**Exhibit 10.31**
|                    |   | **REVOLVING  NOTE**(LIBOR and/or Prime) |
|--------------------|--------|-----------------------------------------|
| **$10,000,000.00** |   | 655787/00003                            |
|               |   | Irvine, California                      |
|               |   | April 27, 2007                          |

 

On May 1, 2008 (“Termination Date”), **SM&A**, a Delaware corporation (“Borrower”), promises topay to the order of **City National Bank**,a national banking association (“CNB”), at its office in this city, in UnitedStates Dollars and in immediately available funds, the principal sum of **Ten Million Dollars ($10,000,000.00)** (“Revolving CreditCommitment”) or so much thereof as may be advanced and then outstanding, plusinterest on the unpaid balance, until fully repaid, at a rate computed on thebasis of a 360-day year, actual days elapsed, at the rates, times and inaccordance with the terms set forth below.

As provided herein, the principal of this Note may beborrowed, repaid and reborrowed from time to time prior to the TerminationDate, provided at the time of any borrowing no Event of Default (as hereinafterdefined) exists, and provided further that the total borrowings outstanding atany one time shall not exceed the lesser of (i) the Revolving CreditCommitment or (ii) the Revolving Credit Commitment, less Letters of Creditissued and outstanding under that certain Agreement for Issuance of Letters ofCredit of even date herewith between Borrower and CNB. Each borrowing andrepayment hereunder shall be noted in the books and records of CNB. The excessof borrowings over repayments shall evidence the principal balance due hereonfrom time to time and at any time. Borrowings hereunder shall be presumed tohave been made to or for the benefit of Borrower when made as noted in suchbooks and records.

For purposes of this Note, the following definitionsshall apply:

**“Business Day”** means a day thatCNB’s Head Office is open and conducts a substantial portion of its business.

**“Eurocurrency Reserve Requirement”**means the aggregate (without duplication) of the rates (expressed as a decimal)of reserves (including, without limitation, any basic, marginal, supplemental,or emergency reserves) that are required to be maintained by banks during theInterest Period under any regulations of the Board of Governors of the FederalReserve System, or any other governmental authority having jurisdiction withrespect thereto, applicable to funding based on so-called “EurocurrencyLiabilities”, including Regulation D (12 CFR 204).

**“Interest Period”** means theperiod commencing on the date a LIBOR Loan is made (including the date a PrimeLoan is converted to a LIBOR Loan, or a LIBOR Loan is renewed as a LIBOR Loan,which, in the latter case, shall be the last day of the expiring InterestPeriod) and ending on the first day of the month occurring prior to or on thedate which is one (1), three (3), six (6), nine (9) or twelve (12) months thereafter,as selected by the Borrower; provided, however, no Interest Period may extendbeyond the Termination Date.

**“LIBOR Base Rate”** means theBritish Banker’s Association definition of the London InterBank Offered Ratesas made available by Bloomberg LP, or such other information service availableto CNB, for the applicable monthly period upon which the Interest Period isbased for the LIBOR Loan selected by Borrower and as quoted by CNB on theBusiness Day Borrower requests a LIBOR Loan or on the last Business Day of anexpiring Interest Period.

**“LIBOR Interest Rate”** means therate per year (rounded upward to the next one-sixteenth (1/16th) of one percent(0.0625%), if necessary) determined by CNB to be the quotient of (a) theLIBOR Base Rate divided by (b) one minus the Eurocurrency ReserveRequirement for the Interest Period; which is expressed by the followingformula:

| LIBOR Base Rate                       |
|---------------------------------------|
| 1 -  Eurocurrency Reserve Requirement |

 

**“LIBOR Loan”** means any Loan tied to the LIBOR Interest Rate.

**“Loan(s)”** means a borrowing under this Note.

**“Prime Loan”** means any Loan tiedto the Prime Rate. A Loan hereunder shall be a Prime Loan any time it is not aLIBOR Loan.

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**“Prime Rate”** means the rate mostrecently announced by CNB at its principal office in Beverly Hills, California,as its “Prime Rate.” Any change in the interest rate resulting from a change inthe Prime Rate shall be effective on the day on which each change in the PrimeRate is announced by CNB.

1.**             Interest on Loans.**   EachLoan shall bear interest from disbursement until due (whether at statedmaturity, by acceleration or otherwise) at a rate equal to, at Borrower’soption, either (a) for a LIBOR Loan, the LIBOR Interest Rate plus two andone quarter of one percent (2.25%) per annum, or (b) for a Prime Loan, thefluctuating Prime Rate minus one half of one percent (-0.50%) per annum.Interest on the Loans shall accrue daily and be payable (a) monthly, inarrears, on the first day of the next month, commencing on the first such datefollowing disbursement; and (b) if a LIBOR Loan, upon any prepayment ofany LIBOR Loan (to the extent accrued on the amount prepaid.) Anything hereinto the contrary notwithstanding, all principal and interest remaining unpaid onthe Termination Date shall be immediately due and payable.

2.**            ****Procedurefor LIBOR Loans.**  ****Borrower may request that a Loan be aLIBOR Loan, if herein allowed (including conversion of a Prime Loan to a LIBORLoan, or continuation of a LIBOR Loan as a LIBOR Loan upon the expiration ofthe Interest Period). Borrower’s request shall be irrevocable, shall be made toCNB, orally or in writing or using the form “Notice of Borrowing/InterestSelection” form attached hereto as Exhibit “A”, no earlier than two (2)Business Days before and no later than 1:00 p.m. Pacific Time on the datethe LIBOR Loan is to be made, and shall specify the Interest Period, the amountof the LIBOR Loan, and such other information as CNB requests. If Borrowerfails to select a LIBOR Loan in accordance herewith, the Loan shall be a PrimeLoan, and any LIBOR Loan shall be deemed a Prime Loan upon expiration of theInterest Period.

3.             **Availability of LIBORLoans.**   Notwithstanding anything herein to the contrary, eachLIBOR Loan must be in the minimum amount of $500,000.00 and increments of$100,000.00. Borrower may not have more than five (5) LIBOR Loans outstandingat any one time under the Revolving Credit Commitment. Borrower may have PrimeLoans and LIBOR Loans outstanding simultaneously.

4.             **Prepayment of Principal.**   Borrowermay prepay the principal amount outstanding on a Prime Loan at any time and inany amount without a prepayment fee. Borrower may not make a partial principalprepayment on a LIBOR Loan. Borrower may prepay the full outstanding principalbalance on a LIBOR Loan prior to the end of the Interest Period, provided,however, that such prepayment is accompanied by a fee (“LIBOR Prepayment Fee”)equal to the amount, if any, by which (a) the additional interest whichwould have been earned by CNB had the LIBOR Loan not been prepaid exceeds(b) the interest which would have been recoverable by CNB by placing theamount of the LIBOR Loan on deposit in the LIBOR market for a period startingon the date on which it was prepaid and ending on the last day of theapplicable Interest Period. CNB’s calculation of the LIBOR Prepayment Fee shallbe conclusive absent manifest error.

5.             **Suspension of LIBOR Loans.**   Inthe event CNB, on any Business Day, is unable to determine the LIBOR Base Rateapplicable for a new, continued, or converted LIBOR Loan for any reason, or anylaw, regulation, or governmental order, rule or determination, makes itunlawful for CNB to make a LIBOR Loan, Borrower’s right to select LIBOR Loansshall be suspended until CNB is again able to determine the LIBOR Base Rate ormake LIBOR Loans, as the case may be. During such suspension, new Loans,outstanding Prime Loans and LIBOR Loans whose Interest Periods terminate mayonly be Prime Loans.

6.             **Late Charge.**   Borrowershall pay to CNB a late charge of 5% or $10.00, whichever is greater, of anypayment not received by CNB on or before the 10th day after the payment is due.

**The occurrence of any of thefollowing with respect to any Borrower or guarantor of this Note or any generalpartner of such Borrower or guarantor shall constitute an “Event of Default”hereunder:**

1.                                       Failureto make any payment of principal or interest when due under this Note.

2.                                       Filingof a petition by or against any of such parties under any provision of the *Bankruptcy Code*;

3.                                       Appointmentof a receiver or an assignee for the benefit of creditors;

4.                                       Commencementof dissolution or liquidation proceedings or the disqualification (under anyapplicable law or regulation) of any of such parties which is a corporation,partnership, joint venture or any other type of entity;

5.                                       Deathor incapacity of any of such parties which is an individual;

6.                                       Revocationof any guaranty of this Note, or any guaranty of this Note becomesunenforceable as to any future advances under this Note;

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7.                                       Anyfinancial statement provided by any of such parties to CNB is false ormaterially misleading;

8.                                       Anymaterial default in the payment or performance of any obligation, or anydefault under any provision of any contract or instrument pursuant to which anyof such parties has incurred any obligation for borrowed money, any purchaseobligation or any other liability of any kind to any person or entity,including CNB;

9.                                       Anysale or transfer of all or a substantial part of the assets of any of suchparties other than in the ordinary course of business;

10.                                 Anyviolation, breach or default under this Note, any letter agreement, guaranty,security agreement, deed of trust, subordination agreement or any othercontract or instrument executed in connection with this Note or securing thisNote;

11.                                 Borrowercreates, incurs, assumes or permits to exist any indebtedness in excess of$1,000,000.00, except indebtedness to CNB and trade debt incurred in theordinary course of business, without CNB’s prior written consent;

12.                                 Borrowermakes or commits to make expenditures for capital assets (including capitalizedlease expenditures and acquisitions) of more than $3,000,000.00 in theaggregate for Borrower and all Subsidiaries in any fiscal year, without CNB’sprior written consent;

13.                                 Borrowermortgages, pledges, hypothecates, grants or contracts to grant any securityinterest of any kind in any of its property or assets to anyone, exceptpurchase money security interest, except CNB, without CNB’s prior writtenconsent.

14.                                 Failureof Borrower to furnish CNB, within the times specified, the followingstatements:

14.1                           Withinforty-five (45) days after the end of each of the first three quarterlyaccounting period of each fiscal year, a financial statement consisting of notless than a balance sheet and income statement, reconciliation of net worth andstatement of cash flows, prepared in accordance with generally acceptedaccounting principles consistently applied, which financial statement may beinternally prepared;

14.2                           Withinone hundred twenty (120) days after the close of each fiscal year, a copy ofthe annual audit report for such year for Borrower and the Subsidiariesincluding therein a balance sheet, income statement, reconciliation of networth and statement of cash flows, with notes thereto, the balance sheet,income statement and statement of cash flows to be audited by a certifiedpublic accountant acceptable to CNB, and certified by such accountants to havebeen prepared in accordance with generally accepted accounting principlesconsistently applied; and

14.3                           Suchadditional information, reports and/or statements as CNB may, from time totime, reasonably request.

15.                                 Failureof Borrower to maintain the following:

15.1                           TangibleNet Worth of not less than $29,000.00;

15.2                           Aratio of Total Senior Liabilities to Tangible Net Worth of not more than 1.00to 1.00; and

15.3                           Aratio of Current Assets to Current Liabilities of not less than 2.00 to 1.00.

For purposes of this Note, the following terms havethe following meanings:

**“Current Assets”** shall bedetermined on a consolidated basis for Borrower and the Subsidiaries inaccordance with generally accepted accounting principles, consistently applied,excluding, however, from the determination of Current Assets, loans toshareholders, management or employees, amounts due from Subsidiaries oraffiliates, deferred costs, and other intangible assets.

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**“Current Liabilities”** shall bedetermined on a consolidated basis for Borrower and the Subsidiaries inaccordance with generally accepted accounting principles, consistently applied,and shall include without limitation (a) all payments on Subordinated Debtrequired to be made within one (1) year after the date on which thedetermination is made; and (b) all indebtedness payable to stockholders,affiliates, Subsidiaries or officers regardless of maturity, unless suchindebtedness shall have been subordinated to CNB, on terms satisfactory to CNB.

**“Subsidiary”** shall mean anycorporation, the majority of whose voting shares are at any time owned,directly or indirectly by Borrower and/or by one or more Subsidiaries.

**“Tangible Net Worth”** shall meanthe total of all assets appearing on a balance sheet prepared in accordancewith generally accepted accounting principles consistently applied for Borrowerand the Subsidiaries on a consolidated basis, minus (a) all intangibleassets including, without limitation, unamortized debt discount, affiliate,employee and officer receivables or advances, goodwill, research anddevelopment costs, patents, trademarks, the excess of purchase price overunderlying values of acquired companies, any covenants not to compete, deferredcharges, copyrights, franchises and appraisal surplus; minus (b) allobligations which are required by generally accepted accounting principlesconsistently applied to be reflected as a liability on the consolidated balancesheet of Borrower and the Subsidiaries; minus (c) the amount, if any, atwhich shares of stock of a non-wholly owned Subsidiary appear on the asset sideof Borrower’s consolidated balance sheet, as determined in accordance withgenerally accepted accounting principles consistently applied; minus(d) minority interests; and minus (e) deferred income and reserves nototherwise reflected as a liability on the consolidated balance sheet ofBorrower and the Subsidiaries.

**“Total Senior Liabilities”** shallmean, as of any date of determination, the amount of all obligations thatshould be reflected as a liability on a consolidated balance sheet of Borrowerand the Subsidiaries prepared in accordance with generally accepted accountingprinciples, consistently applied, less subordinated debt.

Upon the occurrence of any Event of Default, CNB, atits option, may declare all sums of principal and interest outstandinghereunder to be immediately due and payable without presentment, demand,protest or notice of dishonor, all of which are expressly waived by Borrower,and CNB shall have no obligation to make any further advances hereunder. Borroweragrees to pay all costs and expenses, including reasonable attorneys’ fees,expended or incurred by CNB (or allocable to CNB’s in-house counsel) inconnection with the enforcement of this Note or the collection of any sums duehereunder and irrespective of whether suit is filed.

Upon the occurrence of any Event of Default (andwithout constituting a waiver of the Event of Default), and until the Event ofDefault has been cured, the outstanding principal (and interest, to the extentpermitted by law) shall bear additional interest at a fluctuating rate equal tofive percent (5%) per annum higher than the interest rate as determined above;provided, however, for purposes hereof, a LIBOR Loan shall be treated as aPrime Loan upon the termination of the Interest Period.

This Note and all matters related hereto shall begoverned by the laws of the State of Delaware. If this Note is executed by morethan one Borrower, all obligations are joint and several.

**SM&A**, a Delaware corporation
| By:    |   | /s/ Cynthia Davis                 |   |   |
|--------|--------|-----------------------------------|--------|--------|
|   |   | Cynthia Davis, CEO                |   |   |
| By:    |   | /s/ Steve D. Handy                |   |   |
|   |   | Steve D. Handy, SVP/CFO/Secretary |   |   |

 
| BANK USE ONLY |   |   |
|---------------|--------|--------|
|          |   |   |   |
|               |        |        |  |

 

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EXHIBIT A

**NOTICE OFBORROWING/INTEREST SELECTION**

This Notice of Borrowing/Interest Selection (“Notice”)is executed and delivered by **SM&A**, aDelaware corporation (“Borrower”), to **City National Bank**,a national banking association (“CNB”), pursuant to that Revolving Note(“Note”) in the principal sum of $10,000,000.00, dated April 27, 2007,executed by Borrower in favor of CNB. Any terms not defined herein shall havethe meanings defined in the Note or the Interest Rate Provision.

**1.   Request for aLoan.**   Borrower requests a Loan under the Note asfollows:

1.1                                 InterestSelection - State “LIBOR” or “Prime”:                                     

*1.2**                               PrincipalAmount of Loan: $*                               [If LIBOR Loan, minimum of $500,000.00]

1.3                                 LIBORLoan - Effective Date of Interest Period:                                 ,20     

1.4                                 LIBORLoan - Interest Period:             month(s) [1, 3, 6, 9 or 12 months only]

**2.   Conversion toLIBOR Loan.**   Borrower requests conversion of theoutstanding Prime Loan to a LIBOR Loan.

2.1                                 EffectiveDate of Conversion:                        ,20   

2.2                                 PrincipalAmount of Conversion: $                          [minimum of $500,000.00]

2.3                                 InterestPeriod:                  month(s) [1, 3, 6, 9 or 12 months only]

**3.   Renewal of LIBORLoan.**   Borrower requests renewing an outstandingLIBOR Loan as follows:

3.1                                 PrincipalAmount of Renewal of LIBOR Loan: $                        [minimum of $500,000.00] (Amount of LIBOR Loan not renewed as a LIBOR Loan willbe a Prime Loan)

3.2                                 Dateof Renewal:                                  ,20    *[last date of currentInterest Period]*

3.3                                 InterestPeriod:                          month(s) [1,3, 6, 9 or 12 months only]

**4.   Conversion toPrime Loan.**   LIBOR Loans shall automatically convertto a Prime Loan at the end of an Interest Period if CNB fails to timely receivea Notice for an outstanding LIBOR Loan.

**5.   Warranty.****  **In connection with the action requested herein,Borrower hereby represents and warrants to CNB that, as of the date of suchrequest, no Event of Default has occurred and is continuing.

This Notice is executed on                                             ,20     .
| “Borrower” |   | **SM&A**, a Delaware  corporation |
|----------------------|--------|---------------------------------------|
|                 |   | By:                                   |   |   |
|                 |   |                                  |   | Cynthia Davis, CEO |
|                 |   | By:                                   |   |   |
|                 |   |                                  |   | Steven D. Handy, SVP/CFO/Secretary |

 

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