SM&A adds ISS/RiskMetrics to list of proxy advisory firms endorsing its slate of director nominees

By Lisa Kerner

Charlotte, N.C., May 15 - SM&A said Institutional Shareholder Services Inc. (ISS)/RiskMetrics became the third proxy advisory firm to recommend stockholders re-elect all nine of the company's current directors at its May 23 annual meeting.

Glass Lewis & Co. and Proxy Governance Inc. also recommended stockholders support all nine current SM&A directors and reject the dissident slate of former chief executive officer Steven Myers, an SM&A news release said.

According to SM&A, ISS/RiskMetrics noted that the company's performance has improved over the last fiscal year under SM&A's new management team. ISS/RiskMetrics cited the company's increases in revenue, net income and earnings per share in fiscal 2007, the release said.

ISS/RiskMetrics attributed SM&A's past "subpar performance" to Myers' leadership, SM&A said.

Myers, who was asked to leave SM&A in March 2007, is seeking shareholder support for his slate of director nominees, which includes himself, it was previously reported.

ISS/RiskMetrics also analyzed Myers' nominees Redge Bendheim and former SM&A directors Albert Nagy and Kenneth Colbaugh. According to ISS/RiskMetrics, Bendheim lacks relevant industry experience.

In response to the latest statement from SM&A, Myers accused the company of "fear mongering" to detract shareholders from what he said are the real issues: deficient board oversight and loss of shareholder value.

Myers maintains that the recent conclusions by ISS/RiskMetrics and other proxy advisory firms fail to recognize that his slate " would enhance the expertise of the SM&A board," a statement released by Myers said.

According to Myers, the ISS/RiskMetrics report cites SM&A's declining stock price, noting that the dissident shareholder has made a "valid case for a change and greater management oversight given the sustainable poor performance of the company."

Myers pointed out that his nominees own a total of some 17% of SM&A's outstanding shares, compared with the less than 2% owned by the current board.

SM&A and Myers have also publicly debated the event of default recently added to SM&A's credit agreement with City National Bank.

As previously reported, the new event of default is triggered if three or more incumbent directors cease to be members of SM&A's board.

SM&A said the new event of default was required by City National Bank in order to re-assess the credit agreement terms if there are "changed circumstances" as a result of the proxy battle.

Myers maintains the addition of the event of default is an attempt by the company to influence the outcome of the current proxy contest.

The ISS/RiskMetrics report highlighted concerns regarding the event of default provision, Myers added.

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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