SM&A continues public battle with founder, former CEO; annual meeting set for May 23

By Lisa Kerner

Charlotte, N.C., May 8 - SM&A sent another letter to shareholders in an ongoing effort to garner support for the re-election of SM&A's board of directors.

The company has been urging shareholders to reject the "hand-picked dissident slate" of director nominees proposed by and including SM&A founder and former chief executive officer Steven S. Myers.

SM&A will hold its annual meeting on May 23.

In its May 8 letter, SM&A said it is confident its plan will enhance stockholder value. Shareholders can hear details of the plan via a replay of the company's earnings conference call at the SM&A web site, according to the letter.

"We believe our investors will have the same reaction to this plan that our employees did when it was presented at an off-site conference in March," chairman Dwight L. Hanger stated in the letter. "They fully embraced it. When presented, it was met with a two-minute standing ovation."

Hanger's letter also criticized Myers, the company's largest stockholder, saying he was out of touch with SM&A's focus, which has "evolved substantially" since Myers was asked to leave the company in March 2007.

Myers is blamed for saddling SM&A's current board and management with problems he created, according to the letter.

Hanger noted that he expects Myers to criticize SM&A's strategic plan, since acknowledging its potential for enhancing stockholder value would get in the way of Myers' attempt to take control of the company.

In a May 2 letter to shareholders, Hanger called Myers' nominations "a transparent, de facto takeover attempt by four friends" whose ties will make them "anything but independent."

Hanger, in a previous message to shareholders, said nothing positive can come out of Myers' efforts, noting that that at one point during Myers' tenure as CEO, the company's stock traded at $0.62 per share and was delisted.

Myers, in a statement released on Thursday, said SM&A and City National Bank colluded to include in SM&A's credit facility "an illegitimate default provision designed solely to skew the upcoming election and intimidate SM&A's shareholders into voting for the incumbent board."

According to Myers, City National and SM&A renewed the revolving credit agreement in the midst of the proxy contest on the day the agreement expired, May 1, and added one "significant" change to the terms of the credit agreement.

The agreement now contains a default provision that will be triggered if a minority of the board changes in a contested election, Myers said.

Myers wants City National to remedy what he calls unlawful conduct by permanently waiving the default provision by May 12 or otherwise expose City National to "substantial legal liability, including the prospects of class-action lawsuits that will seek punitive damages."

On March 25, Myers said the company's rejection of a shareholder presence on its board of directors "speaks volumes about the intransigence" of the current board.

"As for the board's concern about the cost and distraction of a proxy fight, that was its choice when it refused to nominate the partial board slate I proposed," Myers noted in a prior news release.

SM&A, based in Newport Beach, Calif., provides competition management and program support services to industrial customers in the aerospace and defense, information technology, telecommunications, and other industries.

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