EXHIBIT 10.3

 

BONUS PLAN

 

This Bonus Plan (Plan”), dated as of February 7, 2005, is provided by SMTC
Manufacturing Corporation of Canada (“SMTC Canada”) to John Caldwell (“the
Executive”) on the terms and conditions set forth herein. Certain capitalized
terms used in this Plan are defined in paragraph 1 hereof.

 

1. Definitions. The following definitions apply for all purposes of this Plan.

 

“Affiliate” of any person means (a) any other person directly or indirectly
owning, controlling, or holding with power to vote, five percent or more of the
outstanding voting securities of such person, (b) any person five percent or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote, by such person and (c) any other person
directly or indirectly controlling, controlled by, or under common control with,
such person.

 

“Base Salary” means the annual salary of the Executive as established by the
Company with respect to the Executive, as set forth in his Employment Agreement.

 

“Bonus Percentage” means 100%.

 

“Board” means the Board of Directors of SMTC Corporation.

 

“Cause” shall have the same meaning as under Section 4.8 of the Executive’s
Employment Agreement.

 

“Company” means SMTC Corporation and its Affiliates.

 

“Disability” shall have the same meaning as under Section 4.5 of the Executive’s
Employment Agreement.

 

“EBITDA” shall mean, with respect to any fiscal period, the consolidated net
income of the Company determined in accordance with generally accepted
accounting principles, plus (1) all amounts deducted in computing such net
income in respect of interest, plus (2) all amounts deducted in computing such
net income in respect of amortization and depreciation, plus (3) all amounts
deducted in computing such net income in respect of income taxes plus (4) all
amounts deducted in computing such net income resulting from extraordinary or
non-recurring gains or losses or from the write-up of any assets, and any
amounts included in net income in respect of income earned or accrued other than
in the ordinary conduct of the Company’s business, minus (5) all amounts added
in computing such net income resulting from extraordinary or non-recurring gains
or losses or from the write-up of any assets, and any amounts included in net
income in respect of income earned or accrued other than in the ordinary conduct
of the Company’s business.

 

“Employment Agreement” means the employment agreement between the Executive and
SMTC Manufacturing Corporation of Canada, dated February 7, 2005.

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“Target” means the performance goals of the Company. Such goals would include
but be limited to annual EBITDA, as established by Company management and
approved by the Board as part of its annual operating plan.

 

“Target Bonus” means the annual bonus amount to be paid by SMTC Manufacturing
Corporation of Canada to the Executive pursuant to paragraph 2.

 

“Target Bonus Portion” means, with respect to an Executive, the annual bonus
amount, expressed as a percentage of the Executive’s Target Bonus, to be paid by
SMTC Manufacturing Corporation of Canada to such Executive pursuant to paragraph
3.

 

“Target Percentage Level” means the performance level of the Company, expressed
as a percentage of Target.

 

“Target Shortfall” means the percentage by which the Company’s actual results
falls below Target for fiscal year (as defined below).

 

2. Target Bonus. For each fiscal year beginning on January 1, 2005 and ending on
December 31st of each year thereafter (the Fiscal Year”), Executive shall be
entitled to an annual bonus (“Target Bonus”) in an amount equal to his Base
Salary times his Bonus Percentage. A Target Bonus shall only be payable to the
Executive if the Company meets its Target for the Fiscal Year. If actual results
exceeds Target for the Fiscal Year, the Bonus Percentage may be increased in the
sole discretion of the Board.

 

3. Target Bonus Portion. If the Company’s performance level is not at Target,
the Executive shall be entitled to a Target Bonus Portion, if any, calculated as
follows: If actual results are equal to or greater than 90% of Target for the
Fiscal Year but less than 100% of Target, then the Target Bonus Portion will be
equal to the Base Salary multiplied by the percentage arrived at by subtracting
the Target Shortfall multiplied by five from 100%.

 

Determinations of the amount of EBITDA and all performance goals in connection
with the Target Bonus and the Target Bonus Portion shall be made by the Board in
its sole discretion, based upon the Company’s financial statements (to the
extent possible), and such determination shall be conclusive and binding upon
the Company SMTC Canada, and the Executive. In the event of any acquisition,
merger, recapitalization or other similar event, or any change in generally
accepted accounting principles or the application thereof, the Board, in its
sole discretion, may make such adjustments to the Target, to the calculation of
the Target Bonus and the Target Bonus Portion, to the definition of EBITDA and
other goals or to the other provisions hereof as the Board may deem necessary or
reasonably desirable so that the Target Bonus or Target Bonus Portion hereunder
shall appropriately relate to the results of operations of the Company after
giving effect to such event. Each determination of the Target Bonus or Target
Bonus Portion shall use as a reference point the Company’s annual audited
financial statements and, if made in good faith, shall be conclusive and binding
upon the Company, SMTC Canada and the Executive, absent manifest error.

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4. Termination of Employment.

 

  a. If the Executive’s employment ends before the end of the Fiscal Year for
any of the following reasons:

 

  i. in the event of the Executive’s death;

 

  ii. in the event of the Executive’s Disability; or

 

  iii. in the event the Company terminates Executive’s employment for other than
Cause,

 

then the Executive shall be paid his Target Bonus or Target Bonus Portion, as
applicable, prorated for the time of his actual employment during the Fiscal
Year.

 

b. If the Executive’s employment ends for a reason other than those enumerated
in subparagraph 4.a. above, the Executive shall not receive any bonus based on
the Company’s performance for the Fiscal Year.

 

5. Form and Payment. Payment of all amounts due under this Plan shall be made
promptly after audited financial statements for the fiscal year are sent to the
Company’s shareholders The Board in its sole discretion, may pay up to 100% of
the Target Bonus or the Target Bonus Portion, as applicable, through the grant
of fully vested deferred share units, each such unit being equivalent to the
fair market value of a single share of common stock of the Company on the date
of grant.

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6. Term. Subject to earlier termination as provided in paragraph 4, this Plan
shall be effective for the each fiscal year commencing January 1, 2005.

 

Very truly yours,

SMTC CORPORATION

By:

 

/s/ William Brock

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Title:

 

Director

SMTC MANUFACTURING CORPORATION OF CANADA

By:

 

/s/ William Brock

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Title:

 

Director

 

Acknowledged:

/s/ John Caldwell

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John Caldwell