EXHIBIT 10.6
SM&A
Executive Retention Agreement
     THIS EXECUTIVE RETENTION AGREEMENT (this “Agreement”) by and between SM&A,
a Delaware corporation (the “Company”), and Daniel Hart (the “Executive”) is
made as of August 25, 2008 (the “Effective Date”).
     WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders;
     WHEREAS, the Board of Directors of the Company (the “Board”) has determined
that appropriate steps should be taken to reinforce and encourage the continued
employment and dedication of the Company’s key personnel without distraction
from the possibility of a change in control of the Company and related events
and circumstances; and
     WHEREAS, the Executive entered into that certain Proprietary Information
and Invention Assignment Agreement dated, February 22, 2004 (“Proprietary
Information Agreement”), which shall continue in full force and effect.
     NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive’s
employment with the Company is terminated under the circumstances described
below.
     1. Term of Agreement. This Agreement, and all rights and obligations of the
parties hereunder, shall take effect upon the Effective Date and shall expire
upon: (a) the date twenty-four (24) months after the Change in Control Date (as
such term is defined below), if the Executive is still employed by the Company
after such later date, (b) the fulfillment by the Company of all of its
obligations under this Agreement if the Executive’s employment with the Company
terminates within twenty-four (24) months after the Change in Control Date, or
(c) the termination of the Executive’s employment with the Company if a Change
in Control (as such term is defined below) did not occur prior to the date of
such termination (the “Term”).
     2. Benefits to the Executive.
          2.1 The effect of a Change in Control (as defined below) on any of the
Executive’s stock options, restricted stock awards or other equity awards shall
be determined in accordance with the terms of such options or awards and shall
not be affected by this Agreement.
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          2.2 If a Change in Control occurs and if the Executive’s employment
with the Company terminates within twenty-four (24) months after the Change in
Control Date, then the Executive shall be entitled to the following benefits:
               (a) Termination Without Cause Or For Good Reason. The Executive’s
employment with the Company may be terminated at any time by the Company without
Cause (as defined below) by giving the Executive thirty (30) days’ advance
written notice of such termination, or by the Executive for Good Reason (as
defined below) by giving the Company thirty (30) days’ advance written notice of
such termination; provided, however, that no condition shall constitute Good
Reason unless the Executive provides notice of such condition to the Company
within ninety (90) days of its initial existence, and the Company fails to
remedy the condition within thirty (30) days of its receipt of such notice; and
provided, further, that the Executive terminates employment with the Company
within two (2) years following the initial existence of the Good Reason
condition. In the event of a termination pursuant to this Section 2.2(a), the
Company shall pay to the Executive the following amounts:
                    (1) On the effective date of the Executive’s termination
(the “Date of Termination”), the sum of (A) the Executive’s base salary through
the Date of Termination, (B) any earned but unpaid bonus amounts with respect to
periods ending prior to the Date of Termination to which the Executive is
entitled, and (C) any accrued but unused paid time off through the Date of
Termination (the “Accrued Obligations”); and
                    (2) on a monthly basis, in accordance with the Company’s
standard practice prior to the Date of Termination, for a period of twelve
(12) months following the Date of Termination, an amount equal to the sum of
(A) one-twelfth of the Executive’s highest average annual base salary with the
Company during the three-year period prior to the Change in Control Date and
(B) one-twelfth of the Executive’s highest annual target bonus amount with the
Company during the three-year period prior to the Change in Control Date;
                    (3) provided the Executive is eligible to make, and makes, a
timely election for continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) under any group health plan of
the Company, continuation of coverage in effect for the Executive at the Date of
Termination shall be provided under such plans of the Company, without a premium
charge or cost to the Executive for the twelve (12) month period commencing
after the Date of Termination, or, if earlier, until the date the Executive is
no longer eligible for COBRA (whether because the Executive is covered by a new
employer’s group health plan or otherwise). After the expiration of the period
set forth in the prior sentence concludes, the Executive shall be responsible
for the payment of all further premiums attributable to COBRA continuation
coverage at the same rate as the Company charges all COBRA beneficiaries. The
Executive agrees to notify the Company immediately if the Executive becomes
covered by another group health plan.
                    (4) The Executive shall only be entitled to the severance
and the COBRA payments (if applicable) under Section 2.2(a)(2)-(3) of this
Agreement if (A) the Executive executes (and then the Executive does not
rescind, as may be permitted by law) a general release of all claims against the
Company and its affiliates in the form required by the
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Company and (B) the Executive continues to comply with the Executive’s
continuing obligations under the Proprietary Information Agreement. The Company
shall pay the Executive the severance payments and commence payments of the
reimbursements described in Sections 2.2(a)(2)-(3) on the first regular payroll
period following the effective date of the general release as set forth in the
general release.
               (b) Termination for Cause. The Company may terminate Executive’s
employment for Cause at any time effective immediately upon written notice.
Except for the payment of the Accrued Obligations (or as otherwise required by
law), upon termination for Cause the Company shall have no further obligation to
the Executive under this Agreement by way of compensation or otherwise.
               (c) Resignation without Good Reason. The Executive may terminate
[his/her] employment without Good Reason at any time by giving the Company
thirty (30) days’ advance written notice of such termination. Except for the
payment of the Accrued Obligations (or as otherwise required by law), upon such
termination without Good Reason the Company shall have no further obligation to
the Executive under this Agreement by way of compensation or otherwise.
               (d) Death. The Executive’s employment will terminate immediately
upon the Executive’s death. Except for payment of the Accrued Obligations (or as
otherwise required by law), upon termination for death, the Company shall have
no further obligation to the Executive’s heirs, legatees or estate under this
Agreement by way of compensation or otherwise.
               (e) Disability. The Company may terminate the Executive’s
employment at any time upon the Executive’s Disability (as defined below) by
giving the Executive thirty (30) days’ advance written notice of such
termination. Except for payment of the Accrued Obligations (or as otherwise
required by law), upon termination for Disability the Company shall have no
further obligation to the Executive under this Agreement by way of compensation
or otherwise.
               (f) Continuing Obligations. Upon the Executive’s termination for
any reason set forth in this Section 2 (except death), the Executive shall
continue to be bound by the Executive’s continuing obligations set forth in the
Proprietary Information Agreement, which agreement shall continue in full force
and effect.
               (g) Mitigation. The Executive shall not be required to mitigate
the amount of any payment or benefits provided for in this Section 2 by seeking
other employment or otherwise. The amount of any payment or benefits provided
for in this Section 2 shall not be reduced by any compensation earned by the
Executive as a result of employment by another employer or self employment, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
     3. Key Definitions.
     As used herein, the following terms shall have the following respective
meanings:
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          3.1 “Cause” means:
               (a) repeated refusal or repeated failure to carry out any
reasonable direction from the Company or its Board;
               (b) a material breach of the terms or conditions of the
Executive’s employment;
               (c) demonstrated gross negligence or misconduct in the execution
of the Executive’s assigned duties;
               (d) habitual non-performance or incompetent performance of the
Executive’s duties and responsibilities;
               (e) a conviction for a felony or other serious crime involving
moral turpitude;
               (f) engaging in fraud, embezzlement or other illegal conduct;
               (g) a violation of the Executive’s Proprietary Information
Agreement; or
               (h) a material violation of any written policy or procedure of
the Company, including ethics guidelines adopted from time to time by the Board.
          3.2 “Change in Control” means an event or occurrence set forth in any
one or more of subsections (a) through (c) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
               (a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any
capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 50% or more of either (i) the then-outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (w) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company); (x) any acquisition by the Company in which all or substantially all
of the individuals and entities who were the beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such acquisition beneficially own, directly or indirectly,
more than 50% of the
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then-outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
acquisition (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, respectively; (y) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company; or (z) any acquisition by
any corporation pursuant to a transaction which complies with clauses (i) and
(ii) of subsection (c) of this Section 3.2; or
               (b) the consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving the Company or a sale or other
disposition of all or substantially all of the assets of the Company in one or a
series of transactions (a “Business Combination”), unless, immediately following
such Business Combination, each of the following two conditions is satisfied:
(i) all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and
(ii) no Person (excluding the Acquiring Corporation or any employee benefit plan
(or related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 50% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination); or
               (c) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
          3.3 “Change in Control Date” means the first date during the Term on
which a Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if (a) a Change in Control occurs, (b) the Executive’s
employment with the Company is terminated prior to the date on which the Change
in Control occurs, and (c) it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who had
then taken steps reasonably calculated to effect a future Change in Control or
(ii) otherwise arose in connection with or in anticipation of a future Change in
Control, then for all purposes of this
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Agreement, the “Change in Control Date” shall mean the date immediately prior to
the date of such termination of employment.
          3.4 “Disability” means the Executive’s inability to perform the
essential functions of [his/her] job duties or responsibilities, either with or
without reasonable accommodation, due to sickness, physical or mental impairment
or injury for a period of six (6) consecutive months or for nine (9) months in
any consecutive twelve (12) month period, subject to applicable law. In the
event the Executive disputes the Company’s determination that the Executive
suffers from a Disability, the Executive shall give written notice of such
dispute to the Company during the thirty (30) day notice period prior to the
proposed effective date of such termination, and the Executive and the Company
shall thereupon each select, within thirty (30) days of such notice from the
Executive, a physician to evaluate whether the Executive suffers from a
Disability. Such physicians shall complete their evaluation and report to the
Board within thirty (30) days. If such physicians do not agree as to whether the
Executive suffers from a Disability, they shall promptly select a third
physician to further evaluate the Executive, whose conclusion on such matter
shall be rendered within ten (10) days of their selection, and shall be final
and binding on the Executive and the Company.
          3.5 “Good Reason” shall mean any of the following conditions:
               (a) a material diminution in the Executive’s base salary;
               (b) a material diminution in the Executive’s authority, duties,
or responsibilities;
               (c) a material diminution in the authority, duties, or
responsibilities of the supervisor to whom the Executive is required to report,
including a requirement that the Executive report to a corporate officer or
employee instead of reporting directly to the Board; or
               (d) a material change in the geographic location at which the
Executive must perform the services.
     4. Taxes.
          4.1 Notwithstanding any other provision of this Agreement, except as
set forth in Section 4.3, in the event the Company determines, based upon the
advice of the independent public accountants for the Company, that any payment
or benefit to the Executive or for the Executive’s other benefit paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise would individually or together with any other such payment or benefit
constitute “parachute payments” under Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the “Code”), then the Company shall not be obligated
to provide to the Executive a portion of any parachute payments provided under
this Agreement that constitute “excess parachute payments” under
Section 280G(b)(1) of the Code otherwise payable to the Executive. For purposes
of this Section 4, any “excess parachute payments” so eliminated shall be
referred to as the “Eliminated Payments” and the aggregate amount of such
“Eliminated Payments” shall be referred to as the “Eliminated Amount.”
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          4.2 Notwithstanding any other provision of this Agreement, no such
reduction in “excess parachute payments” shall be made if the Eliminated Amount
(computed without regard to this sentence) exceeds 110% of the aggregate present
value (determined in accordance with Section 280G of the Code and the applicable
regulations thereunder) of the amount of any additional taxes that would be
incurred by the Executive if the Eliminated Payments (determined without regard
to this sentence) were paid to [him/ her] (including, state and federal income
taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the
Code payable with respect to all of the “parachute payments” in excess of the
Executive’s “base amount” (within the meaning of Section 280G(b)(3) of the
Code), and any withholding taxes). The override of such reduction in “excess
parachute payments” pursuant to this Section 4.2 shall be referred to as a
“Section 4.2 Override.” For purpose of this Section, if any federal or state
income taxes would be attributable to the receipt of any Eliminated Payment, the
amount of such taxes shall be computed by multiplying the amount of the
Eliminated Payment by the maximum combined federal and state income tax rate
provided by law.
          4.3 As soon as reasonably practicable after the date on which the
Executive first becomes entitled under this Agreement to receive (whether or not
then due) a “parachute payment” as a result of a termination of employment after
a Change in Control Date, the Company shall determine and notify the Executive
(with reasonable detail regarding the basis for its determinations) (a) which
“parachute payments” constitute “excess parachute payments” within the meaning
of Section 280G of the Code, (b) the Eliminated Amount, and (c) whether the
Section 4.2 Override is applicable. If there is an Eliminated Amount, the
independent public accountants for the Company shall determine which
consideration, compensation or benefits shall be eliminated or reduced in
accordance with this Section 4.3 and to what extent they shall be so eliminated
or reduced, in such manner that the Executive shall retain, after such
elimination or reduction, the maximum after-tax benefit.
          4.4 409A.
               (a) The Company and the Executive intend that this Agreement will
be administered in accordance with Section 409A of the Code, and the rules and
regulations promulgated thereunder (“Section 409A”).
               (b) The Executive hereby acknowledges that he has been advised to
seek and has sought the advice of a tax advisor with respect to the tax
consequences to the Executive for all payments pursuant to this Agreement,
including any adverse tax consequences or penalty taxes under Section 409A and
applicable State tax law. The Executive hereby agrees to bear the entire risk of
any such adverse federal and State tax consequences and penalty taxes in the
event any payment pursuant to this Agreement is deemed to be subject to
Section 409A, and that no representations have been make to the Executive
relating to the tax treatment of any payment pursuant to this Agreement under
Section 409A and the corresponding provisions of any applicable State income tax
laws (including, without limitation, California income tax laws).
               (c) The Company and the Executive agree that, for purposes of
applying Section 409A, the Executive’s right to each severance payment in
accordance with the Company’s then current payroll practices and to the
Company’s payment of monthly premium
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payments for COBRA continuation coverage premiums to or on behalf of the
Executive under this Agreement shall be treated as a right to a series of
separate payments.
               (d) If the Executive is a “specified employee” in accordance with
Section 409A, as determined by the Compensation Committee of the Board in its
sole discretion, as of the date of the Executive’s “separation from service,” as
defined in Section 409A, and if any payments or entitlements provided for in
this Agreement on account of the Executive’s separation from service constitute
a “deferral of compensation” within the meaning of Section 409A and cannot be
paid or provided in the manner provided herein without subjecting the Executive
to additional tax, interest or penalties under Section 409A, then no such
payment or benefit shall be paid or provided to the Executive prior to the first
business day of the seventh calendar month immediately following the month in
which the Executive’s separation from service occurs or, if earlier, the
Executive’s death, at which time all such deferred payments shall be paid in a
lump sum, without interest.
               (e) Notwithstanding anything in this Section 4.4 to the contrary,
the six (6) month delay of payments shall not apply to (i) any severance or
other payments or benefits that become due and payable during the period
commencing with the Date of Termination and ending on March 15 of the succeeding
calendar year and which qualify as “short-term deferral payments” under
Section 409A, and (ii) any remaining severance or other payments or benefits
provided after the Executive’s separation from service to the extent (A) that
the dollar amount of such payments does not exceed two (2) times the lesser of
(x) the Executive’s annualized compensation (based on his or her annual rate of
pay for the calendar year preceding the calendar year in which the separation
from service occurred, adjusted to reflect any increase during such calendar
year which was expected to continue indefinitely had the Executive’s separation
from service not occurred) or (y) the maximum amount of compensation that may be
taken into account under a qualified plan pursuant to Section 401(a)(17) of the
Code for the calendar year in which the separation from service occurred, and
(B) such severance or other payments are made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
separation from service of the Executive occurs.
     5. Miscellaneous Provisions.
          5.1 Severability. In the event that any of the provisions of this
Agreement shall be held to be invalid or unenforceable, then all other
provisions shall nevertheless continue to be valid and enforceable as though the
invalid or unenforceable parts had not been included in this Agreement. In the
event that any provision relating to the time period of any restriction imposed
by this Agreement shall be declared by a court of competent jurisdiction to
exceed the maximum time period which such court deems reasonable and
enforceable, then the time period of restriction deemed reasonable and
enforceable by the court shall become and shall thereafter be the maximum time
period.
          5.2 Binding Agreement. This Agreement shall be binding upon the
Executive and [his/her] successors-in-interest, and the Company. The Company
shall undertake commercially reasonable efforts to require any successor or
assign to all or substantially all of
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the business and/or assets of the Company (whether direct or indirect, by
purchase, merger, consolidation or otherwise), to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform this Agreement if no such succession or assignment had
taken place. In any such event, the term “the Company” as used in this Agreement
shall mean any such successor or assign.
          5.3 Governing Law. This Agreement shall be construed and enforced
according to the laws of the State of California, excluding its choice of law
rules.
          5.4 Entire Agreement. This Agreement (which incorporates by reference
the Proprietary Information Agreement) supersedes all previous promises,
representations, and agreements, written or oral, between the Company and the
Executive relating to the subject matter herein. This Agreement cannot be
modified or amended except by a writing signed by the Executive and a duly
authorized officer of the Company.
          5.5 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively “Notices”) required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served or deposited in the United States mail,
registered or certified, return receipt requested, postage prepaid, addressed as
set forth below, or such other address as such party shall have specified most
recently by written notice. Notices shall be deemed given on the date of service
if personally served. Notices mailed as provided herein shall be deemed given on
the third business day following the date so mailed:

             
 
  To the Company:   SM&A    
 
      4695 MacArthur Court, Suite 800    
 
      Newport Beach, CA 92660    
 
      Attention: Chief Executive Officer    
 
           
 
  To the Executive:        
 
     
 
   
 
           
 
     
 
   
 
           
 
     
 
   

          5.6 Employment by Subsidiary. For purposes of this Agreement, the
Executive’s employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a subsidiary of
the Company.
          5.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
          5.8 Tax Withholding. Any payments except for payments of
reimbursements provided for hereunder shall be paid net of any applicable tax
withholding required under federal, state or local law.
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     6. Arbitration. The Executive and the Company agree that all claims arising
out of or relating to this Agreement shall be resolved by binding arbitration.
The dispute will be arbitrated in accordance with the rules of the American
Arbitration Association and its Employment Arbitration Rules and Mediation
Procedures, as amended. The parties agree to file any demand for arbitration
within the time limit established by the applicable statute of limitations for
the asserted claims or within one (1) year of the conduct that forms the basis
of the claim if no statutory limitation is applicable. Failure to demand
arbitration within the prescribed time period shall result in waiver of said
claims. This Agreement expressly does not prohibit either party from seeking
provisional relief including, without limitation, injunctive or similar relief,
from any court of competent jurisdiction as may be necessary to protect their
respective rights and interests pending arbitration, particularly if necessary
to avoid irreparable harm, including pursuant to California Code of Civil
Procedure Section 1281.8.
     This pre-dispute resolution agreement will cover all matters directly or
indirectly related to the interpretation and enforcement of this Agreement
including the termination of the Executive’s employment, but excluding any
claims which are not subject to arbitration by law. THE PARTIES UNDERSTAND AND
AGREE THAT THEY ARE WAIVING THEIR RIGHTS TO BRING SUCH CLAIMS TO COURT,
INCLUDING THE RIGHT TO A JURY TRIAL.
     7. Acknowledgment by the Executive. The Executive has carefully read and
considered the provisions of this Agreement and agrees that all of the
above-stated restrictions, obligations and promises are fair and reasonable and
reasonably required for the protection of the interests of the Company. The
Executive acknowledges that [he/she] has been advised to consult with a counsel
of [his/her] choice regarding this Agreement. The Executive further acknowledges
that the goodwill and value of the Company is enhanced by these provisions and
that said enhancement is desired by the Executive. The Executive indicates
[his/her] acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement where indicated below.
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.

                  SM&A    
 
           
 
  By:   /s/ Cathy L. McCarthy     
 
     
 
Cathy L. McCarthy    
 
      Its Chief Executive Officer    
 
                EXECUTIVE    
 
           
 
  /s/ Daniel Hart
 
Daniel Hart    

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