company.
3. I hereby acknowledge and agree to comply with my continuing
obligations under this Agreement, including, without limitation, my obligation
not to use for personal benefit or to disclose to others any Proprietary
Information of the Company.
4. I understand and acknowledge that should I fail to comply with my
obligations under the Agreement, the Company shall have the right to injunctive
relief against me, including, without limitation, an injunction prohibiting me
from disclosing Proprietary Information to a third party.
Dated as of __________________
------------------------------------
Guy A. Ackerson
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 20, 1998, between
DECISION-SCIENCE APPLICATIONS, INC., a California corporation (the "Company"),
and GARY L. LUCAS, an individual residing at 6048 Forrest Hollow Lane,
Springfield, Virginia 22152 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of Steven Myers &
Associates, Inc., a California corporation (the "Parent");
WHEREAS, the Parent, the Company, Decision-Science Applications,
Inc., a Virginia corporation ("DSA"), and certain of its shareholders have
entered into an Agreement and Plan of Reorganization and Merger, dated as of
July 22, 1998 (the "Merger Agreement"), pursuant to which DSA will merge with
and into the Company, with the Company being the surviving entity to continue to
carry on its existing business (the "Business");
WHEREAS, the Employee is currently employed by DSA as its Chief
Scientist and, as such, possesses unique and valuable technical, financial and
other knowledge, experience and ability;
WHEREAS, the Company desires to retain the services of the Employee,
has offered to engage him on the terms and conditions hereinafter set forth and
would not have otherwise entered into the Merger Agreement without the Employee
agreeing to be bound hereby;
WHEREAS, the Employee is willing to accept such employment upon the
terms and conditions hereinafter set forth; and
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Merger Agreement that the Company and Employee enter into
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Employee agree as follows (capitalized
terms used in this Agreement not otherwise defined herein shall have the
meanings given to them in the Merger Agreement):
Section 1. Term of Employment.
Subject to the provisions set forth in Sections 2 and 7 hereof, the
Company hereby employs the Employee as its Chief Scientist and the Employee
agrees to be employed by the Company, on the terms and conditions contained
herein, for a period commencing on the date hereof and terminating on the third
(3rd) anniversary of the date hereof (the "Employment Term").
<PAGE> 2
Section 2. Duties.
(a) Office. The Employee is hereby appointed to serve as Chief
Scientist of the Company, and shall have responsibility for managing the Company
and performing such services and duties for the Company as now or hereafter
existing, as are customarily performed by an employee in that position.
The Employee shall report directly to the President, and shall have
responsibility for the management of the Company's Business, operations and
affairs. All subordinate officers and employees shall report to the Employee or
his designee.
It is understood that the respective Boards of Directors of the
Company and of the Parent will have general supervisory authority over the
financial condition and operating activities of the Company, budgets, long-term
plans, acquisitions and divestitures and other strategic alternatives and will
seek input from the Employee as and when needed.
The parties hereto agree that the Employee cannot, on behalf of the
Company, enter into any agreement except as permitted by Company policy.
(b) Full-Time Position. The Employee shall devote his entire time,
attention, abilities, energy and skill during regular business hours to carrying
out his duties hereunder, and shall faithfully, efficiently and diligently
perform such duties to promote the business and affairs of the Company and its
subsidiaries and affiliated companies. During the Employment Term, the
Employee's services shall be exclusive to the Company. The Employee shall not
directly or indirectly engage in any activity competitive with or adverse to the
Company's business or welfare or services of a business, professional or
commercial nature to any other person or firm, whether for compensation or
otherwise.
Section 3. Compensation.
(a) Base Salary. For services rendered by the Employee under this
Agreement, the Company shall pay the Employee or cause to be paid to the
Employee during the Employment Term a base salary (the "Base Salary") at a rate
equal to $150,000 per year. The Base Salary shall be earned and shall be payable
at such intervals and otherwise in such manner as is consistent with the normal
payroll practices of the Company for remuneration of its employees. The Company
shall review the Base Salary at least annually to determine whether an increase
is warranted in accordance with the Company's normal policies and procedures.
(b) Withholding. The Company shall be entitled to withhold amounts
from any compensation or other form of remuneration or benefit payable by the
Company to the Employee that the Company reasonably believes it is required to
withhold under any federal, state, local or foreign tax law to which the Company
is subject.
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Section 4. Other Benefits.
During the Employment Term, except as may be otherwise provided
herein, the Employee shall be entitled to medical benefits, holiday, vacation or
similar rights and such other benefits, perquisites and privileges as are from
time to time provided by the Company, the Parent and their subsidiaries and
affiliated companies to their full-time employees in comparable positions, as
the same may change from time to time and communicated to the Employee.
Section 5. Expenses.
The Company shall, during the Employment Term, reimburse the Employee
for all reasonable documented business expenses actually and necessarily
incurred by him in the course of, and in connection with, his employment by the
Company. The Employee shall keep detailed and accurate records of expenses
incurred in connection with his employment by the Company, and reimbursement
therefor shall be made in accordance with policies and procedures established by
the Company's management from time to time.
Section 6. Representations and Covenants of the Employee.
(a) The Employee represents and warrants to the Company that he is
not a party to or bound by any presently effective agreement or contract,
whether of employment or otherwise, with any third person or entity that would
in any way restrict or prohibit the Employee from undertaking or performing his
obligations on the terms and conditions set forth in this Agreement.
(b) The Employee covenants with the Company that he shall not, during
the Employment Term, enter into any such agreement, contract or understanding
described in Section 6(a) above so as to cause the Company, or any of its
subsidiaries or affiliated companies, to be liable in connection therewith.
Section 7. Termination.
The Employment Term shall terminate upon any of the following
occurrences:
(a) By Reason of Death. If the Employee shall die during the
Employment Term, this Agreement shall terminate except that the Employee's
estate shall be entitled to receive the Base Salary provided in Section 3(a) to
the last day of the month in which his death occurs. Such termination shall not
affect any vested rights which the Employee may have at the time of his death
pursuant to any insurance or other death benefit plans or arrangements of the
Company or any affiliate of the Company.
(b) Termination For Cause; Resignation Without Good Reason.
(i) Payments. If, prior to the expiration of the
Employment Term, the Employee's employment is terminated by the
Company for Cause, as defined in Section 7(c) hereof, or if the
Employee resigns from his employment hereunder other than for Good
Reason, as defined in Section 7(e) hereof, the Employee shall be
entitled to payment of his
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Base Salary accrued through and including the date of such
termination or resignation, plus any other accrued but unpaid
benefits or compensation, but shall not be entitled to any other
compensation or benefits under this Agreement.
(ii) Notice of Termination. Termination of the
Employee's employment for Cause shall be communicated by delivery to
the Employee of a copy of a resolution duly adopted by the Company's
Board of Directors (a "Notice of Termination"). The Notice of
Termination shall specify the effective date of the termination of
the Employee's employment and the Board of Directors' reason for such
termination, including the specific provisions of this Agreement
pursuant to which termination for Cause is being undertaken and the
factual basis on which such termination is predicated.
(iii) Date of Termination. The date of a termination
for Cause shall be the date specified in the Notice of Termination
provided for in this Section 7(b). The date of a resignation by the
Employee without Good Reason shall be the date specified in a written
notice of resignation from the Employee to the Company. The Employee
shall provide at least sixty (60) days' advance written notice of the
date of his resignation without Good Reason.
(c) Definition of Cause. For the purposes of this Agreement, "Cause"
shall mean (i) the failure or inability of the Employee to cure, within thirty
(30) days of receipt of written notice on behalf of the Company's Board of
Directors, the Employee's failure to substantially perform the primary duties of
his employment hereunder resulting in a material adverse impact upon the
Company, its reputation or its business operations; (ii) the conviction of the
Employee of a felony under state or federal criminal laws;; (iii) the commission
by the Employee of any act of fraud or willful misconduct against the Company or
any of its subsidiaries or affiliated companies; (iv) the commission by the
Employee of any act of gross negligence or malfeasance, resulting in a material
adverse impact upon the Company, its reputation or its business operations; or
(v) the violation by the Employee of his covenants contained in Sections 6 and 8
hereof.
(d) Termination Upon Disability. If, during the Employment Term, the
Employee shall become incapable of fulfilling his obligations hereunder because
of injury or physical or mental illness, and such incapacity shall exist or
reasonably may be expected to continue to exist, upon the competent medical
opinion of a doctor chosen by the Company and Employee, for a period exceeding
sixty (60) consecutive days or one hundred twenty (120) non-consecutive days
within a six-month period, the Company shall nevertheless continue to pay the
Employee his Base Salary through the last day of the sixtieth (60th) day of
disability or, if applicable, the date upon which the shorter periods of
disability shall have aggregated more than one hundred twenty (120) days within
the six-month period (in either event, the "Disability Date") plus any other
benefits or compensation accrued through, but unpaid as of, the Disability Date;
provided, however, that nothing in this Agreement shall operate to deprive the
Employee of any rights he may have pursuant to the Family and Medical Leave Act,
the Americans with Disabilities Act or any analogous state statutes. The Company
may, at any time on or after the Disability Date, terminate this Agreement and
all further rights and obligations of the parties under this Agreement, other
than the obligations of the Employee under Section 8 hereof, which obligations
shall continue in effect for the periods therein stated.
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(e) Termination Without Cause; Resignation for Good Reason.
(i) Liquidated Damages Paid by Company. If, prior
to the expiration of the Employment Term, the Employee's employment
is terminated by the Company without Cause, or if the Employee
resigns from his employment hereunder for Good Reason, the Company
shall pay to the Employee his Base Salary accrued up to and including
the date of such termination or resignation plus any other accrued
but unpaid benefits or compensation.
In addition, for the period commencing immediately
following the date of such termination or resignation and ending on
the last day of the Employment Term (the "Offset Period"), the
Company shall pay to the Employee as liquidated damages (the "Company
Paid Liquidated Damages") his Base Salary, as in effect on the date
of such termination.
The Company Paid Liquidated Damages shall be payable in
accordance with the Company's then effective payroll practices and at
such intervals as Base Salary would have been paid if the Employee
had remained in the active service of the Company; provided, however,
that payments of Base Salary during the Offset Period shall be made
not less frequently than monthly.
(ii) Other Benefits. In the event of the Employee's
termination or resignation as provided in this Section 7(e), the
Employee shall continue to participate on the same terms and
conditions as in effect immediately prior to such termination or
resignation in each pension, welfare, life insurance, health,
disability and other fringe benefit plan or program (including
automobile allowances) provided to the Employee at the time of such
termination or resignation until the earlier to occur of:
(A) the end of the Offset Period; or
(B) such time as the Employee is otherwise
covered by similar programs.
Anything herein to the contrary notwithstanding, the
Company shall have no obligation to continue to maintain during the
Offset Period any plan or program solely as a result of the
provisions of this Agreement. If, during the Offset Period, the
Employee is precluded from participating in a plan or program by its
terms or applicable law or if the Company elects not to maintain such
plan or program, the Company shall provide the Employee with
compensation the aggregate value of which is sufficient to purchase a
similar benefit program.
(iii) Death During Offset Period. If the Employee
dies during the Offset Period, the balance of the Company Paid
Liquidated Damages will be paid to his Beneficiary. "Beneficiary"
shall mean the person or persons designated by the Employee in
writing to the Company to receive payments under this Agreement or,
if no such person or persons are designated, the Employee's estate.
(iv) No Other Benefits. Except as expressly provided
in this Section 7(e), in the event the Employee's employment is
terminated by the Company without Cause or the
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<PAGE> 6
Employee resigns his employment with the Company for Good Reason, the
Employee shall not be entitled to any other compensation, benefits or
damages under, or related to, this Agreement with respect to the year
of his termination or resignation or any subsequent year.
(v) Date of Termination. The date of termination of
employment without Cause shall be the date specified in a written
notice of termination to the Employee. The date of resignation for
Good Reason shall be the date specified in a written notice of
resignation from the Employee to the Company, provided, however, that
no such written notice shall be effective unless the cure period
specified in Section 7(f) has expired without the Company having
corrected, to the reasonable satisfaction of the Employee, the event
or events subject to cure. The Employee shall provide at least thirty
(30) days advance written notice of resignation.
(f) Definition of Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any one or more of the following events:
(i) a material reduction in, or the assignment to
the Employee of duties which would be inconsistent with, the
Employee's positions or responsibilities as described in Section
2(a), including the Employee's ceasing to report directly to the
Board; or
(ii) a material reduction in the Employee's Base
Salary as then in effect or failure of the Company to pay any amount
owing to the Employee hereunder when due; or
(iii) failure by the Company to obtain the specific
assumption of this Agreement by any successor of the Company, as
contemplated in Section 10 hereof; or
(iv) the relocation of the Employee to a site that
is more than fifty (50) miles from the site of his current work
location.
Unless the Employee provides written notification of an event described in
clauses (i) through (iii) of the preceding sentence to the Parent within
forty-five (45) days, after the Employee knows or has reason to know of the
occurrence of any such event, the Employee shall be deemed to have consented
thereto and such event shall no longer constitute Good Reason for purposes of
this Agreement. If the Employee provided such written notice to the Parent, the
Parent or the Company shall have thirty (30) days from the date of receipt of
such notice to effect a cure of the event described therein and, upon cure
thereof by the Parent or the Company, as the case may be, to the reasonable
satisfaction of the Employee, such event shall no longer constitute Good Reason
for purposes of this Agreement.
Section 8. Proprietary Information and Inventions.
(a) Employee Acknowledgments. The Employee recognizes that the
Company is engaged in a continuous program of research, development, design and
production respecting its business, present and future, and understands that as
part of his employment by the Company or any of its subsidiaries or affiliates,
he is, or may be expected, to make new contributions and inventions of value to
the Company or any of its subsidiaries or affiliates. The Employee understands
that his
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employment by the Company or any of its subsidiaries or affiliates creates in
him a duty of trust and confidentiality to the Company or any of its
subsidiaries or affiliates with respect to any information (i) related,
applicable or useful to the business of the Company or any of its subsidiaries
or affiliates, including the Company's or any of its subsidiaries' or
affiliates' anticipated research and development; (ii) resulting from tasks
assigned to the Employee by the Company or any of its subsidiaries or
affiliates; (iii) resulting from the use of equipment, supplies or facilities
owned, leased or contracted for by the Company or any of its subsidiaries or
affiliates; or (iv) related, applicable or useful to the business of any client
or customer of (A) the Company or (B) any of the Company's subsidiaries or
affiliates, which may be made known to him by the Company or any of the
Company's subsidiaries or affiliates, or by any client or customer of (A) the
Company or (B) any of the Company's subsidiaries or affiliates, or learned by
him during the Employment Term.
(b) Assignment of Proprietary Information and Inventions to the
Company. The Employee agrees that all Proprietary Information (as defined on
Exhibit A hereto) and Inventions (as defined on Exhibit A hereto) shall be the
sole property of the Company and its assigns, and the Company and its assigns
shall be the sole owner of all patents, trademarks, service marks, copyrights
and other rights (collectively referred to herein as "Rights") pertaining to
Proprietary Information and Inventions in any part of the world. The Employee
hereby assigns to the Company any rights he may have or acquire in Proprietary
Information or Inventions or Rights pertaining to Proprietary Information or
Inventions or Rights. The Employee further agrees as to all Proprietary
Information or Inventions to assist the Company or any person designated by it
in every proper way to obtain and from time to time enforce Rights relating to
said Proprietary Information or Inventions in any and all countries. The
Employee shall execute all documents for use in applying for, obtaining and
enforcing such Rights on such Proprietary Information or Inventions as the
Company may desire, together with any assignments thereof to the Company or
persons designated by it. The Employee's obligation to assist the Company or any
person designated by it in obtaining and enforcing Rights relating to
Proprietary Information or Inventions shall continue beyond the date of the
termination of the Employment Term (the "Termination Date"), but the Company
shall compensate the Employee at a reasonable rate after the Termination Date
for time actually spent by the Employee upon the Company's request for such
assistance. In the event the Company is unable, after reasonable effort, to
secure the Employee's signature on any document or documents needed to apply for
or to enforce any Right relating to Proprietary Information or to an Invention,
whether because of the Employee's physical or mental incapacity or for any other
reason whatsoever, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act on his behalf and in his stead in the execution and
filing of any such application and in furthering the application for and
enforcement of Rights with the same legal force and effect as if such acts were
performed by the Employee. The Employee hereby acknowledges that all original
works of authorship which are made by the Employee (solely or jointly with
others) within the scope of his employment and which are protectable by
copyright are "works for hire" as that term is defined in the United States
Copyright Act (17 USCA, Section 101).
(c) Disclosure of Discoveries, Etc. to the Company. The Employee will
promptly and from time to time disclose in writing to the Company, and the
Company hereby agrees to receive such disclosures in confidence, all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes, or
reduced to
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<PAGE> 8
practice, made, conceived or learned by the Employee, either alone or jointly
with others during the Employment Term, for the purpose of permitting the
Company to determine whether they constitute Inventions. In order to facilitate
the complete and accurate disclosures described above, the Employee agrees to
maintain complete written records of all Inventions, and of all work, study and
investigation done by him during the Employment Term, which records shall be the
property of the Company.
(d) Employee Acts. The Employee shall not knowingly do anything to
imperil the validity of any such patent, design or protection or any application
therefor and shall, at the reasonable cost of the Company, render all possible
assistance to the Company both in obtaining and maintaining such patent, design
or other protection, and the Employee shall not, either during the Employment
Term or thereafter, exploit or make public or disclose any such Invention or
give any information in respect thereof except to the Company or as it may
direct.
(e) Confidentiality. During the Employment Term, and for a period
ending three (3) years after the date of this Agreement whether the Employee is
terminated voluntarily or involuntarily, for cause or without cause, or by
disability, the Employee will keep all Proprietary Information, Inventions and
Rights in the strictest confidence and trust, and the Employee will not
disclose, use or induce or assist in the use or disclosure of any Proprietary
Information, Inventions or Rights pertaining to Proprietary Information, or
anything related thereto, without the prior express written consent of the
Company, except as may be necessary in the ordinary course of performing his
duties as an employee of the Company or as may be required by law. The Employee
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. The Employee agrees that he owes the
Company and such third parties, during the Employment Term and for a period of
three (3) years after the date of this Agreement, a duty to hold all such
confidential or proprietary information in the strictest confidence, and he
shall not disclose, use or induce or assist in the use or disclosure of any such
confidential or proprietary information without the prior express written
consent of the Company, except as may be necessary in the ordinary course of
performing his duties as an employee of the Company consistent with the
Company's agreement with such third party or as required by law.
(f) Noncompetition; Nonsolicitation.
(i) During the Employment Term, the Employee shall
not (A) directly or indirectly engage in any activity which the
Company shall determine in good faith to be in competition with the
Company, or (B) plan or otherwise take any preliminary steps, either
alone or in concert with others, to set up or engage in any business
enterprise that would be in competition with the Company.
(ii) During the Employment Term and for a period
ending three (3) years after the date of this Agreement, the Employee
shall not, either directly or indirectly, either alone or in concert
with others, (x) solicit or entice any employee of or consultant to
the Company to leave the Company or to work for anyone other than the
Company, or (y) solicit, entice or in any way divert any (1) customer
or (2) supplier with whom the Employee has conducted
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<PAGE> 9
business or assisted the Company in providing business, to do
business with any business entity in competition with the Company.
(iii) Upon the termination of the Employment Term,
the Employee shall not, directly or indirectly through affiliates, a
partnership, a joint venture or otherwise, (A) enter into, engage in,
conduct or carry on any business which competes with the business
conducted by the Company at the end of the Employment Term,
(including developments and products of the Company toward which the
Employee has contributed or will, during the Employment Term,
contribute)(collectively referred to herein as a "Competitive
Business") or (B) participate in the management of any person, firm,
enterprise or corporation if such person, firm, enterprise or
corporation engages or proposes to engage in a Competitive Business,
in the geographic areas where the Company conducts business at the
end of the Employment Term for a period ending three (3) years after
the date of this Agreement.
(iv) If any of the covenants contained in this
Section 8(f) is determined to be unenforceable because of the
duration of such covenants or the area covered thereby, or the scope
of such prohibited activities, then the court making the
determination shall have the power to reduce the duration of such
covenant, area covered and/or the scope of prohibited activities
covered thereby, and such covenants, in their reduced form shall be
enforceable. If any of the covenants contained in this Section 8(f)
is determined to be wholly unenforceable by the courts of any
domestic or foreign jurisdiction, such covenant shall be deemed
severable into independent covenants and shall be enforceable as so
severed to the extent permitted by such court.
(g) Delivery of Materials to the Company. Upon the termination of the
Employment Term, the Employee shall deliver to the Company all devices, records,
sketches, reports, proposals, lists, correspondence, equipment, documents,
photographs, photostats, negatives, undeveloped film, notes, drawings,
specifications, tape recordings or other electronic recordings, programs, data
and other materials or property of any nature belonging to the Company or
pertaining to the Employee's work with the Company. The Employee shall not take
with him any of the foregoing or any reproduction of any of the foregoing.
(h) Prior Inventions of the Employee. Listed in Item 1 of Exhibit B
attached hereto are all inventions or improvements relevant to the subject
matter of the Employee's employment which have been made, conceived of or first
reduced to practice by the Employee alone or jointly with others prior to the
Employment Term and which the Employee desires to remove from the operation of
this Agreement. The Employee represents and warrants that such list is complete.
If there is no such list in Item 1 of Exhibit B, the Employee represents and
warrants that he has made no such inventions or improvements prior to the
Employment Term.
(i) Prior Confidentiality Agreements. The Employee represents and
warrants that his performance of all of the terms and provisions of this
Agreement as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information acquired by the Employee
in confidence or in trust prior to his employment by the Company. The Employee
also represents and warrants that he has not entered into, and covenants that he
will not enter into, any agreement, either written or oral, in conflict
herewith.
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(j) Materials or Documents of a Former Employer. The Employee
represents and warrants to and covenants with the Company that he has not
brought and will not bring with him to the Company, or use in his employment
with the Company, any materials or documents of a former employer (which term,
for purposes of this Section 8, shall also include persons, firms, corporations
and other entities for which the Employee has acted as an independent contractor
or consultant), other than materials and documents of DSA relating to its
business and acquired by the Company under the Merger Agreement, which are not
generally available to the public, unless he has obtained express written
authorization from any such former employer for their possession and use. The
materials or documents of a former employer (other than DSA) which are not
generally available to the public but which he will bring to the Company for use
in his employment are identified in Item 2 of Exhibit B attached hereto. As to
each such item, the Employee represents and warrants that he has obtained prior
to the effective date of his employment hereunder express written authorization
for their possession and use in his service to the Company. The Employee also
understands that, in his service to the Company, he is not to breach any
obligation of confidentiality that he has to former employers, and he shall
fulfill all such obligations during his employment hereunder.
(k) Services Provided as a Consultant; Delivery of the Termination
Certificate by the Employee. The terms and conditions of this Section 8 shall
apply to any period, if any, during which the Employee performs services for the
Company as a consultant or independent contractor, as well as any time during
which he is employed directly by the Company. Upon the termination of the
Employment Term, the Employee agrees to sign and deliver the "Termination
Certificate" attached hereto as Exhibit C. The Employee's failure to sign such
Termination Certificate, however, shall not affect his obligations under this
Agreement.
Section 9. Remedies; Liquidated Damages Paid by Employee.
If the Employee commits a breach, or threatens to commit a breach, of
any of the provisions of Section 8 hereof, the Company shall have (i) the right
to have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company, and (ii) the right
to require the Employee to account for and pay over to the Company all
compensation or profits derived or received by the Employee as a result of any
breach of any of the provisions of such Section 8, and the Employee hereby
agrees to account for and pay over such compensation or profits to the Company.
The invalidity or unenforceability of all or any portion of Section 8 shall not
affect the validity or enforceability of any other provision or portion hereof
or thereof, and if any provision or portion of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable or
otherwise invalid as written, then each such provision or portion shall be
enforced and validated to the full extent permitted by law.
Section 10. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Company and its respective successors and assigns and shall be binding upon and
inure to the benefit of the Employee and his executors and administrators. This
Agreement, and the Employee's rights and obligations hereunder, may not be
assigned by the Employee. The Company will require any successor (whether
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direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
Section 11. Waiver of Breach.
The waiver by the Company or the Employee of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any subsequent breach of the same provision or of any other provision
of this Agreement.
Section 12. Notices.
All notices, requests, demands and other communications submitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by express service or if mailed by first-class registered
mail, return receipt requested, postage and registry fees prepaid, and
addressed: if to the Employee, to the address set forth in the first paragraph
hereof; and if to the Company, to:
Decision-Science Applications, Inc.
c/o Steven Myers & Associates, Inc.
4695 MacArthur Court, Suite 800
Newport Beach, California 92660
Attention: President
with a copy to:
Thomas J. Crane, Esq.
Rutan & Tucker
611 Anton Blvd., Suite 1400
Costa Mesa, California 92626
or at such other address as either party shall furnish to the other.
Section 13. Miscellaneous.
This Agreement shall be governed by, and construed in accordance
with, the laws of Virginia without regard to its conflict of laws statutes, as
if this Agreement were executed and performed entirely within Virginia. This
Agreement incorporates the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements,
arrangements and understandings, whether written or oral, relating to such
subject matter. The invalidity of any section, provision or portion of this
Agreement shall not affect the validity of any other section, provision or
portion of this Agreement, and each such section, provision or portion shall be
enforced to the full extent permitted by law. This Agreement may not be modified
or amended, or any term or provision hereof waived or discharged, except by a
written instrument signed by the party against which such amendment,
modification, waiver or discharge is sought to be enforced. The headings
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of this Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 14. Indemnification.
The Company and the Parent will indemnify the Employee in the same
manner and to the same extent to which they indemnify their other senior
executives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
COMPANY: DECISION-SCIENCE APPLICATIONS, INC.
By: /S/ KENNETH W. COLBAUGH
---------------------------------------
Title: Chief Operating Officer
EMPLOYEE: /S/ GARY L. LUCAS
----------------------------------------
Gary L. Lucas
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EXHIBIT A
"Proprietary Information" Defined:
For purposes of this Agreement, "Proprietary Information" shall mean
information that has been created, discovered, developed or otherwise become
known to the Employee or the Company or in which property rights have been
assigned or otherwise conveyed to the Employee or the Company, which the
Employee may have learned or discovered, or may make, learn of or discover while
in employment of the Company, whether before the commencement of this Agreement
or during the term hereof, which information has material economic value or
potential material economic value to the business in which the Company is or
will be engaged. Proprietary Information shall include, but not be limited to,
trade secrets, processes, formulas, data, know-how, negative know-how,
improvements, discoveries, developments, designs, ideas, Inventions, techniques,
all technical data, customer and supplier lists, and any modifications or
enhancements thereto, programs and information (whether or not in writing) which
have actual or potential economic value to the Company, together with any
copyright or patent therein. For purposes of this Agreement, Proprietary
Information shall not include information that has become public knowledge
through legal means without fault by the Employee, or is already public
knowledge prior to disclosure of the same by the Company and/or its subsidiaries
or affiliates to the Employee.
"Inventions" Defined:
For purposes of this Agreement, "Inventions" shall mean all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes,
that are related to or useful in the business or future business of the Company
or result from use of premises or other property owned, leased or contracted for
by the Company. Without limiting the generality of the foregoing, Inventions
shall also include anything that derives actual or potential economic value from
not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use.
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EXHIBIT B
Item 1:
The following is a complete list of all inventions or improvements
relevant to the subject matter of the Employee's employment by the Company that
have been made or conceived of or first reduced to practice by the Employee
alone or jointly with others prior to his employment by the Company:
None
Item 2:
The following is a complete list of all materials and documents of a
former employer that are not generally available to the public that the Employee
will bring or have brought to the Company or have used or will use in his
employment by the Company:
None
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EXHIBIT C
Termination Certification
I certify as follows:
1. When I signed the attached Employment Agreement (the "Agreement"),
I read and understood the terms of the Agreement.
2. I hereby acknowledge that I have fully complied with the terms of
the Agreement, including, without limitation, the disclosure and assignment to
Decision-Science Applications, Inc. (or its successors or assigns) (the
"Company") of any Inventions covered by that Agreement, and the return of any
documents and other materials of any nature relating to my employment with the
Company.
3. I hereby acknowledge and agree to comply with my continuing
obligations under this Agreement, including, without limitation, my obligation
not to use for personal benefit or to disclose to others any Proprietary
Information of the Company.
4. I understand and acknowledge that should I fail to comply with my
obligations under the Agreement, the Company shall have the right to injunctive
relief against me, including, without limitation, an injunction prohibiting me
from disclosing Proprietary Information to a third party.
Dated as of ____________________
---------------------------------------
Gary L. Lucas
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 20, 1998, between
DECISION-SCIENCE APPLICATIONS, INC., a California corporation (the "Company"),
and DANA R. RAUSCHER, an individual residing at 22 Bartlett Road, Whitesboro,
New York 13492- 2934 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of Steven Myers &
Associates, Inc., a California corporation (the "Parent");
WHEREAS, the Parent, the Company, Decision-Science Applications,
Inc., a Virginia corporation ("DSA"), and certain of its shareholders have
entered into an Agreement and Plan of Reorganization and Merger, dated as of
July 22, 1998 (the "Merger Agreement"), pursuant to which DSA will merge with
and into the Company, with the Company being the surviving entity to continue to
carry on its existing business (the "Business");
WHEREAS, the Employee is currently employed by DSA as its Vice
President and Director of New York Operations and, as such, possesses unique and
valuable technical, financial and other knowledge, experience and ability;
WHEREAS, the Company desires to retain the services of the Employee,
has offered to engage him on the terms and conditions hereinafter set forth and
would not have otherwise entered into the Merger Agreement without the Employee
agreeing to be bound hereby;
WHEREAS, the Employee is willing to accept such employment upon the
terms and conditions hereinafter set forth; and
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Merger Agreement that the Company and Employee enter into
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Employee agree as follows (capitalized
terms used in this Agreement not otherwise defined herein shall have the
meanings given to them in the Merger Agreement):
Section 1. Term of Employment.
Subject to the provisions set forth in Sections 2 and 7 hereof, the
Company hereby employs the Employee as its Vice President and Director of New
York Operations and the Employee agrees to be employed by the Company, on the
terms and conditions contained herein, for a period commencing on the date
hereof and terminating on the third (3rd) anniversary of the date hereof (the
"Employment Term").
<PAGE> 2
Section 2. Duties.
(a) Office. The Employee is hereby appointed to serve as Vice
President and Director of New York Operations of the Company, and shall have
responsibility for managing the Company and performing such services and duties
for the Company as now or hereafter existing, as are customarily performed by an
employee in that position.
The Employee shall report directly to the President, and shall have
responsibility for the management of the Company's Business, operations and
affairs. All subordinate officers and employees shall report to the Employee or
his designee.
It is understood that the respective Boards of Directors of the
Company and of the Parent will have general supervisory authority over the
financial condition and operating activities of the Company, budgets, long-term
plans, acquisitions and divestitures and other strategic alternatives and will
seek input from the Employee as and when needed.
The parties hereto agree that the Employee cannot, on behalf of the
Company, enter into any agreement except as permitted by Company policy.
(b) Full-Time Position. The Employee shall devote his entire time,
attention, abilities, energy and skill during regular business hours to carrying
out his duties hereunder, and shall faithfully, efficiently and diligently
perform such duties to promote the business and affairs of the Company and its
subsidiaries and affiliated companies. During the Employment Term, the
Employee's services shall be exclusive to the Company. The Employee shall not
directly or indirectly engage in any activity competitive with or adverse to the
Company's business or welfare or services of a business, professional or
commercial nature to any other person or firm, whether for compensation or
otherwise.
Section 3. Compensation.
(a) Base Salary. For services rendered by the Employee under this
Agreement, the Company shall pay the Employee or cause to be paid to the
Employee during the Employment Term a base salary (the "Base Salary") at a rate
equal to $86,575 per year. The Base Salary shall be earned and shall be payable
at such intervals and otherwise in such manner as is consistent with the normal
payroll practices of the Company for remuneration of its employees. The Company
shall review the Base Salary at least annually to determine whether an increase
is warranted in accordance with the Company's normal policies and procedures.
(b) Withholding. The Company shall be entitled to withhold amounts
from any compensation or other form of remuneration or benefit payable by the
Company to the Employee that the Company reasonably believes it is required to
withhold under any federal, state, local or foreign tax law to which the Company
is subject.
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<PAGE> 3
Section 4. Other Benefits.
During the Employment Term, except as may be otherwise provided
herein, the Employee shall be entitled to medical benefits, holiday, vacation or
similar rights and such other benefits, perquisites and privileges as are from
time to time provided by the Company, the Parent and their subsidiaries and
affiliated companies to their full-time employees in comparable positions, as
the same may change from time to time and communicated to the Employee.
Section 5. Expenses.
The Company shall, during the Employment Term, reimburse the Employee
for all reasonable documented business expenses actually and necessarily
incurred by him in the course of, and in connection with, his employment by the
Company. The Employee shall keep detailed and accurate records of expenses
incurred in connection with his employment by the Company, and reimbursement
therefor shall be made in accordance with policies and procedures established by
the Company's management from time to time.
Section 6. Representations and Covenants of the Employee.
(a) The Employee represents and warrants to the Company that he is
not a party to or bound by any presently effective agreement or contract,
whether of employment or otherwise, with any third person or entity that would
in any way restrict or prohibit the Employee from undertaking or performing his
obligations on the terms and conditions set forth in this Agreement.
(b) The Employee covenants with the Company that he shall not, during
the Employment Term, enter into any such agreement, contract or understanding
described in Section 6(a) above so as to cause the Company, or any of its
subsidiaries or affiliated companies, to be liable in connection therewith.
Section 7. Termination.
The Employment Term shall terminate upon any of the following
occurrences:
(a) By Reason of Death. If the Employee shall die during the
Employment Term, this Agreement shall terminate except that the Employee's
estate shall be entitled to receive the Base Salary provided in Section 3(a) to
the last day of the month in which his death occurs. Such termination shall not
affect any vested rights which the Employee may have at the time of his death
pursuant to any insurance or other death benefit plans or arrangements of the
Company or any affiliate of the Company.
(b) Termination For Cause; Resignation Without Good Reason.
(i) Payments. If, prior to the expiration of the
Employment Term, the Employee's employment is terminated by the
Company for Cause, as defined in Section 7(c) hereof, or if the
Employee resigns from his employment hereunder other than for Good
Reason, as defined in Section 7(e) hereof, the Employee shall be
entitled to payment of his
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<PAGE> 4
Base Salary accrued through and including the date of such
termination or resignation, plus any other accrued but unpaid
benefits or compensation, but shall not be entitled to any other
compensation or benefits under this Agreement.
(ii) Notice of Termination. Termination of the Employee's
employment for Cause shall be communicated by delivery to the
Employee of a copy of a resolution duly adopted by the Company's
Board of Directors (a "Notice of Termination"). The Notice of
Termination shall specify the effective date of the termination of
the Employee's employment and the Board of Directors' reason for such
termination, including the specific provisions of this Agreement
pursuant to which termination for Cause is being undertaken and the
factual basis on which such termination is predicated.
(iii) Date of Termination. The date of a termination for
Cause shall be the date specified in the Notice of Termination
provided for in this Section 7(b). The date of a resignation by the
Employee without Good Reason shall be the date specified in a written
notice of resignation from the Employee to the Company. The Employee
shall provide at least sixty (60) days' advance written notice of the
date of his resignation without Good Reason.
(c) Definition of Cause. For the purposes of this Agreement, "Cause"
shall mean (i) the failure or inability of the Employee to cure, within thirty
(30) days of receipt of written notice on behalf of the Company's Board of
Directors, the Employee's failure to substantially perform the primary duties of
his employment hereunder resulting in a material adverse impact upon the
Company, its reputation or its business operations; (ii) the conviction of the
Employee of a felony under state or federal criminal laws;; (iii) the commission
by the Employee of any act of fraud or willful misconduct against the Company or
any of its subsidiaries or affiliated companies; (iv) the commission by the
Employee of any act of gross negligence or malfeasance, resulting in a material
adverse impact upon the Company, its reputation or its business operations; or
(v) the violation by the Employee of his covenants contained in Sections 6 and 8
hereof.
(d) Termination Upon Disability. If, during the Employment Term, the
Employee shall become incapable of fulfilling his obligations hereunder because
of injury or physical or mental illness, and such incapacity shall exist or
reasonably may be expected to continue to exist, upon the competent medical
opinion of a doctor chosen by the Company and Employee, for a period exceeding
sixty (60) consecutive days or one hundred twenty (120) non-consecutive days
within a six-month period, the Company shall nevertheless continue to pay the
Employee his Base Salary through the last day of the sixtieth (60th) day of
disability or, if applicable, the date upon which the shorter periods of
disability shall have aggregated more than one hundred twenty (120) days within
the six-month period (in either event, the "Disability Date") plus any other
benefits or compensation accrued through, but unpaid as of, the Disability Date;
provided, however, that nothing in this Agreement shall operate to deprive the
Employee of any rights he may have pursuant to the Family and Medical Leave Act,
the Americans with Disabilities Act or any analogous state statutes. The Company
may, at any time on or after the Disability Date, terminate this Agreement and
all further rights and obligations of the parties under this Agreement, other
than the obligations of the Employee under Section 8 hereof, which obligations
shall continue in effect for the periods therein stated.
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<PAGE> 5
(e) Termination Without Cause; Resignation for Good Reason.
(i) Liquidated Damages Paid by Company. If, prior
to the expiration of the Employment Term, the Employee's employment
is terminated by the Company without Cause, or if the Employee
resigns from his employment hereunder for Good Reason, the Company
shall pay to the Employee his Base Salary accrued up to and including
the date of such termination or resignation plus any other accrued
but unpaid benefits or compensation.
In addition, for the period commencing immediately
following the date of such termination or resignation and ending on
the last day of the Employment Term (the "Offset Period"), the
Company shall pay to the Employee as liquidated damages (the "Company
Paid Liquidated Damages") his Base Salary, as in effect on the date
of such termination.
The Company Paid Liquidated Damages shall be payable in
accordance with the Company's then effective payroll practices and at
such intervals as Base Salary would have been paid if the Employee
had remained in the active service of the Company; provided, however,
that payments of Base Salary during the Offset Period shall be made
not less frequently than monthly.
(ii) Other Benefits. In the event of the Employee's
termination or resignation as provided in this Section 7(e), the
Employee shall continue to participate on the same terms and
conditions as in effect immediately prior to such termination or
resignation in each pension, welfare, life insurance, health,
disability and other fringe benefit plan or program (including
automobile allowances) provided to the Employee at the time of such
termination or resignation until the earlier to occur of:
(A) the end of the Offset Period; or
(B) such time as the Employee is otherwise
covered by similar programs.
Anything herein to the contrary notwithstanding, the
Company shall have no obligation to continue to maintain during the
Offset Period any plan or program solely as a result of the
provisions of this Agreement. If, during the Offset Period, the
Employee is precluded from participating in a plan or program by its
terms or applicable law or if the Company elects not to maintain such
plan or program, the Company shall provide the Employee with
compensation the aggregate value of which is sufficient to purchase a
similar benefit program.
(iii) Death During Offset Period. If the Employee
dies during the Offset Period, the balance of the Company Paid
Liquidated Damages will be paid to his Beneficiary. "Beneficiary"
shall mean the person or persons designated by the Employee in
writing to the Company to receive payments under this Agreement or,
if no such person or persons are designated, the Employee's estate.
(iv) No Other Benefits. Except as expressly provided
in this Section 7(e), in the event the Employee's employment is
terminated by the Company without Cause or the
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<PAGE> 6
Employee resigns his employment with the Company for Good Reason, the
Employee shall not be entitled to any other compensation, benefits or
damages under, or related to, this Agreement with respect to the year
of his termination or resignation or any subsequent year.
(v) Date of Termination. The date of termination of
employment without Cause shall be the date specified in a written
notice of termination to the Employee. The date of resignation for
Good Reason shall be the date specified in a written notice of
resignation from the Employee to the Company, provided, however, that
no such written notice shall be effective unless the cure period
specified in Section 7(f) has expired without the Company having
corrected, to the reasonable satisfaction of the Employee, the event
or events subject to cure. The Employee shall provide at least thirty
(30) days advance written notice of resignation.
(f) Definition of Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any one or more of the following events:
(i) a material reduction in, or the assignment to
the Employee of duties which would be inconsistent with, the
Employee's positions or responsibilities as described in Section
2(a), including the Employee's ceasing to report directly to the
Board; or
(ii) a material reduction in the Employee's Base
Salary as then in effect or failure of the Company to pay any amount
owing to the Employee hereunder when due; or
(iii) failure by the Company to obtain the specific
assumption of this Agreement by any successor of the Company, as
contemplated in Section 10 hereof; or
(iv) the relocation of the Employee to a site that
is more than fifty (50) miles from the site of his current work
location.
Unless the Employee provides written notification of an event described in
clauses (i) through (iii) of the preceding sentence to the Parent within
forty-five (45) days, after the Employee knows or has reason to know of the
occurrence of any such event, the Employee shall be deemed to have consented
thereto and such event shall no longer constitute Good Reason for purposes of
this Agreement. If the Employee provided such written notice to the Parent, the
Parent or the Company shall have thirty (30) days from the date of receipt of
such notice to effect a cure of the event described therein and, upon cure
thereof by the Parent or the Company, as the case may be, to the reasonable
satisfaction of the Employee, such event shall no longer constitute Good Reason
for purposes of this Agreement.
Section 8. Proprietary Information and Inventions.
(a) Employee Acknowledgments. The Employee recognizes that the
Company is engaged in a continuous program of research, development, design and
production respecting its business, present and future, and understands that as
part of his employment by the Company or any of its subsidiaries or affiliates,
he is, or may be expected, to make new contributions and inventions of value to
the Company or any of its subsidiaries or affiliates. The Employee understands
that his
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<PAGE> 7
employment by the Company or any of its subsidiaries or affiliates creates in
him a duty of trust and confidentiality to the Company or any of its
subsidiaries or affiliates with respect to any information (i) related,
applicable or useful to the business of the Company or any of its subsidiaries
or affiliates, including the Company's or any of its subsidiaries' or
affiliates' anticipated research and development; (ii) resulting from tasks
assigned to the Employee by the Company or any of its subsidiaries or
affiliates; (iii) resulting from the use of equipment, supplies or facilities
owned, leased or contracted for by the Company or any of its subsidiaries or
affiliates; or (iv) related, applicable or useful to the business of any client
or customer of (A) the Company or (B) any of the Company's subsidiaries or
affiliates, which may be made known to him by the Company or any of the
Company's subsidiaries or affiliates, or by any client or customer of (A) the
Company or (B) any of the Company's subsidiaries or affiliates, or learned by
him during the Employment Term.
(b) Assignment of Proprietary Information and Inventions to the
Company. The Employee agrees that all Proprietary Information (as defined on
Exhibit A hereto) and Inventions (as defined on Exhibit A hereto) shall be the
sole property of the Company and its assigns, and the Company and its assigns
shall be the sole owner of all patents, trademarks, service marks, copyrights
and other rights (collectively referred to herein as "Rights") pertaining to
Proprietary Information and Inventions in any part of the world. The Employee
hereby assigns to the Company any rights he may have or acquire in Proprietary
Information or Inventions or Rights pertaining to Proprietary Information or
Inventions or Rights. The Employee further agrees as to all Proprietary
Information or Inventions to assist the Company or any person designated by it
in every proper way to obtain and from time to time enforce Rights relating to
said Proprietary Information or Inventions in any and all countries. The
Employee shall execute all documents for use in applying for, obtaining and
enforcing such Rights on such Proprietary Information or Inventions as the
Company may desire, together with any assignments thereof to the Company or
persons designated by it. The Employee's obligation to assist the Company or any
person designated by it in obtaining and enforcing Rights relating to
Proprietary Information or Inventions shall continue beyond the date of the
termination of the Employment Term (the "Termination Date"), but the Company
shall compensate the Employee at a reasonable rate after the Termination Date
for time actually spent by the Employee upon the Company's request for such
assistance. In the event the Company is unable, after reasonable effort, to
secure the Employee's signature on any document or documents needed to apply for
or to enforce any Right relating to Proprietary Information or to an Invention,
whether because of the Employee's physical or mental incapacity or for any other
reason whatsoever, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act on his behalf and in his stead in the execution and
filing of any such application and in furthering the application for and
enforcement of Rights with the same legal force and effect as if such acts were
performed by the Employee. The Employee hereby acknowledges that all original
works of authorship which are made by the Employee (solely or jointly with
others) within the scope of his employment and which are protectable by
copyright are "works for hire" as that term is defined in the United States
Copyright Act (17 USCA, Section 101).
(c) Disclosure of Discoveries, Etc. to the Company. The Employee will
promptly and from time to time disclose in writing to the Company, and the
Company hereby agrees to receive such disclosures in confidence, all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes, or
reduced to
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<PAGE> 8
practice, made, conceived or learned by the Employee, either alone or jointly
with others during the Employment Term, for the purpose of permitting the
Company to determine whether they constitute Inventions. In order to facilitate
the complete and accurate disclosures described above, the Employee agrees to
maintain complete written records of all Inventions, and of all work, study and
investigation done by him during the Employment Term, which records shall be the
property of the Company.
(d) Employee Acts. The Employee shall not knowingly do anything to
imperil the validity of any such patent, design or protection or any application
therefor and shall, at the reasonable cost of the Company, render all possible
assistance to the Company both in obtaining and maintaining such patent, design
or other protection, and the Employee shall not, either during the Employment
Term or thereafter, exploit or make public or disclose any such Invention or
give any information in respect thereof except to the Company or as it may
direct.
(e) Confidentiality. During the Employment Term, and for a period
ending three (3) years after the date of this Agreement whether the Employee is
terminated voluntarily or involuntarily, for cause or without cause, or by
disability, the Employee will keep all Proprietary Information, Inventions and
Rights in the strictest confidence and trust, and the Employee will not
disclose, use or induce or assist in the use or disclosure of any Proprietary
Information, Inventions or Rights pertaining to Proprietary Information, or
anything related thereto, without the prior express written consent of the
Company, except as may be necessary in the ordinary course of performing his
duties as an employee of the Company or as may be required by law. The Employee
recognizes that the Company has received and in the future will receive from
third parties their confidential or proprietary information subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes. The Employee agrees that he owes the
Company and such third parties, during the Employment Term and for a period of
three (3) years after the date of this Agreement, a duty to hold all such
confidential or proprietary information in the strictest confidence, and he
shall not disclose, use or induce or assist in the use or disclosure of any such
confidential or proprietary information without the prior express written
consent of the Company, except as may be necessary in the ordinary course of
performing his duties as an employee of the Company consistent with the
Company's agreement with such third party or as required by law.
(f) Noncompetition; Nonsolicitation.
(i) During the Employment Term, the Employee shall not (A)
directly or indirectly engage in any activity which the Company shall
determine in good faith to be in competition with the Company, or (B)
plan or otherwise take any preliminary steps, either alone or in
concert with others, to set up or engage in any business enterprise
that would be in competition with the Company.
(ii) During the Employment Term and for a period ending
three (3) years after the date of this Agreement, the Employee shall
not, either directly or indirectly, either alone or in concert with
others, (x) solicit or entice any employee of or consultant to the
Company to leave the Company or to work for anyone other than the
Company, or (y) solicit, entice or in any way divert any (1) customer
or (2) supplier with whom the Employee has conducted
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<PAGE> 9
business or assisted the Company in providing business, to do
business with any business entity in competition with the Company.
(iii) Upon the termination of the Employment Term, the
Employee shall not, directly or indirectly through affiliates, a
partnership, a joint venture or otherwise, (A) enter into, engage in,
conduct or carry on any business which competes with the business
conducted by the Company at the end of the Employment Term,
(including developments and products of the Company toward which the
Employee has contributed or will, during the Employment Term,
contribute)(collectively referred to herein as a "Competitive
Business") or (B) participate in the management of any person, firm,
enterprise or corporation if such person, firm, enterprise or
corporation engages or proposes to engage in a Competitive Business,
in the geographic areas where the Company conducts business at the
end of the Employment Term for a period ending three (3) years after
the date of this Agreement.
(iv) If any of the covenants contained in this Section
8(f) is determined to be unenforceable because of the duration of
such covenants or the area covered thereby, or the scope of such
prohibited activities, then the court making the determination shall
have the power to reduce the duration of such covenant, area covered
and/or the scope of prohibited activities covered thereby, and such
covenants, in their reduced form shall be enforceable. If any of the
covenants contained in this Section 8(f) is determined to be wholly
unenforceable by the courts of any domestic or foreign jurisdiction,
such covenant shall be deemed severable into independent covenants
and shall be enforceable as so severed to the extent permitted by
such court.
(g) Delivery of Materials to the Company. Upon the termination of the
Employment Term, the Employee shall deliver to the Company all devices, records,
sketches, reports, proposals, lists, correspondence, equipment, documents,
photographs, photostats, negatives, undeveloped film, notes, drawings,
specifications, tape recordings or other electronic recordings, programs, data
and other materials or property of any nature belonging to the Company or
pertaining to the Employee's work with the Company. The Employee shall not take
with him any of the foregoing or any reproduction of any of the foregoing.
(h) Prior Inventions of the Employee. Listed in Item 1 of Exhibit B
attached hereto are all inventions or improvements relevant to the subject
matter of the Employee's employment which have been made, conceived of or first
reduced to practice by the Employee alone or jointly with others prior to the
Employment Term and which the Employee desires to remove from the operation of
this Agreement. The Employee represents and warrants that such list is complete.
If there is no such list in Item 1 of Exhibit B, the Employee represents and
warrants that he has made no such inventions or improvements prior to the
Employment Term.
(i) Prior Confidentiality Agreements. The Employee represents and
warrants that his performance of all of the terms and provisions of this
Agreement as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information acquired by the Employee
in confidence or in trust prior to his employment by the Company. The Employee
also represents and warrants that he has not entered into, and covenants that he
will not enter into, any agreement, either written or oral, in conflict
herewith.
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<PAGE> 10
(j) Materials or Documents of a Former Employer. The Employee
represents and warrants to and covenants with the Company that he has not
brought and will not bring with him to the Company, or use in his employment
with the Company, any materials or documents of a former employer (which term,
for purposes of this Section 8, shall also include persons, firms, corporations
and other entities for which the Employee has acted as an independent contractor
or consultant), other than materials and documents of DSA relating to its
business and acquired by the Company under the Merger Agreement, which are not
generally available to the public, unless he has obtained express written
authorization from any such former employer for their possession and use. The
materials or documents of a former employer (other than DSA) which are not
generally available to the public but which he will bring to the Company for use
in his employment are identified in Item 2 of Exhibit B attached hereto. As to
each such item, the Employee represents and warrants that he has obtained prior
to the effective date of his employment hereunder express written authorization
for their possession and use in his service to the Company. The Employee also
understands that, in his service to the Company, he is not to breach any
obligation of confidentiality that he has to former employers, and he shall
fulfill all such obligations during his employment hereunder.
(k) Services Provided as a Consultant; Delivery of the Termination
Certificate by the Employee. The terms and conditions of this Section 8 shall
apply to any period, if any, during which the Employee performs services for the
Company as a consultant or independent contractor, as well as any time during
which he is employed directly by the Company. Upon the termination of the
Employment Term, the Employee agrees to sign and deliver the "Termination
Certificate" attached hereto as Exhibit C. The Employee's failure to sign such
Termination Certificate, however, shall not affect his obligations under this
Agreement.
Section 9. Remedies; Liquidated Damages Paid by Employee.
If the Employee commits a breach, or threatens to commit a breach, of
any of the provisions of Section 8 hereof, the Company shall have (i) the right
to have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company, and (ii) the right
to require the Employee to account for and pay over to the Company all
compensation or profits derived or received by the Employee as a result of any
breach of any of the provisions of such Section 8, and the Employee hereby
agrees to account for and pay over such compensation or profits to the Company.
The invalidity or unenforceability of all or any portion of Section 8 shall not
affect the validity or enforceability of any other provision or portion hereof
or thereof, and if any provision or portion of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable or
otherwise invalid as written, then each such provision or portion shall be
enforced and validated to the full extent permitted by law.
Section 10. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Company and its respective successors and assigns and shall be binding upon and
inure to the benefit of the Employee and his executors and administrators. This
Agreement, and the Employee's rights and obligations hereunder, may not be
assigned by the Employee. The Company will require any successor (whether
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direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
Section 11. Waiver of Breach.
The waiver by the Company or the Employee of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any subsequent breach of the same provision or of any other provision
of this Agreement.
Section 12. Notices.
All notices, requests, demands and other communications submitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by express service or if mailed by first-class registered
mail, return receipt requested, postage and registry fees prepaid, and
addressed: if to the Employee, to the address set forth in the first paragraph
hereof; and if to the Company, to:
Decision-Science Applications, Inc.
c/o Steven Myers & Associates, Inc.
4695 MacArthur Court, Suite 800
Newport Beach, California 92660
Attention: President
with a copy to:
Thomas J. Crane, Esq.
Rutan & Tucker
611 Anton Blvd., Suite 1400
Costa Mesa, California 92626
or at such other address as either party shall furnish to the other.
Section 13. Miscellaneous.
This Agreement shall be governed by, and construed in accordance
with, the laws of Virginia without regard to its conflict of laws statutes, as
if this Agreement were executed and performed entirely within Virginia. This
Agreement incorporates the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements,
arrangements and understandings, whether written or oral, relating to such
subject matter. The invalidity of any section, provision or portion of this
Agreement shall not affect the validity of any other section, provision or
portion of this Agreement, and each such section, provision or portion shall be
enforced to the full extent permitted by law. This Agreement may not be modified
or amended, or any term or provision hereof waived or discharged, except by a
written instrument signed by the party against which such amendment,
modification, waiver or discharge is sought to be enforced. The headings
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<PAGE> 12
of this Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 14. Indemnification.
The Company and the Parent will indemnify the Employee in the same
manner and to the same extent to which they indemnify their other senior
executives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
COMPANY: DECISION-SCIENCE APPLICATIONS, INC.
By: /S/ KENNETH W. COLBAUGH
----------------------------------------
Title: Chief Operating Officer
EMPLOYEE: /S/ DANA R. RAUSCHER
--------------------------------------------
Dana R. Rauscher
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EXHIBIT A
"Proprietary Information" Defined:
For purposes of this Agreement, "Proprietary Information" shall mean
information that has been created, discovered, developed or otherwise become
known to the Employee or the Company or in which property rights have been
assigned or otherwise conveyed to the Employee or the Company, which the
Employee may have learned or discovered, or may make, learn of or discover while
in employment of the Company, whether before the commencement of this Agreement
or during the term hereof, which information has material economic value or
potential material economic value to the business in which the Company is or
will be engaged. Proprietary Information shall include, but not be limited to,
trade secrets, processes, formulas, data, know-how, negative know-how,
improvements, discoveries, developments, designs, ideas, Inventions, techniques,
all technical data, customer and supplier lists, and any modifications or
enhancements thereto, programs and information (whether or not in writing) which
have actual or potential economic value to the Company, together with any
copyright or patent therein. For purposes of this Agreement, Proprietary
Information shall not include information that has become public knowledge
through legal means without fault by the Employee, or is already public
knowledge prior to disclosure of the same by the Company and/or its subsidiaries
or affiliates to the Employee.
"Inventions" Defined:
For purposes of this Agreement, "Inventions" shall mean all
discoveries, developments, designs, improvements, inventions, formulas, software
programs, processes, techniques, know-how, negative know-how and data, whether
or not patentable or registrable under patent, copyright or similar statutes,
that are related to or useful in the business or future business of the Company
or result from use of premises or other property owned, leased or contracted for
by the Company. Without limiting the generality of the foregoing, Inventions
shall also include anything that derives actual or potential economic value from
not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use.
13
<PAGE> 14
EXHIBIT B
Item 1:
The following is a complete list of all inventions or improvements
relevant to the subject matter of the Employee's employment by the Company that
have been made or conceived of or first reduced to practice by the Employee
alone or jointly with others prior to his employment by the Company:
NONE
/S/ DRR
Item 2:
The following is a complete list of all materials and documents of a
former employer that are not generally available to the public that the Employee
will bring or have brought to the Company or have used or will use in his
employment by the Company:
NONE
/S/ DRR
14
<PAGE> 15
EXHIBIT C
Termination Certification
I certify as follows:
1. When I signed the attached Employment Agreement (the "Agreement"),
I read and understood the terms of the Agreement.
2. I hereby acknowledge that I have fully complied with the terms of
the Agreement, including, without limitation, the disclosure and assignment to
Decision-Science Applications, Inc. (or its successors or assigns) (the
"Company") of any Inventions covered by that Agreement, and the return of any
documents and other materials of any nature relating to my employment with the
Company.
3. I hereby acknowledge and agree to comply with my continuing
obligations under this Agreement, including, without limitation, my obligation
not to use for personal benefit or to disclose to others any Proprietary
Information of the Company.
4. I understand and acknowledge that should I fail to comply with my
obligations under the Agreement, the Company shall have the right to injunctive
relief against me, including, without limitation, an injunction prohibiting me
from disclosing Proprietary Information to a third party.
Dated as of ________________
---------------------------------------
Dana R. Rauscher
15
<PAGE> 1
EXHIBIT 10.5
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") dated as of August 20, 1998 is
among STEVEN MYERS & ASSOCIATES, INC., a California corporation ("SM&A")
DECISION-SCIENCE APPLICATIONS, INC., a Virginia corporation ("DSA"), the
shareholders of DSA as identified on Schedule 1 hereto, Guy A. Ackerson (the
"DSA Representative"), and FIRST AMERICAN TRUST COMPANY, as escrow agent (the
"Escrow Agent").
PRELIMINARY STATEMENT
Pursuant to an Agreement and Plan of Reorganization and Merger dated as
of July 22, 1998 (the "Merger Agreement"), by and among SM&A, DSA, DSA
Acquisition, Inc., a wholly owned subsidiary of SM&A, and the Principal
Shareholders, SM&A is acquiring DSA through the merger of DSA with and into DSA
Acquisition, Inc. Capitalized terms used herein and not otherwise defined herein
have the meanings ascribed to them in the Merger Agreement.
The holders of the Outstanding Company Shares (the "Shareholders") have
agreed to indemnify SM&A as provided in Article 10 of the Merger Agreement
through the deposit of 178,710 shares of SM&A Stock (the "Escrow Shares")
pursuant to Section 2.7 of the Merger Agreement. A list of all Shareholders and
their pro rata interest in the Escrow Shares is attached hereto as Schedule 2.
The parties hereto agree as follows:
1. Establishment of Escrow.
SM&A has delivered to the Escrow Agent and the Escrow Agent acknowledges
receipt of the Escrow Shares in the form of a single stock certificate. The
Escrow Shares shall be held in escrow in the name of the Escrow Agent or its
nominee, subject to the terms and conditions set forth herein. Unless and until
the Escrow Shares are returned to SM&A or delivered to the Shareholders pursuant
to the terms of this Agreement, the Escrow Agent shall vote the Escrow Shares in
accordance with the written instructions of the DSA Representative.
The Escrow Agent shall invest any cash held by it pursuant to this
Agreement in interest bearing accounts or certificates of deposit with such
bank(s) or financial institution(s) as it deems advisable.
2. Amounts Earned on Escrow Shares; Tax Matters.
All amounts earned on the Escrow Shares (dividends or other
distributions, and interest earned thereon) shall be distributed pro rata to the
Shareholders on a quarterly basis. All interest
<PAGE> 2
earned on cash deposited by the Shareholders pursuant to Section 3.3, shall be
paid to the Shareholders entitled thereto on a quarterly basis. The parties
agree that to the extent required by applicable law, including Section 468B(g)
of the Internal Revenue Code of 1986, as amended (the "Code"), the Shareholders
will include all amounts earned on the Escrow Shares and all interest earned on
cash deposits in their gross income for federal, state and local income tax
(collectively, "income tax") purposes and pay any income tax resulting
therefrom. As a condition to a Shareholder's right to replace Escrow Shares with
Escrow Funds as defined in Section 3.3, such Shareholder shall have previously
furnished to the Escrow Agent all information necessary to enable the Escrow
Agent to comply with the reporting and backup withholding obligations of the
Code.
3. Claims Against Escrow Shares.
3.1 At any time or times prior to the Expiration Date (as defined in
Section 5) SM&A may make claims against the Escrow Shares and "Escrow Funds" (as
defined in Section 3.3) for amounts due for indemnification under Article 10 of
the Merger Agreement. SM&A shall notify the DSA Representative and the Escrow
Agent in writing of each such claim ("Notice of Claim"), including a brief
description of the amount and nature of such claim. If the amount subject to the
claim is unliquidated, SM&A shall make a good faith estimate as to the amount of
the claim for purposes of determining the number of Escrow Shares and/or amount
of Escrow Funds, if any, to be withheld by the Escrow Agent if such claim is not
resolved or otherwise adjudicated by the Expiration Date. Such good faith
estimate shall be included in the Notice of Claim. If the DSA Representative
shall dispute a claim or SM&A's estimate as to the amount of the claim, the DSA
Representative shall give written notice thereof to SM&A and to the Escrow Agent
within 30 days after the date SM&A's Notice of Claim was received by the DSA
Representative, in which case the Escrow Agent shall continue to hold the Escrow
Shares/Escrow Funds in accordance with the terms of this Agreement; otherwise,
such liquidated claim shall be deemed to have been acknowledged to be payable
out of the Escrow Shares/Escrow Funds in the full amount thereof as set forth in
the Notice of Claim and the Escrow Agent shall use its best efforts to pay such
liquidated claim from the Escrow Shares/Escrow Funds to SM&A within three
business days after expiration of said 30-day period. Unliquidated claims shall
not be paid until liquidated. Disputes as to SM&A's good faith estimate of a
claim shall be resolved as provided in Section 4.1. The value of Escrow Shares
and Escrow Funds paid to satisfy a claim under this Agreement shall be allocated
pro rata among the Shareholders based on their proportionate interests in the
aggregate Escrow Shares and Escrow Funds. With respect to each Shareholder, the
amount paid to satisfy a claim under this Agreement shall be deducted first from
the Escrow Funds and then, to the extent necessary, from the Escrow Shares
allocable to such Shareholder. If the amount of the claim exceeds the aggregate
value of the Escrow Shares/Escrow Funds
-2-
<PAGE> 3
subject thereto, the Escrow Agent shall have no liability or responsibility for
any deficiency.
3.2 The Escrow Agent shall effect the payment of Escrow Shares to SM&A
by surrendering such Escrow Shares to SM&A's stock transfer agent (U.S. Stock
Transfer Corporation, 1745 Gardena Avenue, Glendale, CA 91204 ("UST")) for
cancellation upon receipt by the Escrow Agent of a copy of a letter from SM&A to
UST, instructing UST to issue a new certificate to the Escrow Agent for the
remaining Escrow Shares after giving effect to such payment. The value per share
of the Escrow Shares for purposes of this Agreement shall be the Average Closing
Price for the Base Period. All claims paid out of the Escrow Shares shall be
rounded to the nearest whole share. The Escrow Agent shall not be responsible
for and shall have no liability in connection with determining whether the
transfer of any Escrow Shares complies with federal or state securities laws.
3.3 In the event that (i) prior to the Expiration Date (as hereinafter
defined), the average of the closing prices of SM&A Stock on the NASDAQ National
Market (or such other national stock exchange on which SM&A Stock is listed) for
any twenty (20) consecutive trading days is $5.00 below the Average Closing
Price for the Base Period, (ii) the Escrow Shares become eligible for sale
pursuant to Rule 144 under the Securities Act, or (iii) the Escrow Shares are
entitled to be included in a registration statement filed by SM&A pursuant to
the Securities Act, then a Shareholder may sell (pursuant to applicable federal
and state securities law, Rule 144 or an effective registration statement, as
the case may be) all or any portion of his allocation of the Escrow Shares (the
"Eligible Escrow Shares"); provided that such Shareholder has arranged, to SM&A
satisfaction, for the deposit into escrow of the proceeds from the sale of such
Eligible Escrow Shares. The funds deposited by a Shareholder pursuant to this
Section 3.3 ("Escrow Funds") shall be held by the Escrow Agent and subject to
the terms and conditions of this Agreement.
3.4 If the DSA Representative shall give notice to SM&A and the Escrow
Agent pursuant to Section 3.1 disputing an SM&A claim, no distribution of the
Escrow Shares/Escrow Funds shall be made by the Escrow Agent to SM&A or to the
Shareholders of the Set Aside Amount (as defined in Section 4.1) with respect to
such claim until either: (i) such disputed claim has been resolved as evidenced
by a written notice executed by SM&A and the DSA Representative instructing the
Escrow Agent as to the distribution of such Set Aside Amount or a portion
thereof; or (ii) such dispute shall have been adjudicated in accordance with the
arbitration procedures described in Section 4.2.
4. Disputed Claims.
4.1 If the DSA Representative shall dispute an indemnification claim of
SM&A as provided in Section 3, the Escrow
-3-
<PAGE> 4
Agent shall set aside a portion of the Escrow Shares/Escrow Funds equal to the
amount of the claim as set forth in the Notice of Claim (the "Set Aside
Amount"), which amount may subsequently be modified by arbitration. If the DSA
Representative shall dispute the Set Aside Amount as provided in Section 3, the
Escrow Shares/Escrow Funds constituting the Set Aside Amount shall be withheld
pursuant to the immediately preceding sentence until otherwise determined by
arbitration. The Set Aside Amount shall be allocated pro rata among the
Shareholders based upon their percentage interests in the aggregate Escrow
Shares/Escrow Funds. With respect to each Shareholder, the amount constituting
the Set Aside Amount shall be deducted first from the Escrow Funds and then, to
the extent necessary, from the Escrow Shares allocable to such shareholder. In
the event SM&A notifies the Escrow Agent in writing that it has made
out-of-pocket expenditures or anticipates that it will incur legal expenses in
connection with any such disputed claim with respect to which it is entitled to
be indemnified under the Merger Agreement, a portion of the Escrow Shares/Escrow
Funds equal to such reasonable incurred or anticipated expenditures shall also
be set aside and added to and become a part of the Set Aside Amount; provided,
that in the event that it shall be agreed (as evidenced by a written notice
executed by SM&A and the DSA Representative as described in Section 3.4) or
determined through an arbitration proceeding described in Section 4.2 that SM&A
is not entitled to indemnification with respect to such claim or such expenses,
SM&A shall not be entitled to the portion of the Escrow Shares/Escrow Funds set
aside for such expenses.
4.2 If, within 60 days after the DSA Representative sends notice of a
dispute, the Escrow Agent has not received written notice executed by SM&A and
the DSA Representative to the effect that the disputed indemnification claim has
been resolved, the indemnification claim shall be referred to an arbitrator
chosen by agreement of the DSA Representative and SM&A. If no agreement is
reached regarding selection of the arbitrator within 30 days after written
request from either party to the other, SM&A or the DSA Representative may
submit the matter in dispute to the Judicial Abitration and Mediation Service,
to be settled by arbitration in Orange County, California in accordance with the
commercial arbitration rules of such association. SM&A and the DSA
Representative agree to act in good faith to select mutually an arbitrator. The
fees and expenses of any arbitration shall be borne equally by the Shareholders
as a group and SM&A, unless and until the arbitrator determines otherwise. Any
fees or expenses attributable to the Shareholders as a group shall be payable
only out of the Escrow Shares/Escrow Funds. In no event shall the Escrow Agent
be responsible for any fees or expenses of any party to any arbitration
proceedings. The determination of the arbitrator as to the amount, if any, of
the indemnification claim that is properly allowable shall be conclusive and
binding upon the parties hereto and judgment may be entered thereon in any court
having jurisdiction thereof, including, without limitation, any Superior Court
in the State of California. The Escrow Agent shall make payments of such claim,
as and to the extent allowed, to SM&A
-4-
<PAGE> 5
within three business days following its receipt of a copy of the arbitration
award determination.
5. Termination and Distribution of Escrow Shares.
5.1 This Agreement shall terminate two (2) years after the Effective
Time (as defined in Section 1.2 of the Merger Agreement) (the "Expiration
Date"); provided that this Agreement shall continue in effect until the
resolution of all outstanding indemnification claims as to which the Escrow
Agent has received notice pursuant to Section 3 hereof on or prior to the
Expiration Date.
5.2 SM&A shall provide the Escrow Agent with reasonable advance notice
of the expected Expiration Date and shall confirm the occurrence of such as soon
as practicable thereafter. On the Expiration Date or as soon thereafter as is
practicable, the Escrow Agent shall distribute to the Shareholders based on
their relative percentage interest in the Escrow Shares and/or Escrow Funds the
remaining Escrow Shares/Escrow Funds less (i) the number of Escrow Shares and
amount of Escrow Funds constituting any then existing Set Aside Amounts, and
(ii) the number of Escrow Shares and amount of Escrow Funds equal to the amount
specified in any Notice of Claim delivered to the Escrow Agent prior to the
Expiration Date with respect to which no Set Aside Amount has yet been
established and the Escrow Agent has not otherwise been instructed by SM&A and
the DSA Representative. At such time thereafter as any remaining indemnification
claim hereunder has been resolved and the Escrow Agent has received a written
notice executed by SM&A and the DSA Representative to that effect (or a copy of
an arbitration award pursuant to Section 4.2 to that effect) and any amounts to
be distributed to SM&A in connection therewith have been so distributed, the
Escrow Agent shall distribute any portion of the remaining Escrow Shares/Escrow
Funds withheld in respect of such claim to the Shareholders based on their
relative percentage interest in such Escrow Shares and/or Escrow Funds. Upon the
resolution of all outstanding indemnification claims hereunder, the Escrow Agent
shall distribute the remaining amount, if any, of the Escrow Shares/Escrow Funds
to the Shareholders based on their relative percentage interest in such Escrow
Share and/or Escrow Funds and this Agreement shall terminate. SM&A shall not be
required to issue certificates for fractional shares in any distribution of
Escrow Shares pursuant to this Agreement, but rather shall pay to the Escrow
Agent for distribution to the Shareholders an amount in cash (without interest)
determined by multiplying each Stockholder's fractional interest by the Average
Closing Price for the Base Period. The Escrow Agent shall effect such
distributions of Escrow Shares as it is required to make to the Shareholders
under this Agreement by surrendering such Escrow Shares to UST for cancellation
upon receipt by the Escrow Agent of a copy of a letter from SM&A to UST,
instructing such transfer agent to issue such shares to the Shareholders based
upon their relative interests therein. The combination of Escrow Shares and
Escrow Funds to be withheld under this Section 5.2 as Set Aside
-5-
<PAGE> 6
Amounts or pursuant to a Notice of Claim (for which no set aside amount has been
established) shall be determined in accordance with Section 4.1.
6. The Escrow Agent.
6.1 Notwithstanding anything herein to the contrary, the Escrow Agent
shall promptly dispose of all or any part of the Escrow Shares/Escrow Funds as
directed by a writing jointly signed by the DSA Representative and SM&A. The
reasonable fees and expenses of the Escrow Agent (as set forth on the fee
schedule attached hereto as Schedule 3) in connection with its performance of
this Agreement shall be borne by SM&A. The Escrow Agent shall not be liable for
any act or omission to act under this Agreement, including any and all claims
made against the Escrow Agent as a result of its holding the Escrow
Shares/Escrow Funds in its own name, except for its own gross negligence or
willful misconduct. The Escrow Agent shall not be liable for, and the
Shareholders (only to the extent of their proportionate share of the Escrow
Shares/Escrow Funds) and SM&A shall jointly and severally indemnify the Escrow
Agent against, any losses or claims (including reasonable out-of-pocket
expenses) arising out of, any action taken or omitted in good faith hereunder or
upon the advice of counsel. The Escrow Agent may decline to act and shall not be
liable for failure to act if in doubt as to its duties under this Agreement. The
Escrow Agent may act upon any instrument or signature believed by it to be
genuine and may assume that any person purporting to give any notice or
instruction hereunder, reasonably believed by it to be authorized, has been duly
authorized to do so. The Escrow Agent's duties shall be determined only with
reference to this Agreement and applicable laws, and the Escrow Agent is not
charged with knowledge of or any duties or responsibilities in connection with
any other document or agreement, including, but not limited to, the Merger
Agreement.
6.2 The Escrow Agent shall have the right at any time to resign
hereunder by giving written notice of its resignation to the parties hereto, at
the addresses set forth herein or at such other address as the parties shall
provide, at least 30 days prior to the date specified for such resignation to
take effect. In such event SM&A and the DSA Representative shall by agreement
appoint a successor escrow agent within said 30 days; if SM&A and the DSA
Representative do not agree upon the selection of a successor escrow agent
within such period, the Escrow Agent may appoint a successor escrow agent. Upon
the effective date of such resignation, the Escrow Shares and the Escrow Funds,
together with all other property then held by the Escrow Agent hereunder, shall
be delivered by it to such successor escrow agent or as otherwise shall be
designated in writing by SM&A and the DSA Representative.
6.3 In the event that the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto, the
Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction and
-6-
<PAGE> 7
request that such court determine the respective rights of such parties with
respect to this Agreement and, upon doing so, the Escrow Agent shall be released
from any obligations or liability to either party as a consequence of any such
claims or demands. The reasonable fees and costs incurred by the Escrow Agent in
interpleading said parties shall be borne equally by SM&A and the Shareholders
as a group.
6.4 The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys. The Escrow Agent shall not be responsible for and shall
not be under a duty to examine, inquire into or pass upon the validity, binding
effect, execution or sufficiency of this Agreement or of any amendment or
supplement hereto.
7. DSA Representative.
7.1 The DSA Representative accepts and agrees to discharge diligently
the duties and responsibilities of the DSA Representative set forth in this
Agreement. SM&A and the Escrow Agent shall be entitled to rely upon the
authorization and designation of the DSA Representative under this Section 7.
7.2 The DSA Representative is authorized to take any action it deems
appropriate or necessary to carry out the provisions of, and to determine the
rights of the Shareholders under, this Agreement, including without limitation,
taking any action required or permitted under this Agreement to protect or
enforce the Shareholders' rights to the Escrow Shares/Escrow Funds. The DSA
Representative's authority includes but is not limited to:
(a) instructing the Escrow Agent to vote the Escrow Shares
pursuant to Section 1 hereof;
(b) receiving all notices or other documents given or to be given
pursuant to this Agreement or in connection with the transactions
contemplated hereby;
(c) engaging special counsel, accountants, investment banks or
other advisors;
(d) prosecuting and settling any dispute in connection with this
Agreement, including without limitation the resolution of any disputes
related to disbursements of the Escrow Shares/Escrow Funds; and
(e) paying all expenses incurred in connection with this
Agreement and the transactions contemplated hereby out of the Escrow
Shares/Escrow Funds pursuant to Sections 7.5 and 7.8 below.
7.3 In the event of the death, resignation, discharge or incapacity of
the DSA Representative, Shareholders holding a
-7-
<PAGE> 8
majority of the Escrow Shares/Escrow Funds shall appoint a successor DSA
Representative. Such successor DSA Representative shall be appointed by an
instrument in writing signed by the requisite Shareholders, and such appointment
shall become effective as to any such successor DSA Representative when such
instrument shall have been delivered to such person, and that person has
consented to such appointment.
7.4 The DSA Representative shall keep the Shareholders reasonably
informed of his decisions of a material nature.
7.5 The reasonable expenses (including the reasonable fees and
disbursements of counsel, accountants and advisors in connection with the
arbitration of a disputed claim or otherwise) incurred by the DSA Representative
in connection with his duties hereunder shall be paid for out of the Escrow
Shares/Escrow Funds by the Escrow Agent as provided in Section 7.8 below and in
an amount not to exceed $100,000. The DSA Representative shall keep adequate and
reasonable books and records of his expenses. Such payment shall not affect the
rights of either SM&A or the Shareholders under the Merger Agreement or Section
11 of this Agreement.
7.6 The DSA Representative shall diligently discharge his duties and
responsibilities under this Agreement. The DSA Representative shall not be
liable to the parties hereto or any Shareholder for any action taken or omitted
by the DSA Representative in good faith, or for any mistake of fact or law,
unless caused by his own gross negligence or willful misconduct. In no event
shall the DSA Representative be responsible or liable for special, indirect or
consequential loss or damages of any kind, regardless of the form of the action.
7.7 The DSA Representative shall be entitled to treat as genuine any
letter or other document furnished to him by SM&A or the Escrow Agent and
reasonably believed by him to be genuine and have been signed and presented by
the proper party or parties.
7.8 The DSA Representative shall not be entitled to any compensation for
services hereunder. To the extent the DSA Representative shall incur
out-of-pocket costs (including the reasonable fees and disbursements of counsel,
accountants and advisors in connection with the arbitration of a disputed claim
or otherwise) in the performance of his duties hereunder, the DSA Representative
shall be authorized to direct the Escrow Agent to reimburse the DSA
Representative for such reasonable expenses out of the Escrow Shares/Escrow
Funds in an amount not to exceed $100,000. The combination of Escrow Shares and
Escrow Funds paid to the DSA Representative hereunder shall be determined in
accordance with Section 3.1 hereof.
7.9 SM&A shall be entitled to treat as genuine any letter or other
document furnished to it by the DSA Representative or the Escrow Agent and
reasonably believed by it to be genuine and have been signed and presented by
the proper party or parties.
-8-
<PAGE> 9
8. Governing Law.
This Agreement is governed by the laws of the State of California
without regard to its conflict of laws provisions, and shall inure to the
benefit of and be binding upon the successors, assigns, heirs and personal
representatives of the parties hereto. Service of process in any proceeding
arising under this Agreement (including service of process for the institution
of such proceeding) may be made by certified mail, return receipt requested,
directed to the respective party in accordance with Section 10 below.
9. Counterparts.
This Agreement may be executed in one or more counterparts, all of which
documents shall be considered one and the same document.
10. Notices.
Any notice or other communication required or permitted hereunder shall
be in writing and shall be deemed given when so delivered in person, by
overnight courier, by facsimile transmission (with receipt confirmed by
telephone or by automatic transmission report) or two business days after being
sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
To SM&A: Steven Myers & Associates, Inc.
4695 MacArthur Boulevard,
Eighth Floor
Newport Beach, California 92660
Attention: Chief Operating Officer
Telephone: 714-975-1550
Fax: 714-975-1624
With a copy to: Rutan & Tucker, LLP
611 Anton Boulevard, 14th Floor
Costa Mesa, California 92626
Attn: Thomas J. Crane, Esq.
Telephone: 714-641-5100
Fax: 714-546-9035
To DSA Representative: Mr. Guy A. Ackerson
1110 N. Glebe Road
Arlington, Virginia 22201
Telephone: (703) 243-2500
Fax: (703) 875-9231
-9-
<PAGE> 10
With a copy to: Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037-1128
Attn: Barbara M. Rossotti, Esq.
Telephone: 202-663-8066
Fax: 202-663-8007
To Escrow Agent: First American Trust Company
2161 San Joaquin Hills Road
Newport Beach, California 92660
Attn: Elizabeth A. Markworth
Telephone: (949) 719-4532
Fax: (714) 667-1613
Addresses may be changed by written notice given pursuant to this section. Any
notice given hereunder may be given on behalf of any party by his counsel or
other authorized representative.
11. Attorney's Fees.
In the event of any litigation among the parties hereto (including,
without limitation, any arbitration proceeding described in Section 4.2 above),
the prevailing party in such litigation or proceeding shall be entitled to
recover all costs incurred in connection therewith, including, without
limitation, reasonable attorneys fees, provided that the costs of any
arbitration proceeding shall be allocated in the manner set forth in Section
4.2.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first stated above.
SM&A: STEVEN MYERS & ASSOCIATES, INC.,
a California corporation
By: /s/ KENNETH W. COLBAUGH
-------------------------------
Kenneth Colbaugh,
Chief Operating Officer
DSA: DECISION-SCIENCE APPLICATIONS, INC.
a Virginia corporation
By: /s/ GUY A. ACKERSON
--------------------------------
Guy A. Ackerson, President
ESCROW AGENT: FIRST AMERICAN TRUST COMPANY
By:________________________________
Its:____________________________
By:________________________________
Its:____________________________
DSA REPRESENTATIVE: ___________________________________
SHAREHOLDERS: /s/ GUY A. ACKERSON
------------------------------------
Guy A. Ackerson, as attorney-in-
fact for the Shareholders identified
on Schedule 4 hereto
-11-
<PAGE> 12
SCHEDULE 1
Shareholders
MALONEY, P.
MORIN, T.
MCCALLISTER
BENT, N.
ELLIS, R.
WILLIAMS, S.
BURNS, P.
LEONG, W.
HODGES, D.
PARK, S.
SMITH, J.
REECE, K.
BASCOM, H.
EVANS, J.
FELDSTEIN, T.
CROGHAN, D.
PETTIT, R.
GULICK, M.
DANFORTH, L.
NEVILLS, W.
CARLISLE, R.
TOTTEN, A.
GREEN, Chris
ASBERY, J.
HAMLETT, C.
RICHMAN, S.
CAPPELANO, P.
MEGARGEE, M.
FITCH, S.
KIERNAN, J.
KELLEY, S.
MCGRATH, T.
ALONZO, M.
NEES, R.
WARNER, C.
GREEN, Chery
FELDSTEIN, D.
ACKERSON, G.
LUCAS, G.
TOMLINSON, P.
KELLOGG, D.A.
FUCILLO, J.
KUROWSKI, W.
LAZARUS, E.
KELLER, K.
ACKERSON, K.
LAUSTEN, L.
MCNEECE, J.
RAUSCHER, D.
EISERMAN, G.
WAGNER, J.
KRUPP, J.
SCESNEY, P.
GORMAN, G.
CLANCY, J.
CLARKE, L.
RAUSCH, A.
HURLBURT, D.
SHAYDA, P.
ANDERES, J.
REAVILL, S.
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<PAGE> 13
SCHEDULE 2
Escrow Interests
Interest In
Stockholder Escrow Shares
MALONEY, P. 0.0150761
MORIN, T. 0.0145151
MCCALLISTER 0.1452759
BENT, N. 0.0132855
ELLIS, R. 0.0118502
WILLIAMS, S. 0.0115928
BURNS, P. 0.0111423
LEONG, W. 0.0103841
HODGES, D. 0.0103506
PARK, S. 0.0103254
SMITH, J. 0.0099756
REECE, K. 0.0099309
BASCOM, H. 0.0098805
EVANS, J. 0.0096777
FELDSTEIN, T. 0.0091489
CROGHAN, D. 0.0042527
PETTIT, R. 0.0080689
GULICK, M. 0.0079374
DANFORTH, L. 0.0076674
NEVILLS, W. 0.0075933
CARLISLE, R. 0.0075234
TOTTEN, A. 0.007175
GREEN, Chris 0.0070631
ASBERY, J. 0.0069204
HAMLETT, C. 0.0065413
RICHMAN, S. 0.0060727
CAPPELANO, P. 0.0060643
MEGARGEE, M. 0.0060307
FITCH, S. 0.0056866
KIERNAN, J. 0.0056418
KELLEY, S. 0.0054222
MCGRATH, T. 0.0050249
ALONZO, M. 0.0047269
NEES, R. 0.0049717
WARNER, C. 0.0049633
GREEN, Chery 0.0065511
FELDSTEIN, D. 0.0063343
ACKERSON, G. 0.1440404
LUCAS, G. 0.0742571
TOMLINSON, P. 0.0545464
KELLOGG, D.A. 0.040665
FUCILLO, J. 0.0301326
KUROWSKI, W. 0.0298472
LAZARUS, E. 0.0271893
KELLER, K. 0.0265626
ACKERSON, K. 0.0250741
LAUSTEN, L. 0.0242404
MCNEECE, J. 0.0228694
RAUSCHER, D. 0.0223644
EISERMAN, G. 0.0209753
WAGNER, J. 0.0209277
KRUPP, J. 0.0206591
SCESNEY, P. 0.0205192
GORMAN, G. 0.020336
CLANCY, J. 0.0152467
CLARKE, L. 0.0142857
RAUSCH, A. 0.0103506
HURLBURT, D. 0.0094804
SHAYDA, P. 0.0087684
ANDERES, J. 0.0061412
REAVILL, S. 0.0008757
1
-13-
<PAGE> 14
SCHEDULE 3
Escrow Agent Fees
-14-
<PAGE> 15
SCHEDULE 4
Shareholders For Whom GUY A. ACKERSON is Attorney-In-Fact
MALONEY, P.
MORIN, T.
MCCALLISTER
BENT, N.
ELLIS, R.
WILLIAMS, S.
BURNS, P.
LEONG, W.
HODGES, D.
PARK, S.
SMITH, J.
REECE, K.
BASCOM, H.
EVANS, J.
FELDSTEIN, T.
CROGHAN, D.
PETTIT, R.
GULICK, M.
DANFORTH, L.
NEVILLS, W.
CARLISLE, R.
TOTTEN, A.
GREEN, Chris
ASBERY, J.
HAMLETT, C.
RICHMAN, S.
CAPPELANO, P.
MEGARGEE, M.
FITCH, S.
KIERNAN, J.
KELLEY, S.
MCGRATH, T.
ALONZO, M.
NEES, R.
WARNER, C.
GREEN, Chery
FELDSTEIN, D.
ACKERSON, G.
LUCAS, G.
TOMLINSON, P.
KELLOGG, D.A.
FUCILLO, J.
KUROWSKI, W.
LAZARUS, E.
KELLER, K.
ACKERSON, K.
LAUSTEN, L.
MCNEECE, J.
RAUSCHER, D.
EISERMAN, G.
WAGNER, J.
KRUPP, J.
SCESNEY, P.
GORMAN, G.
CLANCY, J.
CLARKE, L.
RAUSCH, A.
HURLBURT, D.
SHAYDA, P.
ANDERES, J.
REAVILL, S.
-15-
<PAGE> 1
EXHIBIT 99.1
[STEVEN MYERS & ASSOCIATES LETTERHEAD]
NEWS RELEASE
Contact: Ron Hunn
Steven Myers & Associates
(949) 975-1550
SM&A SIGNS DEFINITIVE AGREEMENT TO ACQUIRE DECISION-SCIENCE
APPLICATIONS, INC.
NEWPORT BEACH, Calif., July 22, 1998 -- Steven Myers & Associates (NASDAQ: WINS)
announced today that it has executed a merger agreement to acquire
Decision-Science Applications, Inc. (DSA) for $30.9 million in a stock for stock
and cash exchange merger.
DSA, founded in 1977, is expected to generate sales of approximately $42 million
in calendar year 1998. The sale, which is contingent on verification of certain
representations and warranties and DSA shareholder approval, is expected to be
concluded on or about mid August. DSA's corporate headquarters are in Arlington,
VA, and has other major operations in Colorado Springs, CO, San Antonio, TX, and
Rome, NY.
"The addition of more than 230 exceptional scientists, systems engineering and
information technology experts of DSA provides the resources necessary to fuel
our growing technical services business. Further, DSA brings to SM&A new clients
that will ultimately provide additional expansion opportunities in our proposal
management and consulting services," said Steve Myers, chairman and chief
executive officer of SM&A.
Add Steve Myers: "The combination of DSA with our recent acquisition of Space
Applications Corporation provides exceptional technical and management strength
to our rapidly growing high-end contract support services. SM&A's total head
count, with DSA, is now approaching 650 highly talented and well educated
employees versus entering 1998 at 160 employees."
SM&A is the largest proposal management company in the United States. SM&A also
provides systems engineering, program integration and information technology
services to aerospace, communications and engineering companies.
Statements herein concerning the company's growth and strategies may include
forward-looking statements, and the company's actual results may differ
materially from those suggested as a result of various factors, including,
without limitation, the company's ability to recruit and retain qualified
technical personnel; identify, acquire and integrate suitable acquisition
candidates; obtain sufficient working capital to support such growth; and
compete successfully with existing and future competitors. Interested parties
should refer to the disclosures set forth under the caption "Risk Factors" and
elsewhere in the company's prospectus dated Jan. 28, 1998, for additional
information regarding risks affecting the company's financial condition and
results of operations.
www.smawins.com SOURCE Steven Myers & Associates
<PAGE> 1
EXHIBIT 99.2
[STEVEN MYERS & ASSOCIATES, INC. LETTERHEAD]
NEWS
RELEASE
Contact: Ron Hunn
SM&A Corporation
(949) 975-1550
For Immediate Release
SM&A CORPORATION SUCCESSFULLY CLOSES ACQUISITION OF DECISION-SCIENCE
APPLICATIONS, INC.
NEWPORT BEACH, Calif., August 20, 1998 -- SM&A Corporation (NASDAQ:
WINS) announced today that it has completed its acquisition Decision-Science
Applications, Inc. (DSA) for $30.9 million in a stock for stock and cash
exchange merger.
DSA, founded in 1977, is expected to generate sales of approximately $42 million
in calendar year 1998. DSA's corporate headquarters are in Arlington, VA, and
has other major operations in Colorado Springs, CO, San Antonio, TX, and Rome,
NY.
"We are delighted to have completed our second acquisition within the last four
months. The addition of more than 230 exceptional scientists, systems
engineering and information technology experts of DSA provides the resources
necessary to fuel our growing technical services business. Further, DSA brings
to SM&A new clients that will ultimately provide additional expansion
opportunities in our proposal management and consulting services," said Steve
Myers, chairman and chief executive officer of SM&A.
Added Steve Myers. "The combination of DSA with our recent acquisition of Space
Applications Corporation provides exceptional technical and management strength
to our rapidly growing high-end contract support services. SM&A's total
headcount, with DSA, is now approaching 650 highly talented and well educated
employees versus entering 1998 at 160 employees."
SM&A is the largest proposal management company in the United States. SM&A also
provides systems engineering, program integration and information technology
services to aerospace, communications, and engineering companies.
<PAGE> 2
Statements herein concerning the company's growth and strategies may include
forward-looking statements, and the company's actual results may differ
materially from those suggested as a result of various factors, including,
without limitation, the company's ability to recruit and retain qualified
technical personnel; identify, acquire, and integrate suitable acquisition
candidates; obtain sufficient working capital to support such growth; and
compete successfully with existing and future competitors. Interested parties
should refer to the disclosures set forth under the caption "Risk Factors" and
elsewhere in the company's prospectus dated Jan. 28, 1998, for additional
information regarding risks affecting the company's financial condition and
results of operations.
