From: Mitch Freedman [FREEDMAN@smtek.com]
Sent: Wednesday, May 08, 2002 11:49 AM
To: rule-comments@sec.gov
Subject: 33-8090 Proposed 8-K change (s7-09-02)

Greetings,

I am General Counsel for SMTEK International, Inc., a Nasdaq small-cap 
company.  I am the only attorney, with no assistant I might add, in our 
company.  We are an electronics manufacturing subcontractor.

I am generally sympathetic to regulatory rules designed to help stockholders 
and the public know what is happening with companies and am pleased to see 
the SEC is attempting to promote new rules for prompt disclosure.

However, with regard to Proposed rule 33-8090, I have two questions based 
upon the following facts:

Our company pays its outside or non-employee directors solely through stock 
options or stock for Board meetings and Board Committee meetings.  It also 
pays them stock or stock options as opposed to cash for their annual pay for 
serving as Board members.  Our company's Amended & Restated 1998 
Non-Employee Directors Stock Plan, paragraph 2.2 states:

"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, the 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 Directors meetings...; and (ii) 
$500 for attending meetings of the committees..."

There are potentially, in my view, two different ways of reading the SEC's 
proposed rules as they apply to paying our outside directors.  The way I 
read the SEC's proposed rules, our Company will only have to file an 8-K for 
the non-employee directors' receipt or award of stock options or stock 
within the proposed time (depending upon the value of the stock or stock 
option) from the date at which the stock is valued.  For while the outside 
or non-employee director is earning his/her stock or stock options for each 
Board or Committee meeting attended during the fiscal quarter, the stock or 
stock option is not truly granted until it is valued five business days 
after the release of our quarterly earnings.

There is a possibility, and here is my concern, that we would somehow have 
to file an 8-K throughout each quarter after every Board or Committee 
meeting before the stock or stock option can even be valued as to what its 
price is and then perhaps we'd have to file ANOTHER 8-K after the valuing.  
That is because, while the SEC says the price determines the timing of the 
8-K filing, there is possibly a disconnect between price value and grant of 
stock or stock options.  It would make no sense to constantly file 8-K's or 
have to file them twice for the same transaction and perhaps the SEC, in 
refining the rules, may wish to revisit how they define granting stock 
options in this proposed rule.  There is no problem under current rules due 
to the time lag under current Forms 4 and 5, I might add.  However, speeding 
things up does create a problem as I hope I have explained here.

From a philosophical, yet still practical basis, I would like to reiterate 
that these stock or stock option payments are in lieu of cash dispersals to 
the directors for attending meetings.  The stock is currently low and the 
directors have worked for free essentially as their stock/stock option 
prices are "underwater."  The purpose of the new rules is to allow 
stockholders to see any unusual movements of stock or stock option grants or 
exercises, not the typical quarterly payments to directors in lieu of cash 
for merely attending meetings or being members of the Board.

My initial question is this:  Am I reading the proposed rule correctly that 
we would only have to file an 8-K after the stock or stock option is VALUED 
as opposed to when it could be said to have been earned?  Is it not truly 
granted or awarded until it is valued?

My philosophical question is:  Is there a way to exempt from the proposed 
rules this type of payment plan, where stock or stock options are received 
in lieu of cash on a set quarterly basis to outside directors?  Put another 
way, the purpose of the proposed rules is to chart movement of stock or 
stock options to directors/officers so that stockholders can make a guess as 
to what's happening in a company either positively or negatively.  With our 
plan, which seems to be within the orbit of the proposed rules, our 
stockholders learn nothing about what's going on in the company in these 
stock or stock option grants that happen regardless of the fiscal quarter 
results.

I realize that "one-offs" or peculiar situations are sometimes lost in rule 
making in any human endeavor.  I raise these questions in the hope that our 
company may be able to navigate correctly through the proposed rules should 
they become final.

If you have any questions or comments regarding this e-mail, please contact 
me at 805-532-2800 extension 187.  Thank you for your courtesy in this 
regard.

Sincerely,

Mitchell J. Freedman
General Counsel
SMTEK International, Inc.
May 8, 2002