Exhibit 10.2

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May 15, 2017

 

Ed Smith
715 E. Windmere Dr.

Phoenix, Arizona 85048

 

Dear Ed:

 

On behalf of SMTC Corporation (“SMTC” or the “Company”), I am pleased to offer
you the position of President and Chief Executive Officer, reporting to the
Company’s Board of Directors (the “Board”), and working from the Company’s
offices in Fremont, California. Your employment under this letter shall be
effective as of May 15, 2017 (the “Employment Start Date”). All dollar amounts
in this letter refer to U.S. funds.

 

Base Salary. Effective as of the Employment Start Date, your annual base salary
will be $27,083.33 per month ($325,000.00 annually), less applicable taxes,
deductions and withholdings, paid in accordance with Company practice, and
subject to annual review.

 

Short-Term Incentive Compensation. You will be eligible to participate in the
Company’s short term incentive plan (“STIP”) with a target incentive of 50% of
your annual base salary, pro-rated based on the period of time you are employed
at SMTC during the relevant Company fiscal year, less applicable taxes,
deductions, and withholdings. Target incentives do not constitute a promise of
payment. To qualify for the STIP bonus, you must remain employed with the
Company through the date that the STIP bonus is paid, except that if you are
terminated without Cause (as defined herein) after the end of the fiscal year
for which the STIP bonus is earned but prior to the date the STIP bonus is paid,
you will still receive the STIP bonus earned. Your actual STIP payout will
depend on SMTC financial performance and the Compensation Committee’s assessment
of your individual performance, and any STIP payout is subject to and governed
by the terms and requirements of the STIP, as approved and amended by the
Compensation Committee from time to time. The STIP bonus will be paid following
Compensation Committee approval of the STIP bonus amount and within 10 days
following release of the Company’s audited financial statements for the fiscal
year for which the STIP bonus is earned. For the avoidance of doubt, your target
bonus for the 2017 fiscal year will be $162,500, reflecting your base salary.

 

 

 

SMTC Corporation

Corporate Headquarters 635 Hood Road, Markham, Ontario, Canada L3R 4N6
Telephone: 905.479.1810 Fax: 905.479.1877 Web Site: www.smtc.com

Toronto     ●     San Jose     ●     Mexico     ●     China

 

 
 

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Option Grant. In connection with your appointment, you will receive a one-time
grant of options covering 671,858 shares of Company common stock under the
Company’s 2010 Incentive Plan. The options will be granted on May ___, 2017,
will have an exercise price per share equal to the Company per share closing
price on that date, and will vest as to 1/5 (20%) of the covered shares upon the
Company’s average closing share price being above each of $2.00, $3.00, $4.00,
$5.00 and $6.00 per share for a 90 day period, or upon a Change in Control Event
(as defined below) resulting in the per share value of Company common stock
being above those same thresholds (1/5 if above $2.00, an additional 1/5 if
above $3.00, an additional 1/5 if above $4.00, an additional 1/5 if above $5.00,
and 100% if above $6.00), subject, in all cases, to your continued employment.
In the event of a Change in Control Event, the options shall immediately expire
to the extent they remain unvested; provided, however, the Company’s board of
directors may, in its sole discretion, accelerate vesting effective immediately
prior to, but contingent on, a Change in Control Event. To ensure alignment with
shareholders, the options may not be exercised, and no option shares may be
sold, within 180 days of any portion of the options vesting, unless a Change in
Control Event occurs. The options shall otherwise reflect the Company’s standard
terms and conditions for employee option grants, including a ten-year term, and
will vest with respect to whole shares only.

 

Company Policies. You recognize that your incentive compensation will be subject
to any applicable Company policies, practices or procedures in effect from time
to time including any policies respecting stock ownership, compensation
recoupment or clawback and other similar policies.

 

Benefits. You will be eligible to participate in those benefits made available
by SMTC to its executive officers from time to time, including the Company’s
401(k) plan. Please refer to the benefit plan documents for applicable terms and
conditions. Of course, SMTC may change its benefits at any time.

 

SMTC will reimburse you for reasonable business expenses incurred in connection
with your employment upon presentation of appropriate documentation in
accordance with the Company’s expense reimbursement policies.

 

Paid Time Off. You will be eligible for four weeks of paid vacation annually
during each Company fiscal year in accordance with any Company vacation policy
in place from time to time. If notwithstanding Company policy any applicable law
requires that vacation pay be carried over to a subsequent fiscal year or paid
out upon a termination of employment, vacation time will accrue up to a maximum
of 160 hours in any fiscal year.

 

Proprietary Information. As an employee of SMTC, you will become knowledgeable
about confidential and/or proprietary information related to the operations,
products and services of SMTC and its subsidiaries. You agree to executive the
Company’s standard form of Proprietary Information and Invention Assignment
Agreement, as the same may be amended from time to time, (the “PIIAA”) a copy of
which was provided with this letter and which is hereby incorporated herein by
this reference.

 

 
 

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Obligations. During your employment, you will devote your full business efforts
and time to SMTC. This obligation, however, will not preclude you from engaging
in civic, charitable or religious activities as long as the activities do not
materially interfere or conflict with your responsibilities to or your ability
to perform your duties of employment with SMTC.

 

Employment At-Will. Please understand that this letter does not constitute a
contract of employment for any specific period of time, but will create an
employment at-will relationship that may be terminated at any time by you or
SMTC, with or without cause and with or without advance notice. The at-will
nature of the employment relationship may not be modified or amended except by
written agreement signed by SMTC and you. Notwithstanding the foregoing, if your
employment is terminated by SMTC other than for Cause (as defined below), then
SMTC will offer you severance benefits described below. All severance benefits,
including benefits payable in connection with a Change in Control Event (as
defined below), are conditioned on you signing a full release of any and all
claims against SMTC, its subsidiaries and affiliates in a release form
acceptable to SMTC (within the period specified in it by the Company) after the
termination of your employment and you not revoking that release pursuant to any
revocation rights afforded by applicable law. Upon a termination of your
employment, you hereby resign as of the date of that termination as a director
and officer of SMTC and its subsidiaries and as a fiduciary of any of its or
their benefit plans, and you agree to promptly execute and deliver upon such
termination any document reasonably required by SMTC to evidence the foregoing.

 

Severance/Termination. In the event your employment is terminated by the Company
other than for Cause (other than in connection with or within twelve (12) months
following an event described in clause (i), (ii) or (iv) of the definition of a
Covered Transaction contained in the Company’s 2010 Incentive Plan) (a “Change
in Control Event”)), you will receive your accrued and unpaid base salary
through the date of termination and will receive continued payment of your base
salary in accordance with the Company’s regular payroll practice for a period of
six months commencing on the first payroll period following the thirtieth day
after termination of employment. In the event that you terminate your employment
or your employment is terminated for Cause, you shall receive no salary or other
benefits other than accrued and unpaid base salary through the date of
termination and any other amount required under applicable law. In this letter,
“Cause” means:

 

(a)     your refusal or material failure to perform your job duties and
responsibilities (other than by reason of your serious physical or mental
illness, injury, or medical condition) after being given reasonable notice of
such failure and a reasonable opportunity to cure;

 

(b)     your failure or refusal to comply in any material respect with material
Company policies or lawful directives of the Board after being given reasonable
notice of such non-compliance and a reasonable opportunity to cure;

 

 
 

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(c)     your material breach of any contract or agreement between you and the
Company (including, but not limited to, this letter agreement and any other
agreement between you and the Company), or your material breach of any statutory
duty, fiduciary duty or any other obligations that you owe to the Company,
provided that you have been given reasonable notice of such breach and a
reasonable opportunity, if such breach is curable, to cure;

 

(d)     your commission of an act of fraud, theft, embezzlement or other
unlawful act against the Company or involving its property or assets;

 

(e)     your engaging in unprofessional, unethical or other intentional acts
that materially discredit the Company or are materially detrimental to the
reputation, character or standing of the Company; or

 

(f)     your indictment or conviction or plea of nolo contendre or guilty plea
with respect to any felony or crime of moral turpitude.

 

For purposes of Cause, you agree that the Company providing you notice within
thirty (30) days of the Board learning of the potential Cause trigger is
reasonable notice and that a cure period of thirty (30) days is a reasonable
opportunity to cure a potential Cause trigger.

 

Change in Control. In the event your employment is terminated by the Company
other than for Cause or if you resign for Good Reason (as defined herein) in
connection with or within twelve (12) months following a Change in Control
Event, you will receive your accrued and unpaid base salary and, to the extent
applicable, vacation through the date of termination and will receive continued
payment of your base salary in accordance with the Company’s regular payroll
practice for a period of twelve (12) months commencing on the first payroll
period following the thirtieth day after termination of employment. In the event
that you terminate your employment without Good Reason or your employment is
terminated for Cause in connection with or within twelve (12) months following a
Change in Control Event, you shall receive no salary or other benefits other
than accrued and unpaid base salary and all other amounts required to be paid
under applicable law.

 

In this letter, “Good Reason” means that you resign your employment after one of
the following conditions has come into existence without your consent:

 

(a)     a reduction in your base salary by more than 5% that is not part of an
overall equivalent compensation reduction affecting substantially all of the
Company’s executive officers; or

 

(b)     A material diminution of your authority, duties or responsibilities,

 

 
 

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provided that you give the Company reasonable notice of your intention to resign
within thirty (30) days of the occurrence of the event potentially triggering
your right to resign for Good Reason and a period of thirty (30) days to cure.

 

Code of Ethics and SMTC Policies. SMTC is committed to creating a positive work
environment and conducting business ethically. As an employee of SMTC, you will
be expected to abide by the Company’s policies and procedures including, but not
limited to, all codes of ethics and SMTC’s Corporate Governance Guidelines.

 

Non-Disparagement. You agree during and after termination of your employment
with the Company, not to knowingly disparage the Company, its subsidiaries or
its officers, directors, employees or agents in any manner that could be harmful
to it or them or its or their business, business reputation or personal
reputation. The Company agrees during and after termination of your employment
with the Company, not to knowingly disparage you in any manner that could be
harmful to you or your business or personal reputation. This paragraph will not
be violated by statements from either party that are truthful, complete and made
in good faith in required response to legal process or governmental inquiry. You
also agree that any breach of this non-disparagement provision by you shall be
deemed a material breach of this letter agreement.

 

Entire Agreement. This letter and the referenced documents and agreements
(including the PIIAA) constitute the entire agreement between you and SMTC with
respect to the subject matter hereof and supersede any and all prior or
contemporaneous oral or written representations, understandings, agreements or
communications between you and SMTC concerning those subject matters.

 

IRC 409A. This letter is intended to comply with the short-term deferral rule
under Treasury Regulation Section 1.409A-1(b)(4) and be exempt from Section 409A
of the Code, and shall be construed and interpreted in accordance with such
intent, provided that, if any severance provided at any time hereunder involves
non-qualified deferred compensation within the meaning of Section 409A of the
Code, it is intended to comply with the applicable rules with regard thereto and
shall be interpreted accordingly. A termination of employment shall not be
deemed to have occurred for purposes of any provision of this letter providing
for the payment of any amounts or benefits upon or following a termination of
employment that are considered “nonqualified deferred compensation” under
Section 409A of the Code unless such termination is also a “separation from
service” within the meaning of Section 409A of the Code and, for purposes of any
such provision of this letter, references to a “termination,” “termination of
employment” or like terms shall mean “separation from service.” If you are
deemed on the date of termination to be a “specified employee” within the
meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard
to any payment that is considered non-qualified deferred compensation under
Section 409A of the Code payable on account of a “separation from service,” such
payment or benefit shall be made or provided at the date which is the earlier of
(A) the date that is immediately following the expiration of the six (6)-month
period measured from the date of your “separation from service”, and (B) the
date of your death (the “Delay Period”). Upon the expiration of the Delay
Period, all payments and benefits delayed pursuant to this paragraph (whether
they would have otherwise been payable in a single sum or in installments in the
absence of such delay) shall be paid or reimbursed to you in a lump sum, and any
remaining payments and benefits due under this letter shall be paid or provided
in accordance with the normal payment dates specified for them herein. For
purposes of Section 409A of the Code, your right to receive any installment
payments pursuant to this letter shall be treated as a right to receive a series
of separate and distinct payments. In no event may you, directly or indirectly,
designate the calendar year of any payment to be made under this letter that is
considered non-qualified deferred compensation. In the event the time period for
considering any release and it becoming effective as a condition of receiving
severance shall overlap two calendar years, no amount of such severance shall be
paid in the earlier calendar year.

 

 
 

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Background Check. You represent that all information provided to SMTC or its
agents with regard to your background is true and correct.

 

Governing Law; Jurisdiction and Venue. All matters relating to or arising out of
this letter or the employment relationship of the parties will be governed by
and construed and interpreted under the laws of California, without regard to
conflict of law principles. Any action, suit, litigation or proceeding
commenced, brought, arising out of or relating to this letter or the employment
relationship shall be brought in the state courts of the State of California in
Santa Clara County and each party irrevocably submits to the exclusive
jurisdiction of such courts in any such action, suit, litigation or proceeding,
waives any objection to venue or convenience of forum it has or may have, agrees
that all such matters shall be heard and determined only in such courts and
agrees not to bring any such action, suit, litigation or proceeding in any other
courts. Each party acknowledges and agrees that this paragraph constitutes a
voluntary and bargained-for agreement between the parties. Each party
acknowledges that any matter arising under this letter is likely to involve
complex and difficult issues and therefore each party irrevocably and
unconditionally waives any right to a trial by jury.

 

We look forward to you joining SMTC. Please indicate your acceptance of this
offer by signing where indicated below and returning an executed copy of this
offer to me at your earliest convenience.

 

 

Sincerely,

 

/s/ Clarke Bailey

Clarke Bailey

Chairman

 

 
 

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I accept this offer of employment with SMTC Corporation and agree to the terms
and conditions outlined in this letter.

 

 

 

/s/ Eddie Smith May 15, 2017    

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Ed Smith

Date