Document:

exv10w1

 

Exhibit 10.1

	 		
	
	 	CREDIT AGREEMENT 

     This Credit Agreement (the “Agreement”), dated as of the 1st day of May, 2008 (“Loan Date”) is
between City National Bank, a national banking association (“CNB”) and SM&A, a Delaware corporation
(“Borrower”).

1. DEFINITIONS. As used in this Agreement, these terms have the following meanings:

     1.1. “Account” or “Accounts” has the meaning given in the Code, and includes, but is not
limited to, any right to payment for goods sold or leased or for services rendered which is not
evidenced by an instrument or chattel paper from any Person, whether now existing or hereafter
arising or acquired, whether or not it has been earned by performance.

     1.2. “Account Debtor” means the Person obligated on an Account.

     1.3. “Affiliate” means any Person directly or indirectly controlling, controlled by, or under
common control with Borrower, and includes any employee stock ownership plan of Borrower or an
Affiliate. “Control” (including with correlative meaning, the terms “controlling,” “controlled by”
and “under common control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or otherwise.

     1.4. “Borrower’s Loan Account” means the statement of daily balances on the books of CNB in
which will be recorded Loans made by CNB to Borrower, payments made on such loans, and other
appropriate debits and credits as provided by this Agreement. CNB will provide a statement of
account for Borrower’s Loan Account at least once each month on a date established by CNB, which
statement will be accepted by and conclusively binding upon Borrower unless it notifies CNB in
writing to the contrary, within five (5) days of receipt of such statement, or ten (10) days after
sending of such statement if Borrower does not notify CNB of its non-receipt of the statement.
Statements regarding other credit extended to Borrower will be provided separately.

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

     1.6. “Code” means the Uniform Commercial Code of California, as currently in effect and as
amended and replaced from time to time, except where the Uniform Commercial Code of another state
governs the perfection of a security interest in Collateral located in that state.

     1.7. “Collateral” there is no Collateral .

     1.8. “Commercial Letters of Credit” means letters of credit issued pursuant to this Agreement
and in response to Borrower’s submission of an Irrevocable Letter of Credit Application and
Security Agreement.

     1.9. “Commitment” means CNB’s commitment to make the loans and issue Letters of Credit in the
aggregate principal amount outstanding at any one time of up to TEN MILLION AND NO/100THS DOLLARS
($10,000,000.00).

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	City National Bank
	 	CREDIT AGREEMENT

     1.10. “Current Assets” will be determined on a consolidated basis for Borrower and the
Subsidiaries in accordance with GAAP excluding, however, loans to stockholders, management or
employees, amounts due from Subsidiaries or Affiliates, deferred costs and other intangible assets.

     1.11. “Current Liabilities” will be determined on a consolidated basis for Borrower and the
Subsidiaries in accordance with GAAP and will include, without limitation: (a) all payments on
Subordinated Debt required to be made within one (1) year after the date on which the determination
is made, and (b) all indebtedness payable to stockholders, Affiliates, Subsidiaries or officers
regardless of maturity, unless such indebtedness has been subordinated, on terms satisfactory to
CNB, to the Obligations.

     1.12. “Debt” means, at any date, the aggregate amount of, without duplication, (a) all
obligations of Borrower or any Subsidiary for borrowed money; or reimbursement for open letters of
credit (b) all obligations of Borrower or any Subsidiary evidenced by bonds, debentures, notes or
other similar instruments; (c) all obligations of Borrower or any Subsidiary to pay the deferred
purchase price of property or services; (d) all capitalized lease obligations of Borrower or any
Subsidiary; (e) all obligations or liabilities of others secured by a lien on any asset of Borrower
or any Subsidiary, whether or not such obligation or liability is assumed; (f) all obligations
guaranteed by Borrower or any Subsidiary; (g) all obligations, direct or indirect, for letters of
credit; and (h) any other obligations or liabilities which are required by GAAP to be shown as
liabilities on the balance sheet of Borrower or any Subsidiary.

     1.13. “Debt Service” means (a) the aggregate amount of Current Maturity of Long Term Debt plus
(b) all interest incurred on borrowed money. “Current Maturity of Long Term Debt” means that
portion of Borrower’s consolidated long term liabilities, determined in accordance with GAAP, which
shall, by the terms thereof, become due and payable within one (1) year following the date of the
balance sheet upon which such calculations are based.

     1.14. “Demand Deposit Account” means Borrower’s demand deposit account no. 023-809958
maintained with CNB.

     1.15. “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 the
Interest Period under any regulations of the Board of Governors of the Federal Reserve System, or
any other governmental authority having jurisdiction with respect thereto, applicable to funding
based on so-called “Eurocurrency Liabilities”, including Regulation D (12 CFR 224).

     1.16. “GAAP” means generally accepted accounting principles, consistently applied.

     1.17. “Guarantor", there is no Guarantor.

     1.18. “Interest Period” means the period commencing on the date a LIBOR Loan is made
(including the date a Prime Loan is converted to a LIBOR Loan, or a LIBOR Loan is renewed as a
LIBOR Loan, which, in the latter case, will be the last day of the expiring Interest Period) and
ending on the first day of the month occurring prior to or on the date which is one (1), three (3),
six (6), nine (9) or twelve (12) months thereafter,

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	 	CREDIT AGREEMENT

as selected by the Borrower; provided, however, no Interest Period may extend beyond the
Termination Date.

     1.19. “Inventory” means goods held for sale or lease in the ordinary course of business, work
in process and any and all raw materials used in connection with the foregoing.

     1.20. “Letters of Credit Commitment” is THREE MILLION AND NO/100THS DOLLARS ($3,000,000.00).

     1.21. “LIBOR Base Rate” means the British Banker’s Association definition of the London
InterBank Offered Rates as made available by Bloomberg LP, or such other information service
available to CNB, for the applicable monthly period upon which the Interest Period is based for the
LIBOR Loan selected by Borrower and as quoted by CNB on the Business Day Borrower requests a LIBOR
Loan or on the last Business Day of an expiring Interest Period.

     1.22. “LIBOR Interest Rate” means the rate 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) the
LIBOR Base Rate divided by (b) one minus the Eurocurrency Reserve Requirement for the Interest
Period; which is expressed by the following formula:

LIBOR Base Rate

1 -  Eurocurrency Reserve Requirement

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

     1.24. “Loan” or “Loans” means the loans extended by CNB to Borrower pursuant to Section 2.

     1.25. “Loan Documents” means, individually and collectively, this Agreement, any Note,
guaranty, security or pledge agreement, financing statement and all other contracts, instruments,
addenda and documents executed in connection with or related to extensions of credit under this
Agreement.

     1.26. “Loan Fee” is $25,000.00.

     1.27. “Notes” means the Note(s) referenced in Section 2.

     1.28. “Obligations” means all present and future liabilities and obligations of Borrower to
CNB hereunder and all other liabilities and obligations of Borrower to CNB of every kind, now
existing or hereafter owing, matured or unmatured, direct or indirect, absolute or contingent,
joint or several, including any extensions and renewals thereof and substitutions therefor.

     1.29. “Person” means any individual or entity.

     1.30. “Potential Event of Default” means any condition that with the giving of notice or
passage of time or both would, unless cured or waived, become an Event of Default.

     1.31. “Prime Loan” means any Loan tied to the Prime Rate.

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	 	CREDIT AGREEMENT

     1.32. “Prime Rate” means the rate most recently 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 in the Prime Rate will become effective on the day on which each change in the Prime Rate is
announced by CNB.

     1.33. “Quick Assets” means the sum of cash, plus cash equivalents, plus Accounts, plus
securities classified as short-term marketable securities according to GAAP, as such items appear
on Borrower’s consolidated balance sheet, determined in accordance with GAAP.

     1.34. “Revolving Credit Commitment” means CNB’s commitment to make the Revolving Credit Loans
in the aggregate principal amount at any one time of up to TEN MILLION AND NO/100THS DOLLARS
($10,000,000.00).

     1.35. “Standby Letters of Credit” means standby letters of credit issued pursuant to this
Agreement and in response to Borrower’s submission of an Irrevocable Standby Letter of Credit
Application and Letter of Credit Agreement.

     1.36. “Subordinated Debt” means Debt of Borrower or any Subsidiary, the repayment of which is
subordinated, on terms satisfactory to CNB, to the Obligations.

     1.37. “Subsidiary” means any Person, the majority of whose voting interests are at any time
owned, directly or indirectly, by Borrower and/or by one or more Subsidiaries.

     1.38. “Tangible Net Worth” means the total of all assets appearing on a balance sheet prepared
in accordance with GAAP for Borrower and the Subsidiaries on a consolidated basis, minus (a) all
intangible assets, including, without limitation, unamortized debt discount, Affiliate, employee,
officer and stockholder receivables or advances, goodwill, research and development costs, patents,
trademarks, the excess of purchase price over underlying values of acquired companies, any
covenants not to compete, deferred charges, copyrights, franchises and appraisal surplus; minus (b)
all obligations which are required by GAAP to be classified as a liability on the consolidated
balance sheet of Borrower and the Subsidiaries; minus (c) the amount, if any, at which shares of
stock of a non-wholly owned Subsidiary appear on the asset side of Borrower’s consolidated balance
sheet, as determined in accordance with GAAP; minus (d) minority interests; and minus (e) deferred
income and reserves not otherwise classified as a liability on the consolidated balance sheet of
Borrower and the Subsidiaries.

     1.39. “Termination Date” means May 1, 2009. Notwithstanding the foregoing, CNB may, at its
option, terminate this Agreement pursuant to the Section entitled “CNB’s Remedies”; the date of any
such termination will become the Termination Date as that term is used in this Agreement.

     1.40. “Total Senior Liabilities” means, as of any date of determination, the amount of all
liabilities that should be reflected as a liability on a consolidated balance sheet of Borrower and
the Subsidiaries prepared in accordance with GAAP, less Subordinated Debt.

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	 	CREDIT AGREEMENT

2. THE CREDIT.

     2.1. Revolving Credit Loan. Subject to the terms of this Agreement, CNB agrees to make loans
(“Revolving Credit Loans”) to Borrower, from the date of this Agreement up to and including the
Termination Date, at such times as Borrower may request, up to the amount of the Revolving Credit
Commitment, less the amount of outstanding Letters of Credit, and unpaid drafts under drawn
Letters of Credit. The Revolving Credit Loans may be repaid and reborrowed at any time up and
including the Termination Date; provided, however, that the aggregate unpaid principal amount of
outstanding Revolving Credit Loans will at no time exceed the Revolving Credit Commitment, less
the amount of the outstanding Letters of Credit, and unpaid drafts under drawn Letters of Credit.

          2.1.1. Procedure for Revolving Credit Loans. Each Revolving Credit Loan may be made by CNB at
the oral or written request of anyone who is authorized in writing by Borrower to request Revolving
Credit Loans until written notice of the revocation of such authority is received by CNB.

          2.1.2. Interest. The Revolving Credit Loans will bear interest from disbursement until due
(whether at stated maturity, by acceleration or otherwise) at a rate equal to, at Borrower’s
option, either (a) for a LIBOR Revolving Loan, the LIBOR plus two and one-quarter percent (2.25%)
per year, or (b) for a Prime Revolving Loan, the fluctuating Prime minus one-half percent (-0.50%)
per year. Interest on the Revolving Credit Loans and other charges incurred under this Agreement
will accrue daily and be payable (a) monthly in arrears, on the first day of each month, commencing
on the first such date following disbursement; (b) if a LIBOR Revolving Loan, upon any prepayment
of any LIBOR Revolving Loan (to the extent accrued on the amount prepaid); and (c) at the
Termination Date. A Revolving Credit Loan tied to the LIBOR Interest Rate is called a “LIBOR
Revolving Loan,” and a Revolving Credit Loan tied to the Prime Rate is called a “Prime Revolving
Loan.” A Revolving Credit Loan will be a Prime Revolving Loan any time it is not a LIBOR Revolving
Loan.

     2.2. Letter of Credit Facility. CNB will, at the request of Borrower any time up to
the Termination Date, issue Letters of Credit for the account of Borrower. The aggregate face
amount of outstanding Letters of Credit and unpaid drafts under drawn Letters of Credit at any time
will not exceed the lesser of (a) the Letter of Credit Commitment or (b) the Revolving Credit
Commitment less Revolving Credit Loans outstanding.

          2.2.1. Issuance of Letters of Credit. Commercial Letters of Credit will be issued to finance
the import of merchandise in accordance with an Irrevocable Letter of Credit Application and
Security Agreement submitted by Borrower and incorporated herein by this reference, subject to the
terms of this Agreement in the event of any conflict herewith. Standby Letters of Credit will be
issued in accordance with an Irrevocable Standby Letter of Credit Application and Letter of Credit
Agreement submitted by Borrower and incorporated herein by this reference, subject to the terms of
this Agreement in the event of any conflict herewith. Letters of Credit will be issued on the
normal documentation used by CNB from time to time in accord with the Uniform Customs and Practices
for Documentary Credits (2007 Revision) International Chamber of Commerce Publication No. 600, or
the International Standby Practices 1998, whichever is applicable. Commercial Letters of Credit
will expire no more than 180 days after issuance. Letters of Credit will expire no more than 180
days after issuance. Unless CNB otherwise agrees in writing, no Standby Letter of Credit may expire
after the Termination Date. Standard CNB fees and charges will apply to the issuance and
administration of Letters of Credit, and any drawings thereunder.

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          2.2.2. Reimbursement for Funding Letter of Credit. Any payment of a draft made after a
drawing under a Letter of Credit will be deemed to be an irrevocable request for a Revolving Credit
Loan under this Agreement. Borrower’s obligation to reimburse CNB may also be satisfied by
charging Borrower’s Demand Deposit Account if requested by Borrower. CNB’s obligation under this
Subsection to make a Revolving Credit Loan will exist irrespective of the existence of any
Potential Event of Default or Event of Default.

     2.3. LIBOR Loan Terms and Conditions. 

          2.3.1. Procedure for LIBOR Loans. Borrower may request that a Revolving Credit Loan be a LIBOR
Loan (including conversion of a Prime Revolving Loan to a LIBOR Revolving Loan, or continuation of
a LIBOR Revolving Loan as a LIBOR Revolving Loan upon the expiration of the Interest Period).
Borrower’s request will be irrevocable, will be made to CNB using the “Notice of Borrowing” 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 day the LIBOR Loan is to be made. If Borrower fails to select a LIBOR Loan
in accordance herewith, the Loan will be a Prime Loan, and any outstanding LIBOR Loan will be
deemed a Prime Loan upon expiration of the Interest Period.

          2.3.2. Availability of LIBOR Loans. Notwithstanding anything herein to the contrary, each
LIBOR 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 outstanding at any one time under this Agreement. Borrower
may have Prime Loans and LIBOR Loans outstanding simultaneously.

          2.3.3. Prepayment of Principal. Borrower may not make a partial principal prepayment on a
LIBOR Loan. Borrower may prepay the full outstanding principal balance 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 which would 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 the amount of the LIBOR Loan on deposit in the LIBOR market for
a period starting on the date on which it was prepaid and ending on the last day of the applicable
Interest Period. CNB’s calculation of the LIBOR Prepayment Fee will be deemed conclusive absent
manifest error.

          2.3.4. Suspension of LIBOR Loans. If CNB, on any Business Day, is unable to determine the
LIBOR Base Rate applicable for a new, continued, or converted LIBOR Loan for any reason, or any
law, regulation, or governmental order, rule or determination, makes it unlawful for CNB to make a
LIBOR Loan, Borrower’s right to select LIBOR Loans will be suspended until CNB is again able to
determine the LIBOR Base Rate or make LIBOR Loans, as the case may be. During such suspension, new
Loans, outstanding Prime Loans, and LIBOR Loans whose Interest Periods terminate may only be Prime
Loans.

     2.4. Default Interest Rate. From and after written notice by CNB to Borrower of the
occurrence of an Event of Default (and without constituting a waiver of such Event of Default), the
Loans and any other amounts due CNB hereunder (and interest to the extent permitted by law) will
bear additional interest at a fluctuating rate equal to five percent (5.0%) per year higher than
the interest rate as determined in the above Section(s) 2.1.2 until the Event of Default has been
cured; provided, however, for

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	 	CREDIT AGREEMENT

purposes of this Section, a LIBOR Loan will be treated as a Prime Loan upon the termination of the
Interest Period. All interest provided for in this Section will be compounded monthly and payable
on demand.

     2.5. Loans and Payments. All payments will be in United States Dollars and in
immediately available funds. Interest will be computed on the basis of a 360 day year, actual days
elapsed. All payments of principal, interest, fees and other charges on the Loans will be made by
charging, and Borrower hereby authorizes CNB to charge, the Borrower’s Demand Deposit Account for
the amount of each such payment. Borrower must have sufficient collected balances in the Borrower’s
Demand Deposit Account in order that each such payment will be available when due. CNB is
authorized to note the date, amount and interest rate of each Loan and each payment of principal
and interest on CNB’s books and records, which notations will constitute presumptive evidence of
the accuracy of the information noted. Any Loan will be conclusively presumed to have been made to
or for the benefit of Borrower when CNB, in its sole discretion, believes that the request therefor
has been made by authorized persons (whether in fact that is the case), or when the Loan is
deposited to the Borrower’s Demand Deposit Account, regardless of whether any Person other than
Borrower may have authority to draw against such account.

     2.6.  Late Charge. Borrower shall pay a late charge of 5% or $10.00, whichever is
greater, of any payment not received by CNB on or before the 10th day after the payment is due.

3. TERM AND TERMINATION.

     3.1. Establishment of Termination Date. The term of this Agreement will begin as
of the date hereof and continue until the Termination Date, unless the term is renewed for
an additional period by CNB giving Borrower prior written notice, in which event the
Termination Date will mean the renewed maturity date set forth in such notice.
Notwithstanding the foregoing, CNB may, at its option, terminate this Agreement pursuant
to Section 8.3; the date of any such termination will become the Termination Date as that
term is used in this Agreement.

     3.2. Obligations Upon the Termination Date. Borrower will, upon the Termination Date:

          3.2.1. Repay the amount of the balance due as set forth in Borrower’s Loan Account plus any
accrued interest, fees and charges;

          3.2.2. Pay CNB cash in the aggregate face amount of the Letters of Credit and unpaid drafts
under drawn Letters of Credit outstanding to be held as cash collateral for Borrower’s obligation
to reimburse CNB upon the funding of such Letters of Credit and drafts; and

          3.2.3. Pay the amounts due on all other Obligations owing to CNB. In this connection and
notwithstanding anything to the contrary contained in the instruments evidencing such Obligations,
the Termination Date hereunder will constitute the maturity date of such other Obligations.

     3.3.  Survival of Rights. Any termination of this Agreement will not affect the rights,
liabilities and obligations of the parties with respect to any Obligations outstanding

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on the date of such termination. Until all Obligations have been fully repaid, CNB will retain its
security interest in all existing Collateral and Collateral arising thereafter, and Borrower will
continue to assign all Accounts to CNB and to immediately turn over to CNB, in kind, all
collections received on the Accounts.

4. CONDITIONS PRECEDENT.

     4.1. Extension of Credit. The obligation of CNB to make any Loan or other
extension of credit hereunder is subject to CNB’s receipt of each of the following, in
form and substance satisfactory to CNB, and duly executed as required by CNB:

          4.1.1. All Loan Documents required by CNB, including but not limited to this Agreement and any
guaranties required hereunder;

          4.1.2. A copy of Borrower’s organizational and governing documents and any public filings made
in connection therewith; and (b) such authorizations and resolutions approving and authorizing the
execution, delivery and performance of this Agreement and any other documents required pursuant to
this Agreement, as may be required by CNB;

          4.1.3. Evidence that the insurance required by Section 6.4 hereof is in effect; and

          4.1.4. A complete list of claims made against Borrower, any Subsidiary or any Guarantor, and
evidence satisfactory to CNB, including, if requested, an opinion of Borrower’s counsel with
respect to any such claim(s), that if such claim(s) is adversely determined, it would not have a
material adverse effect on the business, operations or condition, financial or otherwise, of
Borrower, any Guarantor or any Subsidiary.

     4.2. Conditions to Each Extension of Credit. The obligation of CNB to make any Loan or
other extension of credit hereunder will be subject to the fulfillment of each of the following
conditions to CNB’s satisfaction:

          4.2.1. The representations and warranties of Borrower set forth in Section 5 will be true and
correct on the date of the making of each Loan or other extension of credit with the same effect as
though such representations and warranties had been made on and as of such date;

          4.2.2. No holder of Subordinated Debt will be in violation of his, her or its Subordination
Agreement executed in favor of CNB, and such Subordination Agreement is enforceable with respect to
future advances;

          4.2.3. There will have occurred no Event of Default or Potential Event of Default; and

          4.2.4. All other documents and legal matters in connection with the transactions described in
this Agreement will be satisfactory in form and substance to CNB.

5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each request for a
Loan or other extension of credit will be deemed a representation and warranty made on the date of
such request) that:

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     5.1. Existence, Power and Authorization. Borrower and each Subsidiary is duly
organized, validly existing and in good standing under the laws of the state of its organization,
and is duly qualified to conduct business in each jurisdiction in which its business is conducted.
The execution, delivery and performance of all Loan Documents executed by Borrower are within
Borrower’s powers and have been duly authorized by the Borrower and do not require any consent or
approval of the owners of Borrower.

     5.2. Binding Agreement. The Loan Documents constitute the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with their terms.

     5.3. Ancillary Documents. To the extent that any security agreement, subordination
agreement or guaranty is required to be executed by a Subsidiary or Affiliate, the representations
and warranties set forth in Sections 5.1 and 5.2 are also true and correct with respect to such
Subsidiary and Affiliate and such document.

     5.4. Other Agreements. The execution and performance of the Loan Documents will not
violate any provision of law or regulation (including, without limitation, Regulations X and U of
the Federal Reserve Board) or any order of any governmental authority, court, or arbitration board
or the organizational and governing documents of Borrower, or result in the breach of, constitute a
default under, contravene any provisions of, or result in the creation of any security interest,
lien, charge or encumbrance upon any of the assets of Borrower pursuant to any indenture or
agreement to which Borrower or any of its properties is bound, except liens and security interests
in favor of CNB.

     5.5. Litigation. There is no litigation, tax claim, investigation or proceeding
pending, threatened against or affecting Borrower, any Guarantor or Subsidiary, or any of their
respective properties which, if adversely determined, would have a material adverse effect on the
business, operation or condition, financial or otherwise, of Borrower or any Guarantor or
Subsidiary.

     5.6. Financial Condition. The most recent financial statements of Borrower and each
Guarantor, if any, copies of which have been delivered to CNB, have been prepared in accordance
with GAAP and are true, complete and correct and fairly present the financial condition of
Borrower, its Subsidiaries and each Guarantor, including operating results, as of the accounting
period referenced therein. There has been no material adverse change in the financial condition or
business of Borrower or any Subsidiary or Guarantor since the date of such financial statements.
Neither Borrower nor any Subsidiary or Guarantor has any material liabilities for taxes or
long-term leases or commitments, except as disclosed in the financial statements.

     5.7. No Violations. Borrower is not, nor is any Subsidiary, in violation of any law,
ordinance, rule or regulation to which it or any of its properties is subject.

     5.8. ERISA. Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). No “Reportable Event”
(as defined in ERISA and the regulations issued thereunder) has occurred with respect to any
benefit plan of Borrower nor are there any unfunded vested liabilities under any benefit plan of
Borrower. Borrower has met its minimum funding requirements under ERISA with respect to each of its
plans and has not incurred any material liability to the Pension Benefit Guaranty Corporation
(“PBGC”) in connection with any such plan.

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     5.9. Consents. No consent, license, permit, or authorization of, exemption by, notice
or report to, or registration, filing or declaration with, any governmental authority or agency is
required in connection with the execution, delivery and performance by Borrower of this Agreement
or the transactions contemplated hereby.

     5.10. Use of Proceeds. The proceeds of the Revolving Credit Loan will be used by
Borrower solely for working capital and issuance of Letters of Credit.

     5.11. Regulation U. Borrower is not engaged principally, or as one of its principal
activities, in the business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations U or X of the Federal Reserve Board). No part of the
proceeds of the Loans will be used by Borrower to purchase or carry any such margin stock or to
extend credit to others for the purpose of purchasing or carrying such margin stock.

     5.12. Environmental Matters. 

          5.12.1. The operations of Borrower and each Subsidiary comply in all material respects with
all applicable federal, state and local environmental, health and safety statutes, regulations and
ordinances and fully comply with all terms of all required permits and licenses.

          5.12.2. Borrower and each Subsidiary have received no notices of threatened or pending
governmental or private civil, criminal or administrative proceeding regarding any environmental or
health and safety statute, regulation or ordinance and have not been subject to any federal, state
or local investigations, inspections or orders regarding any environmental or health and safety
statute, regulation or ordinance.

          5.12.3. Neither Borrower nor any Subsidiary knows of any facts or conditions which may exist
which may subject Borrower or any Subsidiary to liability or contingent liability and neither
Borrower nor any Subsidiary is presently liable or contingently liable for any removal, remedial,
response or other costs or damages in connection with any release into the environment of toxic or
hazardous substances or waste included on any federal, state or local hazardous chemical or
substance lists under any federal, state or local statute, regulation or ordinance.

          5.12.4. Borrower will, at all times, defend and indemnify and hold CNB (which for purposes of
this Section includes CNB’s parent company and subsidiaries and all of their respective
shareholders, directors, officers, employees, agents, representatives, successors, attorneys and
assigns) harmless from and against any liabilities, claims, demands, causes of action, losses,
damages, expenses (including without limitation reasonable attorneys’ fees, which attorneys may be
employees of CNB, or may be outside counsel), costs, settlements, judgments or recoveries directly
or indirectly arising out of or attributable to the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal, or presence of a hazardous substance on,
under, or about Borrower’s property or operations or property leased to or used by Borrower. For
these purposes, the term “hazardous substances” means any substance which is or becomes designated
as “hazardous” or “toxic” under any Federal, state, or local law. Any obligation or liability of
Borrower to CNB under this Section will survive the expiration or termination of this Agreement and
the repayment of all Loans and the payment or performance of all other Obligations of Borrower to
CNB.

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	City National Bank
	 	CREDIT AGREEMENT

6. AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of all Obligations,
Borrower will comply with the following covenants:

     6.1. Books and Records. Borrower will maintain, in accord with sound accounting practices, accurate
records and books of account showing, among other things, all Inventory and Accounts, the proceeds
of the sale or other disposition thereof and the collections therefrom. Borrower will not change
the accounting method used to determine Borrower’s Inventory cost without notification to CNB.
Borrower will permit representative(s) of CNB, at any reasonable time, to inspect, audit, examine
and make extracts or copies from all books, records and other data, to inspect any of Borrower’s
properties and to confirm balances due on Accounts by direct inquiry to Account Debtors, and will
give CNB, promptly upon request, all information regarding the business or finances of Borrower.

     6.2. Financial Statements of Borrower. Borrower will furnish to CNB on a continuing
basis:

          6.2.1. Within forty-five (45) days after the end of the first three quarterly accounting
periods of each fiscal year, a financial statement consisting of not less than a balance sheet and
income statement, prepared in accordance with generally accepted accounting principles consistently
applied, which financial statement may be internally prepared;

          6.2.2. Within one hundred twenty (120) days after the close of Borrower’s fiscal year, a copy
of the annual audit report for Borrower and the Subsidiaries, including therein a balance sheet,
income statement, reconciliation of net worth and statement of cash flows, with notes thereto, the
balance sheet, income statement and statement of cash flows to be audited by a certified public
accountant acceptable to CNB, certified by such accountant to have been prepared in accordance with
GAAP; and

          6.2.3. Such additional information, reports and/or statements as CNB may, from time to time,
reasonably request.

     6.3. Taxes and Premiums. Borrower will, and will cause each Subsidiary to, pay and
discharge all taxes, assessments, governmental charges and real and personal property taxes,
including, but not limited to, federal and state income taxes, employee withholding taxes and
payroll taxes, and all premiums for insurance required under this Agreement, prior to the date upon
which penalties are attached thereto.

     6.4. Insurance.

          6.4.1. Borrower will, and will cause each Subsidiary to, provide and maintain the insurance
required under the Loan Documents;

          6.4.2. In addition to the insurance required above, Borrower will, and will cause each
Subsidiary to, maintain insurance of the types and in amounts customarily carried in its lines of
business, including, but not limited to, fire, public liability (with CNB named as additional
insured), property damage, business interruption and worker’s compensation, such insurance to be
carried with companies and in amounts satisfactory to CNB, and will deliver to CNB from time to
time, upon CNB’s request, schedules setting forth all insurance then in effect; and

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	City National Bank
	 	CREDIT AGREEMENT

          6.4.3. If Borrower fails to provide, maintain, or furnish to CNB the policies required by this
Section, CNB may immediately procure such insurance or other insurance necessary to protect CNB’s
interest, and Borrower will pay all premiums thereon promptly upon demand by CNB, together with
interest, at the highest rate provided for any of the Loans extended under Section 2 above, from
the date of expenditure, and if not paid within ten (10) days of CNB’s demand therefor (and without
constituting a waiver of an Event of Default), at a rate five percent (5%) per year higher than
such interest rate until such amount (and interest thereon, to the extent permitted by law), is
paid in full.

     6.5. Notice. Borrower will promptly advise CNB in writing of (a) the opening of any
new, or the closing of any existing, places of business, each location at which Inventory or
equipment is or will be kept, and any change of Borrower’s name, trade name or other name under
which it does business or of any such new or additional name; (b) the occurrence of any Event of
Default or Potential Event of Default; (c) any litigation pending or threatened against Borrower,
any Subsidiary or any Guarantor where the amount or amounts in controversy exceed FIFTY THOUSAND
AND NO/100THS DOLLARS ($50,000.00); (d) any unpaid taxes of Borrower, any Subsidiary or any
Guarantor, which are more than fifteen (15) days delinquent; and (e) any other matter which might
materially or adversely affect Borrower’s or any Subsidiary’s or Guarantor’s financial condition,
property or business.

     6.6. Fair Labor Standards Act. Borrower will, and will cause each Subsidiary to,
comply with the requirements of, and all regulations promulgated under, the Fair Labor Standards
Act of 1938 (29 U.S.C. Code Section 201 et seq.).

     6.7. Corporate Existence. Borrower will, and will cause each Subsidiary to, maintain
its corporate existence and all of its rights, privileges and franchises necessary or desirable in
the normal course of its business.

     6.8. Compliance with Law. Borrower will, and will cause each Subsidiary to, comply
with all requirements of all applicable laws, rules, regulations, orders of any governmental agency
and all material agreements to which they are a party.

     6.9. Borrower’s Financial Tests. Borrower will maintain:

          6.9.1. Tangible Net Worth plus Subordinated Debt of not less than THIRTY MILLION AND NO/100THS
DOLLARS ($30,000,000.00) at all times;

          6.9.2. A ratio of Current Assets to Current Liabilities of not less than 2.0 to 1 at all
times; and

          6.9.3. A ratio of Total Senior Liabilities to Tangible Net Worth of not more than 1.00 at all
times.

7. NEGATIVE COVENANTS. Borrower agrees that until payment in full of all the Obligations,
Borrower will not, nor will it permit any Subsidiary to, do any of the following, without CNB’s
prior written consent:

     7.1. Borrowing. Create, incur, assume or permit to exist any Debt, except (a) Debt to
CNB (b) Subordinated Debt, (c) trade Debt incurred in the ordinary course of

12

 

			
	City National Bank
	 	CREDIT AGREEMENT

business and (d) purchase money Debt in an aggregate amount not to exceed $1,000,00.00 per
Borrower’s fiscal year incurred in connection with the acquisition of capital assets (including
capitalized lease expenditures).

     7.2. Sale of Assets. Sell, lease or otherwise dispose of any of Borrower’s or any
Subsidiary’s assets, other than merchandise Inventory in the ordinary course of business.

     7.3. Loans. Make loans or advances to any Person, except credit extended to employees
or to customers in the ordinary course of business.

     7.4. Contingent Liabilities. Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable for the obligation of any Person, including Borrower, a
Subsidiary or Affiliate, except (a) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, and (b) contingent
liabilities in favor of CNB.

     7.5. Investments. Purchase or acquire the obligations or stock of, or any other
interest in, any partnership, joint venture, limited liability company or corporation, except (a)
direct obligations of the United States of America; or (b) investments in certificates of deposit
issued by, and other deposits with, commercial banks organized under the United States or a State
thereof having capital of at least One Hundred Million Dollars ($100,000,000.00).

     7.6. Mortgages, Liens, etc. Mortgage, pledge, hypothecate, grant or contract to grant
any security interest of any kind in any property or assets, to anyone except CNB.

     7.7. Involuntary Liens. Permit any involuntary liens to arise with respect to any
property or assets including but not limited to those arising from the levy of a writ of attachment
or execution, or the levy of any state or federal tax lien which lien will not be removed within a
period of thirty (30) days.

     7.8. Sale and Leaseback. Enter into any sale-leaseback transaction.

     7.9. Mergers. Enter into any merger or consolidation, or acquire all or substantially
all the assets of any Person more than $5,000,000.00 in the aggregate in any fiscal year, except a
Subsidiary may be merged into or consolidated with another Subsidiary or with Borrower.

     7.10. Dividends and Purchase of Stock. Redeem or repurchase stock or partnership
interests, declare or pay any dividends or make any distribution, whether of capital, income or
otherwise, and whether in cash or other property, except that any Subsidiary may declare
distributions to Borrower; provided, however, if Borrower for any tax year elects to file as a
Sub-Chapter S corporation under the federal or state income tax laws, distributions may be made to
Borrower’s shareholders during any current or subsequent tax year in proportion to their holdings,
in an aggregate amount equal to that payable by an individual in the highest tax bracket upon
Borrower’s taxable income computed as if Borrower were a taxpaying entity.

     7.11. Event of Default. Permit a default to occur under any document or instrument
evidencing Debt incurred under any indenture, agreement or other instrument

13

 

			
	City National Bank
	 	CREDIT AGREEMENT

under which such Debt may be issued, or any event to occur under any of the foregoing which would
permit any holder of the Debt outstanding thereunder to declare the same due and payable before its
stated maturity, whether or not such acceleration occurs or such default be waived.

     7.12. Maximum Capital Expenditures. Borrower makes or commits to make expenditures for
capital assets (including capitalized lease expenditures) of more than $3,000,000.00 in the
aggregate for Borrower and all Subsidiaries in any fiscal year, without CNB’s prior written
consent.

8. EVENTS OF DEFAULT.

     8.1. Events of Default. After expiration of any applicable cure period set forth in Section 8.2, the following will constitute Events of Default under this Agreement:

          8.1.1. Borrower fails to pay when due any installment of principal or interest or any other
amount payable under this Agreement;

          8.1.2. Any Person, or any Subsidiary of any Person, which is a party to any Loan Document
fails to perform or observe any of the terms, provisions, covenants, conditions, agreements or
obligations contained in the Loan Documents;

          8.1.3. The entry of an order for relief or the filing of an involuntary petition with respect
to Borrower, any Subsidiary or any Guarantor under the United States Bankruptcy Code, the
appointment of a receiver, trustee, custodian or liquidator of or for any part of the assets or
property of Borrower, any Subsidiary or any Guarantor, or Borrower, any Subsidiary or any Guarantor
makes a general assignment for the benefit of creditors;

          8.1.4. Any financial statement, representation or warranty made or furnished by Borrower, any
Subsidiary or any Guarantor in connection with the Loan Documents proves to be in any material
respect incorrect;

          8.1.5. Any Person obtains an order or decree in any court of competent jurisdiction enjoining
or prohibiting Borrower or CNB or either of them from performing this Agreement, and such
proceedings are not dismissed or such decree is not vacated within ten (10) days after the granting
thereof;

          8.1.6. Borrower or any Subsidiary neglects, fails or refuses to keep in full force and effect
any governmental permit or approval which is necessary to the operation of its business;

          8.1.7. All or substantially all of the property of Borrower, any Guarantor or any Subsidiary
is condemned, seized or otherwise appropriated;

          8.1.8. The occurrence of (a) a Reportable Event as defined in ERISA which CNB determines in
good faith constitutes grounds for the institution of proceedings to terminate any pension plan by
the PBGC, (b) an appointment of a trustee to administer any pension plan of Borrower, or (c) any
other event or condition which might constitute grounds under ERISA for the involuntary termination
of any pension plan of Borrower, where such event set forth in (a), (b) or (c) results in a
significant monetary liability to Borrower;

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	City National Bank
	 	CREDIT AGREEMENT

          8.1.9. Any obligee of Subordinated Debt fails to comply with the provisions of the documents
evidencing such Subordinated Debt or any Subordination Agreement;

          8.1.10. The individuals who, as of the date of the agreement, constitute the Borrower’s Board
of Directors (the “Incumbent Board”) cease for any reason to constitute at least 75% of the Board
of Directors; provided, however, that any individual who becomes a director subsequent to the date
of this agreement whose election, or nomination for election by the Borrower’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent Board; or

          8.1.11. The Termination Date is not extended.

     8.2. Notice of Default and Cure of Potential Events of Default. Except with respect to
the Events of Default specified in Subsections 8.1.1 or 8.1.3, above, and subject to the provisions
of the Section 8.4 below, entitled “Additional Remedies”, CNB will give Borrower at least ten (10)
days’ written notice of any event which constitutes or, with the lapse of time would become an
Event of Default, during which time Borrower will be entitled to cure same.

     8.3. CNB’s Remedies. Upon the occurrence of an Event of Default, at the sole and
exclusive option of CNB, and upon written notice to Borrower, CNB may (a) declare the principal of
and accrued interest on the Loans, and all other Obligations immediately due and payable in full,
whereupon the same will immediately become due and payable; (b) terminate this Agreement as to any
future liability or obligation of CNB, but without affecting CNB’s rights and security interest in
the Collateral and without affecting the Obligations owing by Borrower to CNB; and/or (c) exercise
its rights and remedies under the Loan Documents and all rights and remedies of a secured party
under the Code and other applicable laws with respect to all of the Collateral.

     8.4. Additional Remedies. Notwithstanding any other provision of this Agreement,
upon the occurrence of any event, action or inaction by Borrower, or if any action or
inaction is threatened which CNB reasonably believes will materially affect the value of
the Collateral, CNB may take such legal actions as it deems necessary to protect the
Collateral, including but not limited to, seeking injunctive relief and the appointment of
a receiver, whether or not an Event of Default or Potential Event of Default has occurred
under this Agreement.

9. MISCELLANEOUS.

     9.1. Reimbursement of Costs and Expenses. Borrower will reimburse CNB for all costs
and expenses relating to this Agreement including, but not limited to, filing, recording or
search fees, audit or verification fees, appraisals of the Collateral and other
out-of-pocket expenses, and reasonable attorneys’ fees and expenses expended or incurred by
CNB (or allocable to CNB’s in-house counsel) in documenting or administering the Loan
Documents or collecting any sum which becomes due CNB under the Loan Documents,
irrespective of whether suit is filed, or in the protection, perfection, preservation or
enforcement of any and all rights of CNB in connection with the Loan Documents, including,
without limitation, the fees and costs incurred in any out-of-court work-out or a
bankruptcy or reorganization proceeding.

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	City National Bank
	 	CREDIT AGREEMENT

     9.2. Dispute Resolution.

          9.2.1. Mandatory Arbitration. At the request of CNB or Borrower, any dispute, claim or
controversy of any kind (whether in contract or tort, statutory or common law, legal or equitable)
now existing or hereafter arising between CNB and Borrower and in any way arising out of,
pertaining to or in connection with: (a) this Agreement, and/or any renewals, extensions, or
amendments thereto; (b) any of the Loan Documents; (c) any violation of this Agreement or the Loan
Documents; (d) all past, present and future loans; (e) any incidents, omissions, acts, practices or
occurrences arising out of or related to this Agreement or the Loan Documents causing injury to
either party whereby the other party or its agents, employees or representatives may be liable, in
whole or in part, or (f) any aspect of the past, present or future relationships of the parties,
will be resolved through final and binding arbitration conducted at a location determined by the
arbitrator in Los Angeles, California, and administered by the American Arbitration Association
(“AAA”) in accordance with the California Arbitration Act (Title 9, California Code of Civil
Procedure Section 1280 et. seq) and the then existing Commercial Rules of the AAA. Judgment upon
any award rendered by the arbitrator(s) may be entered in any state or federal courts having
jurisdiction thereof.

          9.2.2. Judicial Reference. At the request of any party, a controversy or claim which is not
submitted to arbitration as provided and limited in Section 9.2.1 will be determined by a reference
in accordance with California Code of Civil Procedure Section 638 et. seq. If such an election is
made, the parties will designate to the court a referee or referees selected under the auspices of
the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding
referee of the panel, or the referee if there is a single referee, will be an active attorney or
retired judge. Judgment upon the award rendered by such referee or referees will be entered in the
court in which such proceeding was commenced in accordance with California Code of Civil Procedure
Section 644 and Section 645.

          9.2.3. Provisional Remedies, Self Help and Foreclosure. No provision of this Agreement will
limit the right of any party to: (a) foreclose against any real property collateral by the exercise
of a power of sale under a deed of trust, mortgage or other security agreement or instrument, or
applicable law, (b) exercise any rights or remedies as a secured party against any personal
property collateral pursuant to the terms of a security agreement or pledge agreement, or
applicable law, (c) exercise self help remedies such as setoff, or (d) obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration or referral. The institution
and maintenance of an action for judicial relief or pursuit of provisional or ancillary remedies,
or exercise of self help remedies will not constitute a waiver of the right of any party, including
the plaintiff, to submit any dispute to arbitration or judicial reference.

          9.2.4. Powers and Qualifications of Arbitrators. The arbitrator(s) will give effect to
statutes of limitation, waiver and estoppel and other affirmative defenses in determining any
claim. Any controversy concerning whether an issue is arbitratable will be determined by the
arbitrator(s). The laws of the State of California will govern. The arbitration award may include
equitable and declaratory relief. All arbitrator(s) selected will be required to be a practicing
attorney or retired judge licensed to practice law in the

16

 

			
	City National Bank
	 	CREDIT AGREEMENT

State of California and will be required to be experienced and knowledgeable in the substantive
laws applicable to the subject matter of the controversy or claim at issue.

          9.2.5. Discovery. The provisions of California Code of Civil Procedure Section 1283.05 or its
successor section(s) are incorporated herein and made a part of this Agreement. Depositions may be
taken and discovery may be obtained in any arbitration under this Agreement in accordance with said
section(s).

          9.2.6. Miscellaneous. The arbitrator(s) will determine which is the prevailing party and will
include in the award that party’s reasonable attorneys’ fees and costs (including allocated costs
of in-house legal counsel). Each party agrees to keep all controversies and claims and the
arbitration proceedings strictly confidential, except for disclosures of information required in
the ordinary course of business of the parties or by applicable law or regulation.

     9.3. Cumulative Rights and No Waiver. All rights and remedies granted to CNB under the
Loan Documents are cumulative and no one such right or remedy is exclusive of any other. No failure
or delay on the part of CNB in exercising any power, right or remedy under any Loan Document will
operate as a waiver thereof, and no single or partial exercise or waiver by CNB of any such power,
right or remedy will preclude any further exercise thereof or the exercise of any other power,
right or remedy.

     9.4. Applicable Law. This Agreement will be governed by California law.

     9.5. Lien and Right of Set-off. Borrower grants to CNB a continuing lien for all
Obligations of Borrower to CNB upon any and all moneys, securities and other property of Borrower
and the proceeds thereof, now or hereafter held or received by or in transit to CNB from or for
Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special) and credits of Borrower with, and any and all claims
of Borrower against, CNB at any time existing. Upon the occurrence of any Event of Default, CNB is
hereby authorized at any time and from time to time, without notice to Borrower or any other Person
to setoff, appropriate and apply any or all items hereinabove referred to against all Obligations
of Borrower whether under this Agreement or otherwise, and whether now existing or hereafter
arising.

     9.6. Notices. Any notice required or permitted under any Loan Document will be given
in writing and will be deemed to have been given when personally delivered or when sent by the U.S.
mail, postage prepaid, certified, return receipt requested, properly addressed. For the purposes
hereof, the addresses of the parties will, until further notice given as herein provided, be as
follows:

	 	 	 
	CNB:

	 	City National Bank
	 

	 	18111 Von Karman Avenue, Suite 120
	 

	 	Irvine, CA 92612
	 

	 	Attention: Bob Muller, Senior Vice President
	 
	 	 
	Copies To:

	 	City National Bank, Legal Department
	 

	 	400 North Roxbury Drive
	 

	 	Beverly Hills, California 90210-5021
	 

	 	Attn: Managing Counsel, Credit Unit

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	City National Bank
	 	CREDIT AGREEMENT

	 	 	 
	Borrower:

	 	SM&A
	 

	 	4695 MacArthur Court, 8th Floor
	 

	 	Newport Beach, CA 92660
	 

	 	Attention: Cathy L.. McCarthy, President/CEO

     9.7. Assignments. The provisions of this Agreement are hereby made applicable to and will
inure to the benefit of CNB’s successors and assigns and Borrower’s successors and assigns;
provided, however, that Borrower may not assign or transfer its rights or obligations under this
Agreement without the prior written consent of CNB. CNB may assign this Agreement and its rights
and duties hereunder. CNB reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in CNB’s rights and benefits hereunder. In
connection therewith, CNB may disclose all documents and information which CNB now or hereafter may
have relating to Borrower or Borrower’s business.

     9.8. Indemnification. Borrower will, at all times, defend and indemnify and hold CNB
(which for purposes of this Section includes CNB’s parent company and subsidiaries and all of their
respective shareholders, directors, officers, employees, agents, representatives, successors,
attorneys, and assigns) harmless from and against any and all liabilities, claims, demands, causes
of action, losses, damages, expenses (including without limitation reasonable attorneys’ fees,
[which attorneys may be employees of CNB, or may be outside counsel]) costs, settlements, judgments
or recoveries arising out of or resulting from (a) any breach of the representations, warranties,
agreements or covenants made by Borrower herein; (b) any suit or proceeding of any kind or nature
whatsoever against CNB arising from or connected with the transactions contemplated by the Loan
Documents or any of the rights and properties assigned to CNB hereunder; and/or (c) any suit or
proceeding that CNB may deem necessary or advisable to institute, in the name of CNB, Borrower or
both, against any other Person, for any reason whatsoever to protect the rights of CNB hereunder or
under any of the documents, instruments or agreements executed or to be executed pursuant hereto,
including attorneys’ fees and court costs and all other costs and expenses incurred by CNB (or
allocable to CNB’s in-house counsel), all of which will be charged to and paid by Borrower and will
be secured by the Collateral. Any obligation or liability of Borrower to CNB under this Section
will survive the expiration or termination of this Agreement and the repayment of all Loans and the
payment or performance of all other Obligations of Borrower to CNB.

     9.9. Complete Agreement. This Agreement, together with the other Loan Documents,
constitutes the entire agreement of the parties and supersedes any prior or contemporaneous oral or
written agreements or understandings, if any, which are merged into this Agreement. The other Loan
Documents are subject to the terms and conditions of this Agreement, and, in the event of a
conflict between the other Loan Documents and this Agreement, the provisions of this Agreement
shall control. This Agreement may be amended only in a writing signed by Borrower and CNB.

     9.10. Headings. Section headings in this Agreement are included for convenience of
reference only and do not constitute a part of the Agreement for any purpose.

     9.11. Accounting Terms. Except as otherwise stated in this Agreement, all accounting
terms and financial covenants and information will be construed in conformity

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	City National Bank
	 	CREDIT AGREEMENT

with, and all financial data required to be submitted will be prepared in conformity with, GAAP as
in effect on the date of this agreement.

     9.12. Severability. Any provision of the Loan Documents which is prohibited or
unenforceable in any jurisdiction, will be, only as to such jurisdiction, ineffective to the extent
of such prohibition or unenforceability, but all the remaining provisions of the Loan Documents
will remain valid.

     9.13. Counterparts. This Agreement may be signed in any number of counterparts which,
when taken together, will constitute but one agreement.

     9.14. Joint and Several. Should more than one Person sign this Agreement, the
obligations of each signer will be joint and several.

     This Agreement is executed as of the date stated at the top of the first page.

“BORROWER”

SM&A,

a Delaware corporation

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Cathy L. McCarthy, President/CEO
	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

James R. Eckstaedt, CFO
	 	 
	 
	 	 	 	 
	“CNB”
	 	 	 	 
	 
	 	 	 	 
	City National Bank, a national banking association	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Bob Muller, Senior Vice President
	 	 

19exv10w5

 

Exhibit 10.5

Corn Products International

Executive Severance Agreement

          Agreement, as of March 19, 2008, by and between

          Corn Products International, Inc., a Delaware corporation (the “Company”), and
                                         (the “Executive”).

          WHEREAS, the Executive is a key employee of the Company or a subsidiary of the Company as
defined in Section 1.1(b) hereof (“Subsidiary”), and

          WHEREAS, the Board of Directors of the Company (the “Board”) considers the maintenance of a
sound management to be essential to protecting and enhancing the best interests of the Company and
its stockholders and recognizes that the possibility of a change in control raises uncertainty and
questions among key employees and may result in the departure or distraction of such key employees
to the detriment of the Company and its stockholders; and

          WHEREAS, the Board wishes to assure that it will have the continued dedication of the
Executive and the availability of the Executive‘s advice and counsel notwithstanding the
possibility, threat or occurrence of a bid to take over control of the Company, and to induce the
Executive to remain in the employ of the Company or a Subsidiary; and

          WHEREAS, the Executive is willing to continue to serve the Company and its Subsidiaries taking
into account the provisions of this Agreement;

          NOW, THEREFORE, in consideration of the foregoing, and the respective covenants and agreements
of the parties herein contained, the parties agree as follows:

 

 

Article 1. Change in Control

     1.1 Benefits shall be provided under Article 3 hereof only in the event there shall have
occurred a “Change in Control”, as such term is defined below, and the Executive’s employment by
the Company and its Subsidiaries shall thereafter have terminated in accordance with Article 2
below within the period beginning on the date of the “Change in Control” and ending on the second
anniversary of the date of the “Change in Control” (the “Protection Period”). If any Protection
Period terminates without the Executive’s employment having terminated, any subsequent “Change in
Control” shall give rise to a new Protection Period. No benefits shall be paid under Article 3 of
this Agreement if the Executive’s employment terminates outside of a Protection Period.

     (a) “Change in Control” shall mean:

	 	(1)	 	The acquisition by any individual, entity or group (a
“Person”), including any “person” within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of
Rule 13d-3 promulgated under the Exchange Act, of 20% or more of either (i) the
then outstanding shares of common stock of the Company (the “Outstanding 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 Voting Securities”); excluding, however, the following:
(A) any acquisition directly from the Company (excluding any acquisition resulting
from the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from the
Company), (B) any acquisition by the Company, (C) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (3) of this Section 1.1(a); provided further, that for purposes of
clause (B), if any Person (other than the Company or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation controlled
by the Company) shall become the beneficial owner of 20% or more of the Outstanding
Common Stock or 20% or more of the Outstanding Voting Securities by reason of an
acquisition by the Company, and such Person shall, after such acquisition by the
Company, become the beneficial owner of any additional shares of the Outstanding
Common Stock or any additional Outstanding Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;
	 
	 	(2)	 	Individuals who, as of the beginning of any consecutive two-year period
constitute the Board of Directors (the “Incumbent Board”) cease for any
reason to constitute at least a majority of such Board; provided that any
individual who subsequently becomes a director of the Company and whose election,
or nomination for election by the Company’s stockholders, was approved by the vote
of at least a majority of the directors then comprising the Incumbent Board shall
be deemed a member of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the Company as a result of an
actual or threatened solicitation by a Person other than the Board for the purpose
of opposing a solicitation by any other Person with respect to the election or
removal of directors, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person other
than the Board shall not be deemed a member of the Incumbent Board;

 

 

	 	(3)	 	The consummation of a reorganization, merger or consolidation of the
Company or sale or other disposition of all or substantially all of the assets of
the Company (a “Corporate Transaction”); excluding, however, a Corporate
Transaction pursuant to which (i) all or substantially all of the individuals or
entities who are the beneficial owners, respectively, of the Outstanding Common
Stock and the Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock, and the combined voting power
of the outstanding securities of such corporation entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or indirectly) in substantially the same
proportions relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (ii)  no Person (other than: the Company; any
employee benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; the corporation resulting from such
Corporate Transaction; and any Person which beneficially owned, immediately prior
to such Corporate Transaction, directly or indirectly, 15% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors and
(iii) individuals who were members of the Incumbent Board will constitute at least
a majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction; or
	 
	 	(4)	 	The consummation of a plan of complete liquidation or dissolution of
the Company.

	 	(b)	 	For purposes of this Agreement, the term “Subsidiary” shall mean any corporation in
which the Company possesses directly or indirectly fifty percent (50%) or more of the
total combined voting power of all classes of stock.
	 
	 	(c)	 	Upon a Change in Control, any restricted stock, stock options or other equity awards
granted to the Executive pursuant to the Corn Products International, Inc. Stock Incentive
Plan (the “Incentive Plan”) that are not vested shall vest on the date of Change in
Control in accordance with the terms of such plans and related agreements. The Executive‘s
beneficiary with respect to such benefits shall be the same person or persons as
determined under the respective plan.
	 
	 	(d)	 	Immediately prior to a Change in Control, the Company shall deliver to the Corn
Products International, Inc. Executive Benefit Trust, or a comparable “rabbi trust”, to be
held for the benefit of the Executive thereunder, cash or marketable securities with a
fair market value equal to the anticipated payments and benefits to be provided to the
Executive hereunder, as determined by the Company in good faith, subject to approval by
the Executive, which approval shall not unreasonably be withheld.

 

 

Article 2. Termination Following Change in Control

     2.1 The Executive shall be entitled to the benefits provided in Article 3 hereof upon any
termination of his or her employment with the Company and its Subsidiaries within a Protection
Period, except a termination of employment because of his or her death, because of a “Disability,”
by the Company for “Cause,” or by the Executive other than for “Good Reason.”

	 	(a)	 	Disability. The Executive‘s employment shall be deemed to have terminated because of
a “Disability” on the date on which the Executive becomes eligible to receive long-term
disability benefits under the Company‘s Master Welfare and Cafeteria Plan (the “Cafeteria
Plan”) (or any other plan), or a similar long-term disability plan of a Subsidiary, or a
successor to the Cafeteria Plan or to any such similar plan which is applicable to the
Executive. If the Executive is not covered for long-term disability benefits by the
Cafeteria Plan or a similar or successor long-term disability plan, the Executive shall be
deemed to have terminated because of a “Disability” on the date on which he or she would
have become eligible to receive long-term disability benefits if he or she were covered
for long-term disability benefits by the Company‘s Cafeteria Plan.
	 
	 	(b)	 	Cause. Termination of the Executive‘s employment by the Company or a Subsidiary for
“Cause” shall mean termination by reason of (A) the Executive‘s willful engagement in
conduct which involves dishonesty or moral turpitude which either (1) results in
substantial personal enrichment of the Executive at the expense of the Company or any of
its Subsidiaries, or (2) is demonstrably and materially injurious to the financial
condition or reputation of the Company or any of its Subsidiaries, (B) the Executive‘s
willful violation of the provisions of the confidentiality or non-competition agreement
entered into between the Company or any of its Subsidiaries and the Executive or (C) the
commission by the Executive of a felony. An act or omission shall be deemed “willful” only
if done, or omitted to be done, in bad faith and without reasonable belief that it was in
the best interest of the Company and its Subsidiaries. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a written notice of termination from the
Compensation and Nominating Committee of the Board or any successor thereto (the
“Committee”) after reasonable notice to the Executive and an opportunity for the
Executive, together with his or her counsel, to be heard before the Committee, finding
that, in the good faith opinion of such Committee, the Executive was guilty of conduct set
forth above in clause (A) or (B) of the first sentence of this subsection (b) and
specifying the particulars in detail.
	 
	 	(c)	 	Without Cause. The Company or a Subsidiary may terminate the employment of the
Executive without Cause during a Protection Period only by giving the Executive written
notice of termination to that effect. In that event, the Executive‘s employment shall
terminate on the last day of the month in which such notice is given (or such later date
as may be specified in such notice).
	 
	 	(d)	 	Good Reason. Termination of employment by the Executive for “Good Reason” shall mean
termination within a Protection Period:

	 	(i)	 	If there has occurred a reduction by the Company or a Subsidiary in the
Executive‘s base salary in effect immediately before the beginning of the
Protection Period or as increased from time to time thereafter;

 

 

	 	(ii)	 	If the Company or a Subsidiary, without the Executive‘s written
consent, has required the Executive to be relocated anywhere in excess of
thirty-five (35) miles from his or her office location immediately before the
beginning of the Protection Period, except for required travel on the business of
the Company or a Subsidiary to an extent substantially consistent with the
Executive‘s business travel obligations immediately before the beginning of the
Protection Period;
	 
	 	(iii)	 	If there has occurred a failure by the Company or a Subsidiary to
maintain plans providing benefits substantially the same as those provided by any
benefit or compensation plan, retirement or pension plan, stock option plan, life
insurance plan, health and accident plan or disability plan in which the Executive
is participating immediately before the beginning of the Protection Period, or if
the Company or a Subsidiary has taken any action which would adversely affect the
Executive‘s participation in or materially reduce the Executive‘s benefits under
any of such plans or deprive the Executive of any material fringe benefit enjoyed
by the Executive immediately before the beginning of the Protection Period, or if
the Company or a Subsidiary has failed to provide the Executive with the number of
paid vacation days to which he or she would be entitled in accordance with the
applicable vacation policy of the Company or Subsidiary as in effect immediately
before the beginning of the Protection Period;
	 
	 	(iv)	 	If the Company or a Subsidiary has reduced in any manner which the
Executive reasonably considers important the Executive‘s title, job authorities or
responsibilities immediately before the beginning of the Protection Period;
	 
	 	(v)	 	If the Company has failed to obtain the assumption of the obligations
contained in this Agreement by any successor as contemplated in Section 9.2 hereof;
or
	 
	 	(vi)	 	If there occurs any purported termination of the Executive‘s employment
by the Company or a Subsidiary which is not effected pursuant to a written notice
of termination as described in subsection (ii) or (iii) above; and for purposes of
this Agreement, no such purported termination shall be effective.

	 	 	 	The Executive shall exercise his or her right to terminate his or her employment for
Good Reason by giving the Company a written notice of termination specifying in
reasonable detail the circumstances constituting such Good Reason. However, the Company
shall have thirty (30) days to “cure” such that the circumstances constituting such Good
Reason are eliminated. The Executive‘s employment shall terminate at the end of such
thirty (30)-day period only if the Company has failed to cure such circumstances
constituting the Good Reason.
	 
	 	 	 	A termination of employment by the Executive within a Protection Period shall be for
Good Reason if one of the occurrences specified in this subsection (d) shall have
occurred (and subject to the cure provision of the immediately preceding paragraph),
notwithstanding that the Executive may have other reasons for terminating employment,
including employment by another employer which the Executive desires to accept.
	 
	 	(e)	 	Transfers; Sale of Subsidiary. A transfer of employment from the Company to a
Subsidiary, from a Subsidiary to the Company, or between Subsidiaries shall not be
considered a termination of employment for purposes of this Agreement. If the

 

 

	 	 	 	Company‘s
ownership of a corporation is reduced so as to cause such corporation to cease to be a
“Subsidiary” as defined in Section 1.1(b) of this Agreement and the Executive continues in
employment with such corporation, the Executive shall not be considered to have terminated
employment for purposes of this Agreement and the Executive shall have no right to any
benefits pursuant to this Article 3 unless (a) a Change in Control occurred prior to such
reduction in ownership and (b) the Executive‘s employment terminates within the Protection
Period beginning on the date of such Change in Control under circumstances that would have
entitled the Executive to benefits if such corporation were still a Subsidiary.

Article 3. Benefits Upon Termination Within Protection Period

     3.1 If, within a Protection Period, the Executive’s employment by the Company or a Subsidiary
shall terminate other than because of his or her death, because of a Disability, by the Company for
Cause, or by the Executive other than for Good Reason, if the Executive signs a general release in
a form acceptable to the Company that releases the Company from any and all claims that the
Executive may have, and the Executive affirmatively agrees not to violate the provisions of Article
5 (a “General Release”), the Executive shall be entitled to the benefits provided for below:

	 	(a)	 	The Company or a Subsidiary shall pay to the Executive through the date of the
Executive‘s termination of employment base salary at the rate then in effect, together
with salary in lieu of vacation accrued and unused to the date on which Executive’s
employment terminates, and all other benefits due to Executive through the date of
Executive’s termination of employment, in accordance with the standard payroll and other
practices of the Company or Subsidiary.
	 
	 	(b)	 	The Company or Subsidiary shall also pay to the Executive the amount equal to the
target annual bonus established for the Executive under the Company’s Annual Incentive
Program or a similar bonus plan of a Subsidiary (or a successor to any such bonus plan)
for the fiscal year in which the Executive’s termination of employment occurs, reduced pro
rata for that portion of the fiscal year not completed as of the date of the Executive’s
termination of employment.
	 
	 	(c)	 	The Company or a Subsidiary shall pay the Executive as a severance payment an amount
equal to three (3) times the sum of (A) his or her highest base salary in effect during
any period of twelve (12) consecutive months within the thirty-six (36) months immediately
preceding his or her date of termination of employment; and (B) the target annual bonus
established for the Executive under the Company‘s Annual Incentive Program or a similar
bonus plan of a Subsidiary (or a successor to any such bonus plan) for the fiscal year in
which the Executive’s termination of employment occurs. However, if the Executive is at
least sixty-two (62) years of age as of the date of his or her termination of employment,
the Committee shall have the discretion to alternatively provide the Executive a severance
payment prorated for the number of full months until the Executive attains age sixty-five
(65).
	 
	 	(d)	 	If the Executive is a participant in the Executive Life Insurance Plan (“ELIP”) on
the date of the Executive’s termination of employment, the Executive’s eligibility to
participate in the ELIP with respect to a Policy (as defined in the ELIP) shall continue;
provided that, during the thirty-six (36) or lesser month benefit continuation period
described in Section 3.1(e) below, the Executive will attain at least age fifty-five (55)
and would have

 

 

	 	 	 	completed, if the Executive’s termination of employment had not occurred,
at least five (5) Policy Years (as defined in the ELIP) with respect to such Policy.
	 
	 	(e)	 	Subject to (i) and (ii) below, the Company or a Subsidiary shall provide, at the
exact same cost as to the Executive, and at the same coverage level, as in effect as of
the Executive’s date of termination of employment, a continuation of the Executive’s (and,
where applicable, the Executive’s eligible dependents’) welfare benefit coverage,
including health insurance, dental insurance, group term life insurance and long-term
disability insurance (but excluding any flexible spending accounts) for thirty-six (36)
months from his or her date of termination of employment (the “Benefit Period”). However,
if the Executive is at least sixty-two (62) years of age as of the date of his or her
termination of employment, the Committee shall have the discretion to alternatively
provide the Executive’s (and the Executive’s eligible dependents’) health insurance
coverage as described under this subsection (e) for the number of full months until the
Executive attains age sixty-five (65). The Executive’s applicable COBRA health insurance
benefit continuation period shall begin at the end of this thirty-six (36) or lesser month
benefit continuation period. If the Company is not able to provide under its welfare
benefit plans for employees all or any portion of the welfare benefit coverage required to
be provided to the Executive pursuant to this Section 3.1(e), the Company shall provide
such coverage through alternative insurance coverage, at the exact same cost as to the
Executive, and at the same level of benefits to the Executive, as in effect as of the date
of the Executive’s termination of employment.

	 	(i)	 	If the Executive becomes covered under the health insurance, dental
insurance, group term life insurance or long-term disability insurance coverage of
a subsequent employer which does not contain any exclusion or limitation with
respect to any preexisting condition of the Executive or the Executive’s eligible
dependents, the Company’s obligation to provide health insurance, dental insurance,
group term life insurance or long-term disability insurance coverage pursuant to
this Section 3.1(e), whichever is applicable, shall be discontinued prior to the
end of the thirty-six (36) or lesser month continuation period. For purposes of
enforcing this offset provision, the Executive shall have a duty to inform the
Company as to the terms and conditions of any subsequent employment and the
corresponding benefits earned from such employment. The Executive shall provide, or
cause to provide, to the Company in writing correct, complete, and timely
information concerning the same.
	 
	 	(ii)	 	If, as of the Executive’s date of termination of employment, the
provision to the Executive of the health insurance, dental insurance, group term
life insurance or long-term disability insurance coverage described in this Section
3.1(e) would either: (1) violate the terms of the Company’s health insurance,
dental insurance, group term life insurance or long-term disability insurance plan
(or any other related insurance policies), (2) violate any of the Code’s
nondiscrimination requirements applicable to the health insurance, dental
insurance, group term life insurance or long-term disability insurance coverage, or
(3) cause the Executive to be subject to the excise tax under IRC 409A, then the
Company, in its sole discretion, may elect
to pay the Executive, in lieu of the health insurance, dental insurance, group term
life insurance or long-term disability insurance coverage, described under this
Section 3.1(e), whichever is applicable, a lump-sum cash payment equal to the total
monthly premiums (or in the case of a self-funded health insurance plan, the cost
of COBRA continuation coverage) that would have been paid by the Company for the

 

 

	 	 	 	Executive under the health insurance, dental insurance, group term life insurance
or long-term disability insurance plan from the date of termination through the
thirty-six (36) or lesser months following such date.

	 	 	 	In the event that any health insurance, dental insurance, group term life insurance or
long-term disability insurance coverage provided under this Section 3.1(e) is subject to
federal, state, or local income or employment taxes (other than any such taxes which
were applicable to the same extent to the Executive’s insurance coverage prior to the
Executive’s termination of employment) or IRC Section 409A excise tax, or in the event
that a lump-sum payment is made in lieu of all or a part insurance coverage, the Company
shall provide the Executive with an additional payment in the amount necessary such that
after payment by the Executive of all such taxes (calculated after assuming the
Executive pays such taxes for the year in which the payment or benefit occurs at the
highest marginal tax rate applicable), including any taxes imposed on the additional
payments, the Executive effectively received coverage on a tax-free basis (other than
any such taxes which were applicable to the same extent to the Executive’s insurance
coverage prior to the Executive’s termination of employment) or retains a cash amount
equal to the cash payments in lieu of insurance coverage provided pursuant to this
Section 3.1(e), reduced by any such taxes which are applicable to the Executive’s
insurance coverage same extent as prior to the Executive’s termination of employment.
	 
	 	(f)	 	The Company shall also (i) credit to the Executive’s Cash Balance Plan Make-Up
Account in the Company’s Supplemental Executive Retirement Plan or any successor plan (the
“SERP”) an amount equal to the value of any benefits forfeited under the Company’s Cash
Balance Plan for Salaried Employees or any successor plan and (ii) credit to the
Executive’s Savings Plan Make-Up Account in the SERP an amount equal to the value of any
benefits forfeited under the Company’s Retirement Savings Plan for Salaried Employees or
any successor plan.
	 
	 	(g)	 	The Company shall provide the Executive with three (3) additional years of service
credits under the Company’s Cash Balance Plan for Salaried Employees and under the
Executive’s Cash Balance Plan Make-Up Account in the SERP or any successor plans.
However, if the Executive is at least sixty-two (62) years of age as of the date of his or
her termination of employment, the Company shall provide the Executive with a pro rata
portion of three (3) additional years of service credits, based on the number of full
months until the Executive attains age sixty-five (65). All additional years of service
credits (including credits under the Company’s Cash Balance Plan for Salaried Employees
and under the Executive’s Cash Balance Plan Make-Up Account in the SERP) will be
calculated consistently with the provisions in the plans, will be based on target total
cash compensation as of the date employment terminates (base salary plus target annual
bonus), and will be credited to the Executive’s Cash Balance Plan Make-Up Account in the
SERP. Any distribution from the SERP with respect to such additional credits shall comply
with Section 4.1.
	 
	 	(h)	 	The Company shall credit to the Executive’s Savings Plan Make-Up Account in the SERP
an amount equal to three (3) times the sum of (i) the employer matching contributions and
profit sharing contributions made to the Executive’s accounts under the Company’s
Retirement Savings Plan for Salaried Employees and (ii) the employer matching
contributions and profit sharing contributions credited to the Executive’s Savings Plan
Make-Up Account in the SERP or any successor plans, in each case for the

 

 

	 	 	 	most recent plan
year that ended before the date of the Change in Control or, if higher, for the most
recent plan year that ended after the date of the Change in Control (in either case,
annualized to the extent that such plan year consisted of less than twelve (12) months
and/or the Executive was not eligible to participate in the Company’s Retirement Savings
Plan or Savings Plan Make-Up Account in the SERP, as applicable, for the full plan year).
However, if the Executive is at least sixty-two (62) years of age as of the date of his or
her termination of employment, the Company shall provide the Executive with a pro rata
portion of three (3) times the sum of such employer matching contributions and profit
sharing contributions, based on the number of full months until the Executive attains age
sixty-five (65). Any distribution from the SERP with respect to such additional credits
shall comply with Section 4.1.
	 
	 	(i)	 	The Executive’s Cash Balance Plan Make-Up Account and Savings Plan Make-Up Account in
the SERP shall be fully vested on the date of the Executive’s termination of employment.
	 
	 	(j)	 	The Executive shall receive the cash value of his or her current retiree healthcare
spending account (“RHCSA”) and related dependent healthcare spending account, plus the
value of three (3) additional years of Company contributions to such accounts. However,
if the Executive is at least sixty-two (62) years of age as of the date of his or her
termination of employment, the Company shall provide the Executive with a pro rata portion
of the value of three (3) additional years of Company contributions to such accounts,
based on the number of full months until the Executive attains age sixty-five (65). The
Executive shall be immediately vested in his or her RHCSA and related dependent healthcare
spending account on the date of the Executive’s termination of employment and the account
balances will be paid out in accordance with the terms of the Company’s Master Retiree
Welfare Plan or any successor plan. To the extent the Executive’s RHCSA and related
dependent healthcare spending account may not be immediately vested and paid out under the
Company’s Master Retiree Welfare Plan or any successor plan, such amounts shall be paid
out of the general assets of the Company. In addition, notwithstanding anything to the
contrary in the Company’s Master Retiree Welfare Plan or any successor plan, the Executive
shall be immediately eligible to participate in the benefits available to Retirees
thereunder, and the Executive and the Executive’s spouse shall remain eligible for their
lifetimes, to participate, on an after-tax basis in the event that the Executive’s RHCSA
or dependent healthcare spending account, whichever is applicable, has a zero balance, to
participate the benefits provided to Retiree’s under the Company’s Master Retiree Welfare
Plan or any successor plan as of the date of the Executive’s termination of employment.
If the Company is not able to provide under its Master Retiree Welfare Plans or any
successor plan all or any portion of the welfare benefit coverage required to be provided
to the Executive and the Executive’s spouse pursuant to this Section 3.1(j), the Company
shall provide such coverage through alternative insurance coverage.
	 
	 	(k)	 	The Company shall provide the Executive with executive-level outplacement services
for a period of one (1) year from the date of the Executive’s termination of employment.
Such outplacement services shall be provided through an outplacement firm that is mutually
agreed upon by the parties.
	 
	 	(l)	 	The Company shall (i) pay the Executive a lump sum cash amount equivalent to the same
level of personal allowances (such as club dues and automobile expenses) for the period

 

 

	 	 	 	of
three (3) months, as the Executive received immediately prior to his or her termination of
employment, and (ii) continue to pay the lease payments on the vehicle provided to the
Executive by the Company for a period of three (3) months or, if less, the remainder of
the lease period in effect as of the Executive’s date of termination of employment. The
Executive shall be entitled to the continued use of such vehicle during such period and to
purchase the vehicle at the end of such period on the terms provided in the applicable
lease agreement.
	 
	 	(m)	 	All other rights and benefits that the Executive is vested in, pursuant to other
plans and programs of the Company.

     The Executive shall be entitled to all payments and benefits provided for by or pursuant to
this Section 3.1 whether or not he or she seeks or obtains other employment, except as otherwise
specifically provided in this Section 3.1.

Article 4. Benefits Payment Schedule

     4.1 Payment Schedule. Payments due to the Executive pursuant to Article 3 shall be paid as
follows:

	 	(a)	 	If the Executive is not a “Specified Employee” (as that term is defined and
determined under IRC Section 409A) or if the Executive is a Specified Employee, then only
with respect to payments provided in Section 3.1 that are not deferred compensation
subject to IRC Section 409A, as soon as administratively practicable, but in no event
later than March 15 of the calendar year after the calendar year of the Executive’s date
of Separation from Service (as defined under IRC Section 409A); and
	 
	 	(b)	 	If the Executive is a Specified Employee, for payments that are deferred compensation
subject to IRC Section 409A, as soon as administratively practicable on or after, but in
no event later than the end of the calendar year in which such date occurs, or, if later,
the 15th day of the third calendar month following such date, the date six (6)
months following the Executive’s date of Separation from Service.

Notwithstanding the above, the Company’s obligation to pay severance amounts due to the Executive
pursuant to Article 3, to the extent not already paid, shall cease immediately and such payments
will be forfeited, if the Executive violates any condition described in Sections 5.1 or 5.2 after
his or her termination of employment. To the extent already paid, should the Executive violate any
condition described in Sections 5.1 or 5.2 after his or her termination of employment, the
severance amounts provided hereunder shall be repaid in their entirety by the Executive to the
Company, and all rights to such payments shall be forfeited.

Article 5. Restrictive Covenants

     5.1 Confidentiality. The Company has advised the Executive and the Executive acknowledges that
it is the policy of the Company to maintain as secret and confidential all Protected Information
(as defined below), and that Protected Information has been and will be developed at substantial
cost and effort to the Company. The Executive shall not at any time, directly or indirectly,
divulge, furnish or make accessible to any person, firm, corporation, association, or other entity
(otherwise than as may be required in the regular course of Executive’s employment), nor use in any
manner, either during the Executive’s employment period or after the termination, for any reason,
any Protected Information, or cause any such information of the Company or its Subsidiaries to
enter the public domain. For purposes of this Agreement, “Protected Information” means trade
secrets,

 

 

confidential and proprietary business information of the Company or its Subsidiaries, and
any other information of the Company, including but not limited to, software, records, manuals,
books, forms, documents, notes, letters, reports, data, tables, compositions, articles, devices,
apparatus, customer lists (including potential customers), sources of supply, processes, plans,
materials, pricing information, internal memoranda, marketing plans, internal policies, and
products and services which may be developed from time to time by the Company, its Subsidiaries and
its agents or employees, including the Executive; provided, however that information that is in the
public domain (other than as a result of a breach of this Agreement), approved for release by the
Company or lawfully obtained from third parties who are not bound by a confidentiality agreement
with the Company, is not Protected Information.

     5.2
Nonsolicitation. During the term of this Agreement and for a
period of [CEO: twenty-four (24) months]
[other executives: twelve (12) months]
after the Executive’s date of termination of employment, the Executive shall not solicit or
recruit, directly or indirectly, any employee or consultant of the Company or its Subsidiaries.

     5.3 Ownership. The Executive agrees that all inventions, copyrightable material, business
and/or technical information, marketing plans, customer lists, and trade secrets which arise out of
the performance of this Agreement are the property of the Company.

Article 6. Parachute Payments.

     6.1 Gross-Up Payment. The severance benefits payable to the Executive under Agreement shall be
adjusted as set forth in this Section 6.1. If the sum (the “combined amount”) of the amounts under
Article 3 and other payments or benefits which the Executive has received or has the right to
receive from the Company or any of its Subsidiaries which are defined in IRC Section
280G(b)(2)(A)(i) would constitute a “parachute payment” (as defined in IRC Section 280G(b)(2)), the
combined amount shall, unless the following sentence applies, be decreased by the smallest amount
that will eliminate any parachute payment. If the decrease referred to in the preceding sentence is
10 percent (10%) or more of the combined amount, the combined amount shall not be decreased, but
rather the Company shall pay to the Executive an amount sufficient to provide the Executive, after
tax, a net amount equal to the IRC Section 4999 excise tax imposed on such combined amount, as
increased pursuant to this section (the “Gross-Up Payment). For this purpose, “after tax” means the
amount retained by the Executive after satisfaction (whether through withholding, direct payment or
otherwise) of all applicable federal, state, provincial and local income taxes at the highest
marginal tax rate, and the Executive share of any applicable FICA taxes.

     6.2 Gross-Up Payment Schedule. If an Executive becomes entitled to a Gross-Up Payment as
provided in Section 6.1, the Company shall pay the Gross-Up Payment. If the Executive is not a
Specified Employee, the Company shall pay the Gross-Up Payment as soon as administratively
practicable, but not later than March 15 in the calendar year following the Executive’s Separation
from Service. If the Executive is a Specified Employee, the Company shall pay the Gross-Up
Payment as soon as administratively practicable on or after the date which is six (6) months
following the date of the Executive’s Separation from Service. Provided, however, that in
accordance with IRC Section 280G, such Gross-Up Payment shall not be prepaid in the case of health
insurance benefits; the Gross-Up Payment related to such benefits shall be paid and withheld by the
Company at the same date that income taxes are withheld from such health insurance benefits.

     6.3 Tax Computation. In determining the potential impact of the IRC Section 4999 excise tax,
the Company may rely on any advice it deems appropriate, including, but not limited to, the counsel
of its independent auditors. All calculations for purposes of determining whether any of the
combined amount will be subject to the excise tax and the amounts of such excise tax will be made
in

 

 

accordance with applicable rules and regulations under IRC Section 280G in effect at the
relevant time.

     6.4 Subsequent Recalculation. If the Internal Revenue Service adjusts the computation of the
Company so that the Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a market rate of
interest, as reasonably determined by the Committee. If the Executive is a Specified Employee, such
reimbursement shall be made as soon as administratively practicable on a date on or after the date
six (6) months following the Executive’s date of Separation from Service, and if the Executive is
not a Specified Employee, such reimbursement shall be made as soon as administratively practicable
but not later than March 15 of the calendar year following the calendar year in which the Internal
Revenue Service adjusts the Executive’s computation. If the Internal Revenue Service adjusts the
computation such that the Company has exceeded the maximum amount as provided for, then the amount
paid in excess shall be owed back to the Company with applicable interest and shall be deemed a
loan by the Company to the Executive.

     If, after the receipt by the Executive of an amount advanced by the Company pursuant to this
Article 6, the Executive who becomes entitled to receive any refund with respect to such claim due
to an overpayment of any excise tax or income tax, including interest and penalties with respect
thereto, the Executive shall (subject to the Company’s complying with the requirements of this
Article 6) promptly pay to the Company the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto).

Article 7. No Other Severance Benefits; Right to Other Plan Benefits.

     In the event of termination of the Executive‘s employment within a Protection Period under
circumstances entitling the Executive to benefits hereunder, the Executive shall not be entitled to
any other severance benefits except those provided by or pursuant to this Agreement, and the
Executive hereby waives any claim against the Company or any of its Subsidiaries or affiliates for
any additional severance benefits to which he or she might otherwise be entitled. Except as
provided in the preceding sentence, nothing in this Agreement shall be construed as limiting in any
way any rights or benefits that the Executive may have pursuant to the terms of any other plan,
program or arrangement maintained by the Company or any of its Subsidiaries or affiliates.

Article 8. Termination of Employment Agreements.

     Any and all Employment Agreements entered into between the Company or any of its Subsidiaries
and the Executive prior to the date of this Agreement are hereby terminated.

Article 9. Termination and Amendment; Successors; Binding Agreement.

     9.1 This Agreement shall terminate on the close of business on the date preceding the one-year
anniversary of the date of this Agreement; provided, however, that commencing on the annual
anniversary of the date of this Agreement and each anniversary of the date of this Agreement
thereafter, the term of this Agreement shall automatically be extended for one additional year
unless at least six (6) months prior to such anniversary date, the Company or the Executive shall
have given notice to the other party, in accordance with Article 10, that this Agreement shall not
be extended. This Agreement may be amended only by an instrument in writing signed by the Company
and the Executive. The Company expressly acknowledges that, during the term of this Agreement, the
Executive shall have a binding and irrevocable right to the benefits set forth hereunder in the
event of his or her termination of employment during a Protection Period to the extent provided in
Section 2.1. Any purported amendment or termination of this Agreement by the Company, other than

 

 

pursuant to the terms of this Section 9.1, shall be ineffective, and the Executive shall not lose
any right hereunder by failing to contest such a purported amendment or termination.

     9.2 The Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company or to any subsidiary that employs the Executive, to expressly assume and agree to honor
this Agreement in the same manner and to the same extent that the Company would be required to so
honor if no such succession had taken place. Failure of the Company to obtain such agreement prior
to the effectiveness of any such succession shall be a violation of this Agreement and shall
entitle the Executive to benefits from the Company or such successor in the same amount and on the
same terms as the Executive would be entitled hereunder if he or she terminated his or her
employment for Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of termination of employment.
As used in this Section 9.2, “Company” shall mean the Company hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 9.2 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law. The Company shall promptly notify the Executive of any
succession by purchase, merger, consolidation or otherwise to all or substantially all the business
and/or assets of the Company and shall state whether or not the successor has executed the
agreement required by this Section 9.2 and, if so, shall make a copy of such agreement available to
the Executive.

     9.3 This Agreement and all rights of the Executive hereunder shall inure to the benefit of,
and shall be enforceable by, the Executive and the Executive‘s legal representatives. If the
Executive should die while any amounts remain payable to him or her hereunder, all such amounts
shall be paid to his or her designated beneficiary or, if there be no such beneficiary, to his or
her estate.

     9.4 The Company expressly acknowledges and agrees that the Executive shall have a contractual
right to the benefits provided hereunder, and the Company expressly waives any ability, if
possible, to deny liability for any breach of its contractual commitment hereunder upon the grounds
of lack of consideration, accord and satisfaction or any other defense. If any dispute arises after
a Change in Control as to whether the Executive is entitled to benefits under this Agreement, there
shall be a presumption that the Executive is entitled to such benefits and the burden of proving
otherwise shall be on the Company.

     9.5 The Company‘s obligation to provide the benefits set forth in this Agreement shall be
absolute and unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, or other right which the Company or any
Subsidiary may have against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Each and every payment made hereunder by the
Company or any Subsidiary shall be final, and neither the Company nor any Subsidiary will seek to
recover all or any portion of such payment from the Executive or from whomsoever may be entitled
thereto, for any reason whatsoever.

Article 10. Notice.

     All notices of termination and other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand or mailed by United
States registered mail, return receipt requested, addressed as follows:

If to the Executive:

 

 

	 	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 

If to the Company:

	 	 	 
	 

	 	Corn Products International, Inc.
	 

	 	5 Westbrook Corporate Center
	 

	 	Westchester, IL 60154
	 

	 	Attention: Vice President — Human Resources

or to such other address as either party may have furnished to the other in writing in accordance
herewith.

Article 11. Miscellaneous.

     No provision of this Agreement may be waived or modified unless such waiver or modification is
in writing and signed by the Executive and the Company‘s Chief Executive Officer or such other
officer as may be designated by the Board. No waiver by either party of any breach by the other
party of, or compliance with, any provision of this Agreement shall be deemed a waiver of similar
or dissimilar provisions at the same or any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of the State of
Illinois, without regard to its principles of conflict of laws, and by applicable laws of the
United States.

Article 12. Validity.

     The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision, which shall remain in full force and effect.

Article 13. Legal Expenses; Dispute Resolution; Arbitration; Pre-Judgment Interest.

     13.1 The Company shall promptly pay all legal fees and related expenses incurred by the
Executive in seeking to obtain or enforce any right or benefit under this Agreement (including all
fees and expenses, if any, incurred in seeking advice in connection therewith).

     13.2 If any dispute or controversy arises under or in connection with this Agreement,
including without limitation any claim under any Federal, state or local law, rule, decision or
order relating to employment or the fact or manner of its termination, the Company and the
Executive shall attempt to resolve such dispute or controversy through good faith negotiations.

     13.3 If such parties fail to resolve such dispute or controversy within ninety days, such
dispute or controversy shall, if the Executive so elects, be settled by arbitration, conducted
before a panel of three arbitrators in Chicago, Illinois in accordance with the applicable rules
and procedures of the Center for Public Resources then in effect. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction. Such arbitration shall be final
and binding on the parties. Costs of any arbitration, including, without limitation, reasonable
attorneys’ fees of both parties, shall be borne by the Company.

 

 

     13.4 If such parties fail to resolve such dispute or controversy within ninety days and the
Executive does not elect arbitration, legal proceedings may be instituted, in which event the
Company shall be required to pay the Executive‘s legal fees and related expenses to the extent set
forth in Section 13.1 above.

     13.5 Pending the resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all benefits to which the
Executive is entitled, including medical and life insurance benefits, other than those specifically
at issue in the arbitration or court proceeding and excluding long term disability benefits.

     13.6 If the Executive is awarded amounts pursuant to arbitration or court proceeding, the
Company shall also pay pre-judgment interest on such amounts calculated at the Prime Rate (as
defined below) in effect on the date of such payment. For purposes of this Agreement, the term
“Prime Rate” shall mean the prime rate as published in the Wall Street Journal Midwest edition
showing such rate in effect as of the first business day of each calendar quarter.

* * * * *

          IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above
written.

	 	 	 	 	 
	 	 	 
	 	          Executive 	 
	 	 	 	 
	 
	 	Corn Products International, Inc.

 	 
	 	 	 
	 	By:  	
 	 
	 	 	     
Company Representative Position

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