**Exhibit 10.14**

** **

**AMENDED AND RESTATED**

**EMPLOYMENT AGREEMENT**

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), byand between SMTEK INTERNATIONAL, INC., a Delaware corporation (the “Company”),and **EdwardJ. Smith** (“Employee”), is effective as of July 1, 2004 (the“Effective Date”), and amends and restates the Employment Agreement, effectiveas of May 14, 2002, by and between the Company and Employee (the “OldEmployment Agreement”).

 

WHEREAS, the Company desires to continuethe employment of Employee in the position of Chief Executive Officer andPresident, 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 Chief Executive Officerand President, (b) report directly to the Company’s Board of Directors (the“Board”), and (c) perform the duties and functions assigned to him by theBoard.

 

2.  COMPENSATION AND BENEFITS.

 

2.1  BASE SALARY.  While employed by the Company, Employee’s base salary shall be$250,000 per year payable in accordance with the Company’s standard payrollschedule; provided, however, that this base salary will be reviewed for meritand cost of living increases by 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 $950 per month; a cell phone with monthly charges reasonablylimited by the Board; and a corporate credit card with charges reasonablylimited by the Board.

 

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, 

 

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receipts and other details of suchexpenses in the form required by the Company, sufficient to substantiate adeduction for such business expenses under all applicable rules and regulationsof 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 Companyacknowledge and agree that Employee’s employment with the Company is expressly“at will.”  This means that either partymay terminate Employee’s employment with or without Cause (as defined inSection 3.3(d) below) upon written notice. Any termination of Employee’s employment is, however, subject to theterms and provisions of this Agreement as to severance pay and otherobligations.

 

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 Board.  A termination or resignation under suchcircumstances shall be treated as an involuntary termination without Cause, andEmployee’s entitlement to severance pay and additional benefits in accordancewith the provisions of Sections 3.3(a), 3.3(b) and 3.3(c) below shall applyunless, and only if, such termination was for Cause.

 

3.3  INVOLUNTARY TERMINATION.

 

(a)  INVOLUNTARY TERMINATION.  The Company shall be deemed to have terminatedthe employment of Employee involuntarily and without Cause if (1) Employee’sfull-time employment is terminated by the Company without Cause; or (2)Employee terminates his employment with the Company within 60 days after theCompany materially reduces Employee’s functions, duties or responsibilities orreporting relationships or otherwise demotes Employee.

 

(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 in a lump sum no later than 30 days after the termination date.

 

(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 of Employee’stermination 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 Board, which refusal is not remedied by Employee within 30days after his receipt of written notice from the Company identifying therefusal; (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 

 

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involvingan act of moral turpitude; or (4) Employee’s material breach of anyrepresentation or covenant contained in Section 5, 6 or 7 of thisAgreement.  In the event that theCompany terminates Employee’s employment for Cause, Employee shall be entitledonly to accrued but unpaid salary and vacation 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 anyobligation by the Company to pay severance pay (unless the obligation to payseverance exists as of the date of Employee’s death).  However, Employee shall be entitled to accrued but unpaid salaryand vacation 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) normaldisability benefits in accordance with the policies established from time totime by the Company.  For purposes ofthis Agreement, “Disability” shall mean the inability of Employee to performhis employment services hereunder by reason of physical or mental illness orincapacity as determined by a physician chosen by the Company and reasonablysatisfactory to Employee or his legal representative.

 

3.6  CHANGE OF CONTROL BENEFITS.  With respect to any outstanding options to purchase stock of the Company granted toEmployee, Employee shall be entitled to accelerated vesting and otherchange of control benefits subject to theterms of the Company’s 2003 Equity Incentive Plan (the “Plan”) andEmployee’s option agreements under the Plan.

 

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 anniversaryof the Effective Date so that until and unless Company notifies Employee thatthe term will be permitted to expire, there will at all times be one year remainingin the term.

 

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 publiclydisseminated by the Company, other than through a breach hereof.  The Company shall have available to it allremedies, including, but not limited to suits for injunctive relief and/ordamages, as a result of Employee’s breach of confidentiality.  This provision shall survive the terminationof the employment relationship 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 anyreason, he or she shall not (a) directly or indirectly solicit, induce orattempt to solicit or induce any Company employee to discontinue his or heremployment with the Company, (b) usurp any opportunity of the Company thatEmployee 

 

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became aware of during histenure at the Company, or (c) directly or indirectly solicit or induce orattempt to influence any person or business that is an account, customer or clientof the Company to restrict or cancel the business of any such account, customeror 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.

 

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:     | Edward J.  Smith               |
|   |             | 1031  Westranch Place          |
|   |             | Simi Valley,  CA  93065   |

 

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8.3  ENTIRE AGREEMENT/RELEASE UNDER OLDEMPLOYMENT AGREEMENT.  This Agreementsupersedes any and all prior written or oral agreements between Employee andthe Company, including the Old Employment Agreement, and contains the entireunderstanding of the parties hereto, with respect to the terms and conditionsof Employee’s employment with the Company. Except as provided in Section 3.6 of this Agreement, if this Agreementis inconsistent with, or contradicts any term or provision in, any option planor agreement, including the Plan, the terms and provisions of such option planand/or agreement shall govern and supercede the terms and provisions of thisAgreement.  The Employee acknowledgesand agrees that the Company has fully performed and complied with itsobligations under the Old Employment Agreement, and Employee releases theCompany from any claims he may have against the Company arising out of the OldEmployment 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 another corporationor entity or person, unless such shall assume and be able to satisfy all theduties 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 be interpretedfor or against any party because that party or party’s legal representativedrafted 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 invalidateany other covenant, 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/ James P. Burgess                               |                   |   |
| By:                                                | James P. Burgess       |   |
| Its:                                               | Chairman of  the Board |   |
| Date:                                              | August 24,  2004       |   |
|                                                    |                        |  |  |

 

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| “Employee”:  EDWARD J. SMITH |             |
|---------------------------------------------|------------------|
|                                        |             |
|                                        |             |
|   /s/ Edward  J. Smith                 |             |   |
| By:                                         | Edward J. Smith  |   |
| Date:                                       | August 24,  2004 |   |
|                                             |                  |  |  |

 

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