SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SMTEK International, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
SMTEK INTERNATIONAL, INC.
2151 Anchor Court
Thousand Oaks, CA 91320
(805) 376-2595
DEAR FELLOW STOCKHOLDER,
I am pleased to invite you to a special meeting of the
stockholders of SMTEK International, Inc., (the "Company") which will
be held at 10:00 a.m. Pacific time on May 20, 1999, at the Company's
corporate offices located at 2151 Anchor Court, Thousand Oaks,
California 91320.
At this meeting, stockholders will be asked to approve the
following proposals:
1. The sale to TMW Enterprises Inc. or an affiliate thereof
(collectively hereinafter referred to as "TMW") of between
9,000,000 shares and 11,250,000 shares of the Company's Common
Stock for an aggregate price of $4.5 million (the exact number of
shares will be determined based on the share price preceding the
closing date). TMW is controlled by Thomas M. Wheeler, the
Company's largest stockholder.
2. Adoption of a proposed amendment to the Company's Certificate of
Incorporation that would effect a reverse split of the Company's
Common Stock of 1 share for each 20 shares that are currently
outstanding and that would reduce the authorized capital stock of
the Company to 3,750,000 shares of Common Stock, par value $.01
per share and 1,000,000 shares of preferred stock, par value
$1.00 per share.
PURPOSES OF THE COMMON STOCK SALE: The sale of Common Stock to
TMW for $4.5 million will substantially strengthen the Company's
balance sheet by increasing stockholders' equity and cash reserves,
which will increase the Company's working capital to enable more rapid
growth. Furthermore, because the Company plans to use a portion of the
proceeds from this stock sale to retire debt, an added benefit is that
the Company's interest expense will be reduced, which will increase
overall profitability.
PURPOSES OF THE REVERSE STOCK SPLIT: We believe that the 1-for-
20 reverse stock split may stimulate greater interest in the Company's
Common Stock by the financial community and the investing public, and
that such increased interest could promote greater liquidity for the
Company's stockholders and could enhance the Company's flexibility in
its future financing and capitalization needs.
We believe the adoption of these two proposals, taken together,
will have a very favorable impact on the Company's capital structure,
which should enhance the Company's ability to grow and increase
stockholder value.
Detailed information on both of these proposals is contained in
the accompanying proxy statement.
I urge you to vote FOR the sale of Common Stock to TMW, and FOR
the 1-for-20 reverse stock split. Please complete the accompanying
proxy card and return it in the envelope provided as soon as possible.
Thank you.
Sincerely,
Gregory L. Horton
President and Chief Executive Officer
<PAGE>
PRELIMINARY COPY
SMTEK INTERNATIONAL, INC.
2151 Anchor Court
Thousand Oaks, CA 91320
(805) 376-2595
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
A Special Meeting of Stockholders of SMTEK International, Inc.
(the "Company"), a Delaware corporation, will be held at the offices
of the Company located at 2151 Anchor Court, Thousand Oaks, California
91320, at 10:00 a.m., local time, on May 20, 1999, to consider and
vote on the following matters:
1. A proposal to approve the sale of a maximum of 11,250,000 shares
and a minimum of 9,000,000 shares of the Company's Common Stock
to TMW Enterprises, Inc. or an affiliate thereof for an
aggregate price of $4.5 million. TMW is controlled by Thomas M.
Wheeler, the Company's largest stockholder.
2. A proposal to amend the Company's Certificate of Incorporation
to effect a reverse split of the Company's Common Stock of 1
share for each 20 shares that are currently outstanding and to
reduce the authorized capital stock of the Company to 3,750,000
shares of Common Stock, par value $.01 per share and 1,000,000
shares of preferred stock, par value $1.00 per share (the
"Reverse Stock Split").
The Board of Directors of the Company has fixed April 12, 1999
as the record date for the Special Meeting. You must have been a
holder of Common Stock of record at the close of business on that date
to be entitled to receive notice of and to vote at the Special
Meeting. The presence in person or by proxy of a majority of the
outstanding shares of Common Stock of the Company will constitute a
quorum for the conduct of business at the Special Meeting. The
affirmative vote of a majority of the votes cast by the holders of the
Company's Common Stock is required to approve the sale of the shares,
and the affirmative vote of a majority of the outstanding shares of
Common Stock is required to approve the Reverse Stock Split.
Management sincerely hopes that you will attend the meeting.
However, whether you attend or not, please fill in, date, and sign the
enclosed form of proxy and mail it to the Company. Prompt return of
your proxy in the envelope enclosed for that purpose will save us
expenses involved in further communication. Your proxy is revocable
and will not affect your right to vote in person in the event you
attend the meeting. You may revoke the proxy at the meeting by
notifying the Secretary in writing prior to the voting of the proxy.
By Order of the Board of Directors
Richard K. Vitelle
Vice President and Secretary
Thousand Oaks, California
April 20, 1999
<PAGE>
PRELIMINARY COPY
PROXY STATEMENT
SMTEK INTERNATIONAL, INC.
SPECIAL MEETING OF STOCKHOLDERS
To be held on May 20, 1999
__________________________
INFORMATION ABOUT THE COMPANY
The Company is an independent provider of electronic
manufacturing services ("EMS") to original equipment manufacturers in
the computer, telecommunications, instrumentation, medical, industrial
and aerospace industries. The Company also fabricates printed circuit
boards ("PCBs") for use primarily in the computer, communications and
instrumentation industries. Its EMS facilities are located in
Southern California, Florida and Northern Ireland. Its PCB facilities
are located in Northern Ireland and primarily serve customers in
Western Europe.
MATTERS TO BE CONSIDERED
At the 1999 Special Meeting, you will be asked to consider and
vote upon:
(1) A proposal to approve the sale of a maximum of 11,250,000
shares and a minimum of 9,000,000 shares of Common Stock to TMW
Enterprises Inc. or an affiliate thereof (collectively
hereinafter referred to as "TMW") for an aggregate price of $4.5
million pursuant to a Stock Subscription Agreement dated as of
March 4, 1999 between the Company and TMW Enterprises Inc. A
copy of the Agreement is attached hereto as Appendix A. TMW is
controlled by Thomas M. Wheeler, who is presently the Company's
largest stockholder.
(2) A proposal to amend the Company's Certificate of
Incorporation to effect a reverse split of the Company's Common
Stock of 1 share for each 20 shares that are currently
outstanding and to reduce the authorized capital stock of the
Company to 3,750,000 shares of Common Stock, par value $.01 per
share and 1,000,000 shares of preferred stock, par value of
$1.00 per share.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this proxy statement and the enclosed proxy card
because the Company's Board of Directors is soliciting your proxy to
vote your shares at the Special Meeting. This proxy statement
summarizes information that we are required to provide to you under
the rules of the Securities and Exchange Commission and which is
designed to assist you in voting your shares. On April 20, 1999, we
began mailing these proxy materials to all stockholders of record at
the close of business on April 12, 1999.
INFORMATION ABOUT VOTING
Stockholders can vote on matters presented at the Special
Meeting in two ways:
BY PROXY -- You can vote by signing, dating and returning
the enclosed proxy card. If you do this, the individuals
named on the card (your "proxies") will vote your shares in
the manner you indicate. You may specify on your proxy card
whether your shares should be voted for or against the sale
of Common Stock to TMW, and for or against the reverse stock
split. If you do not indicate instructions on the card, your
shares will be voted FOR the Reverse Stock Split proposal,
but will not count as a vote for or against the sale of
shares to TMW.
IN PERSON -- You may come to the Special Meeting and cast
your vote there.
Abstentions will have the same effect as votes against the
proposal for the Reverse Stock Split, but will be treated as not voted
for purposes of determining approval of the sale of the Common Stock
to TMW.
You may revoke your proxy at any time before it is exercised by
sending a written notice of revocation to the Company's Secretary,
Richard K. Vitelle, by providing a later dated proxy or by voting in
person at the meeting.
We are mailing this solicitation by mail, but it may also be
made in person by the Company's officers and employees. The Company
will bear the entire cost of soliciting the proxies, none of whom will
be specially compensated. The Company will also reimburse banks,
brokerage firms, nominees, custodians and fiduciaries for their out-
of-pocket expenses in forwarding proxy materials to beneficial owners
and seeking instruction with respect thereto.
Each share of the Company's Common Stock is entitled to one
vote. As of April 12, 1999 there were 34,088,128 shares of Common
Stock outstanding.
QUORUM REQUIREMENT
A quorum of stockholders is necessary to hold a valid meeting.
If stockholders entitled to cast at least a majority of all the votes
entitled to be cast at the meeting are present in person or by proxy,
a quorum will exist. Abstentions and broker non-votes are counted as
present for establishing a quorum. A broker non-vote occurs when a
broker votes on some matter on the proxy card but not on others
because the broker does not have the authority to do so.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Approval of the proposal to sell shares of Common Stock to TMW
requires an affirmative vote of the majority of the votes cast on the
matter. Approval of the proposal for the Reverse Stock Split requires
an affirmative vote of a majority of all outstanding shares of the
Common Stock. Abstentions will have the same effect as votes against
the proposal for the Reverse Stock Split, but will be treated as not
voted for purposes of determining approval of the sale of the Common
Stock to TMW.
STOCKHOLDER PROPOSALS
Stockholders who wish to include proposals in the upcoming proxy
statement for action at the Company's 1999 annual meeting of
stockholders to be held in November 1999 must cause their proposals to
be received in writing at the Company's principal executive office
(2151 Anchor Court, Thousand Oaks, California 91320) no later than
June 23, 1999. Such proposals should be addressed to the Company's
Secretary and may be included in the proxy statement for the 1999
annual meeting if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission. Use of
certified mail is suggested.
OTHER MATTERS
The Board of Directors does not know of any other matter which
will be presented at the Special Meeting other than the proposals
discussed in this proxy statement. However, if any other matter
properly comes before the Special Meeting, your proxies will act on
such proposal in their discretion.
THIS PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE
FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 20, 1999.
_______________________
The date of this Proxy Statement is April 20, 1999.
_________________________
PROPOSAL ONE - SALE OF SHARES TO TMW
Description of the Transaction
The Company is proposing to sell to TMW a maximum of 11,250,000
shares and a minimum of 9,000,000 shares of the Company's Common Stock
for an aggregate price of $4.5 million. The exact number of shares sold
will be determined by dividing the aggregate price of $4.5 million by
the per share price, subject to a "collar." The per share price will be
equal to the average of the last sales prices of the Company's Common
Stock on the New York Stock Exchange ("NYSE") on the ten consecutive
trading days immediately preceding the closing date, subject to a collar
consisting of a minimum value of $.40 per share and a maximum value of
$.50 per share.
TMW would pay for the shares in cash at the closing. The shares
would be "restricted securities" as defined in the Securities Act of
1933 and could not be resold except in accordance with the provisions of
Securities and Exchange Commission Rule 144. The Company would provide
registration rights for the registration of the shares in the next
registration statement filed by the Company with the SEC that would
permit inclusion of the shares issued to TMW in this transaction.
The Company intends to use the proceeds from the sale of the
shares to TMW to reduce debt and for general corporate purposes.
Background and Interests of Certain Persons in the Transaction
TMW Enterprises Inc. is a Delaware corporation that is controlled
by Thomas M. Wheeler, who is presently the Company's largest
stockholder. In addition, Oscar B. Marx, III, a member of the Company's
board of directors, is also on the board of directors of TMW Enterprises
Inc. and serves as President and Chief Executive Officer of that
company.
On June 30, 1997, the Company borrowed $2 million from Thomas M.
Wheeler under a note payable bearing 8% interest. The note is
scheduled to mature on October 31, 1999 and is secured by a pledge of
the Common Stock of SMTEK, Inc., a subsidiary of the Company. As part
of the note transaction, the Company agreed that it would use its best
efforts to cause the election of two persons selected by Mr. Wheeler to
the Company's Board of Directors. Those seats were initially filled by
Mr. Wheeler and Ms. Charlene Gondek. At the Company's Annual Meeting
held November 18, 1998, Oscar B. Marx, III was elected by the
stockholders for the board position that had been held by Mr. Wheeler.
Although the Company's financial condition has improved over the
past several years, the Company believes that its ability to grow,
both internally and through acquisitions, has been impaired because it
has a high debt level in relation to its stockholders' equity and net
tangible assets. Based on discussions with investment bankers,
management determined that at the present time the Company is not a
viable candidate for a secondary public offering, in part because of
its relatively low stock price. Furthermore, management determined
through discussions with various potential investors that a private
equity placement with an unaffiliated party would in all likelihood
require the stock to be issued at a substantial discount to the
prevailing market price, which would dilute existing stockholders.
In early 1999, the Company's management held discussions with
TMW Enterprises Inc. concerning a potential private placement sale of
Common Stock to strengthen the Company's capital structure. These
discussions culminated on March 4, 1999, when the parties reached
agreement and entered into the Stock Subscription Agreement whereby,
subject to the approval of the Company's Board of Directors and
stockholders, TMW would purchase between 9,000,000 and 11,250,000
shares of the Company's Common Stock for an aggregate price of $4.5
million, representing a minimum per share price of $.40 and a maximum
per share price of $.50. As a point of reference, the average closing
price of the Company's Common Stock on the NYSE was $.397 on the 10
trading days immediately preceding the date that the Stock
Subscription Agreement was entered into. The Stock Subscription
Agreement is attached to this Proxy Statement as Appendix A.
Also on March 4, 1999, the Company's Board of Directors approved
the Stock Subscription Agreement between the Company and TMW Enterprises
Inc. Mr. Marx, a director of the Company who is affiliated with TMW
Enterprises Inc., as described above, abstained from the vote. The
Board of Directors' decision was motivated by the desire to reduce the
Company's debt and strengthen the Company's balance sheet, and to have
sufficient cash resources to pursue strategic acquisitions. Among the
matters considered by the Board of Directors in approving the Stock
Subscription Agreement were: the need to strengthen the Company's
balance sheet to improve its ability to market its services to key OEM
customers; the beneficial impact on the Company's balance sheet and
debt-to-equity ratio from using a portion of the proceeds to retire
debt; the limited availability to the Company of alternative equity
financing; the market price of the Company's Common Stock; and the
Company's status in meeting the requirements of the NYSE for continued
listing of the Company's Common Stock. The Board of Directors relied
upon its own assessment of the value of the Company's Common Stock as
reflected in its recent market price and trading volume together with
the restricted status of the shares to be issued to TMW (considered in
conjunction with the registration rights) and did not seek an
independent valuation.
Effects of the Transaction
Following this transaction, the Company's stockholders' equity
would increase from $8,062,000 to $12,562,000 (based on the actual
stockholders' equity balance as of December 31, 1998).
A further result of the proposed stock sale would be that, assuming
sale of the maximum number of shares (11,250,000) and that no other
shares of the Company's Common Stock are sold to anyone, and without
giving effect to the Reverse Stock Split that is also being proposed at
this meeting, the Company would have outstanding a total of approximately
45,338,000 shares, of which approximately 17,636,000, or approximately
39% of the total outstanding shares, would be aggregately held by Thomas
M. Wheeler and TMW. As a result of this increased ownership, and
because the Company's Certificate of Incorporation permits stockholders
to cumulate their votes for the election of directors, Mr. Wheeler and
his affiliates would have greater voting power. Such voting power
could give Mr. Wheeler a greater ability to influence the policies of
management and to increase his representation on the Company's Board of
Directors.
By virtue of its ownership of the shares proposed to be sold to
it, TMW would be considered an affiliate and a control person as defined
under the Securities Exchange Act of 1934. As a result of that status,
TMW, like Thomas M. Wheeler, would be required to file statements of
ownership with the SEC, the NYSE and the Company, reflecting its initial
ownership and any changes in ownership. In addition, TMW would be
subject to the "short-swing profit" rules of Section 16(b) of the
Securities Exchange Act of 1934 and may be considered part of a "group"
for reporting purposes under SEC regulations.
Principal Stockholders
The following table sets forth 1) as of February 28, 1999 and 2)
upon completion of the sale of the maximum number of shares
(11,250,000) to TMW, the number of shares and percentage of
outstanding Common Stock known by the Company to be beneficially owned
by (i) each person who is known by the Company to own beneficially
more than 5% of the Company's outstanding Common Stock, (ii) each of
the Company's directors and executive officers, and (iii) all
directors and executive officers of the Company as a group. Unless
otherwise noted, shares are held with sole voting and investment
power. Holdings include, where applicable, shares held by spouses and
minor children, including shares held in trust.
AFTER SALE
OF MAXIMUM
SHARES
-------------------
NAME AND ADDRESS NO. PERCENT NO. PERCENT
OF BENEFICIAL OWNER * SHARES OF CLASS SHARES OF CLASS
------ -------- ------ --------
Thomas M. Wheeler 6,386,254 18.7% 6,386,254 14.1% (1)
801 W. Big Beaver Road
Suite 201
Troy, Michigan 48084
TMW -- -- 11,250,000 24.8% (1)
801 W. Big Beaver
Suite 201
Troy, Michigan 48084
Charlene A. Gondek 1,802,498 (2) 5.3% 1,802,498 4.0%
Gregory L. Horton 1,321,666 (3) 3.9% 1,321,666 2.9%
James P. Burgess 30,000 ** 30,000 **
Bruce E. Kanter 40,000 (4) ** 40,000 **
Oscar B. Marx, III -- -- -- --
Richard K. Vitelle 327,566 (5) ** 327,566 **
George R. Weatherford 150,840 (6) ** 150,840 **
Directors and Executive
Officers as a Group (7
persons) 3,672,570 (7) 10.8% 3,672,570 8.1%
_________
* Except as otherwise noted, the address for each beneficial owner
is c/o SMTEK International, Inc., 2151 Anchor Court, Thousand
Oaks, CA 91320.
** Represents less than 1% of the outstanding shares.
(1) In the event of a sale of the minimum number of shares
(9,000,000), the combined percent of class owned by TMW and
Mr. Wheeler would be 35.7%. In the event of a sale of the
maximum number of shares (11,250,000), the combined percent
of class owned by TMW and Mr. Wheeler would be 38.9%.
(2) Includes 60,000 shares underlying exercisable options.
(3) Includes 396,666 shares underlying exercisable options.
(4) Held in a trust created by Mr. Kanter's father, of which
Mr. Kanter is the beneficiary.
(5) Includes 301,666 shares underlying exercisable options.
(6) Includes 97,280 shares underlying exercisable options.
(7) Includes 855,612 shares underlying exercisable options.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE SALE OF COMMON STOCK TO TMW ENTERPRISES, INC. OR AN AFFILIATE
THEREOF.
PROPOSAL TWO - REVERSE STOCK SPLIT
On March 4, 1999, the Board of Directors adopted a resolution to
authorize a 1-for-20 reverse stock split of the Company's outstanding
shares of Common Stock (the "Reverse Stock Split").
The Reverse Stock Split will be effected by an amendment of the
Company's Certificate of Incorporation.
Purposes of the Proposed Reverse Stock Split
The Company believes that the proposed Reverse Stock Split may
have several positive effects on the Company and on the market for its
Common Stock and other securities.
REDUCTION IN THE NUMBER OF OUTSTANDING SHARES. The principal
purpose of the Reverse Stock Split is to reduce the number of
authorized and outstanding shares of the Company's Common Stock. We
believe that the total number of shares currently outstanding is
disproportionately large relative to the Company's present market
capitalization.
SHARE PRICE AND LIQUIDITY ISSUES. We believe that the
relatively low current market price per share of the Company's Common
Stock may impair the acceptability of the Common Stock to
institutional investors and other members of the investing public. We
also believe that the decrease in the number of shares of Common Stock
outstanding as a consequence of the proposed Reverse Stock Split,
without any material alteration of the proportionate economic interest
in the Company held by individual stockholders, may result in a
trading price of the Common Stock which is more appropriate for the
Company. We further believe that a higher stock price may encourage
greater interest in the Company's Common Stock by the financial
community and the investing public, and that such increased interest
could promote greater liquidity for the Company's stockholders and
could enhance the Company's flexibility in its future financing and
capitalization needs. It is possible, however, that liquidity could
be affected adversely by the reduced number of shares outstanding
after the Reverse Stock Split. In addition, any increase in the
market price of the Company's Common Stock resulting from the Reverse
Stock Split may be proportionately less than the decrease in the
number of shares outstanding. We cannot assume that the foregoing
effects will occur, that the market price of the Company's Common
Stock will approximate 20 times the market price before the proposed
Reverse Stock Split, or that the market price immediately after
implementation of the proposed Reverse Stock Split will be maintained
for any period of time.
Effect of the Reverse Stock Split
We will file an amendment to the Company's Certificate of
Incorporation with the Secretary of State of the State of Delaware on
a date (the "Reverse Split Date") selected by the Board in its sole
discretion (but in any event not later than December 31, 1999). The
Reverse Stock Split would be effective at 5:00 p.m. Eastern Time, on
the Reverse Split Date. Even if we receive sufficient votes approving
the Reverse Stock Split, if, for any reason, the Board of Directors
deems it advisable to do so, we may abandon the Reverse Stock Split at
any time prior to filing the Certificate of Amendment with the
Secretary of State of the State of Delaware.
Upon the filing of the Certificate of Amendment, and without
further action by the stockholders of the Company, shares of the
Company's Common Stock held by stockholders of record as of the
Reverse Split Date will be converted into the right to receive an
amount of whole shares of new (post-split) Common Stock equal to the
number of pre-split shares divided by 20. Article Two of the
Company's Certificate of Incorporation currently authorizes the
Company to issue up to 75,000,000 shares of Common Stock. As a result
of the Reverse Stock Split, the Company's authorized shares will
automatically be reduced from 75,000,000 to 3,750,000.
The Company's Common Stock is quoted on the NYSE. There were
approximately 4,000 holders of the Company's Common Stock on the
Record Date.
As of the Record Date, the number of issued and outstanding
shares of Company's Common Stock was 34,088,128. As a result of the
Reverse Stock Split, the aggregate number of shares of Company Common
Stock that would be issued and outstanding would be approximately
1,704,000, and approximately 2,046,000 shares would be authorized and
unissued. In addition, the Company will continue to have 1,000,000
authorized and unissued shares of Preferred Stock. Giving effect to
the sale of the maximum number of shares of the Common Stock to TMW
(11,250,000 pre-reverse split shares), which is also proposed in this
proxy statement, the aggregate number of shares of Common Stock that
would be issued and outstanding after the Reverse Stock Split would be
approximately 2,267,000, and 1,483,000 shares would be authorized and
unissued.
Number of shares Immediately Prior After Sale of
of Common Stock to Reverse After Reverse Maximum Number
of Company Stock Split Stock Split of Shares to TMW
- - ---------------- ----------------- ------------- ----------------
Authorized 75,000,000 3,750,000 3,750,000
Outstanding 34,088,000 1,704,000 2,267,000
Preferred Stock
(Authorized and
unissued) 1,000,000 1,000,000 1,000,000
The proposed Reverse Stock Split will not affect any
stockholder's proportionate interest in the Company, except for those
stockholders who would receive cash in lieu of fractional shares, as
described below. The shares of Common Stock that would be issued upon
approval of the Reverse Stock Split would be fully paid and
nonassessable. The voting rights and other privileges of the
continuing holders of the Company's Common Stock would not be affected
substantially by adoption of the Reverse Stock Split or the subsequent
implementation thereof.
The Reverse Stock Split will not affect the Company's accumulated
deficit, and stockholders' equity will remain substantially unchanged.
Outstanding stock options, warrants and the conversion price of
convertible subordinated debentures will be adjusted to reflect the
ratio of the Reverse Stock Split, if such transaction is effected.
Treatment of Fractional Shares
We will not issue any certificates or scrip representing
fractional shares of Common Stock to stockholders because of the
Reverse Stock Split. Rather, each stockholder who would otherwise
receive a fractional share of Common Stock as a result of the Reverse
Stock Split will receive, in lieu of such fractional share interest,
an amount of cash equal to the average of the last sale prices of the
Common Stock, as reported in the NYSE consolidated reporting system
for the five trading days immediately prior to, and including, the
effective date of the Reverse Stock Split multiplied by the number of
shares of Common Stock held by such holder that would otherwise have
been exchanged for each fractional share. The Company believes that
the cost of purchasing such fractional shares will not be material.
Other Effects of the Reverse Stock Split
The Reverse Stock Split is likely to result in some
stockholders owning "odd-lots" of less than 100 shares of Common
Stock. Brokerage commissions and other costs of transactions in odd-
lots are generally somewhat higher than the costs of transaction on
"round-lots" of even multiples of 100 shares.
Stockholders have no right under Delaware law or under the
Company's Certificate of Incorporation or By-laws to dissent to the
Reverse Stock Split.
Exchange of Stock Certificates
When the Reverse Stock Split is consummated, as soon as
practicable after the Reverse Split Date, we will send a letter of
transmittal to each stockholder of record on the Reverse Split Date
for use in transmitting certificates representing shares of Company's
Common Stock (the "Prior Certificates") to the Company's transfer
agent, American Stock Transfer & Trust Co. (the "Exchange Agent").
The letter of transmittal will contain instructions for the surrender
of the Prior Certificates to the Exchange Agent in exchange for
certificates representing the appropriate number of whole shares of
post-reverse split Common Stock and cash in lieu of any fractional
share. No new certificates will be issued to a stockholder until such
stockholder has surrendered all Prior Certificates together with a
properly completed and executed letter of transmittal to the Exchange
Agent.
Upon proper completion and execution of the letter of
transmittal and its return to the Exchange Agent, together with all
Prior Certificates, stockholders will receive a new certificate or
certificates representing the number of whole shares of Common Stock
into which their shares of Common Stock represented by the Prior
Certificates have been converted. Until their surrender, the
outstanding Prior Certificates will be deemed for all purposes to
represent the number of whole shares of Company's Common Stock to
which such stockholders are entitled to receive as a result of the
Reverse Stock Split. You should not send your Prior Certificates to
the Exchange Agent until you have received the letter of transmittal.
Shares not presented for surrender as soon as practicable after the
letter of transmittal is sent shall be exchanged at the first time
they are presented for transfer.
The Company will pay all the expenses in connection with the
exchange of certificates. No service charges will be payable by
holders of shares of Company's Common Stock.
Federal Income Tax Consequences
The following discussion summarizes the material anticipated
Federal income tax consequences of the Reverse Stock Split to
stockholders of the Company. This summary is based on the Federal
income tax laws now in effect and as currently interpreted. The
summary does not take into account possible changes in such laws or
interpretations, including amendments to applicable statutes,
regulations and proposed regulations or changes in judicial or
administrative rulings, some of which may have retroactive effect, and
does not address consequences of the Reverse Stock Split under state,
local or foreign tax laws. This summary is provided for general
information only and does not address all aspects of the possible
Federal income tax consequences of the Reverse Stock Split and is not
intended as tax advice to any person. In particular, and without
limitation, this summary does not consider the Federal income tax
consequences to stockholders of the Company in light of their
individual investment circumstances or to particular stockholders
subject to special treatment under the Federal income tax laws such as
foreign taxpayers, life insurance companies and regulated investment
companies. YOU SHOULD CONSULT Y0UR OWN TAX ADVISER REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT. We are
not obtaining an opinion of counsel or any ruling from the Internal
Revenue Service regarding the Federal income tax consequences to the
stockholders of the Company as a result of the Reverse Stock Split.
We believe that the Reverse Stock Split would be a tax-free
recapitalization to the Company and its stockholders. If the Reverse
Stock Split qualifies as a recapitalization described in Section
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), then: (i) no gain or loss will be recognized by holders of
the Company's Common Stock who exchange their shares of Common Stock
for new, post-reverse split shares, except that holders of pre-reverse
split Common Stock who receive cash proceeds from the sale of
fractional shares of Common Stock will recognize gain or loss equal to
the difference, if any, between such proceeds and the basis of their
Common Stock allocated to their fractional share interests, and such
gain or loss, if any, will constitute capital gain or loss if their
fractional share interests are held as capital assets at the time of
their sale, (ii) the tax basis of the new, post-reverse split Common
Stock received by holders of old, pre-reverse split shares will be the
same as the tax basis of the old, pre-reverse split shares exchanged
therefor, and (iii) the holding period of the new post-reverse split
shares in the hands of the holders of such shares will include the
holding period of their old, pre-reverse split shares exchanged
therefor, provided that such shares were held as a capital asset
immediately prior to the exchange.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE REVERSE STOCK SPLIT.
By order of the Board of Directors
Richard K. Vitelle
Vice President and Secretary
Thousand Oaks, California
April 20, 1999
<PAGE>
APPENDIX A
STOCK SUBSCRIPTION AGREEMENT
SMTEK INTERNATIONAL, INC.
The undersigned, TMW Enterprises Inc., a Delaware
corporation, hereby subscribes to purchase, either directly for its
own account or indirectly through an affiliated company (both TMW
Enterprises Inc. and its affiliate collectively referred to herein as
"TMW"), for $4,500,000 a certain number of shares of common stock,
$.01 par value of SMTEK International, Inc. ("SMTEK") upon the
following terms and conditions:
1. Number of Shares. The number of shares of SMTEK
common stock to be issued to TMW pursuant to this Agreement is equal
to $4,500,000 divided by the Per Share Price. The "Per Share Price"
is the average of the last sales price of SMTEK's common stock on the
New York Stock Exchange ("NYSE") on the ten consecutive Trading Days
immediately preceding the Closing Date (as that term is defined
below), subject to a collar consisting of a minimum value of $0.40 per
share and a maximum value of $0.50 per share. A "Trading Day" is any
day on which SMTEK stock is actually sold on the NYSE. The number of
common stock shares as determined by this formula is hereinafter
referred to as the "Shares".
2. Board and Stockholder Approval. This Agreement will
be subject to approval by the Board of Directors of SMTEK. SMTEK
agrees that it will promptly present this Agreement to its Board of
Directors. In addition, under the rules of the NYSE, by virtue of
TMW's position as a substantial beneficial security holder of SMTEK,
the sale and purchase contemplated hereby will require, and is
conditioned upon, the favorable vote of the stockholders of SMTEK at a
stockholders meeting duly called and held. Upon board approval, SMTEK
will proceed promptly to call a stockholders meeting for that purpose,
along with such other purposes as may be appropriate in the judgment
of management.
3. Closing. The closing shall be scheduled for the first
business day following a favorable vote at the stockholders meeting
(the "Closing Date"). On the Closing Date, TMW shall make payment in
immediately available funds for the Shares and SMTEK shall issue or
cause to be issued by its transfer agent a stock certificate
evidencing TMW's ownership of the Shares.
4. Securities Laws Exemptions. The offer and sale of
securities contemplated hereby is intended to be exempt from the
registration requirements of the federal and state securities laws by
virtue of Section 4(2) of the Securities Act of 1933, as amended (the
"Act"), and other exemptions available for non-public sales to
accredited investors. In connection with its purchase of the Shares,
TMW shall provide to SMTEK the appropriate investment representations
as reasonably required by SMTEK's counsel to evidence that TMW is
buying the Shares for investment and not resale, that TMW has been
provided with full access to material information concerning SMTEK and
that TMW is able to bear the risks involved in a further investment in
the Shares.
5. Restricted Securities. The Shares will be "restricted
securities" as defined in the Act and, unless registered for resale,
must be held by TMW and may not be resold except in compliance with
the resale requirements of SEC Rule 144.
6. Use of Proceeds. The parties acknowledge that it is
SMTEK's intention to use the proceeds from the sale of Shares for the
reduction of SMTEK's corporate debt and for general corporate
purposes.
7. Piggyback Registration Rights. TMW shall have
Piggyback registration rights for the registration of the Shares in
the next registration statement filed by SMTEK with the Securities and
Exchange Commission that would permit the inclusion of the Shares.
The parties agree to execute such separate Registration Rights
Agreement, containing the customary provisions concerning registration
and indemnification, as recommended by counsel.
8. Compliance with Laws. The parties agree to cooperate
with each other with respect to compliance with all laws applicable to
this transaction and to execute such further agreements, instruments,
representations, and documents as may be reasonably required in order
to evidence such compliance.
9. Expiration. The subscription represented hereby
shall expire on June 30, 1999 if SMTEK has not obtained the necessary
approvals from its board of directors, stockholders and any regulatory
bodies.
Signed this 4th day of March, 1999, by the undersigned
duly authorized officers.
SMTEK International, Inc. TMW Enterprises Inc.
By: /s/ Gregory L. Horton By: /s/ Oscar B. Marx, III
--------------------- ----------------------
Gregory L. Horton Oscar B. Marx, III
President & CEO President & CEO
<PAGE>
PROXY CARD
SMTEK International, Inc.
Proxy for Special Meeting of Stockholders
May 20, 1999
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS OF SMTEK INTERNATIONAL, INC.
The undersigned hereby appoints Mr. Gregory Horton and Mr.
Richard K. Vitelle as Proxies (each of them with full power to act
without the other), each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the
reverse, all the shares of common stock of SMTEK International, Inc.
(the "Company") held of record by the undersigned on April 12, 1999 at
the Special Meeting of Stockholders to be held on May 20, 1999 or at
any adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR the Reverse Stock Split (Proposal
2), but will not be voted for or against the sale of common stock
(Proposal 1).
1. Approval of the sale of Common Stock to TMW Enterprises Inc.
or an affiliate thereof:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval of the 1-for-20 Reverse Stock Split:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING.
The Board of Directors recommends votes FOR the sale of
Common Stock to TMW Enterprises Inc. or an affiliate thereof,
and FOR the 1-for-20 Reverse Stock Split.
Signature: Date: , 1999
----------------------- -------------------
Please sign exactly as name appears herein. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
