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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) May 29, 1998
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STEVEN MYERS & ASSOCIATES, INC.
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(Exact name of registrant a specified in its Charter)
California 0-23585 33-0080929
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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 (714) 975-1550
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Not Applicable
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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 May 29, 1998, Steven Myers & Associates, Inc. ("SM&A") acquired Space
Applications Corporation ("SAC"), a California corporation, in a
reverse-triangular merger (the "Acquisition"). The Acquisition was achieved
pursuant to an Agreement and Plan of Reorganization and Merger (the "Merger
Agreement"), dated May 18, 1998, by and among SM&A, SAC, SAC Acquisition, Inc.
("Sub"), a California corporation, a wholly-owned subsidiary of SM&A, and Roger
H. Skinner, an individual. Pursuant to the Merger Agreement, Sub was merged with
and into SAC, with SAC surviving as a wholly-owned subsidiary of SM&A. In
connection with the Acquisition, the shareholders of SAC received an aggregate
of 819,743 shares of SM&A Common stock on a pro rata basis as set forth in the
Merger Agreement. In determining the aggregate purchase price for SAC, SM&A took
into account the value of companies of similar industry and size to SAC,
comparable transactions, and the market for such companies generally.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of SAC. Financial statements of SAC 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 filing 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 filing of this Current Report on Form
8-K.
(c) Exhibits.
2 Agreement and Plan of Reorganization and Merger, dated May
18, 1998, by and among Steven Myers & Associates, Inc., Space
Application Corporation, and Roger H. Skinner, and certain
exhibits.
99.1 Text of Press Release dated May 18, 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: May 29, 1998 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 Agreement and Plan of Reorganization and Merger, dated May 18, 1998, by
and among Steven Myers & Associates, Inc., SAC Acquisition, Inc., Space
Applications Corporation, and Roger H. Skinner, and certain exhibits.
99.1 Text of Press Release dated May 18, 1998.
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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER
among
STEVEN MYERS & ASSOCIATES, INC.,
SAC ACQUISITION, INC.
SPACE APPLICATIONS CORPORATION
and
ROGER H. SKINNER
Dated as of May 18, 1998
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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 18th day of May, 1998, among STEVEN MYERS & ASSOCIATES, INC.,
a California corporation ("SM&A"); SPACE APPLICATIONS CORPORATION, a California
corporation ("Company"); SAC ACQUISITION, INC., a California corporation
("Newco"); and ROGER H. SKINNER ("Principal Shareholder").
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 this transaction, and is a wholly-owned subsidiary of
SM&A; and
WHEREAS, the Principal Shareholder is the record owner of 134,500 shares
of common stock of the Company; and
WHEREAS, the Company owns a majority of the issued and outstanding
capital stock of Staminet, Inc., a California 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
"Constituent Corporations") deem it advisable and in the best interests of each
of the Constituent Corporations and their respective shareholders that Newco
merge with and into the Company (the "Merger") pursuant to the applicable
provisions of the laws of the State of California (the "Corporate Statute"), and
on the terms and subject to the conditions set forth in this Agreement and the
Agreement of Merger attached hereto as Exhibit A-1; 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 and the Agreement of Merger, and pursuant to the
Corporate Statute, at the Effective Time (as defined in Section 1.2 below),
Newco shall be merged with and into the Company (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 SM&A in accordance with Article 2 below, all outstanding shares of the
capital stock of Newco shall be converted into and become a right to receive
shares of the capital stock of the Surviving Corporation in accordance with
Article 2 below, and the separate existence of Newco shall cease.
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 in substantially the
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form attached hereto as Exhibit A-1, which shall be filed with the Secretary of
State of the State of California on the Closing Date or as soon thereafter as
practicable. The Merger shall become effective at the time the Agreement of
Merger is duly filed with the Secretary of State of California (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 the Company shall be
Amended and Restated to read as set forth in Exhibit A-2;
(b) the Bylaws of the Company shall be amended to read as set
forth on Exhibit A-3;
(c) the Board of Directors of the Surviving Corporation at and
as of the Effective Time shall consist of Kenneth Colbaugh. The director
of the Surviving Corporation shall hold office subject to the Corporate
Statute and the provisions of the Articles of Incorporation and Bylaws
of the Surviving Corporation; and
(d) the officers of the Surviving Corporation shall be as
follows: President - Kenneth W. Colbaugh; Chief Financial Officer and
Secretary - Steven R. Mast.
1.4 Effect of Merger. The Merger shall have the effects set forth in
this Agreement, the Agreement of Merger and the Corporate Statute. Except as
specifically set forth to the contrary in the Corporate Statute, the Agreement
of Merger or in this Agreement, the identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities of the Company shall
continue unaffected and unimpaired by the Merger and the corporate franchises,
existence and rights of Newco shall be merged into the Company, and the Company,
as the Surviving Corporation, shall be fully vested therewith; at the Effective
Time, the separate existence of Newco 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 the Company and Newco 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, 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
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Corporation.
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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. To the best of its knowledge, the Company believes that (a)
the fair market value of the SM&A Stock and other consideration received by each
Company shareholder from SM&A in respect of the Merger is approximately equal to
the fair market value of the Company Stock surrendered in the exchange, and (b)
that the fair market value of the assets of the Company after the Effective Time
will equal or exceed the sum of the liabilities to which the transferred assets
are subject.
2. CONVERSION AND EXCHANGE OF STOCK.
2.1 Definitions. For purposes of this Agreement the following
definitions shall apply:
(a) "Average Closing Price for the Base Period" means the
average of the closing prices of SM&A Stock (defined below) on the
NASDAQ National Market or such other national stock exchange on which
SM&A Stock is listed, for the twenty (20) trading days immediately
preceding the date of this Agreement.
(b) "Average Closing Price for the Protection Period" means
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 the twenty (20) trading days immediately preceding the
Liquidation Date.
(c) "Ceiling Price" means the Average Closing Price for the
Base Period plus $4.00.
(d) "Company Options" mean all options and warrants, whether
vested or not, to purchase Company Stock.
(e) "Company Stock" means the common stock, $1.00 par value
per share, of the Company.
(f) "Exchange Ratio" is equal to (i) the Merger Consideration
(as defined below) divided by (ii) the total number of shares of Company
Stock outstanding immediately prior to the Effective Time.
(g) "Floor Price" means the Average Closing Price for the Base
Period less $4.00.
(h) "Liquidation Date" means with respect to each such share
of SM&A Stock issued in the Merger ("Merger Share" or collectively
"Merger Shares") the earlier
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of (i) one year following the effective date or (ii) the effective date
of a registration statement under the Securities Act in which the such
Merger Share was permitted to be included (whether or not so included).
(i) "Purchase Price Adjustment Amount" shall mean the
aggregate amount of any legal or accounting fees of the Company or the
Subsidiary paid or payable in respect of
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the Merger in excess of $100,000.
(j) "SM&A Option Shares" means shares of SM&A Stock issuable
upon the exercise of an SM&A Option.
(k) "SM&A Stock" means the common stock, no par value of SM&A.
2.2 Aggregate Merger Consideration. The aggregate number of shares of
SM&A Stock to be issued in connection with the Merger ("Merger Consideration")
shall be equal to: (i) $14,700,000 less the Purchase Price Adjustment Amount,
divided by (ii) the Average Closing Price for the Base Period.
2.3 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 Company Stock:
(a) each share of Company Stock outstanding immediately prior
to the Effective Time, other than (i) Dissenting Shares and (ii) shares
held by a subsidiary of the Company, shall automatically be converted
into and become a right to receive that number of shares of SM&A Stock
equal to the Exchange Ratio;
(b) all shares of Company Stock held at the Effective Time by
a subsidiary of the Company shall be cancelled and no payment shall be
made with respect thereto; and
(c) all Dissenting Shares shall be treated in accordance with
Section 2.6 below.
2.4 Conversion of Capital Stock of Newco. Each share of capital stock
of Newco issued and outstanding as of the Effective Time shall be converted into
one thousand (1,000) shares of common stock of the Surviving Corporation as a
result of the Merger.
2.5 Options. Each Company Option outstanding immediately prior to the
Effective Time shall be converted into an option to purchase SM&A Stock ("SM&A
Option") in an amount and at an exercise price determined as provided below:
(a) The number of shares of SM&A Stock subject to the SM&A
Option shall be equal to the product of (i) the number of shares of
Company Stock subject to the Company Option and (ii) the Exchange Ratio;
provided that any fractional shares of SM&A Stock resulting from such
multiplication shall be rounded to the nearest whole share.
(b) The exercise price per share of SM&A Stock under the SM&A
Option shall be equal to (i) the exercise price per share under the
Company Option divided by (ii) the Exchange Ratio; provided that such
exercise price shall be rounded to the nearest cent.
(c) The number of shares subject to the SM&A Option shall be
adjusted in the
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manner set forth in Section 2.10.
The duration, schedule of vesting and other terms of the SM&A Option shall be
substantially the same as the Company Option exchanged therefor; provided,
however, that the SM&A Options shall not be exercisable until the expiration of
one year after the Effective Time.
2.6 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 1300,
et seq. of the California Corporations Code (the "Dissenters Law") shall
not be converted into SM&A Stock. A shareholder who has properly
exercised such dissenters' rights shall no longer retain any rights of a
shareholder of the Company or the Surviving Corporation, except those
provided under the California Corporations Code.
(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.
2.7 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 a holder for conversion of all of such holder's
Company Stock pursuant to Section 2.3 includes a fractional share, such
fractional share shall be rounded to the nearest whole number.
2.8 Escrow of Shares. At the Effective Time, SM&A shall deposit 10%
of the shares of SM&A Stock otherwise issuable to the holders of Company Stock
pursuant to Section 2.3(a) (the "Escrow Shares"), in an escrow for a period of
two (2) years as the source of payment for the indemnification obligations of
the Company's shareholders pursuant to Article 9 below. The Escrow Shares shall
be held and disbursed pursuant to the terms of this Agreement and an escrow
agreement in a form mutually satisfactory to the parties (the "Escrow
Agreement"). Escrow Shares shall be deducted pro rata from the SM&A Stock
allocable to each former holder of Company Stock.
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2.9 Exchange of Certificates and Options.
(a) The conversion of the Company Stock into the right to
receive SM&A Stock, as provided for by this Agreement, shall occur
automatically at the Effective Time without further action by the
holders thereof. SM&A shall, as soon as practicable after the Effective
Time, mail to all former holders of record of Company Stock instructions
for surrendering their certificates representing Company Stock in
exchange for a certificate representing SM&A Stock. Following such
surrender, each such holder shall be entitled to receive in exchange
therefore (subject to the escrow deposit required by Section 2.8) a
certificate representing the SM&A Stock into which such shares have been
converted 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 set forth in Article 2
into which such Company Stock has been converted.
(b) The SM&A Stock into which Company Stock shall be converted
in the Merger 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 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 satisfaction of the transfer agent that such tax
has been paid or is not applicable.
(c) Upon the execution of an appropriate exchange agreement by
the holders of the Company Options, such Company Option shall convert
into an SM&A Option on the terms and conditions described in Section 2.5
and the exchange agreement.
2.10 Price Reconciliation. Upon the Liquidation Date, if the Average
Closing Price for the Protection Period is less than the Floor Price, then SM&A
shall issue such additional shares of SM&A Stock per (a) Merger Share and (b)
SM&A Option Share (except for those Merger Shares and SM&A Option Shares, not
subject to the Liquidation Date), valued at the Average Closing Price for the
Protection Period, equal to the difference between the Floor Price and the
Average Closing Price for the Protection Period.
Upon the Liquidation Date, if the Average Closing Price for the
Protection Period is more than the Ceiling Price, then the each shareholder
holding (a) Merger Shares and (b) SM&A Option Shares, then subject to the
Liquidation Date, shall surrender to SM&A for cancellation that number of shares
of SM&A Stock, valued at the Average Closing Price for the Protection Period,
equal to (i) the difference between the Ceiling Price and the Average Closing
Price for the Protection Period, multiplied by (ii) the number of Merger Shares
(or SM&A Option Shares, as the case may be) (except for those Merger Shares and
SM&A Option Shares not subject to the Liquidation Date) held by such
shareholder.
All shares of SM&A Stock issued pursuant to the Merger shall contain an
appropriate
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legend to reference the restrictions imposed by this Section 2.10.
No fractional shares of SM&A Stock shall be issued or surrendered
pursuant to this Section 2.10. All such fractional shares shall be rounded to
the nearest whole share.
The obligations of the parties to issue or cancel shares of SM&A Stock
pursuant to this Section 2.10 shall terminate with respect to each Merger Share
upon the earlier to occur of (i) one (1) year after the Effective Time or (ii)
the Liquidation Date with respect to such Merger Share.
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 7 and 8 have
been satisfied or waived in writing, or (b) May 28, 1998, or at such other
place, time and date as the parties hereto mutually may agree (the "Closing
Date").
3.2 Closing Documents. 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 the
Principal Shareholder and/or the Company to SM&A:
(i) a duly executed copy of this Agreement;
(ii) a duly executed copy of the Escrow Agreement;
(iii) a duly executed copy of the Agreement of Merger;
(iv) a duly executed copy of the Registration Rights
Agreement;
(v) such certificate of the Company and/or the
Principal Shareholder as required by Article 8;
(vi) an opinion of counsel for the Company,
substantially in the form attached hereto as Exhibit B;
(vii) Employment Agreements between the Surviving
Corporation and Roger H. Skinner and Stanley Y.H. Hee,
respectively, substantially in the form attached hereto as
Exhibits C-1 and C-2;
(viii) certificates of Good Standing and Existence of the
Company and its subsidiaries issued by the Secretary of State of
the State of California and for each other jurisdiction where the
Company or its subsidiaries is qualified to do business;
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(ix) a power of attorney duly executed by each
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
to Company and the Principal Shareholder:
(i) a duly executed copy of this Agreement;
(ii) a duly executed copy of the Escrow Agreement;
(iii) a duly executed copy of the Agreement of Merger;
(iv) a duly executed copy of the Registration Rights
Agreement;
(v) opinion of counsel for SM&A substantially in the
form attached hereto as Exhibit D;
(vi) an officer's certificate pursuant to Section 7.1;
and
(vii) such other documents that may be reasonably
requested by the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDER.
The Company and the Principal Shareholder, jointly and severally,
represent and warrant 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 State of California, 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. True and correct copies of the Articles of Incorporation (certified by
the Secretary of State of California) and Bylaws (certified by the Secretary of
the Company), as each is amended, of each of the Company and Subsidiary are
attached to Schedule 4.1-2. The stock records and minute books of the Company
and 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. The Principal Shareholder has for himself, and
each of the
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Company and Subsidiary has for itself, the full legal right, power and authority
to enter into this Agreement. The Company has the full legal right, power and
authority to enter into the Merger and to perform the transactions contemplated
herein. The execution, delivery and performance of this Agreement, the Agreement
of Merger, 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 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 the Company, Subsidiary or the
Principal Shareholder pursuant to, any Contract (as defined in Section 4.16) or
any mortgage, lien, lease, agreement or instrument to which the Principal
Shareholder, the Company or the Subsidiary is a party or by which each the
Company, Subsidiary or the Principal Shareholder is bound, (c) violate or
conflict with any Legal Requirement applicable to the Company, Subsidiary or the
Principal Shareholder or any of its or his properties or assets or any other
material restriction of any kind or character to which it or he 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.
This Agreement has been duly executed and delivered by the Company and the
Principal Shareholder, and at the Closing the Employment Agreements and any
other individual agreements will be duly executed and delivered by the Principal
Shareholder and Stanley Y.H. Hee, and, assuming the due execution and delivery
hereof and thereof by SM&A and Newco respectively, this Agreement constitutes
the legal, valid and binding obligation of the Principal Shareholder and the
Company, enforceable against each of them in accordance with its 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.
4.3 Capital Stock. The authorized capital stock of the Company
consists solely of 1,000,000 shares of voting common stock of which 336,927 are
issued and outstanding. The Company has options outstanding to purchase 72,300
shares of common stock. The name of each of the Company's shareholders and the
amount of capital stock of the Company held by each such Company shareholder is
set forth on Schedule 4.3 attached hereto. The authorized capital stock of
Subsidiary consists solely of 1,000,000 shares of voting common stock of which
450,000 are issued and outstanding and 400,000 of which are owned by the Company
and 50,000 of which are owned by Michael Mathewson. The Company has agreed with
the Subsidiary that the Subsidiary is authorized to issue shares of the
Subsidiary to certain of its employees such that the Company's ownership
interest in the Subsidiary following such issuance will constitute sixty percent
(60%) of the Subsidiary's issued and outstanding common stock. The Company
solely, and without the Principal Shareholder, represents and warrants that all
of the issued and outstanding shares of the capital stock of the Company are
owned by the shareholders free and clear of Encumbrances. All the issued and
outstanding shares of Subsidiary which are owned by the Company are held free
and clear of Encumbrances. The Company Stock and the outstanding capital stock
of 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 Subsidiary, as the case may be, in compliance with all applicable
state and federal securities laws. Neither the Company Stock nor the Subsidiary
capital stock was issued in violation of the preemptive rights of any past or
present shareholder. Each of the Company's and Subsidiary's
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stock record book, as heretofore made available to SM&A, is correct and
complete.
4.4 Transactions in Capital Stock and Spin-offs. Except as set forth
on Schedule 4.4:
Each of the Company and Subsidiary has not acquired any of its capital
stock since December 17, 1997. No right of first refusal, option, warrant, call,
conversion right or commitment of any kind exists with respect to any authorized
but unissued capital stock of each of the Company and Subsidiary. In addition,
there are no (a) outstanding securities or obligations that are convertible into
or exchangeable for any authorized but unissued shares of the capital stock or
other equity securities of each of the Company or Subsidiary, or (b) contracts,
arrangements or commitments, written or otherwise, under which the Company or
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, there is no 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 or 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 authorized but unissued capital
stock or other equity securities of the Company or Subsidiary, and no person has
made or threatened to make, or, to the Company's and the Principal Shareholder's
knowledge, will in the future make, any such claim. In addition, neither the
Company nor 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.
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. Neither the voting stock structure of the Company
or Subsidiary nor the beneficial or record ownership of shares has been altered
or changed in contemplation of the Merger. Between December 17, 1997 and the
Closing Date, there has not been any sale or spin-off of significant assets of
the Company or Subsidiary other than in the ordinary course of business. Without
limiting the generality of the foregoing, between December 17, 1997 and the
Closing Date, there has not been any (a) issuance, sale, repurchase, redemption
or other transfer of or transaction in the Company Stock or Subsidiary capital
stock or (b) any sale or spin-off of significant assets of the Company or
Subsidiary other than in the ordinary course of business.
4.5 No Bonus Shares. Except as set forth on Schedule 4.5, none of the
shares of the Company Stock or Subsidiary capital stock was issued for any
consideration other than cash.
4.6 Subsidiaries. Except for the Subsidiary and 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
Subsidiary is not, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
4.7 Corporate History. Schedule 4.7 sets forth a complete list of the
corporate predecessors of each of the Company and Subsidiary and a list of
entities from which each of the Company and Subsidiary has acquired material
assets in transactions other than in the ordinary course of business. Neither
the Company nor Subsidiary has been a subsidiary or division of
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<PAGE> 14
another corporation (in the case of Subsidiary, other than the Company), and has
not been previously acquired and divested by another corporation.
4.8 SM&A Stock Ownership. Since January 27, 1998, the effective date
of SM&A's registration statement in respect of its initial public offering,
neither the Company, Subsidiary nor the Principal Shareholder has ever owned any
shares of SM&A's Stock.
4.9 Financial Statements. Copies of the following consolidated
financial statements (the "Financial Statements") of the Company are attached
hereto as Schedule 4.9:
(a) The Company's audited consolidated balance sheet as of
June 27, 1997 and for the two (2) prior years, and consolidated
statements of income, cash flows and shareholders' equity for the year
then ended and for the two (2) prior years; and
(b) The Company's unaudited consolidated balance sheet as of
April 30, 1998 (hereinafter referred to as the "Balance Sheet Date") and
consolidated statements of income, for the ten (10) month period then
ended.
Such 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 Subsidiary as of the
dates indicated thereon, on a consolidated basis, and such statements of
earnings, and cash flows and retained earnings present fairly the results of its
operations for the periods indicated thereon.
4.10 Liabilities and Obligations. Except as set forth on Schedule
4.10, each of the Company and Subsidiary has no material 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 specifically disclosed on Schedule
4.16 hereto, but only so long as no default by either the Company or Subsidiary
(as the case may be) exists under any such Contract. For each such liability for
which the amount is not fixed or is contested, the Company shall provide on
Schedule 4.10 a summary description of the liability.
4.11 Approvals. Except as set forth on Schedule 4.11, 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, Subsidiary or the Principal Shareholder
in connection with the execution, delivery or performance of this Agreement.
4.12 Accounts and Notes Receivable. Schedule 4.12 sets forth an
accurate list of the accounts and notes receivable of each of the Company and
Subsidiary as of the Balance Sheet Date, including receivables from and advances
to the Subsidiary and the Company's employees and shareholders, and amounts that
are not reflected in the most recent available balance sheet. 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 4.12, at least 95% of the amount of all accounts receivable, unbilled
invoices and other debts due or
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<PAGE> 15
recorded in the records and books of account of each of the Company and
Subsidiary as being due to either the Company or 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 ninety (90) days after the Closing (or
one hundred twenty (120) days, with respect to receivables, invoices and debts
due from foreign (non-U.S.) payors), net of applicable reserves as recorded on
the Company's or Subsidiary's books on the date hereof. Except as set forth on
Schedule 4.12, 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 Company or Subsidiary (as the case may be) which is consistent with GAAP
applied on a consistent basis.
4.13 Intellectual Property. Each of the Company and 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"), material to the conduct of its business and used or
held for use in connection with its business, without any conflict with the
rights of others. Neither the Company nor Subsidiary has received any notice
from any other person pertaining to or challenging the right of the Company or
Subsidiary to use any Intellectual Property or Technology owned or used by or
licensed to the Company or Subsidiary. Neither the Company nor Subsidiary has
granted any outstanding licenses or other rights, and has no obligation to grant
any licenses or other rights, under, and the Principal Shareholder and employees
of each of the Company and Subsidiary have no rights in or to, any of the
Intellectual Property or Technology owned or used by or licensed to the Company
or Subsidiary. Except as set forth on Schedule 4.13, no claims have been made by
each of the Company and Subsidiary of any violation or infringement by others of
the rights of the Company or Subsidiary with respect to any Intellectual
Property or Technology of the Company or Subsidiary, and neither the Principal
Shareholder nor the Company knows of any basis for the making of any such claim.
To the best of the Principal Shareholder's Knowledge, neither the Company nor
any of its employees or shareholders has violated or infringed any Intellectual
Property or Technology rights of others.
The Company has delivered to SM&A on Schedule 4.13 a complete and
correct list and summary description of all Intellectual Property and Technology
material to the conduct of the business and owned by, used by or licensed by
each of the Company and Subsidiary.
4.14 Permits. Each of the Company and Subsidiary owns or possesses all
franchises, licenses, permits, consents, approvals and authorizations
(collectively herein referred to as "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 the Company and Subsidiary is in compliance in all material respects with all
of its obligations with respect thereto, and no event has occurred which
permits, or upon giving the notice or lapse of time or otherwise would permit,
revocation or termination of any of the foregoing.
The Company has delivered to SM&A on Schedule 4.14 a complete and
correct list and summary description of all Permits necessary to the conduct of
the business of the Company and Subsidiary except for general business licenses
in the municipalities in which it does business.
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<PAGE> 16
4.15 Real and Personal Property.
(a) Schedule 4.15(a) contains an accurate list of all
leaseholds and other interests of every kind and description in real
property owned by each of the Company and Subsidiary and leases or
licenses or other rights to possession thereof. Neither the Company nor
Subsidiary owns, nor has it ever owned, any real property.
(b) Schedule 4.15(b) contains an accurate list of all items of
tangible personal property of every kind or description owned or held by
each of the Company and Subsidiary and which is capitalized by the
Company and Subsidiary, and the 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 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) Except as set forth on Schedule 4.15(c), each of the
Company and 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 Principal Shareholder's Knowledge,
binding upon the parties (and their successors) thereto in accordance
with their respective terms), all assets and properties (including,
without limitation, real and personal property and all other assets
reflected on the balance sheet and all Intellectual Property and
Technology) necessary to the conduct of the business of each of the
Company and Subsidiary as presently conducted, in each case free and
clear of all Encumbrances.
4.16 Material Contracts and Commitments. Schedule 4.16 sets forth a
summary description, 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
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;
(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 Subsidiary by any other person or of any
other person by the Company or Subsidiary (other than as contemplated by
this Agreement);
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<PAGE> 17
(f) contracts upon which the Company or Subsidiary is
substantially dependent or which are otherwise material to the Company
or Subsidiary;
(g) agreements that limit or restrict the ability of the
Company or Subsidiary to compete or otherwise to conduct their business
in any manner or place, or that contain covenants of any other person
not to compete with the Company or Subsidiary;
(h) any agreement with any holder of securities of the Company
or 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 or documents that grant a power of attorney,
agency or similar authority to another person or entity;
(j) agreements with any labor union or association
representing any employee of the Company or Subsidiary;
(k) agreements with or for the benefit of any affiliates,
shareholders, employees, consultants, officers or directors of the
Company or Subsidiary providing for compensation or benefits
individually in excess of $60,000 annually;
(l) agreements that require the Company or 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;
(m) agreements not made in the ordinary course of business;
and
(n) any other agreements, whether or not made in the ordinary
course of business, that are material to the Company or 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 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 Principal Shareholder'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. To the best of
the Company's and the Principal Shareholder's knowledge, each of the Company and
Subsidiary is not a party to any contract, agreement or other instrument or
commitment which, singly or in the aggregate, materially and adversely affects
or is likely to materially and adversely affect, the business, operations,
properties, assets or condition (financial or otherwise) of the Company or
Subsidiary.
4.17 Insurance. Schedule 4.17-1 sets forth an accurate list of all
insurance policies carried by each of the Company and Subsidiary, and the
Company has delivered to SM&A on Schedule 4.17-2 an accurate list of all
insurance loss runs or worker's compensation claims received for the past three
(3) policy years. Also attached to Schedule 4.17-1 is a summary of
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<PAGE> 18
such policies currently in effect. The insurance carried by each of the Company
and Subsidiary with respect to its properties, assets and business of each of
the Company and Subsidiary is with financially responsible insurance companies.
Such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date. Each of the Company's and
Subsidiary's insurance has never been canceled and each of the Company and
Subsidiary has never been denied coverage.
4.18 Employees, Consultants, Etc.
(a) Schedule 4.18(a) sets forth (i) an accurate and complete
list of (A) all officers and directors of each of the Company and
Subsidiary, (B) all employees and (C) all material consultants currently
performing services for the Company or Subsidiary, and (ii) a list of
all independent contractors and other agents currently performing
services for each of the Company and Subsidiary accurate and complete in
all material respects, 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 4.18(b) also sets forth a schedule, accurate and
complete, showing all employment agreements and any other agreements to
which each of the Company and 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 Subsidiary and (ii) deferred compensation; together in each
case with such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby.
(c) Each of the Company and Subsidiary has complied in all
material respects with the verification requirements and the record
keeping requirements of the Immigration Reform and Control Act of 1986
("IRCA"); to the best of the Principal Shareholder's Knowledge, the
information and documents on which each of the Company and Subsidiary
relied in complying with IRCA are true and correct; and there have not
been any discrimination complaints filed against the Company or
Subsidiary pursuant to IRCA.
(d) No employees of the Company or Subsidiary are represented
by any labor union or covered by any collective bargaining agreement
nor, to the best of the Principal Shareholder's Knowledge, is any
campaign to establish such representation in progress.
(e) To the knowledge of the Principal Shareholder after due
inquiry, neither the Company nor Subsidiary has received or been
notified of any complaint by any employees, applicant, union, or other
party of any discrimination or other conduct forbidden by law.
(f) Each of the Company and Subsidiary has filed all required
reports and information that are due prior to the Closing Date and
otherwise has complied in all material respects with all applicable
regulatory requirements within the jurisdiction of the United States
Equal Employment Opportunity Commission, United States Department of
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<PAGE> 19
Labor and state and local human rights and/or civil rights agencies.
(g) Neither the Company nor Subsidiary has received nor been
notified 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) Except as set forth on Schedule 4.18(h), each employee,
officer and director of each of the Company and Subsidiary has executed
a confidentiality agreement and all of the employees, officers and
directors (not including non-employee directors) of each of the Company
and Subsidiary have executed a proprietary information and inventions
agreement. Copies of such agreements have been provided to counsel to
SM&A and Newco. Neither the Company nor Subsidiary is aware that any of
such persons is in violation thereof.
4.19 Benefit Plans; ERISA Compliance.
(a) Schedule 4.19 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 4.19 as "Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) (sometimes referred to in this
Section 4.19 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 Subsidiary for
the benefit of any present or former officer, employee or director of
each of the Company and 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, dependant 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 Subsidiary for the benefit of any present or former officer,
employee or director of each of the Company or Subsidiary which is not a
Pension Plan or Welfare Plan. Each of the Company and 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 the costs of the amended plan), (ii)
the three annual reports on Form 5500 most recently filed with the
Internal Revenue Service ("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
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<PAGE> 20
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 representation applies to terminated pension plans,
this representation refers to the qualified status of any such plan
through the time of its termination. Each of the Company and Subsidiary
has paid all premiums (including any applicable interest, charges and
penalties for late payment) due the Pension Benefit Guaranty Corporation
("PBGC") with respect to each such Pension Plan for which premiums to
the PBGC are required. No such Pension Plan in whole or in part
maintained by each of the Company and Subsidiary has been terminated or
partially terminated under circumstances which would result in liability
to the PBGC.
(c) 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 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 Subsidiary which may subject the Company or Subsidiary to the
payment of material penalty, interest, tax or other obligation, 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 give rise to any material liabilities to
the Company or Subsidiary.
(d) All voluntary employee benefit associations maintained by
each of the Company and 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 nothing has occurred or
failed to occur which would cause the loss of such exemption.
(e) Except as set forth on Schedule 4.19(e), the execution of
this Agreement or the consummation of the transactions contemplated by
this Agreement will not give
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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 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 Subsidiary being established or becoming accelerated,
vested or payable; or (iii) payment or series of payments by the Company
or Subsidiary, directly or indirectly, to any person that would
constitute a "parachute payment" within the meaning of Section 280G of
the Code.
(f) Each of the Company and 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 Subsidiary maintains or
maintained, or (ii) to which each of the Company and 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. 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, Subsidiary, any
officer of the Company or 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 Subsidiary or
any officer of each of the Company and 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 Subsidiary. No "reportable event" (as that term is
defined in Section 4043 of ERISA) with respect to which the 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
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 Subsidiary has any material
liability outstanding.
(h) 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
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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 material
liability to each of the Company or 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 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) Each of the Company and Subsidiary has not and will not
have any material 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 Subsidiary.
(k) Each of the Company and Subsidiary has not violated in any
material respect 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.
4.20 Conformity with Law; Pending or Threatened Claims. Except as set
forth on Schedule 4.20, each of the Company, Subsidiary, and the Principal
Shareholder have complied with, and each of the Company and 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 Subsidiary or any of its assets or its business; and there are no claims,
actions, suits or proceedings, pending or, to the Knowledge of the Principal
Shareholder threatened, against or affecting the Company or 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 Subsidiary or
its business and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. Each of the Company and
Subsidiary 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
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<PAGE> 23
and employee benefit matters, securities and investor protection matters, labor
and employment matters, and trading-with-the-enemy matters. Neither the Company
nor Subsidiary has received any notification of any asserted present or past
unremedied failure by the Company or Subsidiary to comply with any of such laws,
rules, ordinances, decrees or orders.
4.21 Taxes.
(a) Each of the Company and Subsidiary has timely filed all
federal and other Tax Returns which are required to be filed; and except
as set forth in Schedule 4.21-1 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 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 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 Subsidiary); there are no requests for rulings in respect of any Tax
pending by each of the Company and Subsidiary with any tax authority;
and no penalty or deficiency in respect of any Taxes which has been
assessed against the Company or Subsidiary remains unpaid. The amounts
shown as accruals for Taxes on the financial statements of the Company
or 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 Subsidiary
for its last three (3) fiscal years, or such shorter period of time as
it has existed, have been delivered to SM&A and are listed on Schedule
4.21-2. For purposes of this Section 4.21, "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. "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.
(c) Each of the Company and 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
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for any failure to comply with any such matters.
(d) There is no pending claim by any taxing authority in any
jurisdiction in which each of the Company and Subsidiary does not pay
Taxes or file Tax Returns that the Company or Subsidiary is required to
pay Taxes or file Tax Returns.
(e) Neither the Company nor Subsidiary has made an election
under Section 341(f) of the Code.
(f) Neither the Company nor Subsidiary has agreed nor is
required to make any adjustment under Section 481(a) of the Code.
4.22 Completeness. The certified copies of the Articles of
Incorporation and Bylaws, both as amended to date, attached hereto as Schedule
4.1-2, and the copies of all leases, instruments, agreements, licenses, permits,
certificates or other documents that are included on schedules attached hereto
or that have been delivered to SM&A in connection with the transactions
contemplated hereby, are complete and correct.
4.23 Government Contracts. Except as set forth on Schedule 4.23, each
of the Company and Subsidiary is not now and in the last five (5) years has not
been a party to any governmental contracts subject to price redetermination or
renegotiation.
4.24 Absence of Changes. Except as set forth on Schedule 4.24, 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 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 Subsidiary;
(c) any change in the authorized capital of each of the
Company and Subsidiary or its securities outstanding or any change in
the ownership interests or any grant by each of the Company and
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 Subsidiary;
(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 Subsidiary to any of its officers,
directors, shareholders, employees, consultants or agents, or any change
in the method by which sales commissions are calculated and paid;
(f) any work interruptions, labor grievances or claims filed,
proposed law or
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regulation or any event or condition of any character, materially
adversely affecting the business or future prospects of each of the
Company and 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 Subsidiary to any person, other than in the ordinary course of
business including, without limitation, the Principal Shareholder and
his respective affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to each of the Company and Subsidiary,
including without limitation any indebtedness or obligation of the
Principal Shareholder 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 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,
except in the ordinary course of business;
(k) any waiver of any material rights or claims of each of the
Company and Subsidiary;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit or other right to which each of the
Company and Subsidiary is a party;
(m) any transaction by each of the Company and Subsidiary
outside the ordinary course of its business; or
(n) any authorization, approval, agreement or commitment to do
any of the foregoing.
4.25 Deposit Accounts; Powers of Attorney. Schedule 4.25 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 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 4.25 also sets forth the name of each person, corporation, firm or
other entity holding a
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general or special power of attorney from each of the Company and 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.
4.26 Relations with Governments. Neither the Company, Subsidiary, the
Principal Shareholder nor, to the best of the Principal Shareholder's Knowledge,
any director, officer, agent, employee or other person acting on behalf of the
Company or Subsidiary, has used any Company or Subsidiary funds for improper or
unlawful contributions, payments, gifts or entertainment, or made any improper
or unlawful expenditures relating to political activity to domestic or foreign
government officials or others. Neither the Company, Subsidiary, the Principal
Shareholder nor, to the best of the Principal Shareholder's Knowledge, any
current director, officer, agent, employee or other person acting on behalf of
the Company or Subsidiary, has accepted or received any unlawful contributions,
payments, gifts or expenditures. Each of the Company and Subsidiary has at all
times complied, and is in compliance, with the Foreign Corrupt Practices Act and
with all foreign laws and regulations relating to prevention of corrupt
practices.
4.27 Conflicts of Interest. Except as disclosed in Schedule 4.27,
neither (a) any past or present officer or director of the Company or
Subsidiary, nor (b) to the best of the Principal Shareholder's Knowledge, any
relative of any past or present officer or director of the Company or
Subsidiary, nor (c) any corporation, partnership, trust or other entity of which
any such past or present officer or director of the Company or 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 Subsidiary, including without limitation any agreement or
other arrangement providing for the furnishing of services by or to the Company
or Subsidiary or the rental of any property from or to the Company or
Subsidiary, or otherwise requiring or contemplating any payments by or to the
Company or Subsidiary. Except as disclosed in Schedule 4.27, neither any present
officer or director, nor 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 Subsidiary or any
related business.
4.28 Environmental Matters. Except as set forth on Schedule 4.28, each
of the Company and 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 law, regulation or
code or requirements relating to manufacture, storage, transport, generation,
use, treatment, disposal or handling of pollutants, contaminants, hazardous or
toxic wastes, substances, or materials ("Environmental Laws"). Each of the
Company and Subsidiary holds all permits and registrations required by the
Environmental Laws for the operation of its business. Each of the Company and
Subsidiary has not received any notice, oral or written, of any environmental or
public health or safety liability or violation. Except as set forth on Schedule
4.28, each of the Company and Subsidiary has not buried, dumped, disposed of,
spilled or released any pollutants, contaminants or hazardous or toxic wastes,
substances or materials, including paint and similar substances, which would
constitute a violation of the Environmental Laws.
4.29 Future Plans and Commitments. Schedule 4.29 contains a summary
description
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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 Subsidiary has committed any
material funds in the two (2) year period prior to the date of the Agreement,
which if pursued by the Company or Subsidiary would require additional
expenditures of significant efforts or capital.
4.30 The Private Placement Memorandum. The information supplied by
each of the Company and Subsidiary for inclusion in the Private Placement
Memorandum to be sent to securityholders of the Company will not, on the date
the Private Placement Memorandum (or any amendment thereof or supplement
thereto) is first mailed to securityholders 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 Placement Memorandum or a supplement to the Private Placement
Memorandum, the Company shall promptly inform SM&A and Newco.
4.31 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 (including, without limitation, any agreement or disclosure with
respect to Regulation D under the Securities Act of 1933, as amended
("Regulation D")) 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 the 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 Shareholder 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
his respective obligations under this Agreement (including, without limitation,
under Article 9), and the truth and accuracy of any and all warranties and
representations of the Company and the 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 SM&A.
SM&A represents and warrants to the Company and the Principal
Shareholder as follows:
5.1 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 public
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 affect
on its business.
5.2 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 transactions
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<PAGE> 28
contemplated hereby. The execution, delivery and performance of this Agreement
by SM&A and Newco have been duly and validly authorized by all necessary action
on their respective parts. This Agreement has been duly executed and delivered
by each of SM&A and Newco and constitutes the legal, valid and binding
obligation of SM&A and Newco, enforceable against SM&A and Newco in accordance
with its 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.
5.3 No Conflicts. 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 Company's shareholders in the Merger (a) will not
violate the Articles of Incorporation or Bylaws of SM&A or the Articles of
Incorporation or Bylaws of Newco; (b) will not violate any applicable law,
judgment, order, injunction, decree, rule, regulation or ruling of any
governmental authority applicable to SM&A or Newco; and (c) will not, either
alone or with the giving of notice or the passage of time or both, conflict
with, constitute grounds for termination of, or result in a breach of the terms,
conditions or provisions of, or constitute a default under any material
agreement, instrument, license or permit to which SM&A is now a party.
5.4 Approvals. The execution, delivery and performance of this
Agreement by SM&A and Newco and the issuance and delivery of the shares of
Common 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 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.
5.5 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.
5.6 SM&A Stock Issued in Merger. 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 and those expressly provided for in this Agreement.
5.7 NASDAQ National Market Listing. SM&A's Common 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. The shares of SM&A Stock to be
issued pursuant to the Merger will be, when issued (or as soon thereafter as
reasonably practicable), duly listed on the NASDAQ National Market.
5.8 Approvals. Except for the filing of merger documents with the
State of California, a Form D, and filings made pursuant to applicable state
securities laws, no filing with any governmental authority or any other person
is or was required to be, and has not been,
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obtained or made by SM&A in connection with the execution, delivery or
performance of this Agreement.
5.9 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 this 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 reorganization under the Code.
Following the Merger, SM&A will cause the Company to continue the
historic business of the Company or to use a significant portion of the
Company's business assets in a business.
(e) 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.
5.10 SEC Documents. SM&A has furnished, or within ten (10) days of the
date hereof shall furnish, the Company and each of the Company's shareholders,
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
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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. Since the date the last report was filed by SM&A with the SEC,
there has been no material adverse change in the financial condition, assets, or
liabilities of SM&A.
5.11 The Private Placement Memorandum. The information supplied by
each of SM&A and Newco for inclusion in the Private Placement Memorandum to be
sent to securityholders of the Company will not, on the date the Private
Placement Memorandum (or any amendment thereof or supplement thereto) is first
mailed to securityholders 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 SM&A, Newco or any of its respective affiliates,
officers or directors should be discovered by SM&A or Newco which should be set
forth in an amendment to the Private Placement Memorandum or a supplement to the
Private Placement Memorandum, SM&A or Newco shall promptly inform the Principal
Shareholder.
6. COVENANTS OF THE PRINCIPAL SHAREHOLDER AND THE COMPANY PRIOR TO CLOSING.
6.1 Access and Cooperation. Between the date of this Agreement and
the Closing Date, the Company will afford to the officers and authorized
representatives of SM&A access to all of the Company's and Subsidiary's sites,
properties, books and records and will furnish SM&A with such additional
financial and operating data and other information as to the business and
properties of each of the Company and Subsidiary as SM&A may from time to time
reasonably request. The Company and Subsidiary will cooperate with SM&A, 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. 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
heretofore signed by the Company and SM&A shall remain in full force and effect
to the Closing.
6.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, each of the Company and Subsidiary shall:
(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
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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 each of the Company and Subsidiary;
(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) maintain present salaries and commission levels for all
officers, directors, employees and agents.
6.3 Prohibited Activities. Between the Balance Sheet Date and the
Closing Date, each of the Company and Subsidiary will not, without the prior
written consent of SM&A:
(a) make any change in its Articles of Incorporation or
Bylaws;
(b) except for the issuance of shares of stock on the exercise
of presently outstanding options, issue any securities, options,
warrants, calls, conversion rights or commitments relating to its
securities of any kind;
(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,
except that the Company may repurchase shares of its common stock from
employees pursuant to existing agreements;
(d) enter into any contract or commitment or incur or agree to
incur any liability, except in the ordinary course of business, or make
any capital expenditures in excess of $10,000;
(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
except ordinary and customary bonuses to employees;
(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;
(g) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the normal course of business;
(h) negotiate for the acquisition of any business or the
start-up of any new business;
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(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;
(k) breach or permit a breach, amend or terminate any
agreement or any of its permits, licenses or other rights; or
(l) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
6.4 Nondisclosure of Confidential Information. The Principal
Shareholder recognizes and acknowledges that he had in the past, currently has,
and in the future may possibly have, access to certain confidential information
of each of the Company and Subsidiary, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company and Subsidiary and the Company's and Subsidiary's
business. The Principal Shareholder agrees that he will not disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of SM&A or as required by law, unless such information becomes
known to the public generally through no fault of the Principal Shareholder. In
the event of a breach or threatened breach by the Principal Shareholder of the
provisions of this Section 6.4, SM&A, the Company and Subsidiary shall be
entitled to an injunction restraining the Principal Shareholder from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting SM&A, the Company and Subsidiary from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
6.5 Release by Principal Shareholder. THE PRINCIPAL SHAREHOLDER
HEREBY AGREES AND CONFIRMS THAT EFFECTIVE AS OF THE CLOSING HE HEREBY FULLY
RELEASES, ACQUITS AND FOREVER DISCHARGES EACH OF THE COMPANY AND 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 THE PRINCIPAL SHAREHOLDER BY THE
COMPANY OR SUBSIDIARY FOR THE MOST RECENT STANDARD PAYROLL PERIOD BASED UPON THE
COMPANY'S OR 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.
6.6 No Shop. Prior to the later of (i) the Closing Date or (ii) June
30, 1998, each of the Company, Subsidiary and the Principal Shareholder 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 Subsidiary with any other entity (an "Acquisition
Transaction"). Each of the
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Company, Subsidiary and the 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. Notwithstanding the foregoing, this Section 6.6 shall
have no further force and effect should SM&A notify the Company that it has
determined to not proceed with the transactions contemplated by this Agreement.
6.7 Options. Prior to the Closing, the Company shall make
arrangements for the exercise, cancellation or conversion of the Company Options
into SM&A Options as set forth herein.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDER.
The obligations of the Company and the Principal Shareholder to close
the transactions set forth in this Agreement are subject to the following
conditions. Upon consummation of this Agreement, all conditions not satisfied
are deemed to be waived:
7.1 Representations and Warranties; Performance of Obligations. The
representations and warranties of SM&A and Newco contained in Article 5 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 Newco 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 a
duly authorized agent, the President, Chief Operating Officer or any Vice
President of SM&A shall have been delivered to the Company.
7.2 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.
7.3 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 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.
7.4 Opinion of Counsel. The Company shall have received an opinion
from Rutan & Tucker, LLP, counsel to SM&A, dated the Closing Date, substantially
in the form attached hereto as Exhibit D.
7.5 No Material Adverse Change. No material adverse change in the
results of operations, financial condition or business of SM&A shall have
occurred; and the Company shall have received a certificate signed by the Chief
Operating Officer, Chief Financial Officer or Secretary of SM&A dated the
Closing Date to such effect.
7.6 Employment Agreements. Each of the employment agreements
currently existing between the Company and Roger Skinner and Stanley Hee,
respectively, shall be terminated prior
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to the Closing and replaced by an employment agreement satisfactory to SM&A and
the respective employee.
7.7 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. 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.
8.1 Representations and Warranties; Performance of Obligations. The
representations and warranties of the Principal Shareholder and the Company
contained in Article 4 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 Shareholder 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 the Principal Shareholder and
by a duly authorized agent, the President, Chief Financial Officer or Secretary
of the Company shall have been delivered to SM&A.
8.2 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; 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.
8.3 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 May 1, 1998, and the unaudited consolidated
statements of income, cash flow and shareholder's equity of the Company for the
period then ended, disclosing no material adverse change in the financial
condition of each of the Company and Subsidiary or the results of its operations
from the financial statements originally furnished by the Company, as of June
27, 1997, and the twelve (12) month period so ended.
8.4 No Material Adverse Change. No material adverse change in the
results of operations, financial condition or business of each of the Company
and Subsidiary shall have occurred, and each of the Company and 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 Subsidiary to conduct its business; and SM&A shall have received a
certificate signed by the Principal Shareholder and by the President, Chief
Financial Officer or Secretary of the Company dated the Closing Date to such
effect.
8.5 Review. SM&A, through its authorized representatives, must have
been satisfied with its review of the assets, liabilities, operations, financial
condition, and the practices and
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procedures of each of the Company and 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 Subsidiary, disclosing no
actual or probable violations, compliance problems, required capital
expenditures or other substantive concerns.
8.6 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.
8.7 Opinion of Counsel. SM&A shall have received an opinion from
Rosenfeld, Meyer & Susman, LLP, counsel to the Company, dated the Closing Date,
substantially in the form attached hereto as Exhibit B.
8.8 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 acquisition of the Company Stock and
no manufacturer, governmental agency or body shall have taken any other action
or made any request of SM&A as a result of which SM&A reasonably deems it
inadvisable to proceed with the transactions hereunder.
8.9 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 Subsidiary arising since
the Balance Sheet Date.
8.10 Additional Contracts. The Company shall have delivered to SM&A
list, dated the Closing Date, showing all material contracts and agreements,
together with copies thereof, entered into by each of the Company and Subsidiary
since the date of this Agreement.
8.11 Good Standing Certificates. The Company shall have delivered to
SM&A a certificate, dated as of a date no longer than five (5) days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Commonwealth of Virginia and, unless waived by SM&A, in each state in which the
Company is authorized to do business, showing 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 Subsidiary
for all periods prior to the Closing.
8.12 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.
8.13 [RESERVED].
8.14 Employment Agreements. Each of the employment agreements
currently existing between the Company and Roger Skinner and Stanley Hee,
respectively, shall be terminated prior to the Closing and replaced by an
employment agreement satisfactory to SM&A and the respective employee.
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8.15 Options and Registration Rights. All outstanding rights, options,
warrants and convertible securities of each of the Company and Subsidiary shall
have been exercised, terminated or replaced to the satisfaction of SM&A,
consistent with the other provisions of this Agreement. 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 the President, Chief Financial Officer or Secretary of
the Company.
8.16 [RESERVED]
8.17 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
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 except in
compliance with Rule 144 promulgated under the Securities Act.
8.18 Compliance With Rule 145. All persons who are "affiliates" of the
Company at the Closing Date shall have executed and delivered to SM&A an
agreement in form and substance 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 except in compliance with Rule 145 promulgated under the
Securities Act.
9. INDEMNIFICATION.
9.1 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; provided,
however, that if any party hereto has actual knowledge of a breach by another
party and fails to inform such party of the breach prior to the Closing, then
the party with actual knowledge of the breach shall not be entitled to
indemnification under this Article 9. Notwithstanding the foregoing, the right
of indemnification or other claim against a shareholder 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, that (a) the right to indemnification with respect to
the representations and warranties set forth in Sections 4.19, 4.21 and 4.28
shall survive until thirty (30) days after the expiration of the applicable
statute of limitations (or extensions or waivers thereof) relating to the
matters set forth in such Sections, (b) the right to indemnification with
respect to such representations and warranties, and the liability of either
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 or
such thirtieth day after the expiration of the applicable statute of limitations
(or extensions or waivers thereof), whichever shall be applicable thereto in
accordance with this Section 9.1.
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9.2 Indemnification by Shareholders.
(a) The holders of Company Stock outstanding immediately prior
to the Effective Time 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 a "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 9.1) 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 or the Principal Shareholder contained in this
Agreement, and (ii) the breach by the Company or the Principal
Shareholder of, or the failure by the Company or the Principal
Shareholder to observe, any of his covenants or other agreements
contained in this Agreement.
(b) The liability of each shareholder of the Company, other
than the Principal Shareholder, under this Section 9.2 shall be limited
to his pro rata interest in the Escrow Shares. The liability of the
Principal Shareholder under this Section 9.2 shall be limited to the
value as of the Effective Time of the Principal Shareholder's Merger
Consideration under this Agreement.
(c) All indemnification claims under this Section 9.2 shall be
satisfied first from the Escrow Shares before the Principal Shareholder
shall be required to satisfy all or any portion of such claims pursuant
to his indemnification obligations hereunder.
9.3 Indemnification by SM&A. SM&A covenants and agrees that it will
indemnify, defend, protect and hold harmless the Principal Shareholder, his
successors and heirs (the "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 9.1) 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 contained in this Agreement (it being
understood that, notwithstanding anything to the contrary contained in this
Agreement, to determine if there has been an inaccuracy or breach of a
representation or warranty of SM&A and the Losses arising from such inaccuracy
or breach, such representation or warranty shall be read as if it were not
qualified by materiality, including, without limitation, qualifications
indicating accuracy "in all material respects"), and (b) the breach by SM&A of,
or the failure by SM&A to observe, any of its covenants or other agreements
contained in or made pursuant to this Agreement.
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9.4 Indemnification Procedures.
(a) Promptly after receipt by any person entitled to
indemnification under Section 9.2 or 9.3 (an "indemnified party") of
notice of the commencement of any action, suit or proceeding (other than
actions, suits or proceedings with respect to Taxes which are provided
for in Section 9.5 ("Tax Actions")) 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 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
9.2 or 9.3, 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 9.4, the indemnified party
shall have
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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 9.4. The reimbursement of fees, costs and expenses
required by this Section 9.4 shall be made by periodic payments
during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(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 9 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
9.2 or 9.3, as the case may be, except to the extent that the
indemnifying party is prejudiced by the failure to give such notice.
9.5 Amount Limitation. An SM&A Indemnified Person shall not be
entitled to indemnification under this Section 9 by the holders of Company Stock
immediately prior to the Effective Time for any Losses unless the aggregate of
Losses suffered by all SM&A Indemnified Persons considered together exceeds
$220,500, and then only to the extent of such excess. The Shareholder
Indemnified Person shall not be entitled to indemnification under this Section 9
by SM&A for any Losses unless the aggregate of Losses suffered by the
Shareholder Indemnified Person exceeds $220,500, and then only to the extent of
such excess.
10. NONCOMPETITION.
10.1 Prohibited Activities. The Principal Shareholder hereby
covenants, acknowledges and agrees as follows:
(a) If upon the termination of the Principal Shareholder's
employment the Company and the Principal Shareholder have not executed a
consulting agreement, then for a period of one (1) year after the
termination of his employment (except as set forth in the following
paragraph), the Principal Shareholder shall not for any reason
whatsoever, directly or indirectly, for himself or on behalf or in
conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature 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 that directly or
indirectly competes with the business conducted by the Company,
Subsidiary, SM&A, or any of their subsidiaries in the area of
competitive procurement in any geographical location where they or any
of their subsidiaries conducts business as of the Closing Date;
provided, however, that if after the commencement of the one-year
noncompete period, the closing sale price for SM&A Stock reported by the
Nasdaq National Market is more than $4.50 below the Average Closing
Price for the Base Period for more than one hundred eighty (180)
consecutive trading days, then the restrictions set forth in this
Article 10 shall not apply;
Notwithstanding the foregoing provisions of this paragraph (a)
the Principal
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Shareholder may (i) be a passive investor owning no more than 1% 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 the 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;
(b) For a period of two (2) years, the Principal Shareholder
shall not, directly or indirectly, knowingly offer to employ any person
who is, at that time, or which has been within one (1) year prior to
that time, an employee of SM&A, the Company or the Subsidiary;
(c) For a period of two (2) years after the Closing Date, the
Principal Shareholder shall not, directly or indirectly, engage or
participate in any effort or act to induce any customer, supplier,
associate, employee, sales or other agent or independent contractor of
the Company or the Subsidiary or which has been a customer, supplier,
employee, sales or other agent or independent contractor of the Company
or the Subsidiary within two (2) years prior to that time, to take any
action which might be disadvantageous to the Company and Subsidiary, or
not to take any action which might be advantageous to the Company and
Subsidiary; for a period of two (2) years, the Principal Shareholder
shall not for any reason whatsoever, directly or indirectly, for himself
or on behalf or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature call upon any
prospective acquisition candidate which is in the same business as the
business of the Company or the Subsidiary as of the time of the Closing,
on the Principal Shareholder's behalf or on behalf of any competitor
which candidate was either called upon by the Company or the Subsidiary
(including the respective subsidiaries thereof, if any) or for which the
Company or the Subsidiary made an acquisition analysis, for the purpose
of acquiring such entity;
(d) The Principal Shareholder acknowledges that the damages
that would be suffered by SM&A as a result of any breach of the
provisions of this Section 10.1 may not be calculable and that an award
of a monetary judgment for such a breach would be an inadequate remedy.
Consequently, SM&A 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 Section 10.1 or otherwise to specifically enforce any
of the provisions hereof, and SM&A 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 SM&A and reasonable attorneys
fees; and
(e) It is agreed by the parties that the foregoing covenants
in this Section 10.1 impose a reasonable restraint on the Principal
Shareholder in light of the activities and business of the Company, the
Subsidiary and SM&A (including SM&A's other subsidiaries).
(f) The parties hereto agree that the duration and area for
which the covenants in this Section 10.1 are to be effective are
reasonable. In the event that any court finally determines that the time
period or the geographic scope of any such covenant is
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unreasonable or excessive and any covenant is to that extent made
unenforceable, the parties agree that the restrictions of this Section
10.1 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 Sections
10.1(a), (b), (c) and (d) shall be deemed to be a separate covenant.
10.2 Independent Covenant. All of the covenants in this Section 10
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 the Principal
Shareholder against the Company, the Subsidiary or SM&A, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by SM&A, the Company or Subsidiary of such covenants. It is specifically agreed
that all time periods stated in this Section 10 above, shall be computed by
excluding from such computation any time during which the Principal Shareholder
is in violation of any provision of this Article 10.
10.3 Materiality. The Principal Shareholder hereby agrees that this
covenant is a material and substantial part of this transaction.
11. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON SM&A STOCK;
REGISTRATION RIGHTS.
11.1 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.
11.2 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 E 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. SM&A
shall use its reasonable best efforts to register with the SEC on Form S-8 the
SM&A Options and shares issuable upon exercise thereof prior to the first
anniversary of the Effective Time.
11.3 Form 8-K. The Principal Shareholder 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.
11.4 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
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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."
12. CERTAIN DEFINITIONS.
"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).
"Dissenters' Rights" shall mean the rights of shareholders to dissent
from corporate action and receive payment of the fair value of their shares of
Company Stock under Section 1300 et seq. of the California Corporations Code.
"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.
"GAAP" shall mean generally accepted accounting principles.
"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.
"Knowledge" shall mean facts that are known by Principal Shareholder
after having made diligent inquiry of the other executive officers of the
Company with respect to their knowledge of the relevant facts.
"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.
"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 Subsidiary or (ii) the ability of the Company, Subsidiary or the
Principal Shareholder to consummate the transactions contemplated by this
Agreement or any related agreement to which it or he is a party.
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"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.
"Private Placement Memorandum" means the Private Placement Memorandum
and related disclosure documents furnished to the Company's securityholders
pursuant to the requirements of Regulation D under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"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, process and
procedures owned, used by or licensed to each of the Company and Subsidiary.
13. TERMINATION.
13.1 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 Company and SM&A;
(b) By the Board of Directors of Company if any condition
provided in Section 7 hereof has not been satisfied or waived on or
before the Effective Date;
(c) By the Board of Directors of SM&A if any condition
provided in Section 8 hereof has not been satisfied or waived on or
before the Effective Date;
(d) By the Board of Directors of either Company or SM&A if the
Effective Time has not occurred by June 30, 1998;
(e) By SM&A if the Company or the Principal Shareholder has
breached any of the representations or warranties contained in Section
4;
(f) By SM&A if the Company's Board of Directors (i) fails to
include a recommendation that the Company's shareholders vote in favor
of the adoption of this Agreement, (ii) withdraws its recommendation
that shareholders vote in favor or (iii) promulgates a favorable
recommendation regarding an Acquisition Transaction; and
(g) If the Average Closing Price for the Base Period is more
than $4.50 below the average closing price reported by the Nasdaq
National Market of SM&A Stock over the twenty (20) trading days ending
on (and including) the trading day immediately prior
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to the date of the execution of this Agreement (the "Average Pre-Signing
Price"), then SM&A or the Company may elect to terminate this Agreement.
(h) By Company if SM&A has breached any of the representations
or warranties contained in Section 5;
13.2 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 (as evidenced by
invoices and receipts in reasonable detail) up to a maximum of $250,000
if:
(i) SM&A has terminated this Agreement pursuant to
Section 13.1(e) because of a breach of any of the Company's and
the Principal Shareholder's representations and warranties
contained in Section 4; or
(ii) SM&A has terminated this Agreement pursuant to
Section 13.1(f).
(b) In addition to the amount payable under Section 13.2(a),
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 the
Company is acquired in an Acquisition Transaction for consideration
greater than $14,700,000.
(c) Any payment required under this Section 13.2 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.
13.3 Effect of Termination. Except as provided in Section 13.2, in the
event of a termination of this Agreement pursuant to Section 13.1 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.
14. GENERAL.
14.1 Cooperation. The Company, the Principal Shareholder 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. The 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.
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14.2 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 SM&A, and the heirs and
legal representatives of the Principal Shareholder.
14.3 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 Shareholder and SM&A.
14.4 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.
14.5 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.
14.6 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.
14.7 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.
14.8 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
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<PAGE> 46
with a copy to:
Rutan & Tucker
611 Anton Blvd., Suite 1400
Costa Mesa, CA 92626-1998
Attn: Thomas J. Crane, Esq.
(b) If to the Principal Shareholder, addressed to:
Roger H. Skinner
9251 Rubio Avenue
Sepulveda, CA 91343
with a copy to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Blvd, 4th Floor
Beverly Hills, CA 90210
Attn: David D. Wexler, Esq.
14.9 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of California.
14.10 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.
14.11 Time. Time is of the essence of this Agreement.
14.12 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 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.
14.13 Binding on Trust Principals. Any and all obligations, duties and
liabilities of a Principal Shareholder that is a trust shall be deemed to apply
and shall apply to the principals of such trust.
14.14 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,
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<PAGE> 47
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.
14.15 Schedule Disclosure. Any disclosure or information set forth on
any schedule hereto shall be deemed incorporated by reference into all other
schedules hereto.
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: Chief Operating Officer
---------------------------------
"COMPANY": SPACE APPLICATIONS CORPORATION,
a California corporation
By: /s/ Roger H. Skinner
------------------------------------
Roger H. Skinner, President
"NEWCO": SAC ACQUISITION, INC.,
a California corporation
By: /s/ Kenneth W. Colbaugh
------------------------------------
Name: Kenneth W. Colbaugh
----------------------------------
Title: President
---------------------------------
"PRINCIPAL SHAREHOLDER": /s/ Roger H. Skinner
----------------------------------------
ROGER H. SKINNER
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<PAGE> 48
APPENDIX A-1
AGREEMENT OF MERGER
OF
SAC ACQUISITION, INC.
AND
SPACE APPLICATIONS CORPORATION
This Agreement of Merger is dated May 29, 1998, by and among SPACE
APPLICATIONS CORPORATION, a California corporation ("Company") and SAC
ACQUISITION, INC., a California corporation ("Newco").
R E C I T A L S
WHEREAS, Company is a California corporation and has 336,927 shares of
its common stock outstanding as of the date hereof;
WHEREAS, Newco is a California corporation and has 100 shares of its
common stock outstanding as of the date hereof, all of which are owned by Steven
Myers & Associates, Inc., a California corporation ("SM&A");
WHEREAS, SM&A has 15,000,000 shares of its common stock outstanding as
of the date hereof;
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1. Newco shall be merged with and into Company, and Company shall be
the surviving corporation.
2. Upon such merger, all outstanding shares of common stock of
Company shall be automatically converted to 2.433 shares of common stock of
SM&A.
3. Upon such merger, each outstanding share of Newco shall be
automatically converted to one fully paid and nonassessable share of common
stock of Company.
4. Upon such merger, the Articles of Incorporation of the Company
shall be amended and restated to read as set forth in Exhibit A.
5. The conversion of shares as provided by this Agreement of Merger
shall occur automatically upon the effective date without action on the part of
SM&A, Newco, Company or the holders of such shares. On and after the effective
date and until surrender for exchange, each outstanding stock certificate which
immediately prior to the effective date represented shares of Company common
stock shall be deemed for all purposes, to evidence ownership of and to
represent the number of shares of SM&A common stock into which such shares of
Company common stock shall have been converted, and the record holders of such
outstanding certificates shall, after the effective date, be entitled to vote
such shares of SM&A common
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stock on any matters on which the holders of record of SM&A common stock shall
be entitled to vote.
6. Upon such merger, the separate existence of Newco shall cease and
Company shall succeed, without other transfer, to all the rights and property of
Newco and shall be subject to all the debts and liabilities thereof in the same
manner as if Company had itself incurred them. All rights of creditors and all
liens upon the property of each corporation shall be preserved unimpaired,
provided that such liens upon property of Newco shall be limited to the property
affected thereby immediately prior to the time the merger is effective.
7. After the merger becomes effective, Newco, through the persons
who were its officers immediately prior to the merger, shall execute or cause to
be executed such further assignments, assurances or other documents as may be
necessary or desirable to confirm title to properties, assets and rights in
Company.
8. The effective date of the merger is the date upon which a copy of
this Agreement of Merger is filed with the Secretary of State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement of Merger
on the date first set forth above.
SPACE APPLICATIONS CORPORATION,
a California corporation
By: /s/ Roger Skinner
------------------------------------
Roger Skinner, President
By: /s/ Stanley Y.H. Hee
------------------------------------
Stanley Y.H. Hee, Secretary
SAC ACQUISITION, INC.,
a California corporation
By: /s/ Kenneth W. Colbaugh
-------------------------------------
Kenneth W. Colbaugh, President
By: /s/ Ronald A. Hunn
-------------------------------------
Ronald A. Hunn, Secretary
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<PAGE> 50
APPENDIX A-2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SPACE APPLICATIONS CORPORATION
I
The name of the Corporation is:
Space Applications Corporation
II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California, other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This Corporation is authorized to issue only one class of shares of
stock which shall be designated as common stock; the total number of shares
which the Corporation is authorized to issue is 1,000,000.
IV
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
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<PAGE> 51
V
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the Corporation and its shareholders.
A-2-2
<PAGE> 52
APPENDIX A-3
AMENDED AND RESTATED BYLAWS
OF
SPACE APPLICATIONS CORPORATION
a California corporation
<PAGE> 53
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. OFFICES................................................................. 1
Section 1. Principal Executive Office...................................... 1
Section 2. Other Offices................................................... 1
ARTICLE II. SHAREHOLDERS........................................................... 1
Section 1. Place of Meetings............................................... 1
Section 2. Annual Meetings................................................. 1
Section 3. Special Meetings................................................ 1
Section 4. Notice of Annual or Special Meeting............................. 2
Section 5. Quorum.......................................................... 2
Section 6. Adjourned Meeting and Notice Thereof............................ 2
Section 7. Voting.......................................................... 3
Section 8. Record Date..................................................... 5
Section 9. Consent of Absentees............................................ 5
Section 10. Action Without Meeting.......................................... 6
Section 11. Proxies......................................................... 6
Section 12. Inspectors of Election.......................................... 6
ARTICLE III. DIRECTORS............................................................. 7
Section 1. Powers.......................................................... 7
Section 2. Number of Directors............................................. 8
Section 3. Election and Term of Office..................................... 8
Section 4. Vacancies....................................................... 8
Section 5. Place of Meeting................................................ 9
Section 6. Regular Meetings................................................ 9
Section 7. Special Meetings................................................ 9
Section 8. Quorum.......................................................... 9
Section 9. Participation in Meetings by Conference
Telephone....................................................... 10
Section 10. Waiver of Notice................................................ 10
Section 11. Adjournment..................................................... 10
Section 12. Fees and Compensation........................................... 10
Section 13. Action Without Meeting.......................................... 10
Section 14. Rights and Inspection........................................... 10
Section 15. Committees...................................................... 11
ARTICLE IV. OFFICERS............................................................... 11
Section 1. Officers........................................................ 11
Section 2. Election........................................................ 12
Section 3. Subordinate Officers............................................ 12
Section 4. Removal and Resignation......................................... 12
Section 5. Vacancies....................................................... 12
Section 6. Chairman of the Board........................................... 12
Section 7. President....................................................... 12
Section 8. Vice President.................................................. 13
Section 9. Secretary....................................................... 13
Section 10. Chief Financial Officer......................................... 13
ARTICLE V. OTHER PROVISIONS........................................................ 14
Section 1. Inspection of Corporate Records................................. 14
Section 2. Inspection of Bylaws............................................ 14
</TABLE>
A-3-i
<PAGE> 54
<TABLE>
Page
<S> <C> <C>
Section 3. Endorsement of Documents; Contracts............................. 15
Section 4. Certificates of Stock........................................... 15
Section 5. Representation of Shares of other Corporations.................. 16
Section 6. Stock Purchase Plans............................................ 16
Section 7. Annual Report to Shareholders................................... 16
Section 8. Construction and Definitions.................................... 16
ARTICLE VI. INDEMNIFICATION........................................................ 17
Section 1. Definitions..................................................... 17
Section 2. Indemnification in Actions by Third
Parties......................................................... 17
Section 3. Indemnification in Actions by or in the
Right of the Corporation........................................ 17
Section 4. Mandatory Indemnification Against Expenses...................... 18
Section 5. Required Determinations......................................... 18
Section 6. Advance of Expenses............................................. 18
Section 7. Other Indemnification........................................... 18
Section 8. Circumstances Where Indemnification Not
Permitted....................................................... 19
Section 9. Insurance....................................................... 19
Section 10. Nonapplicability to Fiduciaries of Employee
Benefit Plans................................................... 19
ARTICLE VII. AMENDMENTS............................................................ 19
</TABLE>
A-3-ii
<PAGE> 55
AMENDED AND RESTATED BYLAWS
For the regulation, except as
otherwise provided by statute or its
Articles of Incorporation
of
SPACE APPLICATIONS CORPORATION
a California corporation
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The principal executive office of
the Corporation shall be located at 901 Follin Lane, Suite 400, Vienna, Virginia
22180. The Board of Directors (herein called the "Board") is granted full power
and authority to change said principal executive office from one location to
another.
Section 2. Other Offices. Branch or subordinate offices may
be established at any time by the Board at any place or places.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders shall be held
either at the principal executive office of the Corporation or at any other
place within or without the State of California which may be designated either
by the Board or by the written consent of all persons entitled to vote thereat,
given either before or after the meeting and filed with the Secretary.
Section 2. Annual Meetings. The annual meetings of the shareholders
shall be held on such date and at such time as may be fixed by the Board. At
such meetings, Directors shall be elected and any other proper business may be
transacted.
Section 3. Special Meetings. Special meetings of the shareholders may be
called at any time by the Board, the Chairman of the Board, the President, or by
the holders of shares entitled to cast not less than ten percent (10%) of the
votes at such meeting. Upon request in writing to the Chairman of the Board, the
President, any Vice President or the Secretary by any person (other than the
Board) entitled to call a special meeting of shareholders, the officer forthwith
shall cause notice to be given to the shareholders entitled to vote that a
meeting will be held at a time requested by the person or persons calling the
meeting, not less than thirty-five nor more than sixty days after the receipt of
the request. If the notice is not given within twenty days after
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receipt of the request, the persons entitled to call the meeting may give the
notice.
Section 4. Notice of Annual or Special Meeting. Written notice of each
annual or special meeting of shareholders shall be given not less than ten nor
more than sixty days before the date of the meeting to each shareholder entitled
to vote thereat. Such notice shall state the place, date and hour of the meeting
and (i) in the case of a special meeting, the general nature of the business to
be transacted, and no other business may be transacted, or (ii) in the case of
the annual meeting, those matters which the Board, at the time of the mailing of
the notice, intends to present for action by the shareholders, but, subject to
the provisions of applicable law, any proper matter may be presented at the
meeting for such action. The notice of any meeting at which directors are to be
elected shall include the names of nominees intended at the time of the notice
to be presented by management for election.
Notice of a shareholders' meeting shall be given either personally or by
mail or by other means of written communication, addressed to the shareholder at
the address of such shareholder appearing on the books of the Corporation or
given by the shareholder to the Corporation for the purpose of notice; or, if no
such address appears or is given, at the place where the principal executive
office of the Corporation is located or by publication at least once in a
newspaper of general circulation in the county in which the principal executive
office is located. Notice by mail shall be deemed to have been given at the time
a written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person given the notice by
electronic means, to the recipient.
Section 5. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. The shareholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to have less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are either present
in person or represented by proxy thereat, but in the absence of a quorum
(except as provided in Section 5 of this Article) no other business may be
transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders'
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meeting is adjourned for more than 45 days or, if after adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given as in the case of an original meeting.
Section 7. Voting. The shareholders entitled to notice of any meeting or
to vote at any such meeting shall be only persons in whose name shares stand on
the stock records of the Corporation on the record date determined in accordance
with Section 8 of this Article.
Voting shall in all cases be subject to the provisions of Chapter 7 of
the California General Corporation Law, and to the following provisions:
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder
either in person or by proxy, without a transfer of such shares into the
holder's name; and shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be
entitled to vote shares held by such trustee without a transfer of such
shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by
such receiver; and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into the
receiver's name if authority to do so is contained in the order of the
court by which such receiver was appointed.
(c) Subject to the provisions of Section 705 of the California
General Corporation Law and except where otherwise agreed in writing
between the parties, a shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into
the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and
the Corporation may treat all rights incident thereto as exercisable by
the minor, in person or by proxy, whether or not the Corporation has
notice, actual or constructive, of the nonage, unless a guardian of the
minor's property has been appointed and written notice of such
appointment given to the Corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder
as the bylaws of such other corporation may prescribe or, in the absence
of such provision, as the Board of Directors of such other corporation
may determine or, in the absence of such determination, by the chairman
of the board, president or any vice president of such other corporation.
Shares which are purported to be voted or
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any proxy purported to be executed in the name of a corporation (whether
or not any title of the person signing is indicated) shall be presumed
to be voted or the proxy executed in accordance with the provisions of
this subdivision, unless the contrary is shown.
(f) Shares of the Corporation owned by any subsidiary shall
not be entitled to vote on any matter.
(g) Shares held by the Corporation in a fiduciary capacity,
and shares of the issuing corporation held in a fiduciary capacity by
any subsidiary, shall not be entitled to vote on any matter, except to
the extent that the settlor or beneficial owner possesses and exercises
a right to vote or to give the Corporation binding instructions as to
how to vote such shares.
(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise, or if two or more persons
(including proxyholders) have the same fiduciary relationship respecting
the same shares, unless the secretary of the Corporation is given
written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the
following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so
voting binds all;
(iii) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the
securities in question proportionately.
If the instrument so filed or the registration of the shares shows that
any such tenancy is held in unequal interests, a majority or even split
for the purpose of this section shall be a majority or even split in
interest.
Subject to the following sentence and to the provisions of Section 708
of the California General Corporation Law, every shareholder entitled to vote at
any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are normally
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate or candidates' names have been placed in
nomination
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prior to the voting and the shareholder has given notice at a meeting prior to
the voting of the shareholder's intention to cumulate the shareholder's votes.
If any one shareholder has given such notice, all shareholders may cumulate
their votes for candidates in nomination.
Elections need not be by ballot; provided, however, that all elections
for directors must be by ballot upon demand made by a shareholder at the meeting
and before the voting begins.
In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Section 8. Record Date. The Board may fix, in advance, a record date for
the determination of the shareholders entitled to notice of any meeting to vote
or entitled to receive payment of any dividend or other distribution, or any
allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 days nor less than 10
days prior to the date of the meeting nor more than 60 days prior to any other
action. When a record date is so fixed, only shareholders of record on that date
are entitled to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to the exercise of the rights, as the
case may be, notwithstanding any transfer of shares on the books of the
Corporation after the record date. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting unless the Board fixes a new record date for the
adjourned meeting. The Board shall fix a new record date if the meeting is
adjourned for more than 45 days.
If no record date is fixed by the Board, the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the next
business day next preceding the day on which the meeting is held. The record
date for determining shareholders for any purpose other than set forth in this
Section 8 or Section 10 of this Article shall be at the close of business on the
day on which the Board adopts the resolution relating thereto, or the sixtieth
day prior to the date of such other action, whichever is later.
Section 9. Consent of Absentees. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or
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made a part of the minutes of the meeting. Neither the business to be transacted
at nor the purpose of any regular or special meeting of shareholders need be
specified in any written waiver of notice, except as provided in Section 601(f)
of the California General Corporation Law.
Section 10. Action Without Meeting. Subject to Section 603 of the
California General Corporation Law, any action which, under any provision of the
California General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Unless a
record date for voting purposes be fixed as provided in Section 8 of this
Article, the record date for determining shareholders entitled to give consent
shall be the day on which the first written consent is given.
Section 11. Proxies. Every person entitled to vote shares has the right
to do so either in person or by one or more persons authorized by a written
proxy executed by such shareholder and filed with the Secretary. Every proxy
duly executed shall continue in full force and effect until revoked by the
person executing it prior to the vote pursuant thereto effected by a writing
delivered to the Corporation stating that the proxy is revoked or by a
subsequent proxy executed by the person executing the prior proxy and presented
to the meeting, or by attendance at the meeting and voting in person by the
person executing the proxy; provided, however, that no proxy shall be valid
after the expiration of eleven months from the date of its execution unless
otherwise provided in the proxy.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the Board may appoint any persons, other than nominees for office
inspectors of election to act at such meeting and any adjournment thereof. If
inspectors of election are not so appointed, or if any persons so appointed fail
to appear or refuse to act, the chairman of any such meeting may, and on the
request of any shareholder or shareholder's proxy shall, make such appointment
at the meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or proxies,
the majority of shares present shall determine whether one or three inspectors
are to be appointed.
The duties of such inspectors shall be as prescribed by Section 707(b)
of the California General Corporation Law and shall include: determining the
number of shares outstanding and the voting power of each; the shares
represented at the meeting; the existence of a quorum; the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all
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votes or consents; determining when the polls shall close; determining the
result; and doing such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act or certificate of a majority is effective in all respects as
the decision, act or certificate of all.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations of the Articles of
Incorporation, of these Bylaws and of the California General Corporation Law
relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board. The Board may delegate the management of the day-to-day operation of the
business of the Corporation to a management company or other person provided
that the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the Board shall have the following powers
in addition to the other powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents and
employees of the Corporation, prescribe the powers and duties for them
as may not be inconsistent with applicable law, with the Articles of the
Corporation or these Bylaws, fix their compensation and require from
them security for faithful service.
(b) To conduct, manage and control the affairs and business of
the Corporation and to make such rules and regulations therefor not
inconsistent with applicable law, or with the Articles of the
Corporation or these Bylaws, as they may deem best.
(c) To adopt, make and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal
and of such certificates from time to time as in their judgment they may
deem best.
(d) To authorize the issuance of shares of stock of the
Corporation from time to time, upon such terms and for such
consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of
the Corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecation or other evidences of debt and
securities thereof.
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Section 2. Number of Directors. The authorized number of directors shall
be, until changed by amendment of the Articles or by a Bylaw duly adopted by the
shareholders, one (1).
Section 3. Election and Term of Office. The directors shall be elected
at each annual meeting of the shareholders, but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Each director
shall hold office until the next annual meeting and until a successor has been
elected and qualified.
Section 4. Vacancies. Any director may resign effective upon giving
written notice to the Chairman of the Board, the President, Secretary or the
Board, unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Vacancies in the Board, except those existing as a result of a removal
of a director, may be filled by a majority of the remaining directors, though
less than a quorum, or by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in the case
of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent other than to fill a vacancy created by removal requires the
consent of a majority of the outstanding shares entitled to vote. If the Board
accepts the resignation of a director tendered to take effect at a future time,
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the Board or the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of the director's term of
office.
Section 5. Place of Meeting. Regular or special meetings of the Board
shall be held at any place within or without the State of California which has
been designated from time to time by the Board. In the absence of such
designation, regular meetings shall be held at the principal executive office of
the Corporation.
Section 6. Regular Meetings. Immediately following each annual meeting
of shareholders, the Board shall hold a regular meeting for the purpose of
organization, election of officers and the transaction of other business. Call
and notice of all such regular meetings of the Board of Directors is hereby
dispensed with. Other regular meetings of the Board shall be held without call
on such dates and at such times as may be fixed by the Board, and shall be
subject to the notice requirements set forth in Section 7 hereof.
Section 7. Special Meetings. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President or the Secretary or by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or 48 hours' notice given personally or by telephone, telegraph,
telecopier, telex or other similar means of communication. Any such notice shall
be addressed or delivered to each director at such director's address as it is
shown upon the records of the Corporation or as may have been given to the
Corporation by the director for purposes of notice or, if such address is not
shown on such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mails, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated in person or by telephone or wireless, to the recipient or to a
person at the office or residence of the recipient who the person giving the
notice has reason to believe will promptly communicate it to the recipient.
Section 8. Quorum. One third of the authorized number of directors or
two directors, whichever is larger, constitutes a quorum of the Board for the
transaction of business, except to adjourn as hereinafter provided. Every act or
decision done or
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made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board, unless a greater
number be required by law or by the Articles. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 9. Participation in Meetings by Conference Telephone. Members of
the Board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another.
Section 10. Waiver of Notice. The transactions of any meeting of the
Board, however called and noticed or wherever held, are as valid as though had
at a meeting duly held after regular call and notice if a quorum be present and
if, either before or after the meeting, each of the directors not present signs
a written waiver of notice, a consent to holding such a meeting or an approval
of the minutes thereof. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section 11. Adjournment. A majority of the directors present, whether or
not a quorum is present, may adjourn any directors' meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned. If the meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of the
adjournment.
Section 12. Fees and Compensation. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board.
Section 13. Action Without Meeting. Any action required or permitted to
be taken by the Board may be taken without a meeting if all members of the Board
shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the Board
and shall be filed with minutes of the proceedings of the Board.
Section 14. Rights and Inspection. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties of the
Corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
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Section 15. Committees. The Board may appoint one or more committees,
each consisting of two or more directors, and delegate to such committees any of
the authority of the Board except with respect to:
(i) The approval of any action for which the
California General Corporation Law also requires shareholders'
approval of the outstanding shares.
(ii) The filling of vacancies on the Board or in any
committee;
(iii) The fixing of compensation of the directors for
serving on the Board or on any committee;
(iv) The amendment or repeal of Bylaws or the adoption
of new Bylaws;
(v) The amendment or repeal of any resolution of the
Board which by its express terms is not so amendable or
repealable;
(vi) A distribution to the shareholders of the
Corporation except at a rate or in a periodic amount or within
a price range determined by the Board; or
(vii) The appointment of other committees of the Board
or the members thereof.
Any such committee must be appointed by resolution adopted by a majority
of the authorized number of directors and may be designated an Executive
Committee or by such other name as the Board shall specify. The Board shall have
the power to prescribe the manner in which proceedings of any such committee
shall be conducted. In the absence of any such prescription, such committee
shall have the power to prescribe the manner in which its proceedings shall be
conducted. Unless the Board or such committee shall otherwise provide, the
regular and special meetings and other actions of any such committee shall be
governed by the provisions of this Article applicable to meetings and actions of
the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board, a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Financial
Officers and such other officers as may be elected or appointed in accordance
with the provisions of Section 3 of this Article.
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Section 2. Election. The officers of the Corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen annually by, and shall
serve at the pleasure of the Board, and shall hold their respective offices
until their resignation, removal or other disqualification from service, or
until their respective successors shall be elected.
Section 3. Subordinate Officers. The Board may elect, and may empower
the President to appoint such other officers as the business of the Corporation
may require, each of whom shall hold office for such period, have such authority
and perform such duties as are provided in these Bylaws or as the Board may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be removed, either
with or without cause, by the Board of Directors at any time or, except in the
case of an officer chosen by the Board, by any officer upon whom such power of
removal may be conferred by the Board. Any such removal shall be without
prejudice to the rights, if any, of the officer under any contract of
employment.
Any officer may resign at any time by giving written notice to the
Corporation, but without prejudice to the rights, if any, of the Corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular election or appointment to such
office.
Section 6. Chairman of the Board. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board and exercise and perform such other powers and duties as may be from time
to time assigned by the Board.
Section 7. President. Subject to such powers, if any, as may be given by
the Board to the Chairman of the Board, if there be such an officer, the
President is the general manager and chief executive officer of the Corporation
and has, subject to the control of the Board, general supervision, direction and
control of the business and officers of the Corporation. The President shall
preside at all meetings of the shareholders and in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board. The President
has the general powers and duties of management usually vested in the office of
president and general manager of a corporation and such other powers and duties
as may be prescribed by the Board.
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Section 8. Vice President. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board or,
if not ranked, the Vice President designated by the Board, shall perform all the
duties of the President and, when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the President. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board.
Section 9. Secretary. The Secretary shall keep or cause to be kept, at
the principal executive office and such other place as the Board may order, a
book of minutes of all meetings of shareholders, the Board and its committees,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at Board
and committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, a copy of the Bylaws of the Corporation at the principal
executive offices or business office in accordance with Section 213 of the
California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders of the Board and of any committees thereof required by these
Bylaws or by law to be given, shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
Section 10. Chief Financial Officer. The Chief Financial Officer is the
chief financial officer of the Corporation and shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, and shall send or cause to be sent to
the shareholders of the Corporation such financial statements and reports as are
by law or these Bylaws required to be sent to them. The books of account shall
at all times be open to inspection by any director.
The Chief Financial Officer shall deposit all monies and other valuables
in the name and to the credit of the Corporation with such depositories as may
be designated by the Board. The Chief Financial Officer shall disburse the funds
of the Corporation as may be ordered by the Board, shall render to the President
and directors, whenever they request it, an account of all transactions entered
into as Chief Financial Officer and of the financial
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condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
Section 1. Inspection of Corporate Records.
(a) A shareholder or shareholders holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
Corporation shall have an absolute right to do either or both of the
following:
(i) Inspect and copy the record of shareholders'
names and addresses and shareholdings during usual business
hours upon five business days' prior written demand upon the
Corporation; or
(ii) Obtain from the transfer agent, if any, for the
Corporation, upon five business days' prior written demand and
upon the tender of its usual charges for such a list (the
amount of which charges shall be stated to the shareholder by
the transfer agent upon request), a list of the shareholders'
names and addresses who are entitled to vote for the election
of directors and their shareholdings as of the most recent
record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand.
(b) The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand
on the Corporation, for a purpose reasonably related to such holder's
interest as a shareholder or holder of a voting trust certificate.
(c) The accounting books and records and minutes of
proceedings of the shareholders and the Board and committees of the
Board shall be open to inspection upon written demand on the Corporation
of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or as a holder of
such voting trust certificate.
(d) Any inspection and copying under this Article may be made
in person or by agent or attorney.
Section 2. Inspection of Bylaws. The Corporation shall keep in its
principal executive office the original or a copy of these Bylaws as amended to
date, which shall be open to inspection by shareholders at all reasonable times,
during office hours. If the principal executive office of the Corporation is
located outside
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the State of California and the Corporation has no principal business office in
such state, it shall upon the written notice of any shareholder furnish to such
shareholder a copy of these Bylaws as amended to date.
Section 3. Endorsement of Documents; Contracts. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, conveyance or other instrument in writing and any
assignment or endorsements thereof executed or entered into between the
Corporation and any other person, when signed by the Chairman of the Board, the
President or any Vice President and the Secretary, any Assistant Secretary, the
Chief Financial Officer or any Assistant Financial Officer of the Corporation
shall be valid and binding on the Corporation in the absence of actual knowledge
on the part of the other person that the signing officers had no authority to
execute the same. Any such instruments may be signed by another person or
persons and in such manner as from time to time shall be determined by the
Board, and, unless so authorized by the Board, no officer, agent or employee
shall have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
amount.
Section 4. Certificates of Stock. Every holder of shares of the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the Chairman of the Board, the President or a Vice President and
by the Chief Financial Officer or an Assistant Financial Officer or the
Secretary or an Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the signatures
on the certificate may be facsimile. If any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board may provide; provided, however,
that on any certificate issued to represent any partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
Except as provided in this Section, no new certificate for shares shall
be issued in lieu of an old one unless the latter is surrendered and cancelled
at the same time. The Board may, however, if any certificate for shares is
alleged to have been lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the Corporation may require that the
Corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the
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alleged loss, theft or destruction of such certificate or the issuance of such
new certificate.
Section 5. Representation of Shares of other Corporations. The President
or any other officer or officers authorized by the Board or the President are
each authorized to vote, represent and exercise on behalf of the Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of the Corporation. The authority herein granted may be
exercised either by any such officer in person or by any other person authorized
so to do by proxy or power of attorney duly executed by said officer.
Section 6. Stock Purchase Plans. The Corporation may adopt and carry out
a stock purchase plan or agreement or stock option plan or agreement providing
for the issue and sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to one or more of the
employees or directors of the Corporation or of a subsidiary or to a trustee on
their behalf and for the payment for such shares in installments or at one time,
and may provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment and option or obligation
on the part of the Corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 7. Annual Report to Shareholders. The annual report to
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly waived, but nothing herein shall be interpreted as prohibiting
the Board from issuing annual or other periodic reports to shareholders.
Section 8. Construction and Definitions. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Provisions of the California Corporations Code and in
the California General Corporation Law shall govern the construction of these
Bylaws.
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ARTICLE VI
INDEMNIFICATION
Section 1. Definitions. For the purposes of this Article, "agent" means
any person who is or was a director, officer, employee or other agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation. "Proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative and "expenses" includes without limitation
attorneys' fees and any expenses of establishing a right to indemnification
under Sections 4 or 5(d).
Section 2. Indemnification in Actions by Third Parties. The Corporation
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any proceeding (other than an action by or in the right of
the Corporation to procure a judgment in its favor) by reason of the fact that
such person is or was an agent of the Corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably
believed to be in the best interests of the Corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
Section 3. Indemnification in Actions by or in the Right of the
Corporation. The Corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that such person is or was an agent of the
Corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action, provided that no such
person shall be indemnified for acts, omissions or transactions for which
California Corporations Code Section 204(a)(10) disallows eliminating or
limiting the personal liability of a director. No indemnification shall be made
under this Section 3 for any of the following:
(a) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation in the
performance of such person's duty to the Corporation and its
shareholders, unless and only to the
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extent that the court in which such proceeding is or was pending shall
determine upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
expenses and then only to the extent that the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(c) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. Mandatory Indemnification Against Expenses. To the extent
that an agent of the Corporation has been successful on the merits in defense of
any proceeding referred to in Sections 2 or 3 or in defense of any claim, issue
or matter therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
Section 5. Required Determinations. Except as provided in Section 4, any
indemnification under this Article shall be made by the Corporation only if
authorized in the specific case, upon a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3, by any of the
following:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(b) If a quorum of directors is not obtainable, by independent
legal counsel in a written opinion;
(c) Approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
(d) The court in which such proceeding is or was pending upon
application made by the Corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney or other person is
opposed by the Corporation.
Section 6. Advance of Expenses. Expenses incurred in defending any
proceeding may be advanced by the Corporation prior to the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of the agent to
repay such amount if it shall be determined ultimately that the agent is not
entitled to be indemnified as authorized in this Article.
Section 7. Other Indemnification. The indemnification provided by this
section shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, vote of shareholders or
disinterested directors or
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otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office, to the extent such additional rights to
indemnification are authorized in the Articles of this corporation. The rights
to indemnity hereunder shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of the person. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
such directors and officers may be entitled by contract or otherwise.
Section 8. Circumstances Where Indemnification Not Permitted. No
indemnification or advance shall be made under this Article, except as provided
in Sections 4 or 5(d), in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles, a resolution of the shareholders or an agreement in effect at
the time of the accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any agent of the Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the Corporation would have the
power to indemnify the agent against such liability under the provisions of this
Article.
Section 10. Nonapplicability to Fiduciaries of Employee Benefit Plans.
This Article does not apply to a proceeding against any trustee, investment
manager or other fiduciary of an employee benefit plan in such person's capacity
as such, even though such person may also be an agent as defined in Section 1 of
the employer Corporation. The Corporation shall have power to indemnify such a
trustee, investment manager or other fiduciary to the extent permitted by
subdivision (f) of Section 207 of the California General Corporation Law.
ARTICLE VII
AMENDMENTS
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable Board or vice versa may only be adopted by approval of the outstanding
shares.
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APPENDIX C-1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 29, 1998 between, a SPACE APPLICATIONS
CORPORATION ("Employer"), and ROGER H. SKINNER ("Employee").
W I T N E S E T H:
WHEREAS, Employer has been acquired in a reverse triangular merger
transaction by Steven Myers & Associates, Inc. ("SM&A");
WHEREAS, Employee was the Chief Executive Officer and a major
shareholder of Employer immediately prior to such acquisition;
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
1. Employment.
The Employer hereby employs Employee, and Employee hereby agrees to
serve, as Executive Transition Advisor or in such other comparable executive
position as shall be assigned to Employee by Employer's Board of Directors, for
the period hereinafter defined. Employee agrees to perform services related to
the transition consistent with such office concerning the Acquisition and as
shall from time to time be assigned to Employee by Employer's Board of Directors
relating to such transition and, in the absence of such assignment, such
services customary to such office as are necessary to the operations of
Employer. The employment hereunder is not contemplated to be full time, but on
an as needed basis to assist with the transition of Employer within the SM&A
organization.
2. Term of Employment.
The employment hereunder shall be for the period (the "Term of
Employment") which shall commence on the date hereof and shall end on the first
anniversary of the date set forth above, unless earlier terminated (a) upon
death of Employee, (b) at the option of Employer, upon 20 days' prior written
notice to Employee, in the event of the inability of Employee to perform his
duties hereunder, whether by reason of injury (physical or mental), illness or
otherwise, incapacitating Employee for a continuous period exceeding 180 days of
(c) upon the discharge of Employee by the Board of Directors of Employer for
"cause" as defined herein. For purposes of this Agreement, an event or
occurrence constituting "cause" shall mean:
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(i) Employee's willful failure or refusal after notice
thereof, to perform specific directives of the Board of Directors of
Employer, when such directives are consistent with the scope and nature
of Employee's duties and responsibilities as set forth in Section 1
hereof;
(ii) Dishonesty of Employee materially and adversely
affecting Employer;
(iii) Drunkenness or use of drugs which interferes with the
performance of Employee's duties and responsibilities under this
Agreement, continuing after warning;
(iv) Employee's conviction of a felony or of any crime
involving moral turpitude, fraud or misrepresentation;
(v) Any gross or willful conduct of Employee resulting in
substantial loss of Employer, substantial damage to Employer's
reputation or theft or defalcation from Employer;
(vi) Gross incompetence on the part of Employee in the
performance of the duties and responsibilities under this Agreement; and
(vii) Any material breach (not covered by any of the clauses
(i) through (vi)) of any of the provisions of this Agreement if such
breach is not cured within 10 days after written notice thereof to
Employee by Employer or, if not curable within 10 days, if Employee has
taken material steps to cure within such 10 day period and such cure
occurs within 30 days of such breach.
In addition, upon the expiration of the Term of Employment, Employer
shall have the option, in its sole and absolute discretion, to retain Employee
as a consultant to Employee for an additional one year period, on terms and
conditions to be agreed upon by the parties at such time. Employee has no duty
or obligation to mitigate damages and no sums earned by Employee from other
employment shall offset the obligation of Employer hereunder.
3. Compensation.
(a) Base Salary. As compensation for services hereunder and in
consideration of his agreement not to compete as set forth in Section 4, during
the Term of Employment Employer shall pay Employee an annual salary of $150,000
which shall be payable in appropriate installments to conform with the regular
payroll dates for salaried personnel of Employer.
(b) Other Benefits. The fringe benefits, perquisites, and other benefits
of employment enjoyed by Employee during the year prior to the execution of this
Agreement will continue during the Term of Employment.
(c) Payment Upon Early Termination. In the event of early termination of
employment for any reason specified in Section 2(a), (b) or (c) hereof, Employer
shall no longer be obligated to make any salary payments of any kind whatsoever
to Employee or Employee's
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estate. However, any salary payments earned but not yet made shall be made by
Employer to Employee or Employee's estate. Upon and after termination of
employment for whatever reason specified in Section 2 hereof, Employee shall be
entitled to such benefits other than salary payments to which Employee has
become entitled under the terms of any plan or program referred to in this
Section 3.
4. Covenant Not to Compete; Intellectual Property; Confidentiality.
(a) Covenant Not to Compete. During the Term of Employment and for one
year thereafter, Employee will not, within any jurisdiction in which Employer or
any of its affiliates is duly qualified to do business, or within any marketing
area in which Employer or any of its affiliates is doing business, directly or
indirectly own, manage, operate, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business in the area of "competitive procurements", such being the
business currently conducted by Space Applications Corporation as of the date of
this Agreement. For these purposes, Employee's ownership of securities of public
company not in excess of 1% of any class of such securities shall not be
considered to be competition with Employer.
For a period of twelve (12) months after termination of Employee's
employment with Employer, Employee agrees to refrain from interfering with the
employment relationship between Employer and its other employees by soliciting
any of such individuals to participate in independent business ventures and
agrees to refrain from soliciting business from any client or prospective client
of Employer for Employee's benefit or for any entity in which Employee has an
interest or is employed.
It is the desire and intent of the parties that the provisions of this
Section 4(a) shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If any particular provisions or portion of this Section 4(a) shall be
adjudicated to be invalid or unenforceable, this Section 4(a) shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
this Section 4(a) in the particular jurisdiction in which such adjudication is
made.
(b) Intellectual Property. During the Term of Employment, Employee will
disclose to Employer all ideas, inventions and business plans developed by
Employee during such period which relate directly or indirectly to the business
of Employer or affiliates, including without limitation any process, operation,
product or improvement which may be patentable or copyrightable. Employee agrees
that such will be the property of Employer and that Employee will at Employer's
request and cost do whatever is necessary to secure the rights thereto by
patent, copyright or otherwise to Employer.
(c) Confidentiality. Employee agrees that Employee will not divulge to
anyone (other than Employer or any persons employed or designated by Employer)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or affiliates,
including without limitation all types of trade secrets (unless readily
ascertainable from public or published information or trade sources). Employee
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further agrees not to disclose, publish or make use of any such knowledge or
information of a confidential nature without the prior written consent of
Employer unless required by law.
5. Reimbursement of Expenses.
Employee shall be entitled to be reimbursed for reasonable travel and
other expenses incurred in connection with Employee's services to Employer
pursuant to and during the term of this Agreement upon a basis consistent with
the policies of the Company, including, without limitation, commute expenses to
the Newport Beach offices of Employer's parent, Steven Myers & Associates, Inc.
from Employee's residence within Southern California.
6. Breach By Employee.
Both parties recognize that the services to be rendered under this
Agreement by Employee are special, unique and extraordinary in character, and
that in the event of the breach by Employee of the terms and conditions of this
Agreement to be performed by Employee, or in the event Employee performs
services for any person, firm, corporation or other entity engaged in a
competing line of business with Employer, the Employer shall be entitled, if it
so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enforce the specific performance thereof by Employee, or
to enjoin Employee from performing services for any such other person, firm,
corporation or other entity. No breach by or termination of Employee hereunder
shall affect Employee's rights under any agreement respecting the merger
referred to in the introduction to this Agreement.
7. Assignment.
This Agreement is a personal contract and, except as specifically set
forth herein, the rights and interests of Employee herein may not be sold,
transferred, assigned, pledged or hypothecated. The rights and obligations of
Employer hereunder shall be binding upon and run in favor of the successors and
assigns of Employer provided that Employer not assign this Agreement without
Employee's written consent. In the event of any attempted assignment or transfer
of rights hereunder by Employee contrary to the provisions hereof, Employer
shall have no further liability for payments hereunder.
8. Governing Law; Captions.
This Agreement contains the entire agreement between the parties and
shall be governed by the law of the State of California. It may not be changed
orally, but only by agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought, and
consented to in writing by each of the parties hereto. Section headings are for
convenience of reference only and shall not be considered a part of this
Agreement.
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9. Prior Employment Agreements.
This Agreement supersedes and terminates all prior agreements between
the parties relating to the subject matter herein addressed including that
certain Employment Agreement by and between Employer and Employee dated
February 7, 1995 which, as of the date hereof, is of no further force or effect.
10. Notices.
Any notice or other communication required or permitted hereunder shall
be sufficiently given if delivered in person or sent by telex, telecopy or by
registered or certified mail, postage prepaid, in the case of Employee,
addressed as follows:
Roger H. Skinner
9251 Rubio Avenue
Sepulveda, CA 91343
with a copy to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Blvd, 4th Floor
Beverly Hills, CA 90210
Attn: David D. Wexler, Esq.
and,
in the case of Employer, addressed to it as follows:
Space Applications Corporation
c/o Steven Myers & Associates, Inc.,
4695 MacArthur Boulevard, Eighth Floor
Newport Beach, California 92660
Attention: Chief Operating Officer
with a copy to:
Rutan & Tucker
611 Anton Boulevard, 14th Floor
Costa Mesa, California 92626
Attention: Thomas J. Crane, Esq.
or such other address or number as shall be furnished in writing by either party
to the other, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by telecopier, telex or mailed.
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<PAGE> 79
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the day and year
first above written.
EMPLOYER: SPACE APPLICATIONS CORPORATION,
a California corporation
By: /s/ Kenneth W. Colbaugh
Its: President
EMPLOYEE: /s/ Roger H. Skinner
-------------------------------------
ROGER H. SKINNER
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<PAGE> 80
APPENDIX C-2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 29, 1998 between, a SPACE APPLICATIONS
CORPORATION ("Employer"), and STANLEY Y.H. HEE ("Employee").
W I T N E S E T H:
WHEREAS, Employer has been acquired in a reverse triangular merger
transaction by Steven Myers & Associates, Inc. ("SM&A");
WHEREAS, Employee was the Chief Executive Officer and a major
shareholder of Employer immediately prior to such acquisition;
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
1. Employment.
The Employer hereby employs Employee, and Employee hereby agrees to
serve, as Executive Transition Advisor or in such other comparable executive
position as shall be assigned to Employee by Employer's Board of Directors, for
the period hereinafter defined. Employee agrees to perform services related to
the transition consistent with such office concerning the Acquisition and as
shall from time to time be assigned to Employee by Employer's Board of Directors
relating to such transition and, in the absence of such assignment, such
services customary to such office as are necessary to the operations of
Employer. The employment hereunder is not contemplated to be full time, but on
an as needed basis to assist with the transition of Employer within the SM&A
organization.
2. Term of Employment.
The employment hereunder shall be for the period (the "Term of
Employment") which shall commence on the date hereof and shall end on the first
anniversary of the date set forth above, unless earlier terminated (a) upon
death of Employee, (b) at the option of Employer, upon 20 days' prior written
notice to Employee, in the event of the inability of Employee to perform his
duties hereunder, whether by reason of injury (physical or mental), illness or
otherwise, incapacitating Employee for a continuous period exceeding 180 days of
(c) upon the discharge of Employee by the Board of Directors of Employer for
"cause" as defined herein. For purposes of this Agreement, an event or
occurrence constituting "cause" shall mean:
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(i) Employee's willful failure or refusal after notice
thereof, to perform specific directives of the Board of Directors of
Employer, when such directives are consistent with the scope and nature
of Employee's duties and responsibilities as set forth in Section 1
hereof;
(ii) Dishonesty of Employee materially and adversely
affecting Employer;
(iii) Drunkenness or use of drugs which interferes with the
performance of Employee's duties and responsibilities under this
Agreement, continuing after warning;
(iv) Employee's conviction of a felony or of any crime
involving moral turpitude, fraud or misrepresentation;
(v) Any gross or willful conduct of Employee resulting in
substantial loss of Employer, substantial damage to Employer's
reputation or theft or defalcation from Employer;
(vi) Gross incompetence on the part of Employee in the
performance of the duties and responsibilities under this Agreement; and
(vii) Any material breach (not covered by any of the clauses
(i) through (vi)) of any of the provisions of this Agreement if such
breach is not cured within 10 days after written notice thereof to
Employee by Employer or, if not curable within 10 days, if Employee has
taken material steps to cure within such 10 day period and such cure
occurs within 30 days of such breach.
In addition, upon the expiration of the Term of Employment, Employer
shall have the option, in its sole and absolute discretion, to retain Employee
as a consultant to Employee for an additional one year period, on terms and
conditions to be agreed upon by the parties at such time. Employee has no duty
or obligation to mitigate damages and no sums earned by Employee from other
employment shall offset the obligation of Employer hereunder.
3. Compensation.
(a) Base Salary. As compensation for services hereunder and in
consideration of his agreement not to compete as set forth in Section 4, during
the Term of Employment Employer shall pay Employee an annual salary of $150,000
which shall be payable in appropriate installments to conform with the regular
payroll dates for salaried personnel of Employer.
(b) Other Benefits. The fringe benefits, perquisites, and other benefits
of employment enjoyed by Employee during the year prior to the execution of this
Agreement will continue during the Term of Employment.
(c) Payment Upon Early Termination. In the event of early termination of
employment for any reason specified in Section 2(a), (b) or (c) hereof, Employer
shall no longer be obligated to make any salary payments of any kind whatsoever
to Employee or Employee's
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estate. However, any salary payments earned but not yet made shall be made by
Employer to Employee or Employee's estate. Upon and after termination of
employment for whatever reason specified in Section 2 hereof, Employee shall be
entitled to such benefits other than salary payments to which Employee has
become entitled under the terms of any plan or program referred to in this
Section 3.
4. Covenant Not to Compete; Intellectual Property; Confidentiality.
(a) Covenant Not to Compete. During the Term of Employment and for one
year thereafter, Employee will not, within any jurisdiction in which Employer or
any of its affiliates is duly qualified to do business, or within any marketing
area in which Employer or any of its affiliates is doing business, directly or
indirectly own, manage, operate, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business in the area of "competitive procurements", such being the
business currently conducted by Space Applications Corporation as of the date of
this Agreement. For these purposes, Employee's ownership of securities of public
company not in excess of 1% of any class of such securities shall not be
considered to be competition with Employer.
For a period of twelve (12) months after termination of Employee's
employment with Employer, Employee agrees to refrain from interfering with the
employment relationship between Employer and its other employees by soliciting
any of such individuals to participate in independent business ventures and
agrees to refrain from soliciting business from any client or prospective client
of Employer for Employee's benefit or for any entity in which Employee has an
interest or is employed.
It is the desire and intent of the parties that the provisions of this
Section 4(a) shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If any particular provisions or portion of this Section 4(a) shall be
adjudicated to be invalid or unenforceable, this Section 4(a) shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
this Section 4(a) in the particular jurisdiction in which such adjudication is
made.
(b) Intellectual Property. During the Term of Employment, Employee will
disclose to Employer all ideas, inventions and business plans developed by
Employee during such period which relate directly or indirectly to the business
of Employer or affiliates, including without limitation any process, operation,
product or improvement which may be patentable or copyrightable. Employee agrees
that such will be the property of Employer and that Employee will at Employer's
request and cost do whatever is necessary to secure the rights thereto by
patent, copyright or otherwise to Employer.
(c) Confidentiality. Employee agrees that Employee will not divulge to
anyone (other than Employer or any persons employed or designated by Employer)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or affiliates,
including without limitation all types of trade secrets (unless readily
ascertainable from public or published information or trade sources). Employee
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<PAGE> 83
further agrees not to disclose, publish or make use of any such knowledge or
information of a confidential nature without the prior written consent of
Employer unless required by law.
5. Reimbursement of Expenses.
Employee shall be entitled to be reimbursed for reasonable travel and
other expenses incurred in connection with Employee's services to Employer
pursuant to and during the term of this Agreement upon a basis consistent with
the policies of the Company, including, without limitation, commute expenses to
the Newport Beach offices of Employer's parent, Steven Myers & Associates, Inc.
from Employee's residence within Southern California.
6. Breach By Employee.
Both parties recognize that the services to be rendered under this
Agreement by Employee are special, unique and extraordinary in character, and
that in the event of the breach by Employee of the terms and conditions of this
Agreement to be performed by Employee, or in the event Employee performs
services for any person, firm, corporation or other entity engaged in a
competing line of business with Employer, the Employer shall be entitled, if it
so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enforce the specific performance thereof by Employee, or
to enjoin Employee from performing services for any such other person, firm,
corporation or other entity. No breach by or termination of Employee hereunder
shall affect Employee's rights under any agreement respecting the merger
referred to in the introduction to this Agreement.
7. Assignment.
This Agreement is a personal contract and, except as specifically set
forth herein, the rights and interests of Employee herein may not be sold,
transferred, assigned, pledged or hypothecated. The rights and obligations of
Employer hereunder shall be binding upon and run in favor of the successors and
assigns of Employer provided that Employer not assign this Agreement without
Employee's written consent. In the event of any attempted assignment or transfer
of rights hereunder by Employee contrary to the provisions hereof, Employer
shall have no further liability for payments hereunder.
8. Governing Law; Captions.
This Agreement contains the entire agreement between the parties and
shall be governed by the law of the State of California. It may not be changed
orally, but only by agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought, and
consented to in writing by each of the parties hereto. Section headings are for
convenience of reference only and shall not be considered a part of this
Agreement.
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<PAGE> 84
9. Prior Employment Agreements.
This Agreement supersedes and terminates all prior agreements between
the parties relating to the subject matter herein addressed including that
certain Employment Agreement by and between Employer and Employee dated
February 7, 1995 which, as of the date hereof, is of no further force or effect.
10. Notices.
Any notice or other communication required or permitted hereunder shall
be sufficiently given if delivered in person or sent by telex, telecopy or by
registered or certified mail, postage prepaid, in the case of Employee,
addressed as follows:
Stanley Y.H. Hee
25774 Piuma Road
Calabasas, CA 91302
with a copy to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Blvd, 4th Floor
Beverly Hills, CA 90210
Attn: David D. Wexler, Esq.
and,
in the case of Employer, addressed to it as follows:
Space Applications Corporation
c/o Steven Myers & Associates, Inc.,
4695 MacArthur Boulevard, Eighth Floor
Newport Beach, California 92660
Attention: Chief Operating Officer
with a copy to:
Rutan & Tucker
611 Anton Boulevard, 14th Floor
Costa Mesa, California 92626
Attention: Thomas J. Crane, Esq.
or such other address or number as shall be furnished in writing by either party
to the other, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by telecopier, telex or mailed.
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<PAGE> 85
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the day and year
first above written.
EMPLOYER: SPACE APPLICATIONS CORPORATION,
a California corporation
By: /s/ Kenneth W. Colbaugh
Its: President
EMPLOYEE: /s/ Stanley Y.H. Hee
------------------------------------
STANLEY Y.H. HEE
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<PAGE> 86
APPENDIX E
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the
29th day of May, 1998, by and among STEVEN MYERS & ASSOCIATES, INC., a
California corporation ("SM&A") and Roger H. Skinner and Stanley Y.H. Hee,
individually and as attorney for all other shareholders of Space Applications
Corporation listed on Schedule 1.0 attached hereto (collectively, with Skinner
and Hee, the "SAC Shareholders").
R E C I T A L S:
A. SM&A, Space Applications Corporation ("SAC") and SAC Acquisition
Corporation ("Subsidiary"), a wholly owned subsidiary of SM&A, entered into that
certain Agreement and Plan of Reorganization and Merger dated May 18, 1998
(the "Merger Agreement") pursuant to which Subsidiary will merge into SAC (the
"Merger"). Pursuant to the Merger, SM&A will issue shares of Common Stock of
SM&A (the "SM&A Stock") to the SAC Shareholders.
B. SM&A and the SAC Shareholders desire to set forth in a single
agreement the registration rights to be granted to the SAC Shareholders, and the
covenants to be made in connection therewith, with respect to the shares of SM&A
Stock issued to the SAC Shareholders pursuant to the Merger.
NOW, THEREFORE, for good and valuable consideration, the SAC
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 effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of effectiveness of such registration
statement or document;
(b) The term "Registrable Securities" means (i) shares of SM&A Stock
issuable to the SAC Shareholders upon the conversion of the common stock of SAC
as a result of 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;
(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;
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(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 Securities and Exchange Commission ("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 a lesser
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 the registration on registration statement under the Act on Form
S-3 covering all Registrable Securities which the Holders thereof request to be
registered within twenty (20) days of the mailing of such notice 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 underwriting, they 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 only will be selected by
a majority in interest of the Initiating Holders and shall be reasonably
acceptable to SM&A. In such event, the right of any Holder to include his
Registrable Securities in such registration on Form S-3 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 underwriting 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 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 underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting 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 existing immediately prior to the
Merger. To the extent Registrable Securities requested to be registered are
excluded from
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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 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) such 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.
(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
SM&A is commencing to prepare a registration statement and SM&A is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective.
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 for
shareholders of SM&A existing prior to the Merger) 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 in an
employee benefit plan or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement
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covering the sale of the Registrable Securities), 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 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 managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
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(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 the 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 the 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
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 selling Holder that such Holder shall furnish to SM&A such information
regarding itself, the Registrable Securities held
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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 Registration
Securities have learned of a material adverse change in the condition, business
or prospectus of SM&A from that known to the Holders of the Registerable
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.
8. Underwriting Requirements.
In connection with any offering involving an underwriting of shares of
SM&A's capital stock, SM&A shall not be required under Section 3 to include any
of the Holders' securities in such underwriting unless they accept the terms of
the underwriting 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
unless required by such underwriters), 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
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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 existing prior to the
Merger 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 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.
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(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; provided, that, 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),
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 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 its 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)
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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 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.
(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 public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
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(b) take such action as is necessary to enable the Holders to utilize
Form S-3 for the sale of their 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 SEC 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 assigned (but only with all related obligations) by a
Holder to a transferee or assignee of such securities who, after such assignment
or transfer, holds at least 81,974 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided SM&A is, within a reasonable time after such
transfer, 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; and provided, further, that such
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. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all such assignees and transferees who would not
qualify individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Agreement.
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.
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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 its
Registrable Securities pursuant to SEC 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
conflicts of law principles.
16. Entire Agreement.
This Agreement represents the entire agreement between and among the SAC
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 or upon deposit with the United
States Post 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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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
SAC SHAREHOLDERS:
----------------------------------------
By: /s/ Stanley Y.H. Hee
Stanley Y.H. Hee
----------------------------------------
(Print name and title)
Address:
25774 Piuma Road
Calabasas, CA 92302
By: /s/ Roger H. Skinner
Roger H. Skinner
----------------------------------------
(Print name and title)
Address:
9251 Rubio Avenue
Sepulveda, CA 91343
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SHAREHOLDERS: /s/ STANLEY Y.H. HEE
----------------------------------------
STANLEY Y.H. HEE, as attorney-in-
fact for the Shareholders identified
on Schedule 1 hereto
----------------------------------------
----------------------------------------
----------------------------------------
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EXHIBIT 99.1
SM&A SIGNS DEFINITIVE AGREEMENT TO ACQUIRE SPACE APPLICATIONS CORP.
May 18, 1998 7:24 PM EDT
NEWPORT BEACH, California, May 18/PRNewswire/--Steven Myers & Associates
(Nasdaq: WINS) announced today that it has agreed to acquire Space Applications
Corporation (SAC) for $14.7 million in a stock for stock exchange merger.
SAC, founded in 1969, is expected to generate revenues of approximately
$30 million in its fiscal year 1998, which ends June 26. The sale, which is
contingent on verification of certain representations and warranties, is
expected to be concluded on or about May 29, 1998.
"The addition of the more than 235 exceptional scientists, systems
engineering and information technology experts of SAC provides the resources
necessary to fuel our growing technical services business. Further, SAC 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.
SAC houses its corporate headquarter in Vienna, VA, with other major
operations in Colorado Springs, CO; Largo, MD; Las Vegas, NV; and Costa Mesa,
CA. "SAC has been a leading provider of technical services in space sciences and
advanced information technologies for many years. Combining our capabilities
with SM&A's highly talented workforce and unique market access should position
us well for future growth," said Roger Skinner, chairman and chief executive
officer of SAC.
Added Ken Colbaugh, Executive Vice President and Chief Operating Officer
of SM&A, "Our relationship with SAC goes back to 1985 when SM&A managed a $25
million winning proposal for SAC. The high degree of synergy between our two
companies will contribute to a very effective working relationship from day
one."
SM&A is the largest proposal management company in the United States.
Its proprietary proposal management processes, and a team of approximately 175
highly experienced professionals, help its clients to achieve a higher
probability of winning government and commercial contracts. SM&A also provides
systems engineering and program integration 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 January 28, 1998, for additional
information regarding risk affecting the company's financial condition and
results of operations.
