From: Mitch Freedman [freedman@smtek.com]
Sent: Tuesday, August 20, 2002 11:10 AM
To: rule-comments@sec.gov
Subject: New Section 16(a) Rule: Exempt Transaction Proposal (s7-31-02)

If I correctly read the Romeo/Dye Section 16 Update for August, 2002, 
the SEC has apparently indicated to that publication that the SEC's 
April 12, 2002 proposals on 8-K's and Form 4's are largely moot in 
light of the new legislation the president signed.

May I ask, however, if the SEC is still willing to consider a continuing 
exemption for companies with stock option plans for outside directors where 
the outside directors receive stock options instead of cash for attending 
meetings of the board (full board and committee meetings)?

The plan operates like an employee stock purchase plan in that the outside 
directors receive the stock options regardless of the results of the quarter 
in question.  They attend meetings in the quarter, but do not know until 
5 days after the quarterly results are announced what the stock options are 
valued at. Simply put, the valuation occurs on that 5th day following 
quarterly result announcements.  

Again, the outside directors (along with everyone else) attend the meetings 
during the quarter, but have no idea at that point what the stock price is 
going to be 5 days after earnings come out.

The stockholders have already approved this plan a few years ago and know how 
it works.

My understanding is that this sort of plan is unusual, but we are not alone.

Is it possible that this plan could be included in the continuing exemption? 

Another perhaps more pressing question:  Since the stock options are not valued 
until 5 days after the results of the quarter are announced, would the new 
Form 4 be due then, or would we have to file two Form 4's: The first one being 
filed after the meeting itself (but where we don't know the price) and the 
second one after the valuation of the stock option?  

I would think the stock option isn't really "earned" until after valuation, 
but the rules may not be clear on this.

Thank you for your response and insight in this regard.

Mitchell J. Freedman
VP Legal & Administration
SMTEK International, Inc.
805 532-2800 extension 187
August 20, 2002