<PAGE>
As Filed With the Securities and Exchange Commission on May 27, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________________
SM&A CORPORATION
----------------
(Exact name of registrant as specified in its charter)
California 33-0080929
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4695 MacArthur Court, Eighth Floor, Newport Beach, California 92660
-------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
SM&A CORPORATION
1995 SPACE APPLICATIONS CORPORATION NONQUALIFIED STOCK OPTION PLAN
------------------------------------------------------------------
(Full title of the plan)
Michael A. Piraino
President and Chief Operating Officer
SM&A CORPORATION
4695 MacArthur Court, Eighth Floor
Newport Beach, California 92660
-------------------------------
(Name and address of agent for service)
(949) 975-1550
--------------
(Telephone number, including area code, of agent for service)
COPY TO:
-------
Thomas J. Crane, Esq.
Rutan & Tucker, LLP
611 Anton Boulevard, Fourteenth Floor
Costa Mesa, California 92626
(714) 641-5100
<TABLE>
<CAPTION>
Calculation of Registration Fee
==========================================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered/(1)/ price per unit offering price/(2)/ registration fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 SPACE APPLICATIONS CORPORATION
NONQUALIFIED STOCK OPTION PLAN
Common Stock, no par value 290,503 Shares $7.1875 $2,087,990.30 $580.46
=========================================================================================================================
</TABLE>
(1) Pursuant to the Agreement and Plan of Reorganization and Merger dated as of
May 18, 1998 (the "Merger Agreement"), among SM&A Corporation (the
"Registrant"), SAC Acquisition, Inc., Space Applications
<PAGE>
Corporation and Roger H. Skinner, the Registrant assumed, effective as of
May 29, 1998, all of the outstanding options to purchase common stock of
Space Applications Corporation under the 1995 Space Applications Corporation
Nonqualified Stock Option Plan, and such options became exercisable to
purchase shares of the Registrant's Common Stock, with appropriate
adjustments to the number of shares and exercise price of each assumed
option. The Merger Agreement provides that the Registrant will issue
additional options to purchase shares of the Registrant's Common Stock if,
upon the effective date of this Registration Statement, the average closing
price of the Registrant's Common Stock on the NASDAQ National Market for the
twenty (20) trading days immediately before the effective date of this
Registration Statement (the "Registration Closing Average") is less than
$13.931. The Registrant will issue to the former SAC shareholders options to
purchase that number of shares of the Registrant's Common Stock per share
issued in the merger, valued at the Registration Closing Average, equal to
the difference between $13.931 and the Registration Closing Average. The
average closing price of the Registrant's common stock for the twenty
trading days up to and including May 26, 1999 is $6.983 and, therefore
options to purchase an aggregate of 144,886 additional shares of the
Registrant's Common Stock will be issued to former SAC shareholders.
(2) Computed pursuant to Rules 457(c) and 457(f)on the basis of the average of
the high and low sales price reported for such securities by The Nasdaq
National Market on May 26, 1999.
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<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. Plan Information.
----------------
Not filed as part of this Registration Statement pursuant to Note to
Part I of Form S-8.
ITEM 2. Registrant Information and Employee Plan Annual Information.
-----------------------------------------------------------
Not filed as part of this Registration Statement pursuant to Note to
Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. Incorporation of Documents by Reference.
---------------------------------------
The following documents are incorporated by reference in this
Registration Statement:
(a) Registrant's Annual Report on Form 10-K (File No. 0-23585) for the
fiscal year ended December 31, 1998, filed with the Securities and Exchange
Commission (the "Commission") on March 31, 1999.
(b) Registrant's Proxy Statement dated April 19, 1999, filed in
connection with the Registrant's Annual Meeting of Shareholders held on May 18,
1999.
(c) Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, filed with the Commission on May 17, 1999.
(d) All reports of the Registrant filed pursuant to Section 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since the fiscal year ended December 31, 1998;
(e) The description of the Registrant's securities contained in the
Registrant's registration statement on Form 8-A (File No. 000-23585) filed under
the Exchange Act on January 5, 1997, together with any amendment or report
filed pursuant to such Exchange Act amending or updating such description.
(f) Registrant's registration statement on Form S-1 (File No. 333-
40725) filed with the Commission on November 21, 1997, together with any
amendment or report filed pursuant to the Securities Act of 1933, as amended,
amending or updating such description.
(g) Information concerning options issued under the 1995 Space
Applications Corporation Nonqualified Stock Option Plan, including the amounts
outstanding, exercises, prices and expiration dates, which will be included in
the future, either in the Registrant's proxy statements, annual reports or
appendices to this Registration Statement.
All reports and other documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold, or which deregisters all securities remaining
unsold, shall
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<PAGE>
be deemed incorporated by reference into this Registration Statement and shall
be a part hereof from the date of filing such documents.
For purposes of this Registration Statement, any document or any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded to the extent
that a subsequently filed document or a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such document or such statement in
such document. Any statement so modified or superseded shall not be deemed,
except as to modified or superseded, to constitute a part of this Registration
Statement.
The Registrant shall provide without charge to each Participant for
whom this Prospectus is delivered, upon written or oral request of such person,
a copy of any and all of the information that has been incorporated by reference
in the Registration Statement. Such requests should be directed to: Chief
Financial Officer, SM&A Corporation, 4695 MacArthur Court, Eighth Floor, Newport
Beach, California 92660, (949) 975-1550.
ITEM 4. Description of Securities.
-------------------------
Not Applicable
ITEM 5. Interests of Named Experts and Counsel.
--------------------------------------
Not Applicable
ITEM 6. Indemnification of Directors and Officers.
-----------------------------------------
The Registrant's Amended and Restated Articles of Incorporation (the
"Articles") provide that the liability of the Registrant's directors for
monetary damages shall be eliminated to the fullest extent permissible under
California law. This is intended to eliminate the personal liability of a
director for monetary damages in an action brought by or in the right of the
Registrant for breach of a director's duties to the Registrant or its
shareholders except for liability: (i) for acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law; (ii) for acts
or omissions that a director believes to be contrary to the best interest of the
Registrant or its shareholders or that involve the absence of good faith on the
part of the director; (iii) for any transaction for which a director derived an
improper benefit; (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Registrant or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of serious injury to the Registrant
or its shareholders; (v) for acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication of the director's duty to
the Registrant or its shareholders; (vi) with respect to certain transactions,
or the approval of transactions in which a director has a material financial
interest; and (vii) expressly imposed by statute, for approval of certain
improper distributions to shareholders or certain loans or guarantees.
The Articles also authorize the Registrant to provide indemnification
to its agents (as defined in Section 317 of the California Corporations Code),
through the Registrant's Amended and Restated Bylaws (the "Bylaws") or through
agreements with such agents or both, for breach of duty to the Registrant and
its shareholders, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject to the limits on such
excess indemnification set forth in Section 204 of the California Corporations
Code.
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<PAGE>
The Bylaws of the Registrant provide for indemnification of the
Registrant's officers, directors, employees, and other agents to the extent and
under the circumstances permitted by California law. The Bylaws further provide
that no indemnification shall be made in the case of a derivative suit in
respect to any claim as to which such person has been adjudged to be liable to
the corporation, except with court approval, nor shall indemnification be made
for amounts paid in settling or otherwise disposing of a pending action without
court approval, or for expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Indemnification under
the Bylaws is mandatory in the case of an agent of the Registrant (present or
past) who is successful on the merits in defense of a suit against him or her in
such capacity. In all other cases where indemnification is permitted by the
Bylaws, a determination to indemnify such person must be made by a majority of a
quorum of disinterested directors (if a quorum of directors is not obtainable,
by independent legal counsel in a written legal opinion), a majority of
disinterested shareholders, or the court in which the suit is pending.
The Registrant has entered into agreements to indemnify its directors
and executive officers in addition to the indemnification provided for in the
Articles and Bylaws. Among other things, these agreements provide that the
Registrant will indemnify, subject to certain requirements, each of the
Registrant's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by such
person in any action or proceeding, including any action by or in the rights of
the Registrant, on account of services by such person as a director or officer
of the Registrant, or as a director or officer of any other company or
enterprise to which the person provides services at the request of the
Registrant.
ITEM 7. Exemption from Registration Claimed.
-----------------------------------
Not Applicable
ITEM 8. Exhibits.
--------
4.1 1995 Space Applications Corporation Nonqualified Stock Option
Plan.
4.2 Form of Space Applications Corporation Nonqualified Stock Option
Agreement.
5 Opinion of Rutan & Tucker, LLP.
23.1 Consent of Rutan & Tucker, LLP (included in Exhibit 5).
23.2 Consent of KPMG LLP.
24.1 Power of Attorney (see p. 8).
ITEM 9. Undertakings.
------------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (unless the
information required by paragraphs (i) and (ii) below
-5-
<PAGE>
is contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by reference in this
Registration Statement):
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport Beach, State of California on May 18, 1999.
SM&A CORPORATION,
a California Corporation
By: /S/ MICHAEL A. PIRAINO
---------------------------------------------
Michael A. Piraino, President and Chief
Operating Officer
-7-
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael A. Piraino and Edward A. Beeman,
jointly and severally, his attorneys-in-fact and agents, each with the power of
substitution and resubstitution, for him and in his name, place or stead, in any
and all capacities, to sign any amendment to this Registration Statement on Form
S-8, and to file such amendments, together with exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, granting to
each attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully as he might or could do in person, and ratifying and
confirming all that the attorneys-in-fact and agents, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, including a
majority of the Board of Directors, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------- -------------------------------------- ------------
<S> <C> <C>
/S/ STEVEN S. MYERS Chairman of the Board and Chief May 18, 1999
- --------------------------
Steven S. Myers Executive Officer (Principal
Executive Officer)
/S/ MICHAEL A. PIRAINO President, Chief Operating Officer May 18, 1999
- --------------------------
Michael A. Piraino and Director
/S/ EDWARD A. BEEMAN Senior Vice President, Chief May 20, 1999
- --------------------------
Edward A. Beeman Financial Officer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
/S/ J. CHRISTOPHER LEWIS Director May 18, 1999
- --------------------------
J. Christopher Lewis
/S/ MALCOLM R. CURRIE Director May 20, 1999
- --------------------------
Malcolm R. Currie
/S/ JAMES R. MELLOR Director May 18, 1999
- --------------------------
James R. Mellor
</TABLE>
-8-
<PAGE>
EXHIBITS INDEX
4.1 1995 Space Applications Corporation Nonqualified Stock Option Plan
4.2 Form of Space Applications Corporation Nonqualified Stock Option Agreement
5 Opinion of Rutan & Tucker, LLP
23.1 Consent of Rutan & Tucker, LLP (included in Exhibit 5)
23.2 Consent of KPMG LLP
24.1 Powers of Attorney (see p. 8)
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<PAGE>
Exhibit 4.1
SPACE APPLICATIONS CORPORATION
------------------------------
NONQUALIFIED STOCK OPTION PLAN
------------------------------
1. Purpose.
-------
The purpose of this Space Applications Corporation Nonqualified Stock
Option Plan (the "Plan") is to provide an additional incentive to directors and
selected employees for the successful operation of Space Applications
Corporation (the "Corporation") through ownership of stock therein and to
encourage such employees to remain in the employ of the Corporation or its
subsidiary corporations. It is intended that none of the options granted
pursuant to the Plan will qualify as Incentive Stock Options, as defined in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
---------------
(a) The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Corporation (the "Board"). The
Committee shall consist of not less than one (1) member of the Board and such
other person or persons as the Board may determine (provided that the Committee
may, if the Board so determines, consist of one member). The Board may from
time to time remove members from, or add members to, the Committee. The
Committee shall hold meetings at such times and places as it may determine. If
the Committee consists of more than one person, the vote of a majority of the
Committee at a meeting at which a quorum is present, or acts approved in writing
by the unanimous consent of the members of the Committee, shall be the valid
acts of the Committee.
(b) The Committee may from time to time at its discretion authorize the
granting of options to purchase common stock of the Corporation ("Options") to
such eligible employees as it may select and for such number of shares as it may
designate, subject to the provisions of Paragraphs 3 and 4. The interpretation
and construction by the Committee of any provisions of the Plan or of any Option
shall be final unless otherwise determined by the Board. No member of the Board
or the Committee shall be liable for any action taken or determination made in
good faith with respect to the Plan or any Option.
3. Eligibility.
-----------
The persons who shall be eligible to be granted Options shall be such
employees and directors (whether or not they are employees) of the Corporation
(including any parent or subsidiary thereof) as the Committee shall select from
time to time. No person shall be required to participate in the Plan or to
accept or exercise any Option. No member of the Committee shall be eligible to
receive an Option.
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<PAGE>
4. Limitation on Shares Subject to Options.
---------------------------------------
The common stock of the Corporation (the "Stock") which may be issued and
sold under the Plan shall not exceed, in the aggregate, 200,000 shares of Stock,
except as such number of shares may be adjusted in accordance with Paragraph
5(g). If an Option expires or is terminated or surrendered without having been
fully exercised, the unpurchased shares of Stock subject thereto shall again be
available for the purposes of the Plan.
5. Terms and Conditions of Options.
-------------------------------
The grant of an Option shall be evidenced by an agreement between the
Corporation and the holder of an Option (the "Option Holder") in such form and
substance as the Committee shall from time to time approve. Such an agreement
shall not be inconsistent with the following terms and conditions:
(a) Option Price. Except as provided in the next sentence, the purchase
------------
price per share for shares of Stock under any Option granted under this Plan
(the "Option Price") shall be the Book Value Per Share of Stock or any other
price which the Committee may reasonably determine to reflect the value of the
shares at the time of issuance. In the case of persons who at the time of the
grant of the option are the holders of in excess of ten percent (10%) of the
outstanding capital stock of the Corporation, the Option Price under any Option
granted under this Plan shall be not less than one hundred ten percent (110%) of
the Book Value Per Share of Stock. The "Book Value Per Share of Stock" means
the shareholders' equity of the Corporation as determined by the last audited
financial statements of the Corporation issued prior to the event requiring
that Book Value Per Share of Stock be computed, divided by the number of shares
of Stock outstanding, as of the last day of the fiscal year reflected in such
financial statements. In computing Book Value Per Share of Stock, no adjustment
shall be made for outstanding options, warrants or unexercised rights to
purchase Stock or shares of stock issued or repurchased following the last day
of the fiscal year reflected in such financial statements.
(b) Term and Exercise of Options. The term of each Option shall be as
----------------------------
specified in the agreement evidencing the granting thereof (the "Option
Period"), provided that such term shall not be greater than ten (10) years from
the date of the option agreement. Options will be exercisable at such time or
times, and subject to such restrictions and conditions, as set forth in this
Paragraph 5 and as the Committee shall in each instance approve, which need not
be uniform for all Option Holders; provided, however, that exercisability will
be at no less a rate than twenty percent (20%) of the options granted pursuant
to that agreement per year over a five (5) year period, and except as provided
in Paragraph 5(d), no Option may be exercised by any Option Holder who shall not
have met, both at the date of exercise and continuously since the date of grant,
the eligibility criteria set forth in Paragraph 3.
(c) Leaves of Absence. The option agreements issued pursuant to the Plan
-----------------
may contain such provisions as the Committee shall determine with respect to
approved leaves of absence.
(d) Retirement, Permanent Disability or Death of an Option Holder. In the
-------------------------------------------------------------
event of an Option Holder's retirement as an employee of the Corporation or any
parent or subsidiary thereof (the "Controlled Group"), the Option Holder's
Options or any unexercised portion thereof, to the
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<PAGE>
extent they were exercisable on the date of retirement, shall be exercisable by
the Option Holder or by his or her personal representative, heir or legatee at
any time prior to the expiration of one hundred twenty (120) days from the date
of retirement. In the event of an Option Holder's permanent disability or death
while an employee of the Controlled Group, the Option Holder's Options or any
unexercised portion thereof, to the extent they were exercisable on the date of
permanent disability or death, shall be exercisable by the Option Holder or by
his or her personal representative, heir or legatee at any time prior to the
expiration of one hundred eighty (180) days from the date of permanent
disability or death. For purposes of this paragraph, the determination of
whether an Option Holder is permanently disabled shall be made by the Committee,
based upon relevant medical information.
(e) Termination of Employment. If the employment of an Option Holder with
-------------------------
all members of the Controlled Group terminates for any reason other than (i) his
or her death, permanent disability or retirement, or (ii) as a result of a
surviving or substitute corporation substituting its stock, or that of its
parent or subsidiary, for stock of the Corporation subject to the Option, then
any unexercised portion of the Option Holder's Options, to the extent they were
exercisable on the date of termination, shall be exercisable by the Option
Holder at any time prior to the expiration of thirty (30) days from the date of
termination. A leave of absence approved by the Committee shall not be deemed
to be a termination of employment unless the Committee shall terminate its
approval in which case the Option Holder may exercise his or her Options at any
time prior to thirty (30) days from the date of termination of such approval.
(f) Payment. At the discretion of the Committee, each Option may provide
-------
that, upon its exercise, the Option Price shall be payable in full in cash or by
good personal check or in installments pursuant to a promissory note by the
Option Holder to the Corporation in a form to be approved by the Committee. The
Committee may also, in its sole discretion, make such determination at the time
of exercise of the Option. The Committee may also, in its sole discretion,
allow an Option Holder to exercise his or her Option by surrendering previously
issued Stock or other options to purchase Stock (whether issued under the Plan
or otherwise) held by the Option Holder having a-value (computed by the
Committee) equal to the Option Price. In valuing such options or stock
surrendered upon the exercise of Options in payment of the Option Price, the
Committee may, but is not required to, place the value at the Book Value Per
Share of Stock.
(g) Adjustments.
-----------
(i) In the event of a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination of shares, or any other change in
the shares of Stock, the shares available for purposes of the Plan or subject
to outstanding Options shall correspondingly be increased, decreased, or
changed, so that by exercise of his or her Option, the Option Holder may
receive, without change in aggregate Option Price, the total number of
securities as so increased, decreased or changed as he or she would have
received if he or she had exercised the Option immediately prior to such event
and had continued to hold the securities so purchased until affected by such
event (provided, however, that the Committee may make such adjustments for,
including elimination of, fractional shares as it in its sole discretion shall
determine).
(ii) Notwithstanding any other provision of the Plan, upon the
approval by the Board of the dissolution or liquidation of the Corporation, or
the consolidation of the Corporation
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<PAGE>
into another corporation, or any merger in which the Corporation is not the
surviving corporation or in any merger in which the shareholders of the
Corporation immediately prior to such merger do not continue to hold stock of
the Corporation immediately after such merger, or the sale of all or
substantially all of the Corporation's assets, that the surviving corporation
after a merger or consolidation with the Corporation (or the Corporation if its
shareholders immediately prior to the merger do not continue to hold shares of
the Corporation immediately after the merger) or the purchaser of all or
substantially all of the Corporation's assets may, in its discretion, cause to
be substituted or assumed a new option for any outstanding Option, whether or
not then exercisable, in connection with such merger or consolidation, such new
option to be applicable to the stock of the surviving or substituted
corporation, or any parent or subsidiary thereof or any other consideration
provided to shareholders in any such merger, consolidation or sale of assets.
Any such new option shall contain such terms and provisions as shall be required
in order to be not less favorable to the Option Holder than those contained in
his or her prior Option (except for elimination of fractional shares) had such
Option Holder exercised his or her Option immediately prior to such event. To
the extent that the foregoing adjustments relate to the Stock, such adjustments
shall be made by the Committee, whose determination in that respect shall be
final, binding and conclusive.
(h) Investment Purpose. As a condition to the exercise of all or any
------------------
portion of an Option, the Corporation may, if it shall deem it necessary or
desirable at the time of exercise, for any reason including, without limitation,
any reason connected with any law or regulation of any governmental authority
relating to the regulation of securities, require the Option Holder to represent
in writing to the Corporation, in a form satisfactory to the Corporation, that
it is the Option Holder's then intention to acquire the Stock subject to the
Option for investment and not with a view to the sale or distribution thereof.
In such event no shares of Stock shall be issued to such Option Holder until the
Corporation is satisfied with such representation. The Corporation may
thereafter provide its consent to the transfer of all or any part of such shares
in such manner and under such circumstances as the Corporation may determine.
(i) Modification, Extension and Renewal of Options. Subject to the terms
----------------------------------------------
and conditions and within the limitations of the Plan, the Committee may modify,
extend, renew any outstanding Option, or accept the surrender of any outstanding
Option (to the extent not previously exercised) and authorize the granting of a
new Option in substitution therefor (to the extent not previously exercised).
Notwithstanding the foregoing, except as authorized by this Plan, no
modification of an Option shall, without the consent of the Option Holder, alter
or impair any rights or obligations under any Option previously granted.
(j) Restrictions on Transfer. The agreements required under this Paragraph
------------------------
5 shall contain the restrictions on transferability set forth in Paragraph 7.
(k) Additional Provisions. The agreements required under this Paragraph 5
---------------------
shall contain such other provisions or restrictions as the Board or the
Committee shall deem advisable or necessary. Any of the time limitations set
forth in this Paragraph 5 may be lengthened or shortened in the sole discretion
of the Committee.
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<PAGE>
6. Nonassignability of Options.
---------------------------
Except as provided in this Paragraph 6, no Option shall be assignable or
transferable by the Option Holder except by will or by the laws of descent and
distribution. During the lifetime of an Option Holder, any Option granted to
such Option Holder shall be exercisable only by such Option Holder or, if such
Option Holder is permanently disabled, by his or her personal representative.
Notwithstanding the above, an Option Holder may transfer all or any part of the
Options to a living trust created by such Option Holder (and such trust may re-
transfer such Options to the Option Holder), provided that (i) such Option
Holder is a grantor of such trust; (ii) the beneficiaries of such trust are
members of such Option Holder's immediate family; and (iii) such trust and the
transfer of the Options thereto are revocable by the Option Holder during his
lifetime. For purposes of this Paragraph 6, "immediate family" shall be defined
as a spouse or domestic partner at the time of such transfer, mother, father,
child, grandchild, brother or sister of the Option Holder or his or her spouse
or domestic partner.
7. Repurchase of Stock.
-------------------
(a) Restrictions on Transfer. The Option Holder, the Option Holder's
------------------------
heirs, legatees, executors, administrators and personal representatives, will
not at any time sell or offer to sell, transfer by gift or otherwise, pledge or
otherwise encumber, any or all of the Stock acquired pursuant to the exercise of
the Option without first complying with the provisions of this Article 7. The
certificate or certificates representing the Stock may in the discretion of the
Committee or the Board bear legends referring to such provisions and conditions.
(b) Notice of Proposed Sale. Should the Option Holder desire during his or
-----------------------
her lifetime, and whether or not he or she is then employed by the Corporation,
to sell any of his or her shares of Stock acquired on the exercise of Options,
or any interest in such shares, he or she shall first offer to the Corporation
the right to purchase such shares by serving written notice on the Corporation.
The Notice must specify: (1) the name and address of the person or firm to whom
the Option Holder intends to sell the shares or interest in the shares; (2) the
number of shares or the interest in shares the Option Holder proposes to sell;
(3) the price or amount per share to be paid to the Option Holder for the
proposed sale; and (4) all other terms and conditions of the proposed sale. This
Notice may, at the election of the Option Holder, specify that the Option Holder
desires to sell the shares directly to the Corporation, in which event the price
specified in the Notice shall be the Book Value Per Share of Stock of the
Corporation for each share of Stock offered for purchase.
(c) The Corporation's Option to Purchase. The Committee shall have sixty
------------------------------------
(60) days after Notice by the Option Holder is received by it to determine
whether the Corporation or its assignee shall purchase the shares of Stock
specified in the Notice at the price specified in that Notice, or at the Book
Value Per Share of Stock, whichever is lower. The payment terms of such
purchase shall be, at the election of the Corporation, as set forth in the
Notice. or in annual installments over a period of not to exceed five (-5) years
on terms set by the Committee. A payment made in annual installments shall bear
interest equal to or (greater than the applicable Federal Rate, as determined
pursuant to Section 1274(d) of the Code.
(d) Exercise of Option by the Corporation. Should the Corporation or its
-------------------------------------
assignee, within the time specified in Paragraph 7(c), elect to purchase all of
the shares of Stock specified in the
-14-
<PAGE>
Notice, the Secretary of the Corporation shall promptly give written notice of
that fact to the Option Holder.
Within ninety (90) days thereafter. and upon deliver to it of the
certificate or certificates representing the shares of Stock specified in the
Notice duly endorsed for transfer, the Corporation or its assignee shall deliver
to the Option Holder any cash, notes or other instruments required to consummate
the purchase of such shares. The Corporation may, in its discretion and in full
payment of the purchase price, deliver to the Option Holder a promissory note
reflecting the terms of payment as provided for in the agreement evidencing the
grant of the Option exercised.
(e) Failure of the Corporation to Exercise Option. Should the Corporation
---------------------------------------------
fail to purchase, within the time and in the manner set forth above, all the
shares specified in the Notice, the Option Holder shall have the right, subject
to the conditions set forth below, to sell his/her shares in accordance with all
of the terms and conditions set forth in the Notice for a period of sixty (60)
days from the last date which the Corporation was entitled to exercise its
rights to purchase such shares. The right of the Option Holder to sell shall be
conditioned upon the execution by the transferee of an agreement to be bound by
all of the terms of the stock option agreement, including the restrictions on
transfer and the right to repurchase set forth in this Plan. In the event the
Option Holder does not sell such shares pursuant to the terms set forth in the
Notice within the time prescribed herein, no sale may take place without further
compliance with the terms of this Paragraph 7.
(f) Transfer Upon Discontinuance of Employment. Within sixty (60) days of
------------------------------------------
the discontinuance of employment of the option Holder with all members of the
Controlled Group, under any and all circumstances, whether voluntary or
involuntary, with or without cause, except for retirement, permanent disability
or death, the Corporation shall have the option and right to buy all of the
Stock acquired on the exercise of Options at the higher of the original purchase
price or the Book Value Per Share of Stock, subject to the same terms and
conditions as set forth in this Paragraph 7. Such purchase price may be paid in
cash or by delivery of a promissory note reflecting the terms referred to in
Paragraph 7(c). A leave of absence approved by the Committee shall not be
deemed to be a termination of employment unless the Committee shall terminate
its approval.
(g) Retirement, Permanent Disability or Death of an Option Holder. Within
-------------------------------------------------------------
(i) one hundred fifty (150) days after the retirement of the Option Holder, or
(ii) two hundred ten (210) days after the death or permanent disability of the
Option Holder. the Corporation shall have the right, but not the obligation to,
at the higher of the original purchase price or the Book Value Per Share of
Stock, repurchase from the Option Holder or his or her estate all of the Stock
acquired on the exercise of Options owned by the Option Holder or the Option
Holder's personal representative, heir or legatee. Such purchase price may be
paid in cash or by delivery of a promissory note reflecting the terms referred
to in Paragraph 7(d).
(h) Stock Vested in Spouse. Upon the death of the Option Holder, should
----------------------
the Option Holder's spouse become the owner of all or a part of the Option
Holder's shares. the Option Holder's spouse shall sell, and the Corporation
shall, at the higher of the original purchase price or the Book Value Per Share
of Stock, repurchase from the spouse, all of the Stock acquired on the exercise
of Options to which title shall have vested in the spouse upon and pursuant to
the death of the Option Holder. Such purchase shall be deemed to take place
simultaneously with the initial payment for
-15-
<PAGE>
the purchase of the Stock from the estate of the Option Holder. Such purchase
price may be paid in cash or by delivery of the promissory note referred to in
Paragraph 7(d).
(i) Termination Upon Public Trading of Stock or Acquisition of
----------------------------------------------------------
Corporation. In the event of (i) the consolidation of the Corporation into
- -----------
another corporation; (ii) any merger in which the Corporation is not the
surviving corporation or any merger in which the shareholders immediately prior
to such merger do not continue to hold stock of the Corporation or the surviving
corporation immediately after such merger; or (iii) the sale of all or
substantially all of the assets of the Corporation; or (iv) the Corporation
receiving an opinion of counsel that it is subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, as well as a determination
by the Committee that a liquid public market exists for the Stock, then the
restrictions on transferability of and the right and/or obligation to repurchase
the Stock acquired on the exercise of Options set forth in this Paragraph 7
shall terminate. The provisions of this Paragraph 7(i) shall not apply to a
merger or other reorganization the principal purpose of which is to change the
state of incorporation of the Corporation.
(j) Transfer to Trust. Notwithstanding any provision to the contrary
-----------------
contained in this Paragraph 7, an Option Holder may transfer all or any part of
the Stock acquired pursuant to the exercise of an Option to a living trust
created by such Option Holder (and such trust may re-transfer such shares to the
Option Holder), provided that (i) such Option Holder is a grantor of such trust;
(ii) the beneficiaries of such trust are members of such Option Holder's
immediate family; and (iii) such trust and the transfer of Stock thereto are
revocable by the Option Holder during his or her lifetime. For purposes of this
Paragraph 70), "immediate family" shall be defined as a spouse or domestic
partner at the time of such transfer, mother, father, child, Grandchild, brother
or sister of the Option Holder or his or her spouse or domestic partner. Any
reference in this Plan to Stock held by an Option Holder shall include Stock
transferred to the Option Holder's revocable living trust pursuant to the terms
of this Paragraph 7(j).
8. Duration of the Plan.
--------------------
The term of this Plan shall expire ten (10) years after it is adopted by
the Board of Directors. The provisions of Paragraph 7 shall remain in effect
until the occurrence of one of the terminating events set forth in Paragraph
7(i). The remaining portions of the Plan shall remain in effect until all
shares of Stock subject to or which may become subject to the Plan shall have
been purchased pursuant to the exercise of Options.
9. Rights as a Stockholder.
-----------------------
No Option Holder shall have the rights of a stockholder with respect to
shares of Stock subject to an Option until such Option has been validly
exercised and the shares of Stock issued pursuant thereto.
-16-
<PAGE>
10. Effect of the Plan on the Rights of Employees and Employer.
----------------------------------------------------------
Neither the adoption of the Plan nor any action of the Board or the
Committee shall be deemed to give any employee of any member of the Controlled
Group any right to be granted an Option; and nothing in the Plan or in any
Option shall confer any right to any employee of any member of the Controlled
Group to continue in the employ of any such member or interfere in any way with
any rights of such member to terminate the employment of any employee at any
time.
11. Withholding Taxes.
-----------------
To satisfy any federal, state or local withholding tax requirements with
respect to the issuance of Stock pursuant to the exercise of an Option, the
member of the Controlled Group most recently employing the Option Holder shall
have the right to deduct the necessary amounts from all payments under the Plan,
whether in cash or in Stock, or to deduct the necessary amounts from other
payments such employer member of the Controlled Group makes to the Option
Holder, or to require the Option Holder to remit to such employer member of the
Controlled Group the necessary amounts. The Committee may require that the
Option Holder deposit such sums with the Corporation in addition to the exercise
price as a condition precedent to his or her exercising the Option. The
Committee may, in its discretion, provide that in connection with the exercise
of an Option, the Option Holder will receive cash payments in amounts necessary
to reimburse the Option Holder for his or her income tax liability from such
exercise and the payment made pursuant to this Paragraph 11.
12. Amendment and Termination.
--------------------------
The Board may from time to time alter, amend, suspend or terminate the Plan
with respect to any shares of Stock for which Options have not been granted.
Any such action shall in no way alter or impair the right of the Corporation to
repurchase Stock pursuant to the provisions of Paragraph 7.
13. Use of Funds.
------------
The proceeds received by the Corporation from the sale of Stock pursuant to
the exercise of any Option shall be used for general corporate purposes.
14. Financial Statements.
---------------------
Each year following the close of the fiscal year of the Corporation, the
Option Holder, if he or she so requests, shall be provided with financial
statements of the Corporation for the previous fiscal year when such financial
statements are generally available.
Date Plan Adopted by Board of Directors: June 23, 1995
-17-
<PAGE>
Exhibit 4.2
SPACE APPLICATIONS CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
[EMPLOYEE]
THIS AGREEMENT ("Agreement") is entered into this ______ day of _________,
by and between SPACE APPLICATIONS CORPORATION, a California corporation
(hereinafter the "Corporation") and _________________________ (hereinafter the
"Employee").
All capitalized items not otherwise defined herein have the same meaning as set
forth in the Space Applications Corporation Nonqualified Stock Option Plan
adopted by the Board of Directors of the Corporation on June 15, 1995 (the
"Plan"). If Employee is an employee of a subsidiary of the Corporation, the
term "Corporation" shall include such subsidiary corporation where the context
so requires.
1. Grant of Option:
---------------
(a) Shares Optioned: Option Price: Time and Method of Exercise. In
----------------------------------------------------------
conformity with the Plan, and pursuant to action of the Committee charged with
the administration thereof, the Corporation hereby evidences and confirms its
grant to the Employee, effective on the date hereof, of an option (the "Option")
to purchase, on the terms and conditions and subject to any limitations
hereinafter set forth, an aggregate of shares of the common stock of the
Corporation (the "Stock"), at an exercise price of $_______ per share, which is
the Book Value Per Share of Common Stock (as defined in the Plan) on the date of
grant.
The term "first exercise date" is defined to be for purposes of this
Agreement, the date which is ____________ from the date the Option is granted
and the second and third exercise dates shall be, respectively, the dates which
are ____________ and ____________ from the first exercise date.
Employee may exercise Employee's Option as follows:
(i) From the first exercise date to the second exercise date,
Employee may exercise Employee's Option for ________ shares.
(ii) From the second exercise date to the third exercise date, the
Employee may exercise Employee's Option for additional shares;
(iii) From the third exercise date the Employee may exercise
Employee's Option for all the optioned shares for which Options have not
previously been exercised.
The right to purchase optioned shares is cumulative so that once Employee
becomes entitled pursuant to the foregoing to purchase optioned shares, Employee
may purchase such shares at any time prior to _________. No partial exercise of
such Option may be for less than full shares. In no event may any Options be
exercised after ___________.
In order to exercise the Option, the Employee must provide payment in full
(unless excused from payment in full pursuant to Paragraph 2 below) to the
Corporation; the payment shall be given in the manner specified in Paragraph 2
below and the Employee shall specify in writing the number of shares with
respect to which the Option is being exercised. The Corporation shall not be
required to issue fractional shares.
-18-
<PAGE>
(b) Retirement, Permanent Disability or Death of an Employee. In the event
--------------------------------------------------------
of Employee's retirement as an employee of the Corporation, the Employee's
Options or any unexercised portion thereof, to the extent they were exercisable
on the date of retirement, shall be exercisable by the Employee or by his or her
personal representative, heir or legatee at any time prior to the expiration of
one hundred twenty (120) days from the date of retirement. In the event of an
Employee's permanent disability or death while an employee of the Corporation,
the Employee's Options or any unexercised portion thereof, to the extent they
were exercisable on the date of permanent disability or death, shall be
exercisable by the Employee or by his or her personal representative, heir or
legatee at any time prior to the expiration of one hundred eighty (180) days
from the date of permanent disability or death. For purposes of this paragraph,
the determination of whether Employee is permanently disabled shall be made by
the Committee, based upon relevant medical information.
(c) Termination of Employment. If the employment of Employee with the
-------------------------
Corporation terminates for any reason other than (i) his or her death, permanent
disability or retirement, or (ii) as a result of a surviving or substitute
corporation substituting its stock, or that of its parent or subsidiary, for
stock of the Corporation subject to the Option, then any unexercised portion of
the Employee's Options, to the extent they were exercisable on the date of
termination, shall be exercisable by the Employee at any time prior to the
expiration of thirty (30) days from the date of termination. A leave of absence
approved by the Committee shall not be deemed to be a termination of employment
unless the Committee shall terminate its approval, in which case Employee may
exercise his or her Options at any time within thirty (30) days from the date of
termination of such approval.
(d) Financial Statements. Each year following the close of the fiscal year
--------------------
of the Corporation, Employee, if Employee so requests, shall be provided with
financial statements for the Corporation for the previous fiscal year when such
financial statements are generally available.
2. Deferred Payment:
----------------
Employee shall pay the exercise price in full in cash, by surrendering
previously issued shares of common stock or options to purchase shares of common
stock of the Corporation, valued at the Book Value Per Share of Stock, or by
good personal check upon giving the notice of exercise of the Option unless the
Corporation and Employee have agreed in writing (there being no obligation of
the Corporation to so agree) that all or part of the exercise price may be paid
by Employee in installments in the manner provided for in such agreement. The
"Book Value Per Share of Stock" means the shareholders' equity of the
Corporation as determined by the last audited financial statements of the
Corporation issued prior to the event requiring that Book Value Per Share of
Stock be computed, divided by the number of shares of Stock outstanding, as of
the last day of the fiscal year reflected in such financial statements. In
computing Book Value Per Share of Stock, no adjustment shall be made for
outstanding options, warrants or unexercised rights to purchase Stock or shares
of stock issued or repurchased following the last day of the fiscal year
reflected in such financial statements.
3. Repurchase of Stock:
-------------------
-19-
<PAGE>
(a) Restrictions on Transfer. Employee, Employee's heirs, legatees,
------------------------
executors, administrators and personal representatives, will not at any time
sell or offer to sell, transfer by gift or otherwise, pledge or otherwise
encumber, any or all of the Stock acquired pursuant to the exercise of the
Option without first complying with the provisions of this Paragraph 3. The
certificate or certificates representing the shares may, in the discretion of
the Committee or the Board, bear legends referring to such provisions and
conditions.
(b) Notice of Proposed Sale. Should Employee desire during Employee's
-----------------------
lifetime, and whether or not Employee is then employed by the Corporation, to
sell any of Employee's shares of Stock, or any interest in such shares, Employee
shall first offer to the Corporation the right to purchase such shares by
serving written notice in the manner prescribed in Paragraph 13 (the "Notice").
The Notice must specify: (1) the name and address of the person or firm to whom
Employee intends to sell the shares or interest in the shares; (2) the number of
shares or the interest in shares Employee proposes to sell; (3) the price or
amount per share to be paid to Employee for the proposed sale; and (4) all other
terms and conditions of the proposed sale. This Notice may, at the election of
Employee, specify that Employee desires to sell the shares directly to the
Corporation, in which event the price specified in the Notice shall be the Book
Value Per Share of Stock for each share of Stock offered for purchase.
(c) The Corporation's Option to Purchase. The Committee shall have sixty
------------------------------------
(60) days after Notice by Employee is received by it to determine whether the
Corporation or its assignee shall purchase the shares of Stock specified in the
Notice at the price specified in that Notice, or at the Book Value Per Share of
Stock, whichever is lower. The payment terms of such purchase shall be, at the
election of the Corporation, as set forth in the Notice or in annual
installments over a period not to exceed five (5) years bearing interest at the
Applicable Federal Rate ("Applicable Federal Rate") as determined pursuant to
(S)1274(d) of the Internal Revenue Code, as amended (the "Code").
(d) Exercise of Option by the Corporation. Should the Corporation or its
-------------------------------------
assignee, within the time specified in Paragraph 3(c), elect to purchase all or
a portion of the shares of Stock specified in the Notice, the Secretary of the
Corporation shall promptly give written notice of that fact to Employee.
Within ninety (90) days thereafter, and upon delivery to it of the
certificate or certificates representing the shares of Stock specified in the
Notice duly endorsed for transfer, the Corporation or its assignee shall deliver
to Employee any cash, notes or other instruments required to consummate the
purchase of such shares; the Corporation may, in its discretion and in full
payment of the purchase price, deliver to Employee a promissory note bearing
interest at the Applicable Federal Rate.
(e) Failure of the Corporation to Exercise Option. Except in the case of
---------------------------------------------
an offer to sell to the Corporation, should the Corporation fail to purchase,
within the time and in the manner set forth above, all the shares specified in
the Notice, Employee shall have the right, subject to the conditions set forth
below, to sell Employee's remaining shares to the person and in accordance with
all of the terms and conditions set forth in the Notice for a period of sixty
(60) days from the last date which the Corporation was entitled to exercise its
rights to purchase such shares. The right of Employee to sell shall be
conditioned upon the execution by the transferee of an agreement to be bound by
the restrictions on transfer and the Corporation's right to repurchase set forth
in this
-20-
<PAGE>
Agreement. In the event Employee does not sell such shares pursuant to the terms
set forth in the Notice within the time prescribed herein, no sale may take
place without further compliance with the terms of this Paragraph 3.
(f) Transfer Upon Discontinuance of Employment. Within sixty (60) days of
------------------------------------------
the discontinuance of employment of Employee with the Corporation, under any and
all circumstances, whether voluntary or involuntary, with or without cause,
----
except retirement, permanent disability or death, and within sixty (60) days of
the termination by the Committee of approval of a leave of absence, Employee
hereby offers, and the Corporation shall have the option to buy, all of the
Stock acquired on the exercise of Options at the higher of the exercise price
paid by Employee for the Stock or the Book Value Per Share of Stock for each
share of Stock purchased, subject to the same terms and conditions as set forth
in this Paragraph 3. Such purchase price may be paid in cash or by the delivery
of the promissory note reflecting the terms referred to in Paragraph (c) of this
Paragraph 3. A leave of absence approved by the Committee shall not be deemed to
be a termination of employment unless the Committee shall terminate its
approval.
(g) Retirement, Permanent Disability or Death of Employee. Within (i) one
-----------------------------------------------------
hundred fifty (150) days after the retirement of Employee, or (ii) two hundred
ten (210) days after the death or permanent disability of Employee, the
Corporation shall have the right, but not the obligation to, at the higher of
the exercise price paid by Employee for the Stock or the Book Value Per Share of
Stock, repurchase from Employee or Employee's estate all of the Stock acquired
by the exercise of Options hereunder owned by Employee or Employee's estate,
personal representative, heir or legatee. Such purchase price may be paid in
cash or by delivery of the promissory note reflecting the terms referred to in
Paragraph (c) of this section. No transfer of an Option by will or by the laws
of descent and distribution shall be effective to bind the Corporation unless
the Corporation shall have been furnished with written notice thereof and a copy
of the will and such other evidence, if any, as the Committee may deem necessary
to establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions of this Agreement.
(h) Stock Vested in Spouse. Upon the death of Employee, should Employee's
----------------------
spouse become the owner of all or a part of Employee's shares, Employee's spouse
shall sell, and the Corporation shall, at the higher of the exercise price paid
by Employee for the Stock or the Book Value Per Share of Stock, repurchase from
the spouse, all of the Stock acquired on the exercise of Options to which title
shall have vested in the spouse upon and pursuant to the death of Employee. Such
purchase shall be deemed to take place simultaneously with the initial payment
for the purchase of the Stock from the estate of Employee. Such purchase price
may be paid in cash or by delivery of the promissory note reflecting the terms
referred to in Paragraph (c) of this Paragraph 3.
(i) Termination Upon Public Trading of Stock or Acquisition of Corporation.
----------------------------------------------------------------------
In the event of (i) the consolidation of the Corporation into another
corporation; (ii) any merger in which the Corporation is not the surviving
corporation or in which the shareholders of the Corporation immediately prior to
such merger do not continue to hold Stock of the Corporation or the surviving
corporation immediately after the merger; (iii) the sale of all or substantially
all of the assets of the Corporation; or (iv) the Corporation receiving an
opinion of counsel that it is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, as well as a determination by the
Committee that a liquid public market exists for the Stock, then the
restrictions on transferability of
-21-
<PAGE>
and the right and/or obligation to repurchase the Stock set forth in this
Paragraph 3 shall terminate. The provisions of this Paragraph 3 shall not apply
to a merger or other reorganization the principal purpose of which is to change
the state of incorporation of the Corporation.
(j) Transfer to Trust. Notwithstanding any provision to the contrary
-----------------
contained in this Paragraph 3, Employee may transfer all or any part of the
Stock acquired pursuant to the exercise of an Option to a living trust created
by Employee (and such trust may retransfer such shares to Employee), provided
that (i) Employee is a grantor of such trust; (ii) the beneficiaries of such
trust are members of Employee's immediate family; and (iii) such trust and the
transfer of Stock thereto are revocable by Employee during Employee's lifetime.
For purposes of this Paragraph 3(j), "immediate family" shall be defined as a
spouse or domestic partner at the time of such transfer, mother, father, child,
grandchild, brother or sister of Employee or Employee's spouse or domestic
partner. Any reference in this Agreement to Stock held by an Employee shall
include Stock transferred to Employee's revocable living trust pursuant to the
terms of this Paragraph 3(j).
4. Nonassignability of Option:
--------------------------
Except as otherwise provided in Paragraph 1 or this Paragraph 4, the Option
granted hereunder and the rights and privileges conferred hereby, shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise), and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of such Option or of any right or privilege conferred hereby,
contrary to the provisions hereof, or upon the levy of any attachment or similar
process upon the rights and privileges conferred hereby which attachment is not
removed within ten (10) days of the levy thereof, such Option and the rights and
privileges conferred hereby shall immediately terminate and become null and
void. Notwithstanding the above, Employee may transfer all or any part of the
Options acquired to a living trust created by Employee (and such trust may re-
transfer such shares to Employee), provided that (i) Employee is a grantor of
such trust; (ii) the beneficiaries of such trust are members of Employee's
immediate family; and (iii) such trust and the transfer of the Options thereto
are revocable by Employee during Employee's lifetime. For purposes of this
Paragraph 4, "immediate family" shall be defined as a spouse or domestic partner
at the time of such transfer, mother, father, child, grandchild, brother or
sister of Employee or Employee's spouse or domestic partner.
5. No Interim Rights:
-----------------
Employee shall have no rights as a stockholder with respect to any shares
covered by the Option until Employee shall become the holder of record of such
shares, and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash or other property) or distributions or other
rights in respect of such shares for which the record date is prior to the date
upon which Employee shall become the holder of record thereof, except as
expressly provided in Paragraphs 7 and 8 hereof.
-22-
<PAGE>
6. Changes in Corporation:
----------------------
The existence of the Option granted hereby shall not affect in any way the
right or power of the Corporation or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the common stock or the rights thereof,
or the dissolution or liquidation of the Corporation, or any sale or transfer or
spin-off of all or any part of its assets or business, or any other corporate
act or proceeding whether of a similar character or otherwise.
7. Stock Dividend, Subdivision, Reclassification, Conversion:
---------------------------------------------------------
The shares with respect to which the Option is granted are shares of the
common stock of the Corporation as presently constituted, but if, and whenever,
prior to the delivery by the Corporation of all of the shares of the common
stock in respect to which the Option is granted, the Corporation shall effect
the payment of a stock dividend on common stock payable in shares of common
stock, a subdivision or combination of the shares of the common stock, or a
reclassification of the common stock (whether pursuant to a merger in which the
Corporation is the surviving entity, or otherwise), the number and price of
shares remaining under option shall be appropriately adjusted. Such adjustment
shall be made by the Committee, whose determination as to what adjustment shall
be made, and the extent thereof, shall be final and shall be binding and
conclusive for all purposes. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to the
Option. Except as hereinbefore expressly provided, the declaration and pay
ment by the Corporation of any dividend, payable in cash or property; and the
issue by the Corporation or a subsidiary corporation of shares of stock of any
class, or shares of stock, obligations, or securities convertible into shares of
stock of any class, for cash or property or for labor or services, either upon
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations or securities of the Corporation
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of common stock subject to the Option.
8. Merger or Consolidation:
-----------------------
Upon the dissolution or liquidation of the Corporation, or the
consolidation of the Corporation into another corporation, or upon any merger
(except a merger the principal purpose of which is to change the state of
incorporation of the Corporation) in which the Corporation is not the surviving
corporation or in which the shareholders of the Corporation immediately prior to
such merger do not continue to hold Stock of the Corporation or the surviving
corporation immediately after the merger, or upon the sale of all or
substantially all the Corporation's assets, the Option shall terminate, but
Employee shall have the right, prior to such dissolution, liquidation, merger,
consolidation or sale, to exercise Employee's Option to the extent it shall not
have previously been exercised, subject, however, to any limitation on the
exercise of the Option in effect on the date of exercise. In the event of such
consolidation, merger or sale of assets, the Corporation or the surviving,
substitute or purchasing corporation may, in its discretion, and in the case of
a merger the principal purpose of which is to change the state of incorporation
of the Corporation will substitute or cause to be substituted a new option for
Employee's Option. In such event, the new option shall
-23-
<PAGE>
be applicable to the stock of the surviving or substitute or purchasing
corporation (or its parent or subsidiary corporation) and such new option shall
contain such terms and provisions as shall be required in order to be not less
favorable to Employee than those contained in Employee's prior option. The
foregoing adjustments and the manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion. Any such adjustment
may provide for the elimination of any fractional share which might otherwise
become subject to the Option.
9. Investment Purpose:
------------------
At the time of any exercise of the Option, the Corporation may, if it shall
deem it necessary or desirable for any reason including, without limitation, any
reason connected with any law or regulation of any governmental authority
relating to the regulation of securities, require Employee, or Employee's
personal representative, or the executor of Employee's will or the administrator
of Employee's estate, and the person or persons to whom the Option shall have
been or is to be transferred by such executor or administrator pursuant to will
or the laws of descent and distribution, or any of them, to represent in writing
to the Corporation that it is Employee's or such person's or persons' then
intention to acquire the shares covered by the Option for investment and not
with a view to the sale or distribution thereof (except that the executor of
Employee's will or the administrator of Employee's estate may distribute such
shares to the persons entitled thereto unless such distribution would violate
any law or regulation of any governmental authority and subject to the good
faith written representation by such distributes that it is the distributee's
then intention to acquire the shares for investment and not with a view to the
sale or distribution thereof). In such event, no shares shall be issued to
Employee or such other person or persons pursuant to the exercise of the Option
unless and until the Corporation is satisfied with the correctness of such
representation. The Corporation may at any time or from time to time provide to
Employee or such other person or persons, with respect to the shares acquired
under such an investment verification, the Corporation's consent to the transfer
of all or any part of such shares in such manner and under such circumstances as
the Corporation may determine. In addition to the foregoing, Employee and such
other person or persons, shall, with respect to all of the shares covered by the
Option, cooperate with the Corporation (including without limitation taking such
action and refraining from such action as the Corporation in its sole discretion
may direct), in complying with all applicable requirements of law and all
applicable requirements of any stock exchange on which the Corporation's stock
may be listed, which requirements of law and of such stock exchange are, in the
sole discretion of the Corporation, applicable in connection with the Option or
the shares covered by the Option, including without limitation those which are
applicable to the exercise of the Option, or the disposition of the shares
covered by the option.
10. Disputes:
--------
As a condition of the granting of the Option, Employee, for Employee and
Employee's heirs, personal representatives, legatees, successors and assigns,
agrees that any dispute or disagreement which shall arise under or as a result
of this Agreement shall be determined by the Committee in its sole discretion
and judgment and that any such determination and any other determination,
interpretation or other action made or taken in connection with or pursuant to
this Agreement by the Committee shall be final and binding and conclusive for
all purposes.
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<PAGE>
11. Laws and Regulations:
--------------------
Notwithstanding any of the provisions hereof, Employee agrees that Employee
will not exercise the Option, and that the Corporation will not be obligated to
issue any shares pursuant to this Agreement, if the exercise of the Option or
the issuance of such shares would constitute a violation by Employee or by the
Corporation of any provision of any law or regulation of any governmental
authority or any requirement of any stock exchange on which the Corporation's
stock may be listed. Any determination of the Committee in this connection
shall be final and shall be binding and conclusive for all purposes. The
Corporation shall in no event be obligated to take any affirmative action in
order to cause the exercise of the Option or the issuance of shares pursuant
thereto to comply with any law or any regulation of any governmental authority
or to be freely tradable.
12. Notices:
-------
All notices or other communications provided for by this Agreement shall be
made in writing and shall be deemed properly delivered when (i) delivered
personally or by facsimile transmission equipment, or (ii) mailed to the parties
entitled thereto, registered or certified mail, postage prepaid, if to Employee
or Employee's personal representative, heir, legatee or spouse at the address
set forth after Employee's signature to this Agreement or if to the Corporation
at the following address (or to such address designated in writing by one party
to the other):
SPACE APPLICATIONS CORPORATION
200 East Sandpointe Avenue, Suite 200
Santa Ana, California 92707
Attention: Secretary
13. Successors:
----------
Subject to the provisions hereof, this Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Corporation.
Whenever the word "Employee" is used in any provision of this Agreement under
circumstances where the provision should logically apply to any other person or
persons to whom the Option or Stock, in accordance with the provisions of
Paragraphs 1, 3 or 4 hereof may be transferred, the word "Employee" shall be
deemed to include such person or persons.
14. Changes in Law or Regulations:
-----------------------------
If the provisions of any law or regulation now in effect of any
governmental authority applicable to the Option or to the exercise thereof or
the disposition of shares acquired pursuant thereto are hereafter amended or
terminated or new or additional provisions of any law or regulation are
hereafter enacted or adopted which either eliminate or reduce the advantage to
the Corporation, its subsidiaries, and their respective shareholders, of the
Option, the Corporation may cancel the Option to the extent it has not been
exercised by Employee. The determination of the Corporation to cancel the
Option shall be final and shall be binding and conclusive for all purposes.
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<PAGE>
15. Withholding Taxes:
-----------------
To satisfy any federal, state or local withholding tax requirements, the
Corporation shall have the right to deduct the necessary amounts from all
payments, whether in cash or in Stock, made to Employee, or to require Employee
to remit to the Corporation the necessary amounts prior to the issuance of stock
certificates to Employee. The Committee may, in its discretion, provide that in
connection with the exercise of an Option, Employee will receive cash payments
in lieu of Stock valued at the Book Value Per Share of Stock in amounts
necessary to reimburse Employee for Employee's income tax liability from such
exercise and the payment made pursuant to this Paragraph 15.
16. Miscellaneous:
-------------
(a) Option Not An Incentive Stock Option. This Option is not, and will not
------------------------------------
be treated as, an Incentive Stock option under Section 422A of the Code.
(b) Interpretation. Employee hereby acknowledges that Employee has
--------------
received a copy of the Plan. The Option granted herein shall in all respects be
subject to and governed by the provisions of the Plan. This Agreement shall in
all respects be so interpreted and construed as to be consistent with this
intention. In the event of a conflict between the provisions of the Agreement
and the Plan, the provisions set forth in the Plan shall prevail.
(c) Amendments. No supplement, modification or amendment of any term,
----------
provision or condition of this Agreement shall be binding or enforceable unless
-------
executed in writing by the parties hereto.
(d) Interpretation and Definitions. The word "Corporation" when used in
------------------------------
this Agreement with reference to employment shall include subsidiaries or any
parent of the Corporation.
(e) Parties in Interest. Nothing in this Agreement, whether express or
-------------------
implied, is intended to confer upon any person other than the parties hereto and
their respective heirs, representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement, nor is anything in this
Agreement intended to relieve or discharge the liability of any other party
hereto, nor shall any provision hereof give any entity any right of subrogation
against or action over against any party.
(f) Governing Laws. This Agreement and any other agreement entered into in
--------------
connection herewith shall be construed under and in accordance with the laws of
the State of California applicable to contracts made and wholly to be performed
therein.
(g) Titles and Headings; Interpretation. The headings of the paragraphs of
-----------------------------------
this Agreement contained herein are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. This
Agreement is the result of negotiations among the parties hereto and is not to
be interpreted against any party hereto.
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<PAGE>
(h) Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
(i) Cumulative Rights and Remedies. The rights and remedies provided for
------------------------------
in this Agreement are cumulative and in addition to, and shall not restrict or
limit, any other rights and remedies available at law or in equity.
(j) Gender. Throughout this Agreement, wherever the context requires the
------
singular shall include the plural and the masculine gender shall include the
feminine and neuter genders.
The parties hereto have executed this Agreement the day and year first
above written, which is the time of the granting of the Option hereunder.
SPACE APPLICATIONS CORPORATION ----------------------------------
200 East Sandpointe Avenue, Suite 200 Employee
----------------------------------
By:------------------------------- Address
(officer)
----------------------------------
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<PAGE>
Exhibit 5
May 26, 1999
SM&A Corporation
4695 MacArthur Court, Eighth Floor
Newport Beach, California 92660
Ladies and Gentlemen:
At your request, we have examined the form of Registration Statement on
Form S-8 (the "Registration Statement") to be filed by SM&A Corporation (the
"Company") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, for the purpose of registering the sale of
shares of Common Stock of the Company upon the exercise of options granted under
the 1995 Space Applications Corporation Nonqualified Stock Option Plan, assumed
by the Company in connection with the merger of SAC Acquisition, Inc., a wholly-
owned subsidiary of the Company, with and into Space Applications Corporation.
We are familiar with the proceedings taken and proposed to be taken in
connection with the issuance and sale of the securities in the manner set forth
in the Registration Statement. Subject to completion of the proceedings
contemplated in connection with the foregoing matters, we are of the opinion
that all of the Common Stock to be sold pursuant to the Registration Statement
has been duly authorized and, when issued and sold in the manner set forth in
the Registration Statement will, upon such issuance and sale, be validly and
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement or any amendment thereto.
Respectfully submitted,
/s/ RUTAN & TUCKER, LLP
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<PAGE>
Exhibit 23.2
Consent of Independent Auditors
-------------------------------
To the Board of Directors and Shareholders
SM&A Corporation:
We consent to incorporation by reference of our report dated January 25,
1999, except for notes 5 and 13 which are dated as of March 12, 1999, which
appears in the December 31, 1998, annual report on Form 10-K and to the
reference to our firm under the heading "Experts" in the prospectus.
We also consent to incorporation by reference of our report dated April 3,
1997, which appears in the Registration Statement on Form S-1 dated November 2,
1997.
/s/ KPMG LLP
Orange County, California
May 26, 1999
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