**EXHIBIT 10.16**

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**EMPLOYMENT AGREEMENT**

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), by and between SMTEKINTERNATIONAL, INC., a Delaware corporation (the “Company”), and RichardFitzgerald (“Employee”), is effective as of July 1, 2004 (the “Effective Date”),and amends any prior Employment Agreement and supersedes the Employment OfferLetter by and between the Company and Employee (the “Offer Letter”).  .

 

WHEREAS, the Company desires to continuethe employment of Employee in the position of Vice President, Operations, and

 

WHEREAS, Employee agrees to be employed by the Company in such positionpursuant to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, and for other goodand valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:

 

1.  EMPLOYMENT POSITION.

 

While employedby the Company, Employee shall (a) serve as the Company’s Vice President,Operations,, (b) report directly to the Company’s Chief Executive Officer (the“CEO”), and (c) perform the duties and functions assigned to him by the CEO.

 

2.  COMPENSATION AND BENEFITS.

 

2.1  BASE SALARY.  While employed by the Company, Employee’s base salary shall be$140,000  per year payable in accordancewith the Company’s standard payroll schedule; provided, however, that this basesalary will be reviewed for merit and cost of living increases, by theCompany’s Board of Directors (the “Board”) and/or the Compensation Committee ofthe Board, but shall not be decreased without Employee’s prior written consent.

 

2.2  BONUSES. During each fiscal year that Employee is employed with the Company,Employee shall be eligible for an incentive bonus at the Company’s solediscretion.  Employee shall be eligibleto receive annual bonus compensation based upon criteria and the achievement ofsuch objectives as the Board may from time to time establish, in the exerciseof its discretion.  This bonus, if any,is intended to reward contribution to the Company’s performance over an entirefiscal year, and consequently will be paid only if the Company still employsEmployee, Employee is in good standing at the time the bonus is determined andEmployee is in full compliance with this Agreement.

 

2.3  OTHER BENEFITS.  Employee shall, while employed by the Company, be eligible toparticipate in the employee benefits and benefit plans that the Companygenerally makes available to its full-time regular employees, subject to theterms and conditions of such plans, as they may be modified from time totime.  In addition, while employed bythe Company, Employee shall be entitled to the following benefits: a carallowance of $650 per month; a cell phone with monthly charges reasonablylimited by the Board; and a corporate credit card with charges reasonablylimited by the Board**. **WhileEmployee is employed with the 

 

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Company,the Company shall also pay for reasonable dues, fees and costs, as determinedby the Board, that Employee incurs to maintain membership in appropriateprofessional organizations.

 

2.4  EXPENSE REIMBURSEMENT.  While employed by the Company, Employeeshall be entitled, in accordance with the reimbursement policies in effect fromtime to time, to receive reimbursement from the Company for reasonably businessexpenses incurred by Employee in the performance of Employee’s dutieshereunder, provided Employee furnishes the Company with vouchers, receipts andother details of such expenses in the form required by the Company, sufficientto substantiate a deduction for such business expenses under all applicablerules and regulations of federal and state taxing authorities.

 

2.5  WITHHOLDING.  The Company shall deduct and withhold from the compensationpayable to Employee hereunder any and all applicable federal, state and localincome and employment withholding taxes and any other amounts require to bededucted or withhold by the Company under applicable statutes, regulations,ordinances or orders governing or requiring the withholding or deduction ofamounts otherwise payable as compensation or wages to employees.

 

3.  TERMINATION.

 

3.1  AT WILL. Employee and the Company acknowledge and agree that Employee’semployment with the Company is expressly “at will”.  This means that either party may terminate Employee’s employmentwith or without Cause (as defined in Section 3.3(d) below) upon writtennotice.  Any termination of Employee’semployment is, however, subject to the terms and provisions of this Agreementas to severance pay and other obligations.

 

3.2  VOLUNTARY RESIGNATION.

 

(a)  NO SEVERANCE.  In the event that Employee’s employment with the Companyterminates as a result of his voluntary resignation, Employee shall be entitledonly to accrued but unpaid salary and vacation as of the date of termination.

 

(b)  RELOCATION OF HEADQUARTERS/DIRECTEDRESIGNATION NOT VOLUNTARY RESIGNATION. For purposes of this Agreement, the term “voluntary resignation” shall *not*include any situation where:  (1)Employee terminates his employment with the Company within 60 days after theCompany (A) relocates the Corporate headquarters more than 20 miles fromMoorpark, California **or** (B) requires Employee to physicallyreport for his employment duties more than 20 miles from Moorpark, California;or (2) Employee resigns pursuant to a direct request of the CEO or theBoard.  A termination or resignationunder such circumstances shall be treated as an involuntary termination withoutCause, and Employee’s entitlement to severance pay and additional benefits inaccordance with the provisions of Sections 3.3(a), 3.3(b) and 3.3(c) belowshall apply unless, and only if, such termination was for Cause.

 

3.3  INVOLUNTARY TERMINATION.

 

(a)  INVOLUNTARY TERMINATION.  The Company shall be deemed to haveterminated the employment of Employee involuntarily and without Cause if (1)Employee’s full-time employment is terminated by the Company without Cause; or(2) Employee terminates his employment with the Company within 60 days afterthe Company materially reduces Employee’s functions, duties or responsibilitiesor reporting relationships or otherwise demotes Employee.  The parties agree, however, that if globalparts/materials duties are taken from Employee, such action alone will notconstitute an involuntary termination without Cause under (2) above.

 

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(b) SEVERANCE PAY.  In the eventEmployee’s employment is involuntarily terminated without Cause as stated inSection 3.2(b) or 3.3(a) above, Employee shall be entitled to severance payequal to one year of his salary at his highest base salary with the companypayable fifty-percent no later than 30 days after the termination date, withthe balance monthly over the six (6) month period after the date oftermination.

 

(c)  ADDITIONAL BENEFITS.  In the event of termination because of anyof the events described in Section 3.2(b), Employee’s benefits as outlined inSection 2.3 shall continue for a period of one year following the occurrence ofeither of those events.  In the event oftermination of Employee’s employment pursuant to Section 3.3(a), Employee’sbenefits as outlined in Section 2.3 shall continue for 30 days from the date oftermination of his employment with the Company.  Otherwise, Employee’s benefits terminate upon the date ofEmployee’s termination from the Company.

 

(d)  CAUSE. For purposes of this Agreement, “Cause” shall mean (1) the willful anddeliberate refusal or failure of Employee to comply with a lawful writteninstruction of the CEO or the Board, which refusal is not remedied by Employeewithin 30 days after his receipt of written notice from the Company identifyingthe refusal; (2) an act or acts of personal dishonesty by Employee that wereintended to result in personal enrichment of Employee at the expense of theCompany; (3) Employee’s conviction of any felony involving an act of moralturpitude; or (4) Employee’s material breach of any representation or covenantcontained in Section 5, 6 or 7 of this Agreement.  In the event that the Company terminates Employee’s employmentfor Cause, Employee shall be entitled only to accrued but unpaid salary andvacation as of the date of termination.

 

3.4  DEATH. In the event of Employee’s death, the Employment Period shallautomatically terminate.  Termination ofEmployee’s employment as a result of his death shall not result in any obligationby the Company to pay severance pay (unless the obligation to pay severanceexists as of the date of Employee’s death). However, Employee shall be entitled to accrued but unpaid salary andvacation earned through the date of termination.

 

3.5  DISABILITY. In the event of Employee’s Disability (as defined below) during theEmployment Period for any period of at least six consecutive months, theCompany shall have the right, which may be exercised in its sole discretion, toterminate Employee’s employment.  In theevent the Company elects to terminate Employee, Employee shall not be entitledto any severance pay at any time but shall be entitled to (a) accrued butunpaid salary and vacation earned through the date of termination and (b)normal disability benefits in accordance with the policies established fromtime to time by the Company.  Forpurposes of this Agreement, “Disability” shall mean the inability of Employeeto perform his employment services hereunder by reason of physical or mentalillness or incapacity as determined by a physician chosen by the Company andreasonably satisfactory to Employee or his legal representative.

 

4.  TERM.

 

The term during which Employee will provide servicesto the Company pursuant to this Agreement will commence on the Effective Dateand will expire on the third anniversary of the Effective Date (the “EmploymentPeriod”), unless terminated earlier pursuant to the provisions of Section 3provided that the term shall “evergreen” commencing on the second anniversary ofthe Effective Date so that until and unless Company notifies Employee that theterm will be permitted to expire, there will at all times be one year remainingin the term.

 

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5.  NONDISCLOSURE OF INFORMATION AND NON-SOLICITATION OF EMPLOYEES.

 

5.1  NONDISCLOSURE OF CONFIDENTIALINFORMATION.  Except in the performanceof his duties hereunder, Employee shall not, either during or subsequent to theEmployment Period, disclose, directly or indirectly, to any person or entity oruse for his own direct or indirect benefit any Confidential Information (asdefined below) pertaining to the Company obtained by Employee in the course ofhis employment with the Company.  Forpurposes of this Agreement, “Confidential Information” shall include anyproprietary or confidential information of any kind, nature or descriptionconcerning any matters affecting or relating to the business of the Company,including, without limitation, the Company’s products, services, processes,suppliers, customers, customers’ account executives, financial, sales anddistribution information, price lists, identity and list of actual andpotential customers, trade secrets, technical information, business plans andstrategies to the extent that such information has not been publicly disseminatedby the Company, other than through a breach hereof.  The Company shall have available to it all remedies, including,but not limited to suits for injunctive relief and/or damages, as a result ofEmployee’s breach of confidentiality. This provision shall survive the termination of the employmentrelationship between the Company and Employee.

 

5.2  NON-SOLICITATION.  Employee agrees that, so long as he is employed by the Companyand for a period of one year after termination of his employment for any reason,he or she shall not (a) directly or indirectly hire, solicit, induce or attemptto solicit or induce any Company employee to discontinue his or her employmentwith the Company, (b) usurp any opportunity of the Company that Employee becameaware of during his tenure at the Company, or (c) directly or indirectlysolicit or induce or attempt to influence any person or business that is anaccount, customer or client of the Company to restrict or cancel the businessof any such account, customer or client with the Company.

 

6.  NON-COMPETITION.

 

So long asEmployee is employed by the Company and for a period of one year aftertermination of his employment for any reason, Employee shall not, without theprior written consent of the Board, either directly or indirectly engage in anybusiness engaged in by the Company wherever the Company conducts itsbusiness.  The term “directly” meansEmployee is acting on his own or is acting as a consultant, employee, director,agent, representative or associate with or for any other person or entity.  The term “indirectly” means Employee isacting through any partnership, joint venture, corporation or other entity orperson.

 

7.  REPRESENTATIONS AND COVENANTS OF EMPLOYEE& COMPANY.

 

7.1  BEST EFFORTS.  In consideration of the payments to be made hereunder, Employeeagrees to devote his entire business time and attention to the performance ofhis duties hereunder, and to serve the Company diligently and to the best ofhis abilities.  Notwithstanding theforegoing, Employee shall have the continuing right to (a) make passiveinvestments in the securities of any publicly-owned corporation, (b) make anyother passive investments with respect to which he is not obligated or requiredto, and does not in fact, devote any managerial efforts, and (c) serve as adirector or consultant for other companies or entities provided that they arenot in a business that competes with the Company.

 

7.2  NO RESTRICTIONS.  Employee represents that he is under no actual or allegedrestriction, limitation or other prohibition (whether as a result of his prioremployment or otherwise) to perform his duties as described herein.

 

7.3  AUTHORITY. The individual signing this Agreement on behalf of the Company herebyrepresents and warrants that he has full authority to do so on behalf of theCompany.

 

7.4  DUTIES UPON TERMINATION.  Upon termination of his employment with theCompany for any reason, Employee agrees to deliver promptly to the Company allequipment, notebooks, documents, reports, files, samples, books,correspondence, lists, computes disks or files and the like relating to theCompany’s business, which are or have ever been in his possession or under hiscontrol.

 

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8.  MISCELLANEOUS.

 

8.1  NO WAIVER. The waiver by either party of a breach of any provision of thisAgreement shall not operate as or be construed as a waiver of any subsequentbreach thereof.

 

8.2  NOTICES. Any and all notices referred to herein shall be sufficiently furnishedif in writing, and sent by registered or certified mail, postage prepaid, tothe respective parties at the following addresses or such other address aseither party may from time to time designate in writing:

 
|   | To  the Company: | SMTEK  International, Inc.                 |
|--------|------------------|--------------------------------------------|
|   |             | 200 Science  Drive                         |
|   |             | Moorpark,  CA  93021-2003             |
|   |             | Attention:  Secretary                      |
|   |             |                                       |
|   | To Employee:     | Richard  Fitzgerald                        |
|   |             | at current  address on file at the Company |

 

 

8.3  ENTIRE AGREEMENT/RELEASE UNDER OLDEMPLOYMENT AGREEMENT.  This Agreementsupersedes any and all prior written or oral agreements between Employee andthe Company, including the Offer Letter, and contains the entire understandingof the parties hereto, with respect to the terms and conditions of Employee’semployment with the Company.  If thisAgreement is inconsistent with, or contradicts any term or provision in, anyoption plan or agreement, including the Company’s Equity Incentive Plans andEmployee’s option agreements under Equity Incentive Plans, the terms andprovisions of such option plan and/or agreement shall govern and supercede theterms and provisions of this Agreement.

 

8.4  GOVERNING LAW.  This Agreement shall be construed and enforced in accordance withthe laws and decisions of the State of California.

 

8.5  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, eachof which shall be deemed to constitute an original, but all of which shallconstitute one and the same instrument.

 

8.6  AMENDMENT. This Agreement may not be modified, amended, altered or supplementedexcept by written agreement between Employee and the Company.

 

8.7  ASSIGNMENT AND PARTIES ININTEREST.  This Agreement shall inure tothe benefit of and be binding upon the parties named herein and theirrespective successors and assigns; provided, however, Employee may not assignany of his rights or obligations hereunder. Further, the Company will not consolidate or merge into or with anothercorporation, or transfer all or substantially all of its assets to anothercorporation or entity or person, unless such shall assume and be able tosatisfy all the duties and obligations of the Company under this Agreement.

 

8.8  ATTORNEY’S FEES &COSTS.  In the event an action in law orin equity is required to enforce or interpret the terms and conditions of thisAgreement, the prevailing party shall be entitled to reasonable attorneys feesand costs in addition to any other relief to which that party may be entitled.

 

8.9  INTERPRETATION.   No provision of this document is to beinterpreted for or against any party because that party or party’s legalrepresentative drafted it.

 

8.10  SEVERABILITY.  In the event that any covenant, condition orother provision herein contained is held to be invalid, void or illegal by anycourt of competent jurisdiction, the same shall be deemed severable from theremainder of this Agreement and shall in no way affect, impair or invalidate 

 

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any othercovenant, condition or other provision herein contained.  If such condition, covenant or otherprovision shall be deemed invalid due to its scope or breadth, such covenant,condition or other provision shall be deemed valid to the extent of the scopeor breadth permitted by law.

 

8.11  CAPTIONS/HEADINGS.  The captions or headings in each section orsub-section are only for convenience purposes. Such captions or headings shall not be used to interpret the sections orsub-sections of this Agreement.

 

 

INWITNESS HEREOF, THE PARTIES TO THIS AGREEMENT AGREE TO THE ABOVE AND BINDTHEMSELVES ACCORDINGLY.

 

The “Company”:

 
| SMTEK  International, Inc., a Delaware corporation               |   |
|------------------------------------------------------------------|--------|
|                                                             |   |
|                                                             |   |
|  /s/ Edward  J. Smith                                       |   |   |
| By:  Edward  J. Smith                                       |   |
| Its:    CEO and President                         |   |
| Date: May  25, 2004                                              |   |
|                                                             |   |
|                                                             |   |
|   /s/ Richard  Fitzgerald                                   |   |   |
| By:    “  Employee”: Richard Fitzgerald |   |
| Date: May  25, 2004                                              |   |

 

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