SM&A asks shareholders to reject board nominees proposed by founder, former CEO

By Lisa Kerner

Charlotte, N.C., April 23 - SM&A chairman Dwight L. Hanger asked the company's shareholders to support the board of directors' four nominees for re-election to the nine-member board at the annual meeting on May 23 and to reject "the hand-picked dissident slate" proposed by former SM&A chief executive officer Steven Myers.

Myers, who is one of the four dissident nominees, was asked to retire from the company in March 2007, according to Hanger's April 21 open letter to stockholders. The letter was included in a company news release.

Hanger said he has the "utmost confidence" in the current board and that the board remains committed to the continued implementation of SM&A's strategic plan.

SM&A recruited Cathy McCarthy back to the company as president and CEO, added General Peter Pace to its board and senior executive team and adopted a new 2008 strategic plan, the letter stated.

Pace is retired from the U.S. Marine Corps and is the former chairman of the joint chiefs of staff.

Hanger described Myers' actions as disruptive, adding that Myers' "rhetoric contains numerous misleading and disingenuous statements" in what the company believes is an "attempt to shift accountability for the issues that he has raised from himself and to [unseat] the independent directors who were partially responsible for his departure."

On March 25, Myers, SM&A's founder and largest shareholder, 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 said in a prior news release.

In his letter to stockholders, Hanger said that under McCarthy's leadership, the company has:

• Retained essential members of the management team who were on the verge of leaving;

• Replenished a sales executive team that had lost a significant number of its members;

• Solidified the senior management team by promoting an internal candidate to executive vice president of operations, recruited a senior vice president of human resources and enlisted a "top-level" chief financial officer;

• Posted record revenue in 2007 of $98.3 million, earnings of $6.3 million (up 73%) and earnings per share of $0.33 (up 74%); and

• Completed a successful acquisition.

It was previously reported that Myers is concerned about the company's selling, general and administrative expenses and their impact on earnings per share, as well as SM&A's communications with shareholders and analysts, which he described as poor.

Hanger said Myers voiced these concerns during a meeting but failed to offer any suggestions for improvements.

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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