<PAGE>
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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
of the
Commission Only (as
permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SMTEK International, Inc.
----------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------
(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:
---------------------------------------------------------
----
(2) Aggregate number of securities to which transaction
applies:
---------------------------------------------------------
----
(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):
---------------------------------------------------------
----
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------
----
(5) Total fee paid:
---------------------------------------------------------
----
[ ] Fee paid previously with preliminary materials:
-------------------------------------------------------------
----
[ ] 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:
---------------------------------------------------------
----
(2) Form, Schedule or Registration Statement no.:
---------------------------------------------------------
----
(3) Filing Party:
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----
(4) Date Filed:
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<PAGE>
[Company Logo]
SMTEK INTERNATIONAL, INC.
2151 Anchor Court
Thousand Oaks, California 91320
(805) 376-2595
October 10, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the 2000 Annual Meeting
of Stockholders of SMTEK International, Inc. to be held at the
offices of the Company located at 2151 Anchor Court, Thousand
Oaks, California 91320, on Thursday, November 9, 2000, at 9:00
a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement
fully describes the formal business to be transacted at the
meeting, which includes the election of two directors of the
Company, adoption of an amendment to the Company's 1996 Stock
Incentive Plan to increase by 300,000 the number of shares of
Common Stock that may be issued under the plan, and adoption of
certain amendments to the Company's 1998 Non-Employee Directors
Stock Plan. Directors and officers of the Company will be
present to host the meeting and to respond to any questions from
our stockholders. We hope you will be able to attend.
The Company's Board of Directors believes that a favorable
vote for each matter described in the attached Notice of Annual
Meeting and Proxy Statement is in the best interests of the
Company and its stockholders and unanimously recommends a vote
"FOR" each such matter. Accordingly, we urge you to review the
accompanying materials carefully.
Whether or not you plan to attend the Annual Meeting, please
complete, sign, date and mail the enclosed proxy card promptly.
Sending in the proxy card will not limit your right to revoke
your proxy at a later time or attend the Annual Meeting and vote
in person.
The directors, officers and employees of SMTEK
International, Inc. look forward to seeing you at the meeting.
Sincerely,
/s/ Gregory L. Horton
-----------------------------
--------
Gregory L. Horton
President and Chief Executive
Officer
IF YOU PLAN TO ATTEND THE ANNUAL STOCKHOLDERS MEETING
IN
PERSON, PLEASE RSVP BY CALLING SMTEK TOLL-FREE AT 1-877-
376-2595.
<PAGE>
[Company Logo]
SMTEK INTERNATIONAL, INC.
2151 Anchor Court
Thousand Oaks, California 91320
(805) 376-2595
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 9, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of
stockholders of SMTEK International, Inc., a Delaware corporation
(the "Company"), will be held at the offices of the Company
located at 2151 Anchor Court, Thousand Oaks, California 91320,
at 9:00 a.m. local time on Thursday, November 9, 2000, to
consider and vote on the following matters:
1. To elect two Class II Directors to serve for a term of
three years, or
until their successors are duly elected and qualified;
2. To approve an amendment of the Company's 1996 Stock
Incentive Plan to
increase by 300,000 the number of shares of Common Stock
that may be
issued pursuant to awards thereunder;
3. To approve amendments to the Company's 1998 Non-Employee
Directors Stock
Plan to (i) increase by 150,000 the number of shares of
Common Stock
that can be issued pursuant to awards thereunder, (ii)
award 5,000 stock
options to each non-employee director serving on the Board
of Directors
on October 31, 2000, and (iii) award 5,000 stock options to
each non-
employee director upon initial election or re-election to
the Board of
Directors commencing with this 2000 Annual Meeting; and
4. To transact such other business as may properly come before
the meeting
or any adjournment thereof.
Information concerning these matters, including the names of
the nominees for the Board of Directors, is more fully set forth
in the attached Proxy Statement, which is a part of this notice.
The Board of Directors has fixed September 29, 2000 as the
record date for the meeting, and only stockholders of record at
the close of business on that date are entitled to receive notice
of and vote at the meeting or at any adjournment thereof.
Management sincerely hopes that you will attend the meeting.
However, please fill in, date, and sign the enclosed form of
proxy and mail it to the Company regardless of whether you expect
to attend the meeting in person. The prompt return of your proxy
in the enclosed envelope will save 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. The
proxy may be revoked prior to or at the meeting by notifying the
Secretary of your revocation in writing prior to the voting of
the proxy. The Annual Report of SMTEK International, Inc. for
the fiscal year ended June 30, 2000, including financial
statements, is being mailed to stockholders with this notice.
By Order of the Board of
Directors
/s/ Mitchell J. Freedman
-----------------------------
Mitchell J. Freedman
General Counsel and Secretary
Thousand Oaks, California
October 10, 2000
SMTEK INTERNATIONAL, INC.
2151 Anchor Court
Thousand Oaks, California 91320
(805) 376-2595
PROXY STATEMENT
---------------
2000 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 9, 2000
----------------
INTRODUCTION
This Proxy Statement and accompanying form of proxy are
being furnished to stockholders of SMTEK International, Inc., a
Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies
to be voted at the Annual Meeting of Stockholders to be held at
9:00 a.m. local time on Thursday, November 9, 2000 at the offices
of the Company located at 2151 Anchor Court, Thousand Oaks,
California 91320, or at any adjournment thereof. If a proxy in
the accompanying form is duly executed and returned, the shares
represented by the proxy will be voted at the meeting in the
manner described herein and in accordance with the specification
in the proxy. In the event no specification is made, the proxy
will be voted FOR the election of the Director nominees named
herein, FOR the approval of an amendment to the Company's 1996
Stock Incentive Plan to increase by 300,000 the number of shares
of Common Stock that may be issued pursuant to awards thereunder,
FOR the approval of amendments to the Company's 1998 Non-Employee
Directors Plan to: (i) increase by 150,000 the number of shares
of Common Stock that can be issued pursuant to awards thereunder;
(ii) award 5,000 stock options to each non-employee director
serving on the Board of Directors on October 31, 2000; and (iii)
award 5,000 stock options to each non-employee director upon
initial election or re-election to the Board of Directors
commencing with this 2000 Annual Meeting, and in the discretion
of the proxy holders on such other business as may properly come
before the meeting. The Board of Directors currently knows of no
other business that will be presented for consideration at the
Annual Meeting. Any person executing a proxy may revoke it at
any time prior to its exercise by filing with the Secretary of
the Company a written revocation of the proxy or a duly executed
proxy bearing a later date. You may revoke your proxy at the
meeting by notifying the Secretary of such revocation in writing
prior to the voting of the proxy. This proxy statement was first
mailed to the Company's stockholders on or about
October 10, 2000.
As of the close of business on September 29, 2000, the
Company had outstanding 2,275,475 shares of its Common Stock, par
value $0.01 per share. Each stockholder is entitled to one vote
on each proposal for each share held on the record date
(September 29, 2000). A majority of the shares of Common Stock
issued and outstanding constitutes a quorum. Abstentions and
broker non-votes are counted for the purpose of determining the
presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are
not counted for the purpose of determining whether a proposal has
been approved. Under the laws of the State of Delaware and the
provisions of the Company's Certificate of Incorporation, all
stockholders are entitled to cumulate their votes in the election
of directors. A stockholder may cumulate votes by casting for
the election of one nominee a number of votes equal to the number
of directors to be elected multiplied by the number of shares
owned by the stockholder, or may distribute such votes on the
same principle among as many candidates as the stockholder sees
fit. If a proxy is marked for the election of directors, it may,
at the discretion of the proxy holders, be voted cumulatively in
the election of directors. Under the Delaware General
Corporation Law and the Company's Certificate of Incorporation,
if a quorum is present at the meeting, the nominees for election
as directors who receive the greatest number of votes cast for
election of directors at the meeting by shares present in person
or by proxy and entitled to vote thereon shall be elected as
directors.
For purposes of electing the director nominees named herein
(Proposal One), because directors are elected by a plurality,
abstentions and broker non-votes will be excluded from the vote
and will have no effect on the election of directors. The
affirmative vote of the holders of a majority of shares of Common
Stock present at the Annual Meeting in person or by proxy is
required for the approval of an amendment to the Company's 1996
Stock Incentive Plan (Proposal Two) and the approval of certain
amendments to the Company's 1998 Non-Employee Directors Stock
Plan (Proposal Three). An abstention with respect to Proposals
Two or Three will have the same effect as a negative vote, but
because shares held by brokers as to which the brokers withhold
authority on these proposals will not be considered entitled to
vote on these proposals, a broker non-vote will have no effect on
these votes. A broker non-vote occurs when a nominee holding
shares for a beneficial owner does not vote on a proposal because
the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
The cost of preparing, assembling, printing and mailing this
Proxy Statement and accompanying form of proxy, and the cost of
soliciting proxies relating to the Annual Meeting, will be borne
by the Company. The Company may request banks and brokers to
solicit their customers who beneficially own Common Stock listed
of record in names of nominees, and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses for such
solicitations. The solicitation of proxies by mail may be
supplemented by telephone, facsimile and personal solicitation by
officers, directors and regular employees of the Company, but no
additional compensation will be paid to such individuals.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the
Board of Directors shall be divided into three classes,
designated as Class I, Class II and Class III. Pursuant to the
Company's bylaws, the Board of Directors currently consists of
one Class I director, two Class II directors, and two Class III
directors. The board amended the Company's bylaws in August 2000
to increase the size of the board from four to five directors.
The term of office of the Class II directors expires at this
Annual Meeting. Accordingly, at the Annual Meeting, stockholders
will be asked to elect two Class II directors to serve for a term
of three years, or until their successors are duly elected and
qualified. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE DIRECTOR NOMINEES.
A brief biography of the nominees for election as director,
and of each other director whose term continues after the 2000
Annual Meeting, is presented below.
<TABLE>
YEAR FIRST
ELECTED A
NAME PRINCIPAL OCCUPATION
AGE DIRECTOR
------------------ ---------------------------------------
--- ----------
<S> <C>
<C> <C>
NOMINEES FOR ELECTION AS CLASS II DIRECTORS WITH TERMS EXPIRING
IN 2003:
Gregory L. Horton Chief Executive Officer, President
44 1996
and Chairman of the Board of
Directors, SMTEK International, Inc.
Bruce E. Kanter Management consultant
57 1998
CLASS III DIRECTORS TO CONTINUE IN OFFICE UNTIL THE ANNUAL
MEETING FOR THE YEAR ENDING JUNE 30, 2001:
Clay M. Biddinger CEO, CMB Capital, LLC
45 2000
Oscar B. Marx, III President and CEO, TMW Enterprises Inc.
61 1998
CLASS I DIRECTOR TO CONTINUE IN OFFICE UNTIL THE ANNUAL MEETING
FOR THE YEAR ENDING JUNE 30, 2002:
James P. Burgess Vice President, Trilogy Marketing Inc.
69 1998
</TABLE>
Mr. Horton became the Company's President and Chief
Executive Officer in January 1996. He was appointed a director
in February 1996, and was appointed Chairman of the Board in
July 1996. Since 1986, he has served as the President of SMTEK,
Inc., which became a subsidiary of the Company in January 1996.
Mr. Kanter has provided management consulting services to
various companies since 1994. From 1991 to 1994, Mr. Kanter
served as Executive Vice President, Chief Financial Officer and
director of Westwood One, Inc., the parent company of several
national radio networks and one of the country's largest
producers and distributors of radio programming. Mr. Kanter is a
director of Discus Dental, a privately-held marketer and
manufacturer of dental products.
Mr. Biddinger was appointed a director of the Company on
August 23, 2000. Mr. Biddinger has served as the CEO of CMB
Capital, LLC, a private equity company, which provides leasing
and asset management services to small and mid-sized technology
businesses, from March 1999 to the present. From 1981 to 1998,
Mr. Biddinger served as CEO of Sun Financial Group, Inc., an
equipment leasing company that he founded and which became a
subsidiary of GATX Capital Corporation in 1995. Mr. Biddinger is
a director of Florida Banks Inc., a Nasdaq-listed company.
Mr. Marx has served as President and CEO of TMW Enterprises
Inc., a private equity investment company, since 1995, and as
Chairman of Pullman Industries, a privately held metal-forming
company, since 1996. Mr. Marx served as President and CEO of
Electro-Wire Products, Inc., an electrical distribution company,
from 1994 to 1995, and as Vice President - Automotive Components
Group of Ford Motor Company from 1989 to 1994. Mr. Marx is a
director of Parametric Technology Corporation and Amerigon Inc.
(Nasdaq-listed companies), Tesma International (an automotive
parts company listed on the Toronto Stock Exchange) and Ecoair
Company (a privately held technology development company).
Mr. Burgess has served as Vice President of Trilogy
Marketing, Inc., a manufacturers' representative for electronics
products companies, from 1996 to the present. From 1995 to 1996,
Mr. Burgess served as Vice President of Alcoa Fujikura Limited, a
supplier of electrical products to the automotive industry. Mr.
Burgess served as Vice President of Electro-Wire Products, Inc.,
an electrical distribution company, from 1985 to 1995, prior to
the acquisition of that company by Alcoa Fujikura Limited.
None of the Company's executive officers or directors are
related by blood or marriage. In June 1997, the Company agreed
to provide Mr. Thomas M. Wheeler, the Company's largest
stockholder, with the right to nominate individuals to fill two
seats on the board. Mr. Wheeler's designees on the board are
Messrs. Burgess and Marx. See "Certain Relationships and
Transactions." Aside from that agreement, there are no
arrangements or understandings between the listed individuals and
any other person pursuant to which those individuals were
selected as an officer or director.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held eight meetings during the fiscal
year ended June 30, 2000. The Company has standing audit and
compensation committees of the board. All of the directors
attended more than 75% of the board meetings and meetings of
committees of which they are members.
The audit committee consists of Messrs. Kanter and Burgess.
The principal functions of the audit committee are to review with
the independent auditors and management the results of the annual
financial statement audit, and to review the status of internal
accounting controls. The audit committee held five meetings
during the fiscal year ended June 30, 2000. The Board of
Directors adopted a written Audit Committee Charter on May 16,
2000.
During the fiscal year ended June 30, 2000, the compensation
committee consisted of Messrs. Kanter and Marx. The compensation
committee establishes the levels of compensation of the directors
and senior management and also administers the Company's option
and incentive plans (except the Amended and Restated 1998 Non-
Employee Directors Stock Option Plan). The compensation
committee held four meetings during the fiscal year ended
June 30, 2000. The report of the compensation committee begins
on page 7. On September 12, 2000, Mr. Biddinger was appointed to
the compensation committee, replacing Mr. Kanter.
DIRECTOR COMPENSATION
Pursuant to the Amended and Restated 1998 Non-Employee
Directors Stock Plan (the "Directors Plan"), on July 1 of every
year, each non-employee director is automatically entitled to
receive an annual grant of Company Common Stock or stock options
with a fair value of $12,000.
The Directors Plan also provides for compensation to non-
employee directors of $1,000 for each meeting of the board
attended in person or by telephone and $500 for each meeting of
board committees attended in person or by telephone (if such
committee meetings are not held on the same day as meetings of
the board). All such compensation is payable in the form of
Common Stock or stock options.
Annually, each non-employee director makes an election to
receive director compensation in the form of Common Stock or
stock options. For purposes of determining the number of
securities issued as compensation to non-employee directors, the
fair value of Company Common Stock is equal to the fair market
value of Common Stock on the grant date, and the fair value of
stock options is determined using the Black-Scholes pricing model
using data and assumptions as of the grant date. The exercise
price of all stock options is equal to the fair market value of
the Common Stock at the date of grant. Under the terms of the
Directors Plan, each option granted is fully exercisable upon the
grant date. Each option grant has a ten-year term. During
fiscal year 2000, 4,557 shares of Common Stock were issued to non-
employee directors and 14,855 stock options were granted to non-
employee directors at option prices ranging from $3.63 to $3.88 a
share.
If Proposal Three herein is approved by the stockholders at
the 2000 Annual Meeting, each non-employee director serving on
the Board of Directors on October 31, 2000 will be awarded 5,000
stock options, and thereafter each non-employee director will be
awarded 5,000 stock options upon initial election or re-election
to the Board of Directors commencing with this 2000 Annual
Meeting.
Directors are reimbursed for their travel expenses. In
addition, one director, Mr. Kanter, had a consulting agreement
with the Company whereby he provided consulting services to the
Company for a monthly fee of $5,000. Pursuant to this
arrangement, Mr. Kanter received $60,000 in consulting fees from
the Company in fiscal 2000. This consulting agreement was
terminated in July 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934,
as amended, the directors and executive officers of the Company
and persons who own more than 10% of the Company's Common Stock
("statutory insiders") are required to file reports with the
Securities and Exchange Commission of their ownership of the
Company's Common Stock on Form 3 and any subsequent changes in
that ownership on Form 4 or Form 5.
To the Company's knowledge, based solely upon its review of
the copies of such reports required to be furnished to the
Company during or with respect to the fiscal year ended June 30,
2000, the Company believes that all Section 16(a) filing
requirements applicable to its statutory insiders during or for
such fiscal year were satisfied, except that Bruce E. Kanter was
late in filing a Form 4 to report a disposition of the Company's
Common Stock during fiscal 2000.
EXECUTIVE COMPENSATION
Executive Compensation Table
The following table sets forth the cash compensation paid or
accrued by the Company, as well as certain other compensation,
for its fiscal years ended June 30, 2000, 1999 and 1998 to each
of the Company's executive officers whose compensation exceeded
$100,000 for the fiscal year ended June 30, 2000:
<TABLE>
Long-Term
Annual Compensation
Compensation All Other
Name and -----------------------
Awards: Stock Compensation
Principal Positions Age Year Salary Bonus
Options (#) ($) (A)
--------------------- --- ---- -------- ------------ -
------------ ------------
<S> <C> <C> <C> <C>
<C> <C>
Gregory L. Horton 44 2000 $204,000 $ (B)
15,000 $43,200
Chairman, President 1999 150,000 85,000
25,000 (C) 400
and CEO 1998 150,000 126,000
0 1,400
Richard K. Vitelle 47 2000 $129,000 $ (B)
3,000 $ 900
VP Finance & Admin., 1999 125,000 10,000
19,250 (C) 3,100
CFO and Treasurer 1998 125,000 10,000
0 1,400
George R. Weatherford 60 2000 $122,000 $171,000 (D)
10,000 $ 600
Corp. VP Operations 1999 93,000 17,000
14,864 (E) 300
</TABLE>
--------------------
(A) Amounts, in the aggregate for all years presented, consist,
where
applicable, of 401(k) plan employer contributions allocated
to the named
officers' accounts ($4,400), term life insurance premiums
paid by the
Company for the benefit of the named officers ($11,800), and
cash
payments in lieu of time off for earned vacation ($35,100).
(B) Bonus amounts for Messrs. Horton and Vitelle have not yet
been determined
for fiscal 2000.
(C) Consists of options repriced in fiscal 1999 which had
originally been
issued in years prior to fiscal 1999.
(D) Includes a special incentive payment of $150,000 in
connection with the
divestiture on November 12, 1999 of Irlandus Circuits Ltd.,
one of the
Company's European operating units.
(E) Includes 4,864 options repriced in fiscal 1999 which had
originally been
issued in years prior to fiscal 1999.
Mr. Horton's biographical information appears above under
the heading "Proposal One - Election of Directors."
Mr. Vitelle has served as the Company's Vice President of
Finance and Administration, Chief Financial Officer and Treasurer
since January 1996.
Since August 1998, Mr. Weatherford has served as the
Company's Corporate Vice President of Operations. From
March 1997 until August 1998, he served as Managing Director of
Irlandus Circuits Ltd., the Company's printed circuit board
fabrication subsidiary located in Northern Ireland. From
February 1994 to March 1997, Mr. Weatherford managed his personal
real estate investments. Prior to February 1994, Mr. Weatherford
had over 20 years experience in general management positions with
various companies within the U.S. printed circuit board industry.
OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 2000
The following table sets forth information concerning
options granted to each of the named executive officers during
fiscal 2000:
<TABLE>
Potential
Realizable Value
at Assumed Annual
% of Total
Rates of Stock
Options Exercise
Price Appreciation
Granted to or Base
for Option Term
Options Employees in Price
Expiration ------------------
Name Granted Fiscal Year ($/sh) Date
5% 10%
--------------------- -------- ------------ -------- --------
-- ------- -------
<S> <C> <C> <C> <C>
<C> <C>
Gregory L. Horton 15,000 7.2% $3.88
12/16/09 $36,600 $92,800
Richard K. Vitelle 3,000 1.4% $3.75
3/29/10 $ 7,100 $17,900
George R. Weatherford 10,000 4.8% $3.88
12/16/09 $24,400 $61,800
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information concerning
options held by each of the named executive officers as of
June 30, 2000.
<TABLE>
Number of
Securities
Value of
Underlying
Unexercised
Unexercised
in-the-money
Shares Value Options at FY-End
Options at FY-End
Acquired on Realized (#) Exercisable /
($) Exercisable /
Name Exercise (#) ($) Unexercisable (A)
Unexercisable (B)
--------------------- ------------ -------- -----------------
-----------------
<S> <C> <C> <C>
<C>
Gregory L. Horton -- -- 19,999 / 20,001
-- / 1,800
Richard K. Vitelle -- -- 15,061 / 7,189
-- / 750
George R. Weatherford -- -- 7,364 / 17,500
-- / 1,200
</TABLE>
--------------------
(A) All options listed in the table are exercisable at option
prices equal
to fair market value on the date of grant.
(B) The value of unexercised in-the-money options is based upon
the fair
market value for the Common Stock on June 30, 2000 of $4.00
less the
applicable option exercise price.
EMPLOYMENT AGREEMENTS AND EXECUTIVE SEVERANCE ARRANGEMENTS
Mr. Horton's employment agreement was extended to
December 31, 2000, and currently provides for a base annual
salary of $225,000. Mr. Horton is also eligible to receive
annual bonus compensation upon achievement of objectives and
criteria as the Board of Directors may establish. Mr. Horton's
employment is "at will." Should he voluntarily resign or be
terminated for cause, Mr. Horton will not be entitled to
severance pay. He is entitled to severance pay equal to 1.67
times his annual base salary if he is terminated without cause.
Mr. Vitelle's employment agreement, which has a term ending
September 12, 2001, originally provided for a base annual salary
of $125,000. Effective March 29, 2000, Mr. Vitelle's annual base
salary was increased to $140,000. Mr. Vitelle's employment is
"at will." If his employment is terminated by the Company for
cause, then he is not entitled to severance pay. However, Mr.
Vitelle is entitled to 12 months' base salary and benefits as
severance if he is terminated by the Company without cause, or if
he is terminated as the result of a change in control of the
Company. In addition, if the principal place of Mr. Vitelle's
employment is relocated to any site beyond the 35-mile radius of
the Company's present headquarters, then he may resign at any
time within the following 12 months, whereupon he will be
entitled to 12 months' severance payments and benefits.
Mr. Weatherford's terms of employment provide for an annual
base salary of $105,000 (increased to $125,000 effective
August 23, 1999), an annual bonus equal to 1% of the pretax
income of each operating unit, and six months' salary
continuation as severance in the event his employment is
terminated in conjunction with a change in control of the Company
or the termination of the Chief Executive Officer. Mr.
Weatherford's terms of employment also provide for certain
incentive payments upon attainment of certain strategic corporate
milestones. Pursuant to these provisions, and in connection with
the divestiture on November 12, 1999 of Irlandus Circuits Ltd.,
one of the Company's European operating units, Mr. Weatherford
received a special incentive payment of $150,000.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the
"Committee") administers the Company's executive compensation
programs and reviews and approves salaries and bonuses of the
executive officers named in the Executive Compensation Table. The
Company's executive compensation programs are designed to:
* provide competitive levels of base and incentive
compensation in
order to attract, retain and motivate high quality
employees;
* tie individual total compensation to individual
performance and
the success of the Company; and
* align the interests of the Company's executive
officers with those
of its stockholders.
BASE SALARY. Base salary is targeted to be moderate yet
competitive in relation to salaries commanded by those in similar
positions atin comparable companies. The Committee reviews
management's recommendations for executives' salaries and
examines survey data for executives with similar responsibilities
atin comparable companies to the extent possible. Individual
salary determinations are based on experience, achievement of
goals and objectives, sustained performance and comparison to
peer positions outside the Company.
INCENTIVE COMPENSATION PROGRAM. Incentive compensation for
the Company's executive officers is designed to reward such
individuals for their contributions to corporate and individual
objectives. In addition, the Company's operating units maintain
profit sharing plans under which operating unit managers and
other key employees receive incentive cash compensation based on
the performance and pre-tax profits of those operations. Except
for Mr. Weatherford's incentive compensation arrangement, the
Company's executive officers named above do not participate in
these operating unit profit sharing plans.
STOCK OPTIONS. The Board of Directors administers the
Company's 1993 and 1996 Stock Incentive Plans, which are designed
to align the interests of management and other key employees with
those of the Company's stockholders. The number of stock options
granted is related to the recipient's base compensation, level of
responsibility and accomplishments. All options have been granted
with an option exercise price equal to the fair market value of
the Company's Common Stock on the date of grant. The tables
above set forth information concerning options granted to named
executives during fiscal 2000.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Gregory L. Horton
was appointed President and Chief Executive Officer of the
Company in January 1996. The Committee addressed Mr. Horton's
base salary during its May 2000 meeting. The Committee took into
consideration competitive executive salaries in publicly traded
companies of similar size and complexity. On this basis, the
Committee determined that Mr. Horton's base salary was low
relative to competitive salaries. The Committee also noted that
the Company is making progress towards being a better managed
Company, although such progress is not necessarily evident from
the financial results for fiscal 2000. Principally on the basis
of these factors, the Committee granted Mr. Horton 15,000 new
stock options and increased his base salary from $200,000 to
$225,000 effective May 1, 2000. Mr. Horton also received $33,000
cash during fiscal 2000 in lieu of time off for earned vacation.
The Committee has extended Mr. Horton's Employment Agreement to
December 31, 2000.
SUBMITTED BY THE COMPENSATION COMMITTEE:
BRUCE E. KANTER AND OSCAR B. MARX III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
TheDuring fiscal 2000 the Compensation Committee wasis
comprised of Messrs. Kanter and Marx. Effective September 12,
2000, Mr. Biddinger was appointed to the Compensation Committee,
replacing Mr. Kanter. NoneNeither of these individuals were
officers or employees of the Company during fiscal 2000 or at any
prior time. There are no interlocks between the Company and
other entities involving the Company's executive officers and
directors who serve as executive officers or directors of other
entities.
STOCK PERFORMANCE GRAPH
The following performance table compares the cumulative
total return for the period from June 30, 1995 through
June 30, 2000, from an investment of $100 in: (i) the Company's
Common Stock, (ii) the Nasdaq Composite, (iii) the Dow Jones
Industrial as a group, and (iv) an Electronics Manufacturing
Services ("EMS") Peer Group, as defined below. The EMS Peer
Group consists of the following publicly held electronics
manufacturing services companies, each of whose business, taken
as a whole, resembles the Company's activities: EFTC
Corporation, IEC Electronics Corp., Reptron Electronics, Inc.,
Sigmatron International, Inc., Sparton Corporation, and Xetel
Corporation. The Peer Group Index was derived using the weighted
average of individual company stock prices for each period. For
each group an initial investment of $100 is assumed on
June 30, 1995. The total return calculation assumes reinvestment
of all dividends for the indices. The Company did not pay
dividends on its Common Stock during the time frame set forth
below.
[Graph with data points below]
The data points depicted on the graph are as follows:
<TABLE>
Nasdaq Dow Jones EMS Peer
SMTEK
Date Composite (A) Industrial (A) Group (B)
International, Inc.
-------- ------------- -------------- ---------
-------------------
<S> <C> <C> <C>
<C>
06/30/95 100.00 100.00 100.00
100.00
06/30/96 128.39 124.11 99.22
123.08
06/30/97 156.15 168.73 152.49
69.23
06/30/98 205.58 196.48 101.05
46.15
06/30/99 296.02 240.79 49.36
20.00
06/30/00 437.30 229.32 49.70
12.31
</TABLE>
(A) In fiscal 2000, the Company changed its market index from
the Dow Jones
Industrial to the Nasdaq Composite, due to the fact that
the Company
transferred its stock listing from the New York Stock
Exchange to the
Nasdaq Small Cap Market effective July 1, 1999.
(B) In fiscal 2000, the Company changed its peer index from the
Dow Jones
Computer Index group of companies (without IBM) to the EMS
Peer Group
because (i) the Dow Jones Computer Index group of companies
(without
IBM) is no longer available and (ii) the Company believes
that the EMS
Peer Group index is more relevant to its line of business.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 15, 2000,
except as otherwise indicated, 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,
(iii) each named executive officer and (iv) all executive
officers and directors 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.
Beneficial Ownership Of Common Stock As Of September
15, 2000
-------------------------------------------------------
------
Name and Address of
Beneficial Owner* No. of Shares Percent of
Class
------------------- ------------- ----------
------
Thomas M. Wheeler
801 W. Big Beaver Road 881,813
38.8%
Suite 201
Troy, Michigan, 48084
Gregory L. Horton 66,249 (A)
2.9%
Clay M. Biddinger 4,174 (B) **
James P. Burgess 20,157 (C) **
Bruce E. Kanter 19,534 (D) **
Oscar B. Marx, III 13,466 (E) **
Richard K. Vitelle 16,356 (F) **
George R. Weatherford 12,042 (G) **
Directors and named 151,978 (H)
6.5%
executive officers
as a group (8 persons)
-------------------------
* 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.
(A) Includes 19,999 shares underlying options either currently
exercisable or
exercisable within 60 days.
(B) Includes 4,174 shares underlying exercisable options.
(C) Includes 2,416 shares underlying exercisable options.
(D) Includes 15,327 shares underlying exercisable options.
(E) Includes 13,466 shares underlying exercisable options.
(F) Includes 15,061 shares underlying options either currently
exercisable or
exercisable within 60 days.
(G) Includes 7,364 shares underlying options either currently
exercisable or
exercisable within 60 days.
(H) Includes 77,807 shares underlying options either currently
exercisable or
exercisable within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 30, 1997, the Company borrowed $2 million from
Thomas M. Wheeler. As a condition to obtaining the $2 million
loan from Mr. Wheeler, the Company agreed to acquire all of the
issued and outstanding shares of Jolt Technology, Inc., a
privately-held electronics manufacturing company owned by Mr.
Wheeler and two other individuals, for 450,000 shares of the
Company's Common Stock. Mr. Wheeler received 319,313 shares of
the Company's Common Stock upon the consummation of the Jolt
acquisition on June 30, 1998. As a further condition to
obtaining the $2 million loan from Mr. Wheeler, the Company
agreed to give Mr. Wheeler the right to nominate individuals to
fill two seats on its Board of Directors. In May 1999, following
approval by the Company's stockholders, the Company entered into
a $4.5 million private placement of Common Stock with Mr. Wheeler
which increased his ownership interest in the Company from 18.7%
to 38.8%, and which enabled the Company to pay off the $2 million
loan with Mr. Wheeler. Although the loan was paid off in
May 1999, it was the understanding of Mr. Wheeler and the Company
that Mr. Wheeler would have the ongoing right to nominate
individuals to fill two directorships. Currently, Mr. Wheeler's
designees on the board are Messrs. Burgess and Marx.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE
PLAN
The 1996 Stock Incentive Plan (the "Incentive Plan") was
originally approved by the stockholders on July 11, 1996 with
110,000 shares of Common Stock authorized for issuance pursuant
to awards granted thereunder. An amendment to the Incentive Plan
to make an additional 250,000 shares of Common Stock available
under the Incentive Plan was approved by the stockholders at the
1999 Annual Meeting on December 16, 1999.
PURPOSES OF THIS AMENDMENT
The maximum number of shares of Company Common Stock that
may be issued pursuant to awards under the Incentive Plan
currently is 360,000. At September 15, 2000, options to purchase
266,829 shares of Common Stock were outstanding. Accordingly,
only 93,171 shares remain available for new employee stock option
grants.
The Company relies heavily on the Incentive Plan to recruit,
retain and reward qualified employees and consultants and to
motivate them with compensatory arrangements and benefits that
make use of or are measured by the performance of the Company's
Common Stock. The board and the committee that administers the
Incentive Plan believe that the number of shares of Common Stock
currently available under the Incentive Plan may be insufficient
to achieve the purposes of the Incentive Plan in the near future.
Consequently, the board has unanimously approved, subject to
approval by stockholders, an amendment of the Incentive Plan to
make an additional 300,000 shares of Common Stock available under
the Incentive Plan. If the amendment is approved by the
stockholders, there will be a total of 660,000 shares of Common
Stock authorized for issuance under the Incentive Plan.
The remaining provisions of the Incentive Plan will be
unaffected by the proposed amendment. For more information about
the terms of the Plan, please refer to the full text of the
Incentive Plan as amended, which is attached to this Proxy
Statement as Exhibit A.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Each of the named executive officers are eligible to receive
option grants under the Incentive Plan. By approving an increase
in the number of shares authorized under the Incentive Plan,
these individuals will likely continue to receive annual option
grants as a part of their total compensation. Whether such
options are granted, and the terms of any such grants, are
matters in the discretion of the compensation committee of the
Board of Directors.
VOTE REQUIRED FOR APPROVAL
The proposed amendment to the Incentive Plan requires the
affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by proxy, at the Annual
Meeting. Proxies will be voted FOR the proposal unless the
Secretary is instructed otherwise on a Proxy returned to the
Company at its principal executive office or at the Annual
Meeting. Abstentions indicated on such a Proxy card will be
counted as a vote AGAINST this proposal. "Broker non-votes"
specified on Proxies returned by brokers holding shares for
beneficial owners who have not provided instructions as to voting
on this issue will be treated as not present for voting on this
issue. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENT TO THE INCENTIVE PLAN.
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO THE 1998 NON-EMPLOYEE DIRECTORS
STOCK PLAN
The Company's 1998 Non-Employee Directors Stock Plan (the
"Directors Plan") was originally approved by the stockholders on
November 19, 1998. Certain amendments to the Directors' Plan
were approved by the stockholders at the 1999 Annual Meeting on
December 16, 1999. The following discussion summarizes the
current terms of the Directors Plan that will materially change
if this proposal is approved by the stockholders.
CURRENT COMPENSATION STRUCTURE
Under the current Directors Plan, each non-employee director
of the Company receives an automatic annual grant of Company
Common Stock with an aggregate fair market value equal to
$12,000. Annual grants are made to sitting board members on July
1 of each year. For any person who becomes an eligible director
after July 1, the initial grant is made on the date the person
joins the board in a prorated number of Common Stock based on the
length of time from the date of joining the board until next July
1.
Non-employee directors also receive compensation for
meetings attended which is paid in the form of Common Stock with
a fair market value equal to: (i) $1,000 for a board meeting;
and (ii) $500 for a committee meeting (if such committee meeting
is not held on the same day as a meeting of the Board of
Directors).
Non-employee directors may elect to receive stock options in
lieu of receiving Common Stock for: (i) all or a portion of an
annual grant; or (ii) all or a portion of the meeting fees. The
number of options granted to an eligible director is determined
by dividing the value of the shares of Common Stock that an
eligible director would otherwise receive by the fair value of
one stock option, as determined by applying the Black-Scholes
option pricing model. If no election is made or if a new
election is not made with respect to any subsequent fiscal year,
the eligible director shall be deemed to have made an election to
receive an award of Common Stock.
PROPOSED AMENDMENTS TO THE DIRECTORS PLAN
The board believes that in order to attract and retain
qualified persons to serve on the Board of Directors and to
encourage attendance at board meetings, it is necessary and
appropriate that eligible directors be provided with increased
compensation for time spent by them performing the services of a
director. Subject to stockholder approval, the Board of
Directors has approved the following amendments to the Directors
Plan because the board believes it is important to the long-term
success of the Company for it to be able to obtain and keep
directors with superior abilities and experience, and to provide
incentives to directors to encourage the highest level of
performance by providing them with a proprietary interest in the
Company. If Proposal Three is approved by the stockholders at
the 2000 Annual Meeting, each non-employee director serving on
the Board of Directors on October 31, 2000 will be awarded 5,000
stock options, and thereafter each non-employee director will be
awarded 5,000 stock options upon initial election or re-election
to the Board of Directors commencing with this 2000 Annual
Meeting. All other remaining provisions of the Directors Plan
regarding director compensation are unaffected by this proposed
amendment.
The maximum number of shares of Common Stock that may be
issued pursuant to awards under the Directors Plan is currently
50,000. At September 15, 2000, 8,941 shares of Common Stock had
been issued under the Directors Plan, and 38,234 shares of Common
Stock were reserved for future issuance pursuant to stock options
which have been granted under the Directors Plan. Accordingly,
only 2,825 shares of Common Stock remain available for new
grants. In addition to the changes described in the preceding
paragraph, Proposal Three, if approved by the stockholders, will
also amend the Directors Plan to increase by 150,000 the number
of shares of Common Stock that can be issued pursuant to awards
thereunder. The Board of Directors believes that the proposed
increase in the number of shares of Common Stock authorized for
the Directors Plan is necessary for the following reasons:
* The number of non-employee directors was recently
increased
from three to four, and it is possible that the
Board will be
expanded by adding more non-employee directors in
the future.
* Board members are currently receiving their annual
retainers
and meeting fees in the form of Company securities
as opposed
to cash. In order to conserve its cash to finance
its
operations, it is important for the Company to be
able to
compensate its non-employee directors through non-
cash means.
* The Company believes that the Directors Plan
provides an
important incentive which facilitates recruitment
and retention
of qualified individuals to serve on its Board of
Directors.
The number of shares of Common Stock currently available
under the Directors Plan, if not increased, will be insufficient
to achieve the purposes of the Directors Plan. If Proposal Three
is approved by the stockholders there will be a total of 200,000
shares of Common Stock authorized for issuance under the
Directors Plan.
The remaining provisions of the Directors Plan will be
unaffected by the proposed amendments. For more information
about the terms of the Directors Plan, please refer to the full
text of the Directors Plan as amended, which is attached to this
Proxy Statement as Exhibit B.
The Directors Plan will continue to be administered by the
entire board or a committee comprised of at least two members of
the board who are "eligible directors" within the meaning of Rule
16b-3 promulgated by the Securities and Exchange Commission. The
board may amend or terminate the Directors Plan without approval
of the stockholders; provided, however, that stockholder approval
is required for any amendment that increases the aggregate number
of shares of Common Stock subject to the Directors Plan or alters
the persons eligible to participate in the Directors Plan. The
Directors Plan will terminate on December 31, 2007 unless earlier
terminated by the stockholders or the board.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
If Proposal Three is approved, The table below summarizes
the total compensation to be received by each non-employee
director under the Directors Plan if Proposal Three is approved:
1998 Non-Employee Director Stock Plan Compensation Structure,
as Amended
---------------------------------------------------------------
-------------
Description Compensation (A)
---------------------- --------------------------------------
-------------
Annual grant Common Stock or stock options valued
at $12,000 (B)
Attendance at a board Common Stock or stock options valued
at $1,000 (B)
meeting (in person
or via telephone)
Attendance a committee Common Stock or stock options valued
at $500 (B)
meeting (in person
or via telephone)
Upon re-election to 5,000 stock options
the board (C)
-------------------------
(A) Amounts shown are for each non-employee director.
(B) The number of shares of Common Stock or stock options
cannot be
determined at this time because such number will be
determined by the
fair market value at the time of grant. On September 15,
2000, the
closing price of the Company's Common Stock was $4.6875 per
share.
(C) Directors are elected to the board every three years on a
staggered-term
basis, such that at least one non-employee director is
elected every
year and all non-employee directors are not elected in the
same year.
If Proposal Three is approved by the stockholders, all non-
employee
directors serving on the Board of Directors on October 31,
2000 will be
awarded 5,000 stock options, and thereafter each non-
employee director
will be awarded 5,000 stock options upon initial election
or re-election
to the Board of Directors commencing with this 2000 Annual
Meeting. If
Proposal Three is approved and Mr. Kanter is re-elected to
the Board at
the Annual Meeting on November 9, 2000 or any adjournment
thereof, Mr.
Kanter will receive 10,000 stock options (5,000 options
will be awarded
because he was a director on October 31, 2000, and 5,000
options will be
awarded because of his re-election to the Board of
Directors). If
Proposal Three is approved, the other non-employee
directors will be
awarded 5,000 stock options each because they were
directors on
October 31, 2000.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendments to the Directors Plan
requires the affirmative vote of the holders of a majority of the
shares of Common Stock present, in person or by proxy, at the
Annual Meeting. Proxies will be voted FOR the resolution unless
the Secretary is instructed otherwise on a proxy returned to the
Company at its principal executive office or at the Annual
Meeting. Abstentions indicated on such a proxy card will be
counted as a vote AGAINST this proposal. "Broker non-votes"
specified on proxies returned by brokers holding shares for
beneficial owners who have not provided instructions as to voting
on this issue will be treated as not present for voting on this
issue. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENTS TO THE DIRECTORS PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has served as the Company's independent public
accountants since 1994. The Board of Directors has selected KPMG
to serve as the Company's independent public accountants for
fiscal 2001. Representatives of KPMG are expected to be present
at the Annual Meeting and will be afforded the opportunity to
make a statement and answer questions from stockholders.
STOCKHOLDER PROPOSALS
Stockholders who wish to include proposals in next year's
proxy statement for action at the Company's Annual Meeting of
Stockholders in 2001 must submit their proposals in writing at
the Company's principal executive office (2151 Anchor Court,
Thousand Oaks, California 91320) no later than June 11, 2001.
Proposals received after that date will be considered untimely
and will not be included in next year's proxy statement. Such
proposals should be addressed to the Company's Secretary and may
be included in next year's proxy statement if they comply with
certain rules and regulations promulgated by the Securities and
Exchange Commission. Use of certified mail is suggested.
ANNUAL REPORT
The Company's annual report to stockholders for fiscal 2000,
including audited financial statements, accompanies this proxy
statement. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR FISCAL 2000 (WITHOUT EXHIBITS) ARE AVAILABLE FROM THE COMPANY
WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST BY A
STOCKHOLDER. Copies of the Form 10-K are also available on-line
through the Securities and Exchange Commission website at
www.sec.gov.
MISCELLANEOUS
The Board of Directors is unaware of any other business to
be presented for consideration at the meeting. If, however, such
other business should properly come before the meeting, the
proxies will be voted in accordance with the best judgment of the
proxy holders.
By Order of the Board of
Directors
/s/ Mitchell J. Freedman
-----------------------------
Mitchell J. Freedman
General Counsel and Secretary
Thousand Oaks, California
October 10, 2000
<PAGE>
EXHIBIT A
SMTEK INTERNATIONAL, INC.
AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE; EFFECTIVE DATE; DEFINITIONS
1.1 PURPOSE. The purpose of this SMTEK International, Inc.
Amended and Restated 1996 Stock Incentive Plan (the "Plan") is to
enable the Company and its Subsidiaries to attract, retain and
motivate their officers and key employees with compensatory
arrangements and benefits that make use of or are measured by
Company stock so as to provide for or increase the proprietary
interests of such persons in the Company and to align their
interests with those of the Company's stockholders. Non-employee
Consultants to the Company also may be eligible on an ad hoc
basis for the grant of Awards other than Awards of Incentive
Stock Options.
1.2 EFFECTIVE DATE. Subject to the approval of the Board
and to ratification by the Company's stockholders as provided in
Section 9.9, this Plan shall be effective on and after June 10,
1996. Unless earlier terminated, as provided in Section 9.2, the
Plan will terminate ten years after its adoption by the Board
(June 10, 2006), but such termination will not affect any Award
previously granted.
1.3 DEFINITIONS. Throughout this Plan, the following terms
shall have the meanings indicated:
(a) "AGREEMENT" shall mean an Option Agreement, SAR
Agreement, Restricted Stock Agreement, Unrestricted Stock
Agreement, Performance Award Agreement, Phantom Stock Agreement
or Dividend Equivalent Agreement.
(b) "AWARD" or "AWARDS" shall mean any one or more of
the following awards that may be offered by the Committee to
Employees and Consultants under this Plan; provided that ISOs may
not be awarded to Consultants:
(i) Options (including ISOs and NQSOs);
(ii) Stock Appreciation Rights;
(iii) Restricted Stock;
(iv) Unrestricted Stock;
(v) Performance Shares or Performance Units;
(vi) Phantom Stock; or
(vii) Dividend Equivalents.
(c) "BOARD" shall mean the Board of Directors of the
Company.
(d) "CODE" shall mean the Internal Revenue Code of
1986, as amended, any successor revenue laws of the United
States, and the rules and regulations promulgated thereunder.
(e) "COMMITTEE" shall mean any committee of the Board
designated by the Board to administer this Plan in accordance
with Article II.
(f) "COMMON STOCK" shall mean the common stock, par
value $.01 per share, of the Company.
(g) "COMPANY" shall mean SMTEK International, Inc., a
Delaware corporation.
(h) "CONSULTANT" shall mean an individual who is not
an Employee but who provides consulting services to the Company
and who is determined by the Committee to be of key significance
to the Company.
(i) "DIVIDEND EQUIVALENT" shall mean a right to
receive an amount in cash that is tied to Common Stock dividends
pursuant to Article VIII of the Plan and a Dividend Equivalent
Agreement.
(j) "DIVIDEND EQUIVALENT AGREEMENT" shall mean an
agreement between the Company and an Employee or Consultant
pursuant to which Dividend Equivalents are granted pursuant to
this Plan.
(k) "EMPLOYEE" shall mean any person engaged as an
officer or employee of the Company or a Subsidiary.
(l) "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.
(m) "FAIR MARKET VALUE" shall mean, with respect to
the Common Stock on any day, (i) the closing sales price on the
immediately preceding business day of a share of Common Stock as
reported on the principal securities exchange on which shares of
Common Stock are then listed or admitted to trading, or (ii) if
not so reported, the closing sales price on the immediately
preceding business day of a share of Common Stock as published in
the Nasdaq National Market Issues report in THE WALL STREET
JOURNAL, or (iii) if no such closing prices are reported, the
mean between the high bid and low asked prices on the immediately
preceding business day as reported on the Nasdaq National Market
System, or (iv) if not so reported, as furnished by any member of
the National Association of Securities Dealers, Inc. selected by
the Committee. In the event that the price of a share of Common
Stock shall not be so reported or furnished, the Fair Market
Value of a share of Common Stock shall be determined by the
Committee in its absolute discretion. The market value of an
Option granted under the Plan on any day shall be the market
value of the underlying Common Stock, determined as aforesaid,
less the exercise price of the Option. A "business day" is any
day, other than a Saturday or Sunday, on which the relevant
market is open for trading.
(n) "INCENTIVE STOCK OPTION" or "ISO" shall mean an
Option that qualifies as an incentive stock option under Code
Section 422 and that includes an express provision that it is
intended to be an ISO. No Option that is intended to be an ISO
shall be invalid under this Plan for failure to qualify as an
ISO.
(o) "NON-QUALIFIED STOCK OPTION" or "NQSO" shall mean
a nonqualified stock option which is an Option that does not
qualify as an incentive stock option under Code Section 422.
(p) "OPTION" shall mean an option to purchase shares
of Common Stock granted by the Committee to an Employee or
Consultant pursuant to this Plan. An Option may be an ISO or an
NQSO; provided that ISOs may be granted only to Employees and not
to Consultants.
(q) "OPTION AGREEMENT" shall mean an agreement between
the Company and an Employee or Consultant evidencing an Option
granted pursuant to this Plan.
(r) "OPTION SHARES" shall mean the shares of Common
Stock purchased upon exercise of an Option.
(s) "PERFORMANCE AWARD AGREEMENT" shall mean an
agreement between the Company and an Employee or Consultant
pursuant to which Performance Shares or Performance Units are
issued to the Employee or Consultant pursuant to this Plan.
(t) "PERFORMANCE SHARES" shall mean shares of Common
Stock granted under Article VII of the Plan in accordance with
certain performance criteria.
(u) "PERFORMANCE UNITS" shall mean a fixed amount of
cash granted under Article VII of the Plan in accordance with
certain performance criteria.
(v) "PHANTOM STOCK" shall mean fictitious shares of
Common Stock granted only as a ledger account pursuant to Article
VIII and a Phantom Stock Agreement.
(w) "PHANTOM STOCK AGREEMENT" shall mean an agreement
between the Company and an Employee or Consultant pursuant to
which Phantom Stock is granted pursuant to this Plan.
(x) "PLAN" shall mean this SMTEK International, Inc.
Amended and Restated 1996 Stock Incentive Plan, as the same may
be amended from time to time.
(y) "RESTRICTED STOCK" shall mean Common Stock granted
under Article VI of this Plan, subject to such restrictions as
the Committee may determine, as evidenced in a Restricted Stock
Agreement. Shares of Common Stock shall cease to be Restricted
Stock when, in accordance with the terms of the Restricted Stock
Agreement, they become transferable and free of substantial risk
of forfeiture.
(z) "RESTRICTED STOCK AGREEMENT" shall mean an
agreement between the Company and an Employee or Consultant
pursuant to which Restricted Stock is issued to the Employee or
Consultant pursuant to this Plan.
(aa) "RESTRICTION PERIOD" shall mean the time period
during which Restricted Stock is subject to the restrictions set
forth in a Restricted Stock Agreement.
(bb) "SAR AGREEMENT" shall mean an agreement between
the Company and an Employee or Consultant pursuant to which a
Stock Appreciation Right is issued to the Employee or Consultant
pursuant to this Plan.
(cc) "STOCK APPRECIATION RIGHTS" or "SARs" shall mean
the right to receive cash or Common Stock, granted pursuant to
Article V of this Plan and a SAR Agreement.
(dd) "SUBSIDIARY" shall mean any corporation,
partnership or other entity in which the Company directly or
indirectly owns 50% or more of the total combined power to cast
votes in the election of directors, trustees, managing partners
or similar officials.
(ee) "10% STOCKHOLDER" shall mean an individual owning
(directly or by attribution as provided in Code Section 424(d))
stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company.
(ff) "UNRESTRICTED STOCK" shall mean Common Stock
granted under Article VI of this Plan that is not Restricted
Stock.
(gg) "UNRESTRICTED STOCK AGREEMENT" shall mean an
agreement between the Company and an Employee or Consultant
pursuant to which Unrestricted Stock is issued to the Employee or
Consultant pursuant to this Plan.
ARTICLE II
ADMINISTRATION
2.1 COMMITTEE ADMINISTRATION. This Plan and the Awards
granted hereunder shall be interpreted, construed and
administered by the Committee in its sole discretion. An
Employee or Consultant eligible for Awards under the Plan may
appeal to the Committee in writing any decision or action of the
Committee with respect to the Plan that adversely affects the
Employee or Consultant. Upon review of such appeal and in any
other case where the Committee has acted with respect to the
Plan, the interpretation and construction by the Committee of any
provisions of this Plan or of any Award shall be conclusive and
binding on all parties.
2.2 COMMITTEE COMPOSITION. The Committee shall consist of
not less than two persons who shall be members of the Board and
shall be subject to such terms and conditions as the Board may
prescribe. Each Committee member shall be a "disinterested
person" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act ("Rule
16b-3"). Once designated, the Committee shall continue to serve
until otherwise directed by the Board. From time to time, the
Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies however caused, and remove all members of the
Committee.
A majority of the entire Committee shall constitute a
quorum, and the action of a majority of the members present at
any meeting at which a quorum is present shall be deemed the
action of the Committee. In addition, any decision or
determination reduced to writing and signed by all of the members
of the Committee shall be fully as effective as if it had been
made by a majority vote at a meeting duly called and held.
Subject to the provisions of this Plan and the Company's bylaws,
and to any terms and conditions prescribed by the Board, the
Committee may make such additional rules and regulations for the
conduct of its business as it shall deem advisable. The
Committee shall hold meetings at such times and places as it may
determine.
2.3 COMMITTEE POWERS. The Committee shall have authority
to: (i) select the Employees and Consultants eligible to receive
Awards under the Plan, (ii) award Restricted Stock, Unrestricted
Stock, Performance Shares and Performance Units, Phantom Stock
and Dividend Equivalents and (iii) grant Options and SARs,
pursuant to an Agreement providing for such terms (not
inconsistent with the provisions of this Plan) as the Committee
may consider appropriate. Such terms shall include, without
limitation, as applicable, the number of shares, the Option
price, the medium and time of payment, the term of each Award,
any performance criteria, and any vesting requirements and may
include conditions (in addition to those contained in this Plan)
on the exercisability of all or any part of an Option or SAR or
on the transferability or forfeitability of Restricted Stock.
Notwithstanding any such conditions, the Committee may, in its
discretion, accelerate the time at which any Option or SAR may be
exercised or the time at which Restricted Stock may become
transferable or nonforfeitable. In addition, the Committee shall
have complete discretionary authority to prescribe the form of
Agreements; to adopt, amend and rescind rules and regulations
pertaining to the administration of the Plan; and to make all
other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of
any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. All expenses
of administering this Plan shall be borne by the Company. The
Committee also has the power to delegate to Company officers, or
others, its authority with respect to any Awards that may be
granted to Consultants or to Employees who are not then officers
of the Company or subject to Section 16 of the Exchange Act.
2.4 LIMITATION ON RECEIPT OF BENEFITS BY COMMITTEE MEMBERS.
No person while a member of the Committee shall be eligible to
receive Awards under this Plan, but a member of the Committee may
exercise Options (but not Stock Appreciation Rights) granted
prior to his or her becoming a member of the Committee.
2.5 GOOD FAITH DETERMINATIONS. No member of the Committee
or other member of the Board shall be liable for any action or
determination made in good faith with respect to this Plan or any
Award granted hereunder.
ARTICLE III
ELIGIBILITY; TYPES OF BENEFITS; SHARES SUBJECT TO
PLAN;
RECAPITALIZATION; REORGANIZATION
3.1 ELIGIBILITY. The Committee shall from time to time
determine and designate the Employees and Consultants of the
Company to receive Awards under this Plan and the shares of
Restricted Stock and Unrestricted Stock, or the number of
Options, Stock Appreciation Rights, Performance Shares or
Performance Units, Phantom Stock or Dividend Equivalents to be
awarded to each such Employee or Consultant, or the formula or
other basis on which such Awards shall be awarded to Employees
and Consultants. In making any such Award, the Committee may
take into account the nature of services rendered by an Employee
or Consultant, commissions or other compensation earned by the
Employee or Consultant, the capacity of the Employee or
Consultant to contribute to the success of the Company, and other
factors that the Committee may consider relevant. In no event
will a Consultant be granted an ISO under this Plan.
3.2 TYPES OF BENEFITS. Benefits under this Plan may be
granted in any one or any combination of Awards, as described in
this Plan.
The Committee may: (a) give Employees and Consultants a
choice between two Awards or combinations of Awards; (b) grant
Awards in the alternative so that acceptance of or exercise of
one Award cancels the right of an Employee or Consultant to
another Award; and (c) grant Awards in any combination or
combinations and subject to any condition or conditions
consistent with the terms of this Plan that the Committee in its
sole discretion may consider appropriate.
3.3 SHARES SUBJECT TO THIS PLAN. Subject to the provisions
of Section 4.1(e) (relating to adjustment for changes in Common
Stock), the maximum number of shares that may be issued under
this Plan shall not exceed in the aggregate 660,000 shares of
Common Stock. Such shares may be authorized and unissued shares
or authorized and issued shares that have been reacquired by the
Company. If any Options granted under this Plan shall for any
reason terminate or expire or be surrendered without having been
exercised in full, or if any other Awards were granted but were
subsequently reacquired by the Company for no more than the price
at which they were sold (plus interest thereon) pursuant to the
terms of the Award under which they were issued or sold, the
shares not purchased under such Options or other Awards shall be
available again for grant under this Plan. Upon the forfeiture
(in whole or in part) of Restricted Stock, the shares of Common
Stock forfeited shall be available again for grant under this
Plan.
3.4 ASSISTANCE WITH PURCHASE PRICE. The Company is vested
with authority under the Plan to assist any person to whom an
Award is granted hereunder (including any officer of the Company)
in the payment of the purchase price or other amounts payable in
connection with the receipt or exercise of that Award, by lending
such amounts to such person on such terms and at such rates of
interest and upon such security (or without security) as shall
have been authorized by the Committee.
3.5 RECAPITALIZATION; REORGANIZATION. Subject to any
required action by the stockholders of the Company, the maximum
number of shares of Common Stock that may be issued under this
Plan pursuant to Section 3.3 above, the number of shares of
Common Stock covered by each outstanding Option, the number of
shares of Common Stock to which each Stock Appreciation Right
relates, the kind of shares subject to outstanding Options, the
per share exercise price under each outstanding Option and the
number and/or kind of shares or securities or other forms of
consideration which may be sold or issued under the Plan and for
which Awards may thereafter be granted and for which Awards
previously granted under the Plan may thereafter be exercised or
settled, shall be adjusted to the extent and in the manner the
Committee deems appropriate for any increase or decrease in the
number of issued shares of Common Stock resulting from a
reorganization, recapitalization, restructuring,
reclassification, stock split, reverse stock split, stock
dividend, combination of shares, merger, consolidation, rights
offering subdivision or consolidation of shares or the payment of
a stock dividend (but only on the Common Stock) or any other
change in the corporate structure or shares of the Company.
Subject to any action that may be required on the part of
the stockholders of the Company, if the Company is the surviving
corporation in any merger, each outstanding Option and Stock
Appreciation Right shall pertain to and apply to the securities
or other consideration that a holder of the number of shares of
Common Stock subject to the Option or to which the Stock
Appreciation Right relates would have been entitled to receive in
the merger. A dissolution, liquidation or consolidation of the
Company or a merger in which the Company is not the surviving
corporation, other than a merger effected for the purpose of
changing the Company's domicile, shall cause each outstanding
Option and Stock Appreciation Right to terminate, provided that
each holder shall, in such event, have the right immediately
prior to such dissolution, liquidation, merger or consolidation,
to exercise his or her Option or Stock Appreciation Right in
whole or in part without regard to any installment provision
contained in his or her Agreement, but if a Stock Appreciation
Right has been granted in connection with an Option neither the
Option nor the Stock Appreciation Right shall be exercisable
within six months after their grant except in the event of death
or disability of the optionee. The foregoing sentence shall
apply to any outstanding Options which are ISOs to the extent
permitted by Code Section 422(d), and such outstanding ISOs in
excess thereof shall, immediately upon the occurrence of a
merger, consolidation, sale, transfer, acquisition, tender offer
or exchange offer, be treated for all purposes of the Plan as
NQSOs and shall be immediately exercisable as such as provided in
the foregoing sentence. Notwithstanding the foregoing, in no
event shall any Option be exercisable after the date of
termination of the exercise period of such Option. In the case
of a merger effected for the purpose of changing the Company's
domicile, each outstanding Option and Stock Appreciation Right
shall continue in effect in accordance with its terms and shall
apply or relate to the same number of shares of common stock of
such surviving corporation as the number of shares of Common
Stock to which it applied or related immediately prior to such
merger, adjusted for any increase or decrease in the number of
outstanding shares of common stock of the surviving corporation
effected without receipt of consideration.
In the event of a change in the Common Stock as presently
constituted, which change is limited to a change of all of the
authorized shares with par value into the same number of shares
with a different par value or without par value, the shares
resulting from any such change shall be deemed to be the Common
Stock within the meaning of this Plan.
The foregoing adjustments shall be made by the Committee,
whose determination shall be final, binding and conclusive.
Except as expressly provided in this subsection, the holder
of an Option or Stock Appreciation Right shall have no rights by
reason of (i) any subdivision or consolidation of shares of any
class, (ii) any stock dividend, (iii) any other increase or
decrease in the number of shares of stock of any class, (iv) any
dissolution, liquidation, merger, or consolidation or spin-off,
split-off or split-up of assets of the Company or stock of
another corporation, or (v) any issuance by the Company of shares
of stock of any class, or securities convertible into shares of
stock of any class. Moreover, except as expressly provided in
this subsection, the occurrence of one or more of such events
shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common
Stock subject to the Option (or the number of shares that relate
to a Stock Appreciation Right).
The grant of an Option or Stock Appreciation Right pursuant
to this Plan shall not affect in any way the right or power of
the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure
or to merge or to consolidate or to dissolve, liquidate, sell, or
otherwise transfer all or any part of its business or assets.
ARTICLE IV
STOCK OPTIONS
4.1 GRANT; TERMS AND CONDITIONS. The Committee, in its
discretion, may from time to time grant ISOs and/or NQSOs to any
Employee, and may grant NQSOs to any Consultant eligible to
receive Awards under this Plan. Each Employee or Consultant who
is granted an Option shall enter into an Option Agreement with
the Company in a form specified by the Committee and containing
such provisions as the Committee, in its sole discretion, shall
from time to time approve consistent with this Plan. The Option
Agreements need not be identical, but each Option Agreement by
appropriate language shall include the substance of all of the
following terms and conditions:
(a) NUMBER OF SHARES. Each Option Agreement shall
state the number of shares to which it pertains.
(b) OPTION PRICE. Each Option Agreement shall state
the Option exercise price, which, in the case of an Option
intended to be an ISO, shall not be less than 100% of the Fair
Market Value of the shares of Common Stock subject to the Option
on the date of granting the Option. In the case of an ISO
granted to a 10% Stockholder, the price at which each share of
Common Stock covered by the Option may be purchased shall not be
less than 110% of the Fair Market Value per share of Common Stock
on the date of grant of the Option. The date of the grant of an
Option shall be the date specified by the Committee in its grant
of the Option. The price at which each share of Common Stock
covered by an NQSO granted under the Plan may be purchased shall
be the price determined by the Committee, in its absolute
discretion, to be suitable to attain the purposes of this Plan.
(c) MEDIUM AND TIME OF PAYMENT. Upon the exercise of
an Option, the Option exercise price shall be payable in United
States dollars, in cash (including by check) or (unless the
Committee otherwise prescribes) in shares of Common Stock owned
by the optionee (but not with Restricted Stock prior to the
expiration of the Restriction Period), in NQSOs granted to the
optionee under the Plan (provided that the purchase price of
Common Stock under an ISO may not be paid in NQSOs), by the
withholding of a portion of the shares or other compensation
issuable pursuant to the Award or in a combination of cash,
Common Stock and Options. If all or any portion of the Option
exercise price is paid in Common Stock owned by the optionee,
that stock shall be valued at its Fair Market Value as of the
date the Option is exercised. If all or any portion of the
Option exercise price is paid in NQSOs granted to the optionee
under the Plan, such NQSOs shall be valued at their Fair Market
Value as of the date the Option is exercised. If an Option under
the Plan and Option Agreement permits the recipient to pay for
the shares of Common Stock issuable pursuant thereto with
previously owned shares, the recipient will be able to exercise
the Option in successive transactions (known as "pyramiding"),
starting with a relatively small number of shares, and, by a
series of exercises using shares acquired from each such
transaction to pay the purchase price of the shares acquired in
the following transaction, exercise an Option for a larger number
of shares with no additional cash and no more investment than the
original number of shares delivered.
(d) TERM AND EXERCISE OF OPTIONS. The term of each
Option shall be determined by the Committee; provided that the
exercise of an ISO shall in no event be more than ten years from
the date of grant, or in the case of an ISO granted to a 10%
Stockholder, more than five years from the date of grant.
Notwithstanding the foregoing, an ISO shall terminate and may not
be exercised if the Employee to whom it is granted ceases to be
employed by the Company except that the Option Agreement may, at
the discretion of the Committee, provide: (1) that if such
Employee's employment terminates for any reason other than
conduct that in the judgment of the Committee involves dishonesty
or action by the Employee that is detrimental to the best
interest of the Company, the Employee may at any time within
three months after termination of his employment exercise his
Option but only to the extent the Option was exercisable by him
on the date of termination of his employment; (2) that if such
Employee's employment terminates on account of total and
permanent disability (determined in the Committee's discretion),
the Employee may at any time within one year after termination of
his employment exercise his Option but only to the extent the
Option was exercisable on the date of his termination of
employment; or (3) that if such Employee dies while in the employ
of the Company, or within the three or twelve month period
following termination of his employment as described in (1) or
(2) above, his Option may be exercised at any time within twelve
months following his death by the person or persons to whom his
rights under the Option shall pass by will or by the laws of
descent and distribution, but only to the extent that such Option
was exercisable by him on the date of his termination of
employment. The provisions of the foregoing sentence shall apply
to any outstanding Options which are ISOs to the extent permitted
by Code Section 422(d) and such outstanding ISOs in excess
thereof shall, immediately upon the occurrence of the event
described in the preceding sentence, be treated for all purposes
of the Plan as NQSOs and shall be immediately exercisable as such
as provided in the foregoing sentence. Each Option Agreement may
provide for acceleration of exercisability in the event of
retirement, death or disability. Any cessation of employment,
for purposes of ISOs only, shall include any leave of absence in
excess of 90 days unless the optionee's reemployment rights are
guaranteed by law or by contract. Notwithstanding anything to
the contrary in this subsection, an Option may not be exercised
by anyone after the expiration of its term. An Option may only
be transferred by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended ("Internal Revenue
Code") or Title I of the Employee Retirement Income Security Act,
or the rules thereunder or as otherwise permitted by Rule 16b-3
and the Committee may place further limitations on transfers.
(e) RIGHTS AS A STOCKHOLDER. Subject to Section 9.10
of this Plan regarding uncertificated shares, an optionee or a
transferee of an Option shall have no rights as a stockholder
with respect to any shares covered by his or her Option until the
date of the issuance of a stock certificate to him or her for
those shares upon payment of the exercise price. No adjustments
shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distributions or other
rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 3.5.
(f) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of
this Plan, the Committee may modify, extend or renew outstanding
Options granted under this Plan, or accept the surrender of
outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor
(to the extent not theretofore exercised). No modification of an
Option shall, without the consent of the optionee, alter or
impair any rights or obligations under any Option theretofore
granted under this Plan.
(g) RELOAD OPTIONS. If upon the exercise of an
Option granted under the Plan (the "Original Option") the
optionee pays the purchase price for the Original Option in whole
or in part in shares of Common Stock owned by the optionee for at
least six months, the Company shall grant to the optionee on the
date of such exercise an additional Option under the Plan (the
"Reload Option") to purchase that number of shares of Common
Stock equal to the number of shares of Common Stock so held for
at least six months and transferred to the Company in payment of
the purchase price upon the exercise of the Original Option. The
price at which each share of Common Stock covered by the Reload
Option may be purchased shall be the Fair Market Value per share
of Common Stock on the date of exercise of the Original Option.
The Reload Option shall not be exercisable until one year after
the date the Reload Option is granted or after the expiration
date of the Original Option. Upon the payment of the purchase
price for a Reload Option granted hereunder in whole or in part
in shares of Common Stock held for more than six months, the
optionee is entitled to receive a further Reload Option in
accordance with this Section. Shares of Common Stock covered by
a Reload Option shall not reduce the number of shares of Common
Stock available under the Plan pursuant to Section 3.
4.2 OTHER TERMS AND CONDITIONS. Through the Option
Agreements authorized under this Plan, the Committee may impose
such other terms and conditions, not inconsistent with the terms
of this Plan, on the grant or exercise of Options, as it deems
advisable.
4.3 ADDITIONAL PROVISIONS APPLICABLE TO INCENTIVE STOCK
OPTIONS. The Committee may, in its discretion, grant options
under the Plan to eligible Employees which Options constitute
ISOs; provided, however, that the aggregate Fair Market Value of
the Common Stock with respect to which ISOs are exercisable for
the first time by the optionee during any calendar year shall not
exceed the limitation set forth in Code Section 422(d). Any
Option shall not be considered an ISO unless it includes an
express provision that the Option is intended to be an ISO.
ARTICLE V
STOCK APPRECIATION RIGHTS
5.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee, in
its discretion, may from time to time grant Stock Appreciation
Rights to Employees or Consultants under this Plan. A Stock
Appreciation Right is a right granted under the Plan to receive a
payment that is measured with reference to the amount by which
the Fair Market Value of a specified number of shares of Common
Stock appreciates from a specified date, such as the date of
grant of the Award, to the date of exercise. Payment of a Stock
Appreciation Right may be made in cash or in shares valued at
their Fair Market Value on the date of exercise, or a combination
thereof, as specified in the Award. Stock Appreciation Rights
may, but need not, relate to and be granted in conjunction with
specific Options.
5.2 EXERCISE. Stock Appreciation Rights shall entitle the
holder, upon exercise thereof in whole or in part, to receive
payment in the amount and form determined pursuant to subsection
5.3(b). The exercise of Stock Appreciation Rights shall result
in a termination of the Stock Appreciation Rights with respect to
the number of shares covered by the exercise and, if offered in
tandem with an Option, may further result in a termination of the
related Option, or a portion thereof, in connection with the
exercise of the SAR.
5.3 TERMS AND CONDITIONS. Any SARs granted under this Plan
shall be evidenced by SAR Agreements, which SAR Agreements shall
be in such form and contain such provisions as the Committee
shall from time to time approve consistent with this Plan. The
SAR Agreements need not be identical, but each SAR Agreement by
appropriate language shall include the substance of all of the
following additional terms and conditions:
(a) Stock Appreciation Rights shall not be exercisable
during the first six months after their date of grant. Such
rights shall not be transferable other than by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code
of 1986, as amended ("Internal Revenue Code") or Title I of the
Employee Retirement Income Security Act, or the rules thereunder
or as otherwise permitted by Rule 16b-3 and the Committee may
further limit transfers.
(b) Upon exercise of Stock Appreciation Rights the
recipient shall be entitled to receive therefor payment, in the
sole discretion of the Committee, in the form of shares of Common
Stock (rounded down to the next whole number so that no
fractional shares are issued), cash or any combination thereof.
The amount of such payment shall be equal in value to the
difference between the Fair Market Value per share of the Common
Stock on the date the Stock Appreciation Right is exercised and
the value per share of such stock as of the date of the SAR Award
(or such other date designated by the Committee in the SAR
Agreement) multiplied by the number of shares with respect to
which the Stock Appreciation Right shall have been exercised.
(c) Stock Appreciation Rights granted under this Plan
in tandem with an Option will expire or terminate no later than
the expiration or termination date of the related Option.
(d) Any exercise by an officer or director of the
Company of a Stock Appreciation Right may be made only during the
ten-day period beginning on the third business day following the
release for publication of any quarterly or annual statement of
sales and earnings by the Company and ending on the 12th business
day following the date of such release, or such other period of
time as may be provided under Rule 16b-3. "Officer" for the
purposes of this subsection shall mean only officers who are
subject to Section 16(b) of the Exchange Act.
5.4 EFFECT ON RELATED STOCK OPTION. The number of shares
with respect to which Stock Appreciation Rights are exercised
(rather than the number of shares issued by the Company upon such
exercise) shall be deemed for the purpose of Section 3.3 to have
been issued under an Option granted pursuant to this Plan and
shall not thereafter be available for the granting of further
Awards under this Plan.
5.5 NO RIGHTS AS A STOCKHOLDER. Holders of Stock
Appreciation Rights hereunder shall have no rights as a
stockholder in respect thereof. No adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is
issued, except as provided in Section 3.5.
ARTICLE VI
RESTRICTED AND UNRESTRICTED STOCK
6.1 RESTRICTED STOCK. The Committee, in its discretion,
may from time to time award Restricted Stock to any Employee or
Consultant eligible to receive Awards under this Plan. Each
Employee or Consultant who is awarded Restricted Stock shall
enter into a Restricted Stock Agreement with the Company in a
form specified by the Committee agreeing to the terms and
conditions of the award and such other matters consistent with
this Plan as the Committee in its sole discretion shall
determine. Such conditions may include, but shall not be limited
to, the deferral of a percentage of the Employee's annual cash
compensation, not including dividends paid on Restricted Stock,
if any, to be applied toward the purchase of Restricted Stock
upon such terms and conditions, including such discounts, as may
be set forth in the Restricted Stock Agreement. Restricted Stock
may be awarded as a bonus for services rendered or to be rendered
in the service of the Company or a Subsidiary.
Restricted Stock awarded to Employees may not be sold,
transferred, pledged or otherwise encumbered during a Restriction
Period commencing on the date of the award and ending at such
later date or dates as the Committee may designate at the time of
the award. The recipient shall have the entire beneficial
ownership of the Restricted Stock awarded to him, including the
right to receive dividends and the right to vote such Restricted
Stock.
If an Employee ceases to be employed by the Company prior to
the expiration of the Restriction Period, he shall forfeit all of
his Restricted Stock with respect to which the Restriction Period
has not yet expired; provided, however, the Restricted Stock
Agreements, in the discretion of the Committee and pursuant to
such terms and conditions as it may impose, may provide: (1)
that if such Employee's employment terminates for any reason
other than conduct that in the judgment of the Committee involves
dishonesty or action by the Employee that is detrimental to the
best interests of the Company, the Restricted Stock or any
related compensation deferral or a portion thereof shall not be
forfeited; (2) that if such Employee's employment terminates on
account of total and permanent disability, the Employee shall not
forfeit his Restricted Stock or any related compensation deferral
or a portion thereof; or (3) that if such Employee dies while
employed by the Company, his Restricted Stock or any related
compensation deferral or a portion thereof is not forfeited.
Subject to Section 9.10, each Employee or Consultant who is
awarded Restricted Stock may, but need not, be issued a stock
certificate in respect of such shares of Restricted Stock. Each
certificate registered in the name of an Employee or Consultant,
if any, shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award as
specifically set forth in the Restricted Stock Agreement.
The Committee shall require that any stock certificate
issued in the name of an Employee or Consultant evidencing shares
of Restricted Stock be held in the custody of the Company until
the expiration of the Restriction Period applicable to such
Restricted Stock and that, as a condition of such issuance of a
certificate for Restricted Stock, the Employee or Consultant
shall have delivered a stock power, endorsed in blank, relating
to the shares covered by such certificate. In no event shall the
Restriction Period end prior to the payment by the Employee or
Consultant to the Company of the amount of any federal, state or
local income or employment tax withholding that may be required
with respect to the Restricted Stock.
If any change is made in the Common Stock by reason of any
merger, consolidation, reorganization, recapitalization, stock
dividend, split up, combination of shares, exchange of shares,
change in corporation structure, or otherwise, any shares
received by an Employee or Consultant with respect to Restricted
Stock shall be subject to the same restrictions applicable to
such Restricted Stock and the certificates representing such
shares shall be deposited with the Company.
6.2 UNRESTRICTED STOCK. The Committee, in its discretion,
may from time to time sell or award Unrestricted Stock (or debt
or other securities which are convertible into Unrestricted
Stock) to any Employee or Consultant eligible to receive Awards
under this Plan. Each Employee or Consultant who is awarded
Unrestricted Stock shall enter into an Unrestricted Stock
Agreement with the Company in a form specified by the Committee
agreeing to the terms and conditions of the award and such other
matters consistent with this Plan as the Committee in its sole
discretion shall determine. Such conditions may include, but
shall not be limited to, the deferral of a percentage of the
Employee's annual cash compensation, not including dividends paid
on the Unrestricted Stock, if any, to be applied toward the
purchase of Unrestricted Stock upon such terms and conditions,
including such discounts, as may be set forth in the Unrestricted
Stock Agreement. Unrestricted Stock may be awarded as a bonus
for services rendered or to be rendered in the service of the
Company or a Subsidiary or may be awarded in connection with a
Performance Award Agreement as provided in Article VII.
Upon the issuance of Unrestricted Stock to an Employee or
Consultant hereunder, the Employee or Consultant shall have the
entire beneficial ownership and all the rights and privileges of
a stockholder with respect to the Unrestricted Stock awarded to
him, including the right to receive dividends and the right to
vote such Unrestricted Stock.
Subject to Section 9.10 of this Plan, each Employee or
Consultant who is awarded Unrestricted Stock may, but need not,
be issued a stock certificate in respect of such shares of
Unrestricted Stock.
ARTICLE VII
PERFORMANCE SHARES OR UNITS
7.1 GRANT OF PERFORMANCE SHARES OR UNITS. The Committee,
in its discretion, may from time to time grant Performance Shares
or Performance Units to Employees or Consultants under the Plan.
A Performance Share is an Award that represents a fixed number of
shares of Unrestricted Stock and a Performance Unit is an Award
that represents a fixed amount of cash each of which vests at a
specified time or over a period of time in accordance with
performance criteria established in connection with the granting
of the Award.
7.2 TERMS AND CONDITIONS OF PERFORMANCE SHARES AND UNITS.
Each award of a Performance Share or Performance Unit shall be
evidenced by a Performance Award Agreement, which Performance
Award Agreement shall be in such form and contain such provisions
as the Committee shall from time to time approve consistent with
this Plan. The Performance Award Agreements need not be
identical, but each such Agreement by appropriate language shall
include the substance of the following additional terms and
conditions:
(a) Each Performance Award Agreement shall state the
number of shares of Unrestricted Stock or the dollar amount to be
awarded.
(b) Each Performance Award Agreement shall state the
performance criteria that must be met. Such criteria may measure
the performance of the grantee, of the Subsidiary or business
unit in which the grantee is employed, of the Company, or a
combination of any of the foregoing.
(c) The vested portion of a Performance Share is
payable to the grantee either in the shares of Unrestricted Stock
it represents or in cash in an amount equal to the Fair Market
Value of those shares on the date of vesting, or a combination
thereof, as specified in the Performance Agreement. The vested
portion of a Performance Unit is payable to the grantee either in
cash or in shares of Unrestricted Stock valued at their Fair
Market Value on the date of vesting, or a combination thereof, as
specified in the Performance Agreement.
7.3 STOCKHOLDER RIGHTS. An Employee or Consultant who
receives Unrestricted Stock pursuant to this Plan and a
Performance Award Agreement shall have the entire beneficial
ownership and all of the rights and privileges of a stockholder
with respect to such Unrestricted Stock awarded to him, including
the right to receive dividends and the right to vote such
Unrestricted Stock. Subject to Section 9.10 of this Plan, each
Employee or Consultant who is awarded Unrestricted Stock pursuant
to this Plan and a Performance Award Agreement may, but need not,
be issued a stock certificate in respect of such shares of
Unrestricted Stock.
ARTICLE VIII
PHANTOM STOCK AND DIVIDEND EQUIVALENTS
8.1 GRANT. The Committee, in its discretion, may from time
to time grant Phantom Stock or Dividend Equivalents to Employees
or Consultants under this Plan.
(a) PHANTOM STOCK. Phantom Stock is the right to
receive an amount of cash under the Plan measured by the Fair
Market Value of a specified number of shares of Common Stock on a
specified date, or measured by the excess of such Fair Market
Value over a specified minimum, which may but need not include a
Dividend Equivalent.
(b) DIVIDEND EQUIVALENT. A Dividend Equivalent is a
right granted under the Plan to receive an amount, in cash,
equivalent to the dividends that are paid, if any, on a specified
number of shares of Common Stock during a specified period of
time.
8.2 TERMS AND CONDITIONS. Each award of Phantom Stock or a
Dividend Equivalent shall be evidenced by a Phantom Stock
Agreement or Dividend Agreement which shall be in such form and
contain such provisions as the Committee may from time to time
approve, consistent with this Plan.
ARTICLE IX
MISCELLANEOUS
9.1 WITHHOLDING TAXES. An Employee granted Awards under
this Plan shall be conclusively deemed to have authorized the
Company to withhold from the salary, commissions or other
compensation of such Employee funds in amounts or property
(including Common Stock) in value equal to any federal, state and
local income, employment or other withholding taxes applicable to
the income recognized by such Employee and attributable to the
Awards as, when and to the extent, if any, required by law;
provided, however, that in lieu of the withholding of federal,
state and local taxes as herein provided, the Company may require
that the Employee or Consultant (or other person exercising an
Option or Stock Appreciation Rights, or holding Restricted Stock,
Unrestricted Stock or other property or cash pursuant to this
Plan) pay the Company an amount equal to the federal, state and
local withholding taxes on such income at the time such
withholding is required or at such other time as shall be
satisfactory to the Company. An Award may provide for the
satisfaction of a recipient's tax withholding obligation by the
retention of shares to which the recipient would otherwise be
entitled or by the recipient's delivery of previously owned
shares or other property.
9.2 AMENDMENT, SUSPENSION, DISCONTINUANCE OR TERMINATION OF
PLAN. The Committee may from time to time amend, suspend or
discontinue this Plan or revise it in any respect whatsoever for
the purpose of maintaining or improving the effectiveness of this
Plan as an incentive device, for the purpose of conforming this
Plan to applicable governmental regulations or to any change in
applicable law or regulations, or for any other purpose permitted
by law; provided, however, that no such action by the Committee
shall adversely affect any Award theretofore granted under this
Plan without the consent of the holder so affected; and provided
further that the Committee may not materially increase the number
of shares of Common Stock authorized under Section 3.3 of this
Plan or materially modify this Plan's requirements as to
eligibility for participation in the Plan without the approval of
the stockholders of the Company.
9.3 GOVERNING LAW. This Plan and all rights and
obligations hereunder shall be construed in accordance with and
governed by the laws of the State of California.
9.4 DESIGNATION. This Plan may be referred to in other
documents and instruments as the "SMTEK International, Inc.
Amended and Restated 1996 Stock Incentive Plan."
9.5 INDEMNIFICATION OF COMMITTEE. In addition to such
other rights of indemnification as they may have as directors or
as members of the Committee, the members of the Committee shall
be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in
connection with the defense of any investigation, action, suit or
proceeding, or in connection with any appeal therefrom to which
they or any of them may be a party by reason of any action taken
or failure to act under or in connection with this Plan or any
Award, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction
of a judgment in or dismissal or other discontinuance of any such
investigation, action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such investigation,
action, suit or proceeding that such Committee member is liable
for negligence or misconduct in the performance of his duties;
provided that, within 60 days after institution of any such
investigation, action, suit or proceeding, a Committee member
shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
9.6 RESERVATION OF SHARES. The Company shall at all times
during the term of this Plan, and so long as any Award shall be
outstanding, reserve and keep available (and will seek or obtain
from any regulatory body having jurisdiction any requisite
authority in order to issue) such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this
Plan. Inability of the Company to obtain from any regulatory
body of appropriate jurisdiction, authority considered by the
Company to be necessary or desirable to the lawful issuance of
any shares of its Common Stock hereunder shall relieve the
Company of any liability in respect of the nonissuance or sale of
such Common Stock as to which such requisite authority shall not
have been obtained.
9.7 APPLICATION OF FUNDS. The proceeds received by the
Company from the sale of Common Stock pursuant to Options or
other Awards under this Plan will be used for any general
corporate purposes.
9.8 NO OBLIGATION TO EXERCISE. The granting of an Award
shall impose no obligation upon the holder to exercise or
otherwise realize the value of that Award.
9.9 APPROVAL OF STOCKHOLDERS. No Award granted under this
Plan shall be enforceable against the Company unless and until
this Plan has been approved or ratified by the stockholders of
the Company in the manner and to the extent required by the
Exchange Act and the General Corporation Law of the State of
Delaware.
9.10 UNCERTIFICATED SHARES. Each Employee or Consultant
who exercises an Option to acquire Common Stock or is awarded
Restricted Stock or Unrestricted Stock may, but need not, be
issued a stock certificate in respect of the Common Stock so
acquired. A "book entry" (i.e., a computerized or manual entry)
shall be made in the records of the Company to evidence the
issuance of shares of Common Stock to an Employee or Consultant
where no certificate is issued in the name of the Employee or
Consultant. Such Company records, absent manifest error, shall
be binding on Employees and Consultants. In all instances where
the date of issuance of shares may be deemed significant but no
certificate is issued in accordance with this Section 9.10, the
date of the book entry shall be the relevant date for such
purposes.
9.11 OTHER ACTIONS. Nothing contained in the Plan shall be
construed to limit the authority of the Company to exercise its
corporate rights and powers, including, but not by way of
limitation, the right of the Company to grant or assume options
for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or
association.
9.12 EMPLOYEES SUBJECT TO SECTION 16 OF THE EXCHANGE ACT.
Notwithstanding any other provision herein, any Award granted
hereunder to an Employee or Consultant who is then subject to
Section 16 of the Exchange Act shall be subject to the following
limitations:
(a) The Award may provide for the issuance of shares
of Common Stock as a stock bonus for no consideration other than
services rendered or to be rendered. In the event of an Award
under which shares of Common Stock are or may in the future be
issued for any other type of consideration, the amount of such
consideration shall either:
(i) be equal to the amount (such as the par value
of such
shares) required to be received by the Company in order
to assure
compliance with applicable state law, or
(ii) be equal to or greater that 50% of the Fair
Market Value
of such shares on the date of grant of such Award.
(b) Any derivative security (as defined in the rules
and regulations under Section 16 of the Exchange Act) granted
under the Plan shall be transferable by the recipient thereof
only to the extent not prohibited by Rule 16b-3.
<PAGE>
EXHIBIT B
SMTEK INTERNATIONAL, INC.
AMENDED AND RESTATED 1998 NON-EMPLOYEE DIRECTORS STOCK
PLAN
ARTICLE I
GENERAL
1.01 PURPOSE.
The purpose of the Amended and Restated 1998 Non-Employee
Directors Stock Plan (the "Plan") of SMTEK International, Inc.
(the "Company") is to promote the best interests of the Company
and its stockholders by providing members of the Board who are
not employees of the Company or its affiliates with an
opportunity to acquire a proprietary interest in the Company. By
encouraging stock ownership by directors who are not employees of
the Company or its affiliates, the Company seeks to attract and
retain on the Board persons of exceptional competence and to
provide a further incentive to serve as a director of the
Company.
1.02 ADMINISTRATION.
The Plan shall be administered by the Board or a committee
appointed by the Board (the "Committee") comprised of at least
two members of the Board who are "Non-Employee Directors" within
the meaning of Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor rule ("Rule 16b-
3"). All references to the Board herein shall also be deemed to
be a reference to the Committee. The Board, subject to the
express provisions of the Plan, shall have the power to construe
the Plan and any agreements defining the rights and obligations
of the Company and Plan participants, to resolve all questions
arising thereunder, to adopt and amend such rules and regulations
for the administration thereof as it may deem desirable, and
otherwise to carry out the terms of the Plan and such agreements.
The interpretation and construction by the Board of any
provisions of the Plan or of any option granted under the Plan
shall be final. Notwithstanding the foregoing, the Board shall
have no authority or discretion as to the selection of persons
eligible to receive securities under the Plan, the number of
securities granted under the Plan, the timing of such grants, or
the exercise price or vesting provisions of securities granted
under the Plan, which matters are specifically governed by the
provisions of the Plan.
1.03 ELIGIBLE DIRECTORS.
A person shall be eligible to receive grants under this Plan
(an "Eligible Director") if, at the time of the grant, he or she
is a duly elected or appointed member of the Board, but is not
and has not since the beginning of the Company's most recently
completed fiscal year been an employee of the Company or any of
its affiliates (except for a director who has served solely as an
uncompensated interim executive officer and who no longer serves
in that capacity) and is not otherwise eligible for selection as
a person to whom stock may be allocated or to whom stock options
or stock appreciation rights may be granted (except for non-
discretionary grants) pursuant to any plan of the Company or any
of its affiliates entitling participants therein to acquire
stock, stock options, or stock appreciation rights of the Company
or any of its affiliates
1.04 SHARES OF COMMON STOCK SUBJECT TO THE PLAN AND GRANT LIMIT.
The shares that may be issued under the Plan shall be
authorized and unissued shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), or previously issued
shares of Common Stock reacquired by the Company. The aggregate
number of shares that may be granted under the Plan shall not
exceed 150,000 shares of Common Stock, subject to adjustment in
accordance with Article III.
1.05 AMENDMENT OF THE PLAN.
The Board may, insofar as permitted by law, from time to
time suspend or discontinue the Plan or revise or amend it in any
respect whatsoever that would not compromise the ability of
Eligible Directors to serve as disinterested administrators of
the Company's other employee benefit plans under Section 16 of
the Exchange Act and the rules promulgated thereunder, except
that no such amendment shall alter or impair or diminish any
rights or obligations under any option theretofore granted under
the Plan without the consent of the person to whom such option
was granted. In addition, if an amendment to the Plan would
increase the number of shares subject to the Plan (as adjusted
under Article III), increase the number of shares for which an
option or options may be granted to any optionee (as adjusted
under Article III), change the class of persons eligible to
receive options under the Plan, provide for the grant of options
having an exercise price per option share less than the exercise
price specified in the Plan, extend the final date upon which
options may be granted under the Plan, or otherwise materially
increase the benefits accruing to participants in a manner not
specifically contemplated herein or affect the Plan's compliance
with Rule 16b-3, the amendment shall be approved by the Company's
stockholders to the extent required to comply with Rule 16b-3 or
any other state or federal securities law. Under no
circumstances may the provisions of the Plan that provide for the
amounts, price, and timing of option grants be amended more than
once every six months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or the rules thereunder.
Subject to the foregoing, the Board may amend the Plan to comply
with or take advantage of changes in the rules promulgated by the
Securities and Exchange Commission or its staff under Section 16
of the Exchange Act.
1.06 DURATION OF PLAN.
This Plan shall be effective upon its approval by the
stockholders, which requires the affirmative vote of the holders
of a majority of the Common Stock of the Company present, or
represented, and entitled to vote at a meeting duly held. No
shares of Common Stock or stock options may be awarded prior to
approval of the Plan by the stockholders. This Plan will
terminate on December 31, 2007 unless a different termination
date is fixed by the stockholders or by action of the Board but
no such termination shall affect the prior rights under this Plan
of the Company or of anyone to whom shares have been transferred
prior to such termination.
1.07 RESTRICTIONS.
All options and shares granted under the Plan shall be
subject to the requirement that, if at any time the Board shall
determine, in its discretion, that the listing, registration or
qualification of shares granted under the Plan upon any
securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with,
the granting of shares or options or the issuance, if any, or
purchase of shares in connection therewith, such option may not
be exercised as a whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Company. Unless the shares of stock to be issued under the Plan
have been effectively registered under the Securities Act of
1933, as amended (the "Securities Act"), the Company shall be
under no obligation to issue any shares of stock unless the
person who receives such shares or exercises such option, as a
whole or in part, shall give a written representation and
undertaking to the Company satisfactory in form and scope to
counsel to the Company and upon which, in the opinion of such
counsel, the Company may reasonably rely, that he or she is
acquiring the shares of stock issued to him or her for his or her
own account as an investment and not with a view to, or for sale
in connection with, the distribution of any such shares of stock,
and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable
law, and that if shares of stock are issued without such
registration, a legend to this effect may be endorsed upon the
certificates representing the securities so issued.
1.08 NONASSIGNABILITY.
Options granted under the Plan shall be transferable only to
the extent such transfer is by will or the applicable laws of
descent and distribution or pursuant to a qualified domestic
relations order, as defined by the Internal Revenue Code of 1986,
as amended (the "Code") or Title I of ERISA or the rules
promulgated thereunder, and is not otherwise prohibited by Rule
16b-3. During the lifetime of the optionee, the option shall be
exercisable only by the optionee (or the optionee's permitted
transferee) or his or her guardian or legal representative.
1.09 WITHHOLDING TAXES.
Whenever shares of stock are to be issued, whether directly
or upon exercise of an option granted under the Plan, the Board
shall have the right to require the Eligible Director to remit to
the Company an amount sufficient to satisfy any federal, state
and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares. The Board may,
in the exercise of its discretion, allow satisfaction of tax
withholding requirements by accepting delivery of stock of the
Company or by withholding a portion of the stock otherwise
issuable.
1.10 DEFINITION OF "FAIR MARKET VALUE."
For purposes of the Plan, the term "Fair Market Value" when
used in reference to the value of a share of Common Stock shall
mean, on any day, (i) the closing sales price on the immediately
preceding business day of a share of Common Stock as reported on
the principal securities exchange on which shares of Common Stock
are then listed or admitted to trading, or (ii) if not so
reported, the closing sales price on the immediately preceding
business day of a share of Common Stock as published in the
Nasdaq National Market Issues report in The Wall Street Journal,
or (iii) if no such closing prices are reported, the mean between
the high bid and low asked prices on the immediately preceding
business day as reported on the Nasdaq National Market System, or
(iv) if not so reported, as furnished by any member of the
National Association of Securities Dealers, Inc. selected by the
Board. In the event that the price of a share of Common Stock
shall not be so reported or furnished, the Fair Market Value of a
share of Common Stock shall be determined by the Board in its
absolute discretion. A "business day" is any day, other than a
Saturday or Sunday, on which the relevant market is open for
trading.
1.11 RIGHTS AS A STOCKHOLDER.
(a) Eligible Directors shall have all rights and privileges
of a stockholder as to shares received under this Plan, including
the right to vote and receive dividends, except that during the
Restricted Period, as defined in Section 1.12, the shares of
Common Stock may not be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of.
(b) An optionee or a permitted transferee of an option
shall have no rights as a stockholder with respect to any shares
issuable or issued upon exercise of the option until the date of
the receipt by the Company of all amounts payable in connection
with exercise of the option, including the exercise price and any
amounts required by the Company pursuant to Section 1.09.
1.12 RESTRICTED PERIOD
Certificates representing any shares of Common Stock to
which the Participant is entitled under this Plan shall be
registered in the Participant's name but shall be held in custody
by the Company for the Participant's account for a period (the
"Restricted Period") ending six months from the date of grant of
the stock option or the date of issuance of the shares, at which
time those certificates shall be delivered to the Participant.
During the Restricted Period, the Participant shall have all
rights and privileges of a shareholder as to such shares,
including the right to vote and receive dividends, except that
the shares of Common Stock may not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of.
ARTICLE II
STOCK AWARDS
2.01 ANNUAL GRANTS.
Each Eligible Director automatically shall be entitled to
receive an annual grant of that number of shares of Common Stock
equal to $12,000 divided by the Fair Market Value of a share of
Common Stock on the grant date (the "Annual Grant"). Annual
Grants made under this Section shall be made initially as of July
1, 2000 and thereafter on July 1 of each year (or the first
business day thereafter on which the Company's Common Stock is
traded on the principal securities exchange on which it is
listed). For any person who first becomes an Eligible Director
after July 1, 2000, the initial grant shall be made on the date
the person becomes an Eligible Director in a prorated number of
shares based on the length of time from the date of becoming an
Eligible Director until the next July 1. All shares awarded
hereunder shall be full shares, rounded up to the nearest whole
share. No fractional shares shall be issued.
2.02 MEETING FEES.
Each Eligible Director shall, on the fifth business day
following each quarterly public release of the Company's earnings
(the "Valuation Date"), automatically be entitled to receive, for
each meeting of the Company's Board of Directors attended by such
Eligible Director during the preceding fiscal quarter, that
number of shares of Common Stock as are obtained by dividing the
Fair Market Value of a share of Common Stock on the Valuation
Date into: (i) $1,000 for attending Board of Director meetings
in person or by conference telephone call; and (ii) $500 for
attending meetings of the committees of the Board of Directors in
person or by conference telephone call, if such committee
meetings are not held on the same day as meetings of the Board of
Directors (alone or together with (i), "Meeting Fees"). The
initial Valuation Date shall be the first Valuation Date that
follows July 1, 1999. All shares awarded shall be full shares,
rounded up to the nearest whole share. No fractional shares
shall be issued.
2.03 ELECTION TO TAKE OPTIONS.
(a) An Eligible Director may elect, in accordance with the
procedures set forth in Section 2.03(b) below, to receive options
to purchase shares of Common Stock ("Options") in lieu of
receiving (i) all or a portion of an Annual Grant made pursuant
to Section 2.01 of this Plan; or (ii) all or a portion of the
Meeting Fees made under Section 2.02 of this Plan (alone or
together with an Annual Grant, an "Award"). The number of
Options granted to an Eligible Director will be determined by
dividing the aggregate Fair Market Value of the shares of Common
Stock that an Eligible Director would otherwise receive by the
fair value of one stock option determined by applying the Black-
Scholes Option Pricing Model and such other factors as the Board
deems appropriate. Any fractional Options resulting from
application of the Black-Scholes formula shall be eliminated by
rounding up to the nearest whole Option.
(b) Any election to receive Options in lieu of shares of
Common Stock as payment of an Annual Grant or Meeting Fees shall
be made in writing to the Board (on a form prescribed by the
Board) prior to the first day of the Company's fiscal year during
which the Annual Grant or Meeting Fees will be earned. Each
election, which shall be made in a manner as determined by the
Board in its sole and absolute discretion, shall designate (i)
whether the election applies to Annual Grant or Meeting Fees;
(ii) whether the Annual Grant or Meeting Fees, as applicable, are
to be awarded in Common Stock or Options; and (iii) the
applicable percentage of the Annual Grant or Meeting Fees to be
awarded in Common Stock or Options.
(c) An election under this Section 2.03 is irrevocable and
is valid only for the Company's fiscal year commencing
immediately following the date of the election.
(d) If no election is made or if a new election is not made
with respect to any subsequent fiscal year pursuant to Section
2.03(b), the Eligible Director shall be deemed to have made an
election to receive an Award of Common Stock for purposes of
Section 2.03(a).
(e) An individual who becomes an Eligible Director after
the date by which an election would otherwise be required to be
made hereunder may elect to receive an Award during that fiscal
year by making an election, in the form required hereunder,
within thirty days of becoming an Eligible Director. Such
election shall become effective the first day of the month
following the date of the election.
2.04 OPTION GRANTS UPON ELECTION TO BOARD OF DIRECTORS
Each Eligible Director on the Board of Directors on October
31, 2000 will be granted 5,000 Options on November 9, 2000. In
addition, commencing on November 9, 2000 and continuing
thereafter, each Eligible Director will be granted 5,000 Options
on the day the Eligible Director is initially elected or re-
elected to the Board of Directors.
2.05 EXERCISE OF OPTIONS.
All Options granted under the Plan shall become exercisable
upon the date of grant. Options may be exercised in whole or in
part at any time during the Option term, by giving written notice
of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full
of the purchase price in accordance with Section 2.06 of this
Plan. No shares of Common Stock shall be issued until payment,
as provided in Section 2.06, has been made or provided for. Upon
proper exercise, and upon satisfaction of the Restricted Period
as provided in Section 1.12, the Company shall deliver to the
person entitled to exercise the Options or his or her designee a
certificate or certificates for the shares of Common Stock to
which the Options pertain. Certificates representing shares
issued upon exercise of Options may be held in custody by the
Company as provided in Section 1.12.
2.06 EXERCISE PRICE OF OPTIONS.
For Options granted under this Plan, the Options price shall
be payable upon the exercise of such Options in legal tender of
the United States or such other consideration as the Board may
deem acceptable, including without limitation Common Stock
(delivered by or on behalf of the person exercising the option or
retained by the Company from the Common Stock otherwise issuable
upon exercise and valued at Fair Market Value as of the exercise
date), provided, however, that the Board may, in the exercise of
its discretion,
(i) allow exercise of Options in a broker-assisted or similar
transaction
in which the exercise price is not received by the Company
until
immediately after exercise, and/or
(ii) allow the Company to loan the exercise price to the person
entitled to
exercise Options, if the exercise will be followed by an
immediate sale
of some or all of the underlying shares and a portion of
the sales
proceeds is dedicated to full payment of the exercise
price.
2.07 OPTION AGREEMENTS.
Options granted under the Plan shall be evidenced by an
option agreement duly executed on behalf of the Company stating
the number of shares of stock issuable upon exercise of the
Options, the exercise price, the time at which the Options become
exercisable, and the time during which the Options remain
exercisable. Such option agreements may but need not be
identical and shall comply with and be subject to the terms and
conditions of the Plan, a copy of which shall be provided to each
Options recipient and incorporated by reference into each option
agreement. Any option agreement may contain such other terms,
provisions and conditions not inconsistent with the Plan as may
be determined by the Board.
2.08 TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no Options
shall be exercisable after the expiration of 10 years from the
effective date of their grant. In the event that any outstanding
Options under the Plan expire by reason of lapse of time or are
otherwise terminated without exercise for any reason, then the
shares of Common Stock subject to any such Options that have not
been issued upon expiration or termination of the Options shall
again become available in the pool of shares of Common Stock for
which Options may be granted under the Plan. In the event that
the holder of any Options granted under the Plan shall cease to
be an Eligible Director of the Company, all Options granted under
the Plan to such holder shall remain exercisable, regardless of
the reason the optionee ceases to be an Eligible Director, for a
period of two years after the date the optionee ceases to be an
Eligible Director (or, if sooner, until the expiration of the
Options according to their terms), and shall then terminate. In
the event of the death of an optionee while such optionee is an
Eligible Director or within the period after termination of such
status during which he or she is permitted to exercise Options,
such Options may be exercised by the executors or administrators
of the optionee's estate or by any person or persons who shall
have acquired the Options directly from the optionee by his or
her will or the applicable laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by
the Code or Title I of ERISA, or the rules promulgated thereunder
or as otherwise permitted by Rule 16b-3.
ARTICLE III
RECAPITALIZATIONS AND REORGANIZATIONS
3.01 ANTI-DILUTION ADJUSTMENTS.
If the outstanding shares of Common Stock of the Company are
(a) increased, decreased or exchanged for a different number or
kind of shares or other securities, or if additional shares or
new or different shares or other securities are distributed in
respect of such shares of Common Stock (or any stock or
securities received with respect to such Common Stock), through
merger, consolidation, sale or exchange of all or substantially
all of the properties of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off or other distribution with respect
to such shares of Common Stock (or any stock or securities
received with respect to such Common Stock), or (b) if the value
of the outstanding shares of Common Stock of the Company is
reduced by reason of an extraordinary cash dividend, an
appropriate and proportionate adjustment may be made by the Board
in (x) the maximum number and kind of shares to be issued under
the Plan, (y) the number and kind of shares subject to then
outstanding options, and (z) the price for each share or other
unit of any other securities subject to then outstanding options.
No fractional interests will be issued under the Plan resulting
from any such adjustments.
3.02 CORPORATE TRANSACTIONS.
If the Company shall be the surviving corporation in any
merger or consolidation, each outstanding option shall pertain
and apply to the securities to which a holder of the same number
of shares of Common Stock that are subject to that option would
have been entitled. A Change in Control (as defined below) of
the Company shall cause the Plan to terminate, provided that
outstanding options granted to optionees who remain Eligible
Directors after such Change in Control shall remain in effect
according to their terms subject to adjustments made pursuant to
Section 3.01, and outstanding options granted to optionees who
cease to be Eligible Directors after such Change in Control shall
remain exercisable according to their terms, subject to
adjustments made pursuant to Section 3.01, for a period of two
years following such Change in Control. For purposes hereof, a
"Change in Control" means the following and shall be deemed to
occur if any of the following events occur:
(a) Except as provided by subparagraph (b) hereof, the
acquisition (other than from the Company) by any person, entity
or group, within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting
securities of the Company), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of the then outstanding shares of
Common Stock; or
(b) Approval by the stockholders of the Company of a
reorganization, merger or consolidation with any other person,
entity or corporation, other than
(i) a merger or consolidation which would result in
the voting
securities of the Company outstanding immediately prior
thereto
continuing to represent (either by remaining outstanding or
by being
converted into voting securities of another entity) more
than fifty
percent (50%) of the combined voting power of the voting
securities of
the Company or such other entity outstanding immediately
after such
merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no
person or entity acquires fifty percent (50%) or more of the
combined
voting power of the Company's then outstanding voting
securities; or
(c) Approval by the stockholders of the Company of a plan
of complete liquidation of the Company or an agreement for the
sale or other disposition by the Company of all or substantially
all of the Company's assets.
Notwithstanding the preceding provisions of this paragraph,
a Change in Control shall not be deemed to have occurred (1) if
the "person" described in the preceding provisions is an
underwriter or underwriting syndicate that has acquired the
ownership of the Company's voting securities solely in connection
with a public offering of the Company's securities or (2) if the
"person" described in the preceding provisions is an employee
stock ownership plan or other employee benefit plan maintained by
the Company that is qualified under the provisions of ERISA.
3.03 DETERMINATION BY THE BOARD.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by
the Board, whose determination in that respect shall be final,
binding and conclusive. The grant of an option pursuant to the
Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all of
any part of its business or assets.
<PAGE>
PROXY CARD
SMTEK International, Inc.
Proxy for Annual Meeting of Stockholders
November 9, 2000
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS OF SMTEK INTERNATIONAL, INC.
The undersigned hereby appoints Mr. James P. Burgess and Mr.
Oscar B. Marx, III 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 September 29, 2000 at the Annual Meeting of
Stockholders to be held on November 9, 2000 and 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 nominee to
the Board of Directors, FOR Proposal Two, FOR Proposal Three, and
in their discretion on such other matters as may come before the
meeting.
1. Election of Gregory L. Horton and Bruce E. Kanter as
Class II
Directors to continue in office until 2003:
FOR nominees named above [ ] WITHHOLD
authority to vote [ ]
(except as marked to the contrary) for the nominees
named above
*EXCEPTIONS
(INSTRUCTIONS: To withhold authority to vote for any
individual
nominee, strike a line through the nominee's name in
the list above.
If you desire to cumulate your votes for a nominee,
write your
instruction as to the number of votes cast for such
nominee in the
space provided below. The total number of votes cast
must not
exceed TWO times the number of shares you hold.)
*Exceptions:
--------------------------------------------
-------------
2. Approval of an amendment to the Company's 1996 Stock
Incentive Plan
to increase by 300,000 the number of shares of Common
Stock that may
be issued pursuant to awards thereunder:
FOR [ ] AGAINST [ ] ABSTAIN [
]
3. Approval of amendments to the 1998 Non-Employee
Directors Stock Plan
to: (i) increase by 150,000 the number of shares of
Common Stock
that may be issued pursuant to awards thereunder; (ii)
award 5,000
stock options to each non-employee director serving on
the Board of
Directors on October 31, 2000; and (iii) award 5,000
stock options
to each non-employee director upon initial election or
re-election
to the Board of Directors commencing with this 2000
Annual Meeting:
FOR [ ] AGAINST [ ] ABSTAIN [
]
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING
THE ENCLOSED
ENVELOPE.
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR THE DIRECTOR
NOMINEES, FOR
PROPOSAL TWO AND FOR PROPOSAL THREE.
Signature: Date:
, 2000
--------------------------- ------------------
--
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.
